SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Event Requiring Report: April 14, 2000
QINNET.COM, INC.
(Exact name of registrant as specified in its charter)
Delaware 000-28659 75-2610514
(State of Incorporation) (Commission (IRS Employer
File Number) Identification #)
450 North Brand Boulevard, 6th Floor, Glendale, CA 91203
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(Address of Principal Executive Offices)
(818) 291-6250
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(Registrant's telephone number, including area code)
Internet Corporation of America, Inc.
16910 Dallas Parkway, Suite 100, Dallas, TX 75248
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(Registrant's Former Name and Address)
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
AGREEMENT AND PLAN OF REORGANIZATION
On April 13, 2000, a change in control of the Registrant occurred in conjunction
with closing under an Agreement and Plan of Reorganization (the "Reorganization
Agreement") between the Registrant and Qinnet.Com, Inc. ("Qinnet"), a Delaware
corporation.
The closing under the Reorganization Agreement consisted of a cash and stock for
stock exchange in which Qinnet acquired all of the issued and outstanding common
stock of the Registrant in exchange for the payment of $50,000 and the issuance
of 50,000 shares of its common stock. As a result of this transaction, the
Registrant became a wholly-owned subsidiary of Qinnet.
The Reorganization was approved by the unanimous consent of the Board of
Directors of Qinnet on March 11, 2000. The Reorganization is intended to qualify
as a reorganization within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended.
Prior to the Agreement, Qinnet had 1,250,497 shares of common stock issued and
outstanding. Following the Agreement, Qinnet had 1,300,497 shares of common
stock outstanding. Qinnet, formerly known as Telespace Ltd., was incorporated in
the State of Delaware on May 31, 1989.
Upon effectiveness of the Reorganization Agreement, pursuant to Rule 12g-3(a) of
the General Rules and Regulations of the Securities and Exchange Commission,
Qinnet became the successor issuer to Internet Corporation of America, Inc. for
reporting purposes under the Securities Exchange Act of 1934 and elects to
report under the Act effective March 21, 2000.
A copy of the Reorganization Agreement is filed as an exhibit to this Form 8-K
and is incorporated in its entirety herein. The foregoing description is
qualified by reference to the full text of the Reorganization Agreement.
QINNET CORPORATE ORGANIZATION
Qinnet is a Delaware corporation that was incorporated on May 31, 1989.
Merger Agreement
Qinnet entered into a merger agreement with Qinnet Holdings Corp. ("Qinnet
Holdings") on January 12, 2000 (the "Merger Agreement"). Qinnet Holdings Corp.
is a Washington corporation that was incorporated in June, 1999. The Merger
Agreement contemplates the merger of Qinnet and Qinnet Holdings (the "Merger").
<PAGE>
The Merger Agreement contemplates that Qinnet will issue one share of Qinnet
common stock for each share of Qinnet Holdings common stock upon completion of
the Merger. Qinnet plans to file a Form S-4 registration statement with the
Securities and Exchange Commission under the Securities Act of 1933 (the "Act")
in order to qualify the issue of the Qinnet common stock to the shareholders of
Qinnet Holdings. The closing of the Merger will be subject to approval by the
shareholders of Qinnet and Qinnet Holdings. As of April 13, 2000, there are a
total of 13,109,100 shares of Qinnet Holdings outstanding. Accordingly, Qinnet
will issue a total of 13,109,100 shares of Qinnet common stock upon completion
of the Merger.
A copy of the Merger Agreement is filed as an exhibit to this Form 8-K and is
incorporated in its entirety herein. The foregoing description is qualified by
reference to the full text of the Merger Agreement.
Beijing QinNet Electronic Technologies Co., Ltd. ("Qinnet Beijing")
The business activities of Qinnet Holdings are carried out in China by Beijing
QinNet Electronic Technologies Co., Ltd. ("Qinnet Beijing"), a wholly owned
subsidiary of Qinnet Holdings. Upon completion of the Merger, Qinnet Beijing
will become a subsidiary of Qinnet.
BUSINESS PLAN OF QINNET HOLDINGS
Qinnet Holding's business plan is to acquire and establish Internet Service
Providers ("ISPs") and Internet Content Providers ("ICPs") within China. The
business objective of Qinnet Holdings is to provide full Internet, electronic
business and electronic commerce solutions to government entities, private
enterprises and individuals in the various provinces of China. The goal is to
achieve exposure, critical mass and scale to the high growth potential of this
huge, but largely untapped market. China is considered one of the fastest
growing markets for the Internet in the world. Qinnet Holdings plans to assemble
a management team that has significant Chinese and North American information
technology and business experience in order to implement its business plan.
Qinnet Holdings plans to develop its "www.qinnet.com" Internet web site in
connection with the expansion of its Qinnet.com business.
Industry Background - Use of the Internet in China
China has embraced the computer/Internet phenomenon. China has the potential to
become one of the world's largest markets for Internet and related services as
China seeks to catch up with the rest of the industrialized world. Analysts
predict China will have between 10 to 13 million Internet users by 2001 and 33
million users by 2003.
The Chinese government recognizes the Internet to be a powerful tool in which to
improve China's overall economic competitiveness. There are over 15,000
national-level companies in China which have greater than 1,000 employees and
thousands of medium and small companies with more than 100 employees. These
entities, plus government ministries and departments at the local and national
level, will require access to the web in the very near future.
<PAGE>
Factors driving the growth of China's Internet market include:
>> The rapidly increasing number of installed telephone lines; >> Declining
access costs making Internet use more affordable; >> High growth rates in the
sales of personal computer's and modems; >> The introduction of new access
mediums (e.g. set top boxes on television's); >> Greater availability of local,
Chinese content; and
>> The government's recognition that the Internet and electronic commerce spur
economic growth.
PLAN OF OPERATIONS AND BUSINESS ACQUISITIONS
Qinnet Holdings plans to implement its business plan in three overlapping phases
through its subsidiary, Qinnet Beijing:
Phase One - Acquisition of Tjvan, Brainn and Beijing IT
Qinnet Beijing has entered into three arrangements for the acquisition of ISP
and ICP businesses in China - tjvan.net (Tianjin), brainninfo.com (Shenyang) and
Beijing IT Consulting (Beijing), each of which is discussed below. These three
businesses are within relatively close proximity to Beijing, and are the
foundation for Qinnet Holdings' expansion plans. These operations have varying
strengths in ISP and ICP operations. All are characterized by founders and
management who are motivated by the qinnet.com strategy, who have achieved
relative success in their individual operations to-date and are located in
cities which are likely to see high Internet growth. Qinnet Beijing will acquire
70% of each operation through a local JV and provide capital, technology and
management skill for expansion. Each of the three operations have additional
management to add to Qinnet Beijing's existing Chinese management capability.
Phase Two - Business Expansion & Integration
Phase Two of the business strategy is to acquire an additional six to eight ISP
and ICP business across China by mid 2000. Key target criteria for business to
be acquired will be locations with large populations, Internet growth potential
and good quality JV partners with strong local connections. Examples include
Shanghai, Guangzhou, and Shenzhen. These areas generally are located near the
coastal region, have a large number of foreign firms in operation and have a
business climate characterized by strong government support. Businesses with a
solid local ISP and ICP emphasis and strong, motivated management will be
targeted.
<PAGE>
Phase Two will also necessitate the integration of the acquisitions under the
Qinnet Beijing umbrella. Major web sites will feature elements of commonality
while ensuring local flavor and input. Qinnet Beijing should be able to benefit
from technology synergies via new hardware and software upgrades. Each
acquisition will operate under common business, technical and control parameters
established by Qinnet Beijing to monitor performance.
Phase Three - National Rollout
Qinnet Beijing plans to continue acquisitions to truly develop a nation-wide
Internet service under the qinnet.com brand name. The technical infrastructure
and management systems will have been finalized during Phase Two, allowing
Qinnet Beijing to focus on the rollout of a national IP network and the
marketing required for subscriber growth and expansion into IP services.
Planned Revenues
Qinnet Holdings plans to generate revenues from the following:
a) Dial up and leased line access to individuals and corporate customers:
b) Content related services including web hosting, web design and on-line
services.
c) Electronic commerce services.
d) IP telephony services.
e) Data communications services
Acquisition of Tjvan.com in Tianjin
In October 1999, Qinnet Beijing and Tianjin Xiandao Information Network Co.,
Ltd. ("Tjvan.com") signed an agreement to establish a joint venture company, in
which Qinnet Beijing owns 70% of the equity interest, to accelerate growth of
Tjvan.com's existing Internet and Internet related business operations. With
capital invested by Qinnet Beijing, the two have agreed to upgrade existing
equipment, add more lines and strengthen marketing development to increase the
current customer base of 8,300 to 20,000 within a year.
Qinnet Beijing has agreed to invest 3 million RMB ($360,000 US) to acquire a 70%
equity interest in Tvan.com and to finance Tjvan.com's ISP expansion. Expansion
of the partnership with China Unicom will include exclusive ISDN lines and IP
Telephony distributorship in Tianjin as well as co-operating and sharing access
to each others' web sites and customer base. The joint venture will allow Qinnet
Beijing to lever the valuable experience of Tjvan.com for future ISP operations
and acquisitions. With the capital injection, the joint venture plans to
increase the number of subscribers from 8,300 to greater than 20,000 and 40,000
within two years to become the largest ISP in Tianjin. This user base in a
single location will provide a solid foundation for Qinnet's growth.
<PAGE>
As the second largest ISP in Tianjin, Tjvan.com has established a strategic
alliance with China Unicom Tianjin for ISP dial-up operations. In this exclusive
agreement, China Unicom provides the ISP dial-up operation with new
infrastructure and DDN/ISDN lines at half price. Tjvan.com provides marketing,
customer support, network management and other related business services. The
two parties will equally share the operating profit. As of December 31, 1999,
Tjvan.com had 8,300 dial-up subscribers with 50% of these being corporate users.
The number of subscribers nearly tripled in 6 months. Tianjin city has an
estimated 400,000 PC users with 30,000 Internet subscribers.
Acquisition of Brainninfo.com in Shenyang
Qinnet Beijing has entered into a joint venture agreement with Shenyang Brainn
Information Co., Ltd. ("Braininfo.com") to establish a joint venture company to
accelerate Brainninfo.com's Internet business development. Qinnet Beijing now
owns the controlling interest in the joint venture company, called Shenyang
Qinnet-Brainn Information Technologies Company Ltd. The business plan for this
joint venture is to: (1) add equipment to expand its service capacity to serve
over 2,000 corporate/individual subscribers; (2) construct 50 data information
stations across the City of Shenyang; and (3) jointly establish the e-book
online service to become the first online book sales web site in the Liaoning
Province.
Brainninfo.com is connected to Jitong (China GBNet) and comprises customer
service, research & development, web design, technical support and international
business staff. All key staff are university graduates with Bachelor, Masters or
Ph.D. degrees. In one year Brainninfo.com developed over 20 web sites and
e-commerce models including the following:
Liaoning Food Web (www.infood.org),
Liaoning Consumer Association Web (www.ln315.org.cn)
China Art & Handcraft Web (www.netdragon.com.cn)
Liaoning Education Publishers Web (www.edupress.com)
Shenyang Electronics Street Information Web (www.brainninfo.com)
The major web sites developed are Liaoning Food Web and Shenyang Electronics
Street Information Web, as well as a "Web City" (under development and partially
in use) which publishes the latest information on real estate in Shenyang. The
Shenyang Electronics Street Information Web publishes the latest prices of
computer hardware and software daily for 3,500 computer stores along the
"Electronics Street" in Shenyang. Other web sites under development include
job-hunting and housing information.
Brainninfo.com is currently negotiating with the largest book publishing house
in the Northeast of China to establish an online book sales operation.
Brainninfo.com has also developed and patented software for online bookstores
which can be sold to any bookstore that wants to go on-line.
<PAGE>
Greater Shenyang is one of the largest cities in China with a population over 10
million. It is the capital of Liaoning province, the industrial and hi-tech
center of Northeast China. Greater Shenyang includes 7 large cities with over
million people each located in close proximity to each other (Fushun, Fuxin,
Dalian, Yingkou, Anshan, and Benxi).
Acquisition of Beijing IT Consulting Co., Ltd. in Beijing
Qinnet Beijing has entered into an agreement to acquire Beijing IT Consulting
Co., Ltd. ("BITC"). BITC created two web sites a year ago. These two web sites,
www.cheyou.com ("cheyou" in Chinese means "Friends of Automobiles") and
www.xinxi.net ("xinxi" in Chinese means "Information"), were designed to provide
services for over 1,000 registered corporate customers and receive over 20,000
page views per day in the Chinese auto industry and the general public.
Since Qinnet Beijing is also headquartered in Beijing, Qinnet Beijing and BITC
have agreed to merge the two operations in one at the BQET's locations at Suite
630, Anhua Building, Anwai St., Beijing.
Additional Financing Required
Qinnet Holdings will require additional equity financing in order to achieve its
stated plan of operations. The business plan of Qinnet Holdings may differ from
the stated plan of operations. Qinnet Holdings may decide not to pursue the
stated plan of operations. In addition, the Qinnet Holdings may modify the
stated plan of operations based on the available amount of financing in the
event that Qinnet Holdings cannot achieve the required equity financings to
complete the stated plan of operations. Qinnet Holdings does not have any
arrangement in place for any debt or equity financing which would enable Qinnet
Holdings to meet the stated plan of operations.
The Registrant believes the above statements may be forward-looking statements.
Actual results and the actual plan of operations may differ materially from what
is stated above. Factors which may cause the actual results of the Registrant or
its actual plan of operations to vary include, among other things, decisions of
the board of directors not to pursue a specific course of action based on its
re-assessment of the facts or new facts, changes in the Internet business or
general economic conditions and those other factors identified herein.
Competition
While at least several hundred ISP's were established in the mid 1990's, only a
few today can claim any meaningful level of subscribers. No major entity has
emerged as a nationwide, unified provider of ISP and ICP services. China
Telecom, via its ChinaNet 163 and 169 services, dominates the ISP market. The
term "ChinaNet" does not describe a single ISP, with one management or ownership
structure. ChinaNet is in fact an umbrella brand used by a family of ISP's owned
and operated by the provincial telecom authorities ("PTA's"). These ISP's have
traditionally acted as autonomous and un-coordinated operating units that has
limited the effectiveness of ChinaNet's nationwide capabilities. The biggest
obstacle to the offering of a coordinated and consistent "ChinaNet" ISP service
is not capital or bandwidth, but the lack of a customer service orientation,
inadequate management resources and an inefficient and unreliable billing and
clearing system. The ChinaNet brand is still immature and it is not clear that
it will ever develop into a real brand name for ISP service.
<PAGE>
In early 1999, several leading, independent ISP's signed up as resellers of
ChinaNet services. These ISP's (including China Online, Infohighway and Homeway)
have effectively given up in their attempts to operate separately in competition
against China Telecom.
In early 2000, Singapore's Pacific Internet (Nasdaq: PCNTF) announced a JV with
Thakral Corporation to offer technical, marketing and management services to
licensed Chinese ISP's. Pacific Internet has ISP interests in Singapore, India,
Thailand the Philippines. Its investment in China is evidence that interest in
the Chinese ISP market is increasing significantly.
No single ISP has emerged in China as a leading, nationwide ISP service. This
has been due to numerous factors including lack of capital, lack of skilled
management resources and the cost disadvantages imposed by China Telecom.
Government Regulation
Overall regulation of the Internet in China is unclear, a situation which has
been exacerbated by the number of (government) players seeking to exert control
over this fast growing sector. Prior to the creation of the Ministry of Industry
and Information (MII) in March 1999, the Ministry of Post and Telecommunications
plus various provincial government authorities were responsible for the granting
of ISP licenses. These licenses were granted in the early to mid 1990's and
usually had a 5 year duration. With this 5 year period starting to expire, many
ISP's now are required to go to their respective Bureau of Industry and
Information for renewal and extension. Whilst there is no clear framework
established under the MII system, ISPs may receive new 5 year licenses upon
application.
Among other things, the recently created MII is responsible for:
>> Setting upper limits on the access charges which ISPs can charge consumers;
>> Establishing the DDN charges ISPs must pay to China Telecom; >> Establishing
the framework in which China Telecom's regulated monopoly is to be disbanded; >>
Enhancing the level of local competition in China's telecommunications industry.
ISPs and portal sites serving the mainland China market need to ensure that
content provided on the net meets certain government requirements - the
authorities do not tolerate sites that promote pornography or are deemed
anti-government in any manner whatsoever.
<PAGE>
DESCRIPTION OF PROPERTY
Qinnet does not own any real property. Qinnet is currently in the process of
establishing its head office in Glendale, California. Qinnet anticipates
entering into a lease agreement upon Qinnet finding acceptable premises on
agreeable terms.
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following information sets forth the names of the officers and directors of
Qinnet, their present positions with Qinnet, and their biographical information.
Name Age Office(s) Held
- ---- --- ----------------
Weiguo Lang 41 Director and President
Scott Houghton 31 Director, Secretary and Treasurer
Dr. Weiguo Lang was appointed as President and a director of Qinnet on October
26, 1999. In 1997, Dr. Lang established his first Internet service provider
operation in Chengdu, the capital of Sichuan Province, which was one of very few
earliest Internet service provider operations in China. Since then, Dr. Lang has
pursued and researched various Internet opportunities in China. From 1995 to
1998, Dr. Lang was President of Agro International, a publicly-listed Canadian
company. From 1993 thru 1994, he was a senior consultant for International
Business for the Canadian International Trade & Development Corporation. Prior
to moving to Canada to further his education, Dr. Lang was a division manager in
Heilongjiang Province, China from 1984 - 1987. Dr. Lang received M.Sc. and Ph.D.
degrees in Engineering from Canada and a B.Sc. degree from China. Most of his
work was related to computer programming and mathematical modeling and
simulation. Dr. Lang speaks fluent mandarin and resides in both China and
Canada.
Scott Houghton was appointed as Secretary and Treasurer and a director of Qinnet
on October 26, 1999. Mr. Houghton holds a Mechanical Engineering degree from the
University of New Brunswick. Mr. Houghton spent from 1995 to 1998 employed by
Turbodyne Technologies Inc. as their head of corporate and investor relations.
Previous to this, Mr. Houghton worked in the engineering and manufacturing
divisions of Spar Aerospace Ltd., where he was responsible for the design and
manufacture of several communications satellites. Mr. Houghton is a director of
Four Crown Foods Inc., a Canadian federal corporation which is a reporting
issuer under the Securities Exchange Act of 1934. Mr. Houghton has worked with
the Four Crown Foods since 1999.
<PAGE>
<TABLE>
<CAPTION>
Terms of Office
Directors of Qinnet are appointed for one year terms to hold office until the
next annual general meeting of the holders of Qinnet's Common Stock or until
removed from office in accordance with Qinnet's by-laws. Officers of Qinnet are
appointed by Qinnet's board of directors and hold office until removed by
Qinnet's board of directors.
REMUNERATION OF OFFICERS AND DIRECTORS
The following table sets forth certain information as to Qinnet's highest paid
officers and directors for its first fiscal year ended December 31, 1999. No
other compensation was paid or will be paid to any such officers or directors
other than the cash compensation set forth above under this Item 6 "Business -
Employees".
Summary Compensation Table
Name of Individual or Capacities in which Aggregate
Identity of Group Remuneration was Received Remuneration
Weiguo Lang Director and President NIL
Scott Houghton Director and Secretary NIL
Treasurer
Officers and Directors Directors and Officers NIL
of Qinnet as a Group
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS
The following table sets forth, as of April 13, 2000, the beneficial ownership
of Qinnet's Common Stock by each officer and director of Qinnet, by each person
known by Qinnet to beneficially own more than 5% of Qinnet's Common Stock
outstanding and by the officers and directors of Qinnet as a group. Except as
otherwise indicated, all shares are owned directly.
Name and address Number of Shares Percentage of
Title of class of beneficial owner of Common Stock Common Stock(1)
<S> <C> <C> <C>
Common Stock Weiguo Lang 1,032,000 79.4
Director and President
Suite B, 2889 152 Ave. N.E.
Redmond, WA 98052
Common Stock Scott Houghton NIL 0.0%
Director, Secretary
and Treasurer
Suite 201, 701 West Pender St.
Vancouver, British Columbia
Common Stock All Officers and Directors 1,032,000 79.4%
as a Group (2 persons)
</TABLE>
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(1) Based on 1,300,497 shares of Common Stock of Qinnet issued and outstanding
on April 13, 2000.
<PAGE>
Interest of Management and Others in Certain Transactions
Except as disclosed below, none of the following persons has any direct or
indirect material interest in any transaction to which Qinnet is a party since
the incorporation of Qinnet during the past two years or in any proposed
transaction to which Qinnet is proposed to be a party:
(A) any director or officer of Qinnet;
(B) any proposed nominee for election as a director of Qinnet;
(C) any person who beneficially owns, directly or indirectly,
shares carrying more than 10% of the voting rights attached to
Qinnet's Common Stock; or
(D) any relative or spouse of any of the foregoing persons, or any
relative of such spouse, who has the same house as such person
or who is a director or officer of any parent or subsidiary of
Qinnet.
Qinnet has entered into the Merger Agreement with Qinnet Holdings. Each of Mr.
Weiguo Lang, the President and a director of Qinnet, and Mr. Scott Houghton,
Secretary and Treasurer and a director of Qinnet, is an officer and a director
of Qinnet Holdings. Mr. Lang does not own any of the shares of Qinnet Holdings.
Mr. Houghton does not own any of the shares of Qinnet Holdings.
COMMON STOCK OF QINNET
Under Qinnet's Certificate of Incorporation, the total number of shares of all
classes of stock that Qinnet shall have authority to issue is 50,000,000 shares
of common stock, par value $0.00001 per share (the " Common Stock"). As of April
13, 2000, a total of 1,300,497 shares of Common Stock are issued and
outstanding.
Common Stock
Holders of Common Stock have the right to cast one vote for each share held of
record on all matters submitted to a vote of holders of Common Stock, other than
votes for the election of directors. Holders of one percent (1%) of the capital
stock issued and outstanding and entitled to vote, represented in person or by
proxy, are necessary to constitute a quorum at any meeting of Qinnet's
stockholders. The vote by the holders of a majority of such outstanding shares
is required to effect certain fundamental corporate changes such as liquidation,
merger or amendment of Qinnet's Certificate of Incorporation.
Holders of Common Stock are entitled to receive dividends pro rata based on the
number of shares held, when, as and if declared by the Board of Directors, from
funds legally available therefor. In the event of the liquidation, dissolution
or winding up of the affairs of Qinnet, all assets and funds of Qinnet remaining
after the payment of all debts and other liabilities shall be distributed, pro
rata, among the holders of the Common Stock. Holders of Common Stock are not
entitled to pre-emptive or subscription or conversion rights, and there are no
redemption or sinking fund provisions applicable to the Common Stock.
<PAGE>
Share Purchase Warrants
Qinnet has not issued and does not have outstanding any warrants to purchase
shares of the Common Stock.
Options
Qinnet has issued a total of 187,000 options to purchase shares of the Common
Stock to its directors, officers and permitted consultants. Each outstanding
option is exercisable at a price of $13.00 per share. The options have been
granted by Qinnet pursuant to Qinnet's incentive stock option plan.
Convertible Securities
Qinnet has not issued and does not have outstanding any securities convertible
into shares of Common Stock or any rights convertible or exchangeable into
shares of Common Stock
Transfer Agent
Securities Transfer Corporation of Dallas, Texas is the transfer agent for the
Shares.
Market Price of and Dividends on the Registrant's Common Equity and Other
Stockholder Matters
Qinnet's Common Stock is traded on the OTC Bulletin Board under the symbol
"QNNTE". The first day in which Qinnet's shares traded was January 12, 2000. The
high and the low bid prices for Qinnet's shares for each quarter of actual
trading were:
Quarter High Low
January 12, 2000 to $17.125 $9.17
March 31, 2000
April 1, 2000 to $13.50 $12.63
April 13, 2000
The quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
As of April 13, 2000, there were 703 registered shareholders of Qinnet.
None of the holders of Qinnet's Common Stock have any right to require Qinnet to
register any shares of Qinnet's Common Stock pursuant to the 1933 Act. Qinnet
anticipates registering the shares to be issued upon completion of the Merger
Agreement by the filing of a Form S-4 registration statement under the Act.
Qinnet has not declared any dividends on its Common Stock since its inception.
There are no dividend restrictions that limit Qinnet's ability to pay dividends
on Common Stock in Qinnet's Certificate of Incorporation or By-Laws.
Legal Proceedings
Qinnet is not currently a party to any legal proceedings.
Changes in and Disagreements with Accountants
None.
Recent Sales of Unregistered Securities
Qinnet completed the issuance of 50,000 shares of its common stock to Halter
Capital Corporation on completion of the Reorganization Agreement. These shares
were issued pursuant to Section 4(2) of the Act on April 13, 2000.
<PAGE>
Qinnet has granted options to purchase a total of 187,000 shares of Common Stock
to its officers, directors, employees and permitted consultants pursuant to
Qinnet's incentive stock option plan. Each option is exercisable at a price of
$13.00 per share. The options were granted pursuant to Rule 701 of the Act.
Qinnet has not issued any other securities during the past three years.
Indemnification of Directors and Officers
The officers and directors of Qinnet are indemnified as provided under the
Delaware General Corporation Law and the Bylaws of Qinnet.
The By-laws of Qinnet provide that Qinnet will indemnify its directors and
officers to the fullest extent not prohibited by the Delaware General
Corporation Law; provided, however, that Qinnet may modify the extent of such
indemnification by individual contracts with its directors and officers; and,
provided, further, that Qinnet shall not be required to indemnify any director
or officer in connection with any proceeding (or part thereof) initiated by such
person unless (i) such indemnification is expressly required to be made by law,
(ii) the proceeding was authorized by the Board of Directors of Qinnet, (iii)
such indemnification is provided by Qinnet, in its sole discretion, pursuant to
the powers vested in Qinnet under the Nevada General Company Law or (iv) such
indemnification is required to be made pursuant to the By-laws.
The By-laws of Qinnet provide that Qinnet will advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer, of
Qinnet, or is or was serving at the request of Qinnet as a director or executive
officer of another Company, partnership, joint venture, trust or other
enterprise, prior to the final disposition of the proceeding, promptly following
request therefor, all expenses incurred by any director or officer in connection
with such proceeding upon receipt of an undertaking by or on behalf of such
person to repay said amounts if it should be determined ultimately that such
person is not entitled to be indemnified under the By-laws of Qinnet or
otherwise.
The By-laws of Qinnet provide that no advance shall be made by Qinnet to an
officer of Qinnet (except by reason of the fact that such officer is or was a
director of Qinnet in which event this paragraph shall not apply) in any action,
suit or proceeding, whether civil, criminal, administrative or investigative, if
a determination is reasonably and promptly made (i) by the Board of Directors by
a majority vote of a quorum consisting of directors who were not parties to the
proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, that the facts known to the decision-making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of Qinnet.
<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and the other information in this
Form 8-K and any other filings we may make with the United States Securities and
Exchange Commission in the future before investing in our common stock. If any
of the following risks occur, or if others occur, our business, operating
results and financial condition could be seriously harmed. The trading price of
our common stock could decline due to any of these risks, and you may lose all
or part of your investment.
RISKS RELATED TO OUR FINANCIAL CONDITION AND BUSINESS MODEL
AS WE HAVE ONLY RECENTLY COMMENCED BUSINESS OPERATIONS, WE FACE A HIGH RISK OF
BUSINESS FAILURE
Qinnet Holdings commenced business operations in 1999. We are presently in the
process of establishing our Internet service provider operations. Accordingly,
we have only a limited operating history for you to evaluate our business. You
must consider the risks, expenses and uncertainties that an early stage company
like ours faces. These risks include our ability to: (i) compete acquisitions of
Internet service provider business in China; (ii) attract the Chinese community
to use our Internet service provider operations; (iii) enter into agreements
with telecommunication providers in China to enable us to provide Internet
service provider operations; and (iv) respond effectively to competitive
pressures. If we are unsuccessful in addressing these risks, our business,
financial condition and results of operations will be materially and adversely
affected and our business may fail.
AS WE HAVE NEVER MADE MONEY, WE EXPECT OUR LOSSES TO CONTINUE
We have never been profitable. We expect to continue to incur significant losses
for the foreseeable future as we will incur increased operating expenses while
we complete development of our Internet service provider operations prior to
realizing any revenues from our operations. If we are not able to generate
significant revenues from our Internet service provider operations, then we may
not be able to achieve profitability.
IF WE ARE NOT BE ABLE TO OBTAIN SUFFICIENT FUNDS TO ESTABLISH OUR BUSINESS, THEN
OUR BUSINESS MAY FAIL
Our business plan calls for increased expenses associated with the development
and marketing of our Internet service provider operations. We anticipate that
revenues from operations will initially not be sufficient to cover these
expenses. Accordingly, we will likely have substantial future capital
requirements after this offering. There is no assurance that we will be able to
<PAGE>
obtain additional financing. Obtaining additional financing will be subject to a
number of factors, including: (i) market conditions; (ii) our operating
performance; and (iii) investor sentiment. These factors may make the timing,
amount, terms and conditions of additional financing unattractive for us. If we
are unable to raise additional capital, we may not be able to implement our
business plan and our business may fail.
RISKS RELATED TO OUR MARKETS AND STRATEGY
IF THE INTERNET IS NOT WIDELY ACCEPTED, OUR BUSINESS WILL SUFFER
We expect to derive a portion of our revenue for the foreseeable future from
Internet service provider revenues, and to a lesser extent, from electronic
commerce. Electronic commerce and the Internet are new and rapidly evolving
markets, particularly in developing nations such as China. If the Internet is
not accepted in China, our business will suffer.
OUR BUSINESS OPERATIONS MAY BE ADVERSELY AFFECTED BY SOCIAL AND POLITICAL
CONDITIONS IN CHINA
We expect to establish our Internet service provider operations in China and to
derive a substantial portion of our revenues from the domestic Chinese market.
Social and political conditions in China may be more volatile than in developed
countries. This volatility may cause our operations to fluctuate. This
volatility could make it difficult for our business to grow, which could have an
adverse effect on our stock price. Historically, volatility has been caused by:
(i) significant governmental influence over many aspects of telecommunication
industry; (ii) political uncertainty; (iii) unexpected changes in regulatory
requirements; (iv) slow or negative growth; (v) imposition of trade barriers. We
have no control over these matters. Volatility resulting from these matters may
decrease our ability to expand our Internet service provider operations in
China, adversely affect Internet availability to Chinese consumers, create
uncertainty regarding our operating climate and adversely affect our customers'
advertising budgets, all of which may adversely impact our business.
IF THE CHINESE CURRENCY DEPRECIATES RELATIVE TO THE U.S. DOLLAR, THEN OUR
REVENUES MAY DECLINE
Our reporting currency is the U.S. dollar. We anticipate that our revenues from
operations within China will be earned in Chinese currency. Our revenues from
domestic Chinese customers will decline in value if the Chinese currency
depreciates relative to the U.S. dollar. Accordingly, our revenues may decrease
if the Chinese currency depreciates relative to the U.S. dollar, with the result
that our business operations and financial condition may be harmed.
<PAGE>
IF INTERNET USE IN CHINA DOES NOT GROW, OUR BUSINESS WILL SUFFER
The Internet market in China is in an early stage of development. Our future
success depends on the continued growth of the Internet in China. In addition,
our future success depends on the number of Chinese consumers accepting and
using the Internet increasing. Our business, financial condition and results of
operations will be materially and adversely affected if Internet usage by
resident Chinese does not continue to grow or grows more slowly than we
anticipate. Internet usage in these markets may be inhibited for a number of
reasons, including: (i) the cost of Internet access; (ii) the availability of
telecommunications infrastructure; (iii) ease of use and language barriers; and
(iv) quality of service.
UNDERDEVELOPED TELECOMMUNICATIONS INFRASTRUCTURE MAY LIMIT THE GROWTH OF THE
INTERNET IN CHINA AND ADVERSELY AFFECT OUR BUSINESS
Access to the Internet requires a relatively advanced telecommunications
infrastructure. The telecommunications infrastructure in many parts of China is
not as well-developed as in the United States or Europe. The quality and
continued development of the telecommunications infrastructure in China will
have a substantial impact on our ability to deliver our services and on the
market acceptance of the Internet in China in general. If further improvements
to the Chinese telecommunications infrastructure are not made, the Internet will
not gain broad market acceptance in China. If access to the Internet in China
does not continue to grow or grows more slowly than we anticipate, our business,
financial condition and results of operations will be materially and adversely
affected.
IF WE ARE NOT ABLE TO EFFECTIVELY MANAGE OUR EXPANDING OPERATIONS, THEN OUR
BUSINESS WILL BE HARMED
Our business plan anticipates that our business operations will undergo
significant expansion as we establish our Internet service provider operations.
This expansion will require that we hire additional personnel and establish
offices in locations within China. We anticipate that this growth will place a
significant strain on our managerial, operational and financial resources. To
accommodate this growth, we must successfully find and train additional
employees, acquire and implement new computer hardware and software systems and
establish new offices. We may not succeed with these efforts. Our failure to
expand in an efficient manner could cause our expenses to be greater than
anticipated, our revenues to grow more slowly than expected and could otherwise
have a material adverse effect on our business, financial condition and results
of operations.
IF WE ARE UNABLE TO HIRE AND RETAIN KEY PERSONNEL THAT ARE IN HIGH DEMAND, THEN
WE MAY NOT BE ABLE TO IMPLEMENT OUR BUSINESS PLAN AND OUR BUSINESS WILL SUFFER
<PAGE>
We depend on the services of our senior management and key technical personnel.
Our inability to attract and hire technical personnel could have a material
adverse effect on our business, financial condition and results of operations.
In addition, our success is largely dependent on our ability to hire highly
qualified managerial, sales and technical personnel. These individuals are in
high demand and we may not be able to attract the staff we need.
IF WE ARE NOT ABLE TO COMPETE EFFECTIVELY AGAINST OUR COMPETITORS, THEN WE MAY
NOT BE ABLE TO ACHIEVE MARKET ACCEPTANCE AND OUR BUSINESS MAY BE HARMED
There are many companies that provide Internet service provider operations in
China. Competition is intense and is expected to increase significantly in the
future because there of the potential rewards of establishing successful
Internet service provider operations in China. Competition could materially and
adversely affect our business, financial condition and results of operations. In
addition, our competitors may develop competing Internet service provider
operations that achieve greater market acceptance. It is also possible that new
competitors may emerge and acquire significant market share. Our inability to
respond to competition will have a material and adverse effect on our business,
financial condition and results of operations.
RISKS RELATED TO THE INTERNET AND OUR TECHNOLOGY INFRASTRUCTURE
IF WE EXPERIENCE UNEXPECTED NETWORK INTERRUPTIONS CAUSED BY SYSTEM FAILURES,
THEN WE MAY EXPERIENCE REDUCED VISITOR TRAFFIC, REDUCED REVENUE AND HARM TO OUR
REPUTATION
Once we commence operations, our business operations will depend on the
continued, uninterrupted operation of the computer systems and networks that
will operate our Web sites. These computer systems and networks are vulnerable
to disruptions, such as system crashes, that could cause our Web sites to cease
operation. If we experience delays and interruptions, we may lose customers with
the result that we could experience a delay in achieving revenues or a decrease
in revenues. We plan to maintain our computer servers in China and we will rely
on telecommunication systems in China for the operation and use of our Web
sites. If we fail to protect our systems against damage from fire, hurricanes,
power loss, telecommunications failure, break-ins or other events, disruptions
to our Internet service provider operations could have a material adverse effect
on our business, financial condition and results of operations.
RISKS RELATED TO LEGAL UNCERTAINTY
WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATIONS AND LEGAL
UNCERTAINTIES AFFECTING THE INTERNET WHICH COULD ADVERSELY AFFECT OUR BUSINESS
<PAGE>
Government regulation could slow the growth of the Internet in China. This could
delay growth in demand for our Internet service operations and limit the growth
of our revenues.
OUR STOCK PRICE MAY BE VOLATILE.
We anticipate that the market price of our common stock may be subject to wide
fluctuations in response to several factors, such as:
1. actual or anticipated variations in our results of operations;
2. our ability or inability to generate new revenues;
3. increased competition; and
4. conditions and trends in the Internet and electronic commerce industries.
Further, we anticipate that our common stock may be traded on the Nasdaq OTC
Bulletin Board. Companies traded on the OTC Bulletin Board have traditionally
experienced extreme price and volume fluctuations. There is no assurance that
our common stock will continue to be traded on the OTC Bulletin Board. If our
common stock is traded on the OTC Bulletin Board, our stock price may be
adversely impacted by factors that are unrelated or disproportionate to our
operating performance. The trading prices of many technology companies' stocks
are at or near historical highs and reflect price earnings ratios substantially
above historical levels. These market fluctuations, as well as general economic,
political and market conditions, such as recessions, interest rates or
international currency fluctuations may adversely affect the market price of our
common stock.
IF OUR STOCK PRICE IS VOLATILE, WE MAY BECOME SUBJECT TO SECURITIES LITIGATION
WHICH IS EXPENSIVE AND COULD RESULT IN A DIVERSION OF RESOURCES
In the past, following periods of volatility in the market price of a particular
company's securities, securities class action litigation has often been brought
against that company. Many companies in our industry have been subject to this
type of litigation in the past. We may also become involved in this type of
litigation. Litigation is often expensive and diverts management's attention and
resources, which could have a material adverse effect upon our business,
financial condition and results of operations.
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Not Applicable.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
Successor Issuer Election.
Pursuant to Rule 12g-3(a) of the General Rules and Regulations of the Securities
and Exchange Commission, upon effectiveness of the Agreement, Qinnet became the
successor issuer to Internet Corporation of America, Inc. for reporting purposes
under the Securities Exchange Act of 1934 and elects to report under the Act
effective April 13, 2000.
ITEM 6. RESIGNATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
Pursuant to the terms of the aforementioned Agreement, the Registrant has
accepted the resignation of Kevin Halter Jr., as the Registrant's Director and
Officer as of April 13, 2000.
ITEM 7. FINANCIAL STATEMENTS
Audited financial statements for each of Qinnet.com, Inc. and Internet
Corporation of America, Inc. are filed herewith as follows:
1. Audited financial statements for Qinnet.com, Inc. for the periods ending
March 31, 2000, December 31, 1999 and December 31, 1998
(a) Balance Sheet;
(b) Statement of Operations and Comprehensive Income;
(c) Statement of Changes in Stockholders' Equity;
(d) Statement of Cash Flows;
(e) Notes to Financial Statements.
<PAGE>
2. Unaudited financial statements for Qinnet.com, Inc. for the three months
ending March 31, 2000 and March 31, 1999
(a) Balance Sheet;
(b) Statement of Operations and Comprehensive Income;
(c) Statement of Cash Flows;
(d) Notes to Financial Statements.
3. Audited financial statements for Internet Corporation of America, Inc. for
the periods ending December 31, 1999 and December 31, 1998
(a) Balance Sheet;
(b) Statement of Operations and Comprehensive Income;
(c) Statement of Changes in Stockholders' Equity;
(d) Statement of Cash Flows;
(e) Notes to Financial Statements.
4. Unaudited financial statements for Internet Corporation of America, Inc.. for
the three months ending March 31, 2000 and March 31, 1999
(a) Balance Sheet;
(b) Statement of Operations and Comprehensive Income;
(c) Statement of Cash Flows;
(d) Notes to Financial Statements.
5. Pro Forma financial statements showing the pro forma combination of Qinnet
and the Registrant are also filed with the financial statements.
ITEM 8. CHANGE IN FISCAL YEAR
Qinnet has a December 31 fiscal year end. The fiscal year of the Registrant is
December 31. Qinnet will file a Transitional Report on Form 10-QSB, if required.
<PAGE>
EXHIBITS
2.1 Agreement and Plan of Reorganization between Qinnet.com, Inc. and
Internet Corporation of America, Inc., dated April 11, 2000.
2.2 Merger Agreement between Qinnet.com, Inc. and Qinnet Holdings Corp.
dated January 12, 2000.
3.1 Certificate of Incorporation of Specialistics Inc.
3.2 Certificate for Renewal and Revival of Certificate of Incorporation.
3.3 Certificate of Amendment to Certificate of Incorporation changing the
Corporation's name from "Specialistics Inc." to "Eastern Group
International Co., Ltd."
3.4 Certificate of Amendment of Certificate of Incorporation changing the
Corporation's name from "Eastern Group International Co., Ltd." to
"TeleSpace Limited".
3.5 Certificate of Amendment of Certificate of Incorporation amending
Article 5.
3.6 Certificate of Amendment of Certificate of Incorporation amending
Article IV.
3.7 Certificate of Amendment of Certificate of Incorporation changing the
Corporation's name from "TeleSpace Limited" to "qinnet.com, Inc."
3.8 By-Laws of Qinnet, as amended.
24.1 Consent of accountants
27.1 Financial Data Schedule for Internet Corporation of America, Inc.
99.1 Financials for Internet Corporation of America, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
By: /s/ Scott Houghton
- ----------------------
Scott Houghton
Director, Secretary and Treasurer
Date: April 14, 2000
AGREEMENT AND PLAN OF REORGANIZATION
On April 13, 2000, a change in control of the Registrant occurred in conjunction
with closing under an Agreement and Plan of Reorganization (the "Reorganization
Agreement") between the Registrant and Qinnet.Com, Inc. ("Qinnet"), a Delaware
corporation.
The closing under the Reorganization Agreement consisted of a cash and stock for
stock exchange in which Qinnet acquired all of the issued and outstanding common
stock of the Registrant in exchange for the payment of $50,000 and the issuance
of 50,000 shares of its common stock. As a result of this transaction, the
Registrant became a wholly-owned subsidiary of Qinnet.
The Reorganization was approved by the unanimous consent of the Board of
Directors of Qinnet on March 11, 2000. The Reorganization is intended to qualify
as a reorganization within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended.
Prior to the Agreement, Qinnet had 1,250,497 shares of common stock issued and
outstanding. Following the Agreement, Qinnet had 1,300,497 shares of common
stock outstanding. Qinnet, formerly known as Telespace Ltd., was incorporated in
the State of Delaware on May 31, 1989.
Upon effectiveness of the Reorganization Agreement, pursuant to Rule 12g-3(a) of
the General Rules and Regulations of the Securities and Exchange Commission,
Qinnet became the successor issuer to Internet Corporation of America, Inc. for
reporting purposes under the Securities Exchange Act of 1934 and elects to
report under the Act effective March 21, 2000.
A copy of the Reorganization Agreement is filed as an exhibit to this Form 8-K
and is incorporated in its entirety herein. The foregoing description is
qualified by reference to the full text of the Reorganization Agreement.
QINNET CORPORATE ORGANIZATION
Qinnet is a Delaware corporation that was incorporated on May 31, 1989.
Merger Agreement
Qinnet entered into a merger agreement with Qinnet Holdings Corp. ("Qinnet
Holdings") on January 12, 2000 (the "Merger Agreement"). Qinnet Holdings Corp.
is a Washington corporation that was incorporated in June, 1999. The Merger
Agreement contemplates the merger of Qinnet and Qinnet Holdings (the "Merger").
<PAGE>
The Merger Agreement contemplates that Qinnet will issue one share of Qinnet
common stock for each share of Qinnet Holdings common stock upon completion of
the Merger. Qinnet plans to file a Form S-4 registration statement with the
Securities and Exchange Commission under the Securities Act of 1933 (the "Act")
in order to qualify the issue of the Qinnet common stock to the shareholders of
Qinnet Holdings. The closing of the Merger will be subject to approval by the
shareholders of Qinnet and Qinnet Holdings. As of April 13, 2000, there are a
total of 13,109,100 shares of Qinnet Holdings outstanding. Accordingly, Qinnet
will issue a total of 13,109,100 shares of Qinnet common stock upon completion
of the Merger.
A copy of the Merger Agreement is filed as an exhibit to this Form 8-K and is
incorporated in its entirety herein. The foregoing description is qualified by
reference to the full text of the Merger Agreement.
Beijing QinNet Electronic Technologies Co., Ltd. ("Qinnet Beijing")
The business activities of Qinnet Holdings are carried out in China by Beijing
QinNet Electronic Technologies Co., Ltd. ("Qinnet Beijing"), a wholly owned
subsidiary of Qinnet Holdings. Upon completion of the Merger, Qinnet Beijing
will become a subsidiary of Qinnet.
BUSINESS PLAN OF QINNET HOLDINGS
Qinnet Holding's business plan is to acquire and establish Internet Service
Providers ("ISPs") and Internet Content Providers ("ICPs") within China. The
business objective of Qinnet Holdings is to provide full Internet, electronic
business and electronic commerce solutions to government entities, private
enterprises and individuals in the various provinces of China. The goal is to
achieve exposure, critical mass and scale to the high growth potential of this
huge, but largely untapped market. China is considered one of the fastest
growing markets for the Internet in the world. Qinnet Holdings plans to assemble
a management team that has significant Chinese and North American information
technology and business experience in order to implement its business plan.
Qinnet Holdings plans to develop its "www.qinnet.com" Internet web site in
connection with the expansion of its Qinnet.com business.
Industry Background - Use of the Internet in China
China has embraced the computer/Internet phenomenon. China has the potential to
become one of the world's largest markets for Internet and related services as
China seeks to catch up with the rest of the industrialized world. Analysts
predict China will have between 10 to 13 million Internet users by 2001 and 33
million users by 2003.
The Chinese government recognizes the Internet to be a powerful tool in which to
improve China's overall economic competitiveness. There are over 15,000
national-level companies in China which have greater than 1,000 employees and
thousands of medium and small companies with more than 100 employees. These
entities, plus government ministries and departments at the local and national
level, will require access to the web in the very near future.
<PAGE>
Factors driving the growth of China's Internet market include:
>> The rapidly increasing number of installed telephone lines; >> Declining
access costs making Internet use more affordable; >> High growth rates in the
sales of personal computer's and modems; >> The introduction of new access
mediums (e.g. set top boxes on television's); >> Greater availability of local,
Chinese content; and
>> The government's recognition that the Internet and electronic commerce spur
economic growth.
PLAN OF OPERATIONS AND BUSINESS ACQUISITIONS
Qinnet Holdings plans to implement its business plan in three overlapping phases
through its subsidiary, Qinnet Beijing:
Phase One - Acquisition of Tjvan, Brainn and Beijing IT
Qinnet Beijing has entered into three arrangements for the acquisition of ISP
and ICP businesses in China - tjvan.net (Tianjin), brainninfo.com (Shenyang) and
Beijing IT Consulting (Beijing), each of which is discussed below. These three
businesses are within relatively close proximity to Beijing, and are the
foundation for Qinnet Holdings' expansion plans. These operations have varying
strengths in ISP and ICP operations. All are characterized by founders and
management who are motivated by the qinnet.com strategy, who have achieved
relative success in their individual operations to-date and are located in
cities which are likely to see high Internet growth. Qinnet Beijing will acquire
70% of each operation through a local JV and provide capital, technology and
management skill for expansion. Each of the three operations have additional
management to add to Qinnet Beijing's existing Chinese management capability.
Phase Two - Business Expansion & Integration
Phase Two of the business strategy is to acquire an additional six to eight ISP
and ICP business across China by mid 2000. Key target criteria for business to
be acquired will be locations with large populations, Internet growth potential
and good quality JV partners with strong local connections. Examples include
Shanghai, Guangzhou, and Shenzhen. These areas generally are located near the
coastal region, have a large number of foreign firms in operation and have a
business climate characterized by strong government support. Businesses with a
solid local ISP and ICP emphasis and strong, motivated management will be
targeted.
<PAGE>
Phase Two will also necessitate the integration of the acquisitions under the
Qinnet Beijing umbrella. Major web sites will feature elements of commonality
while ensuring local flavor and input. Qinnet Beijing should be able to benefit
from technology synergies via new hardware and software upgrades. Each
acquisition will operate under common business, technical and control parameters
established by Qinnet Beijing to monitor performance.
Phase Three - National Rollout
Qinnet Beijing plans to continue acquisitions to truly develop a nation-wide
Internet service under the qinnet.com brand name. The technical infrastructure
and management systems will have been finalized during Phase Two, allowing
Qinnet Beijing to focus on the rollout of a national IP network and the
marketing required for subscriber growth and expansion into IP services.
Planned Revenues
Qinnet Holdings plans to generate revenues from the following:
a) Dial up and leased line access to individuals and corporate customers:
b) Content related services including web hosting, web design and on-line
services.
c) Electronic commerce services.
d) IP telephony services.
e) Data communications services
Acquisition of Tjvan.com in Tianjin
In October 1999, Qinnet Beijing and Tianjin Xiandao Information Network Co.,
Ltd. ("Tjvan.com") signed an agreement to establish a joint venture company, in
which Qinnet Beijing owns 70% of the equity interest, to accelerate growth of
Tjvan.com's existing Internet and Internet related business operations. With
capital invested by Qinnet Beijing, the two have agreed to upgrade existing
equipment, add more lines and strengthen marketing development to increase the
current customer base of 8,300 to 20,000 within a year.
Qinnet Beijing has agreed to invest 3 million RMB ($360,000 US) to acquire a 70%
equity interest in Tvan.com and to finance Tjvan.com's ISP expansion. Expansion
of the partnership with China Unicom will include exclusive ISDN lines and IP
Telephony distributorship in Tianjin as well as co-operating and sharing access
to each others' web sites and customer base. The joint venture will allow Qinnet
Beijing to lever the valuable experience of Tjvan.com for future ISP operations
and acquisitions. With the capital injection, the joint venture plans to
increase the number of subscribers from 8,300 to greater than 20,000 and 40,000
within two years to become the largest ISP in Tianjin. This user base in a
single location will provide a solid foundation for Qinnet's growth.
<PAGE>
As the second largest ISP in Tianjin, Tjvan.com has established a strategic
alliance with China Unicom Tianjin for ISP dial-up operations. In this exclusive
agreement, China Unicom provides the ISP dial-up operation with new
infrastructure and DDN/ISDN lines at half price. Tjvan.com provides marketing,
customer support, network management and other related business services. The
two parties will equally share the operating profit. As of December 31, 1999,
Tjvan.com had 8,300 dial-up subscribers with 50% of these being corporate users.
The number of subscribers nearly tripled in 6 months. Tianjin city has an
estimated 400,000 PC users with 30,000 Internet subscribers.
Acquisition of Brainninfo.com in Shenyang
Qinnet Beijing has entered into a joint venture agreement with Shenyang Brainn
Information Co., Ltd. ("Braininfo.com") to establish a joint venture company to
accelerate Brainninfo.com's Internet business development. Qinnet Beijing now
owns the controlling interest in the joint venture company, called Shenyang
Qinnet-Brainn Information Technologies Company Ltd. The business plan for this
joint venture is to: (1) add equipment to expand its service capacity to serve
over 2,000 corporate/individual subscribers; (2) construct 50 data information
stations across the City of Shenyang; and (3) jointly establish the e-book
online service to become the first online book sales web site in the Liaoning
Province.
Brainninfo.com is connected to Jitong (China GBNet) and comprises customer
service, research & development, web design, technical support and international
business staff. All key staff are university graduates with Bachelor, Masters or
Ph.D. degrees. In one year Brainninfo.com developed over 20 web sites and
e-commerce models including the following:
Liaoning Food Web (www.infood.org),
Liaoning Consumer Association Web (www.ln315.org.cn)
China Art & Handcraft Web (www.netdragon.com.cn)
Liaoning Education Publishers Web (www.edupress.com)
Shenyang Electronics Street Information Web (www.brainninfo.com)
The major web sites developed are Liaoning Food Web and Shenyang Electronics
Street Information Web, as well as a "Web City" (under development and partially
in use) which publishes the latest information on real estate in Shenyang. The
Shenyang Electronics Street Information Web publishes the latest prices of
computer hardware and software daily for 3,500 computer stores along the
"Electronics Street" in Shenyang. Other web sites under development include
job-hunting and housing information.
Brainninfo.com is currently negotiating with the largest book publishing house
in the Northeast of China to establish an online book sales operation.
Brainninfo.com has also developed and patented software for online bookstores
which can be sold to any bookstore that wants to go on-line.
<PAGE>
Greater Shenyang is one of the largest cities in China with a population over 10
million. It is the capital of Liaoning province, the industrial and hi-tech
center of Northeast China. Greater Shenyang includes 7 large cities with over
million people each located in close proximity to each other (Fushun, Fuxin,
Dalian, Yingkou, Anshan, and Benxi).
Acquisition of Beijing IT Consulting Co., Ltd. in Beijing
Qinnet Beijing has entered into an agreement to acquire Beijing IT Consulting
Co., Ltd. ("BITC"). BITC created two web sites a year ago. These two web sites,
www.cheyou.com ("cheyou" in Chinese means "Friends of Automobiles") and
www.xinxi.net ("xinxi" in Chinese means "Information"), were designed to provide
services for over 1,000 registered corporate customers and receive over 20,000
page views per day in the Chinese auto industry and the general public.
Since Qinnet Beijing is also headquartered in Beijing, Qinnet Beijing and BITC
have agreed to merge the two operations in one at the BQET's locations at Suite
630, Anhua Building, Anwai St., Beijing.
Additional Financing Required
Qinnet Holdings will require additional equity financing in order to achieve its
stated plan of operations. The business plan of Qinnet Holdings may differ from
the stated plan of operations. Qinnet Holdings may decide not to pursue the
stated plan of operations. In addition, the Qinnet Holdings may modify the
stated plan of operations based on the available amount of financing in the
event that Qinnet Holdings cannot achieve the required equity financings to
complete the stated plan of operations. Qinnet Holdings does not have any
arrangement in place for any debt or equity financing which would enable Qinnet
Holdings to meet the stated plan of operations.
The Registrant believes the above statements may be forward-looking statements.
Actual results and the actual plan of operations may differ materially from what
is stated above. Factors which may cause the actual results of the Registrant or
its actual plan of operations to vary include, among other things, decisions of
the board of directors not to pursue a specific course of action based on its
re-assessment of the facts or new facts, changes in the Internet business or
general economic conditions and those other factors identified herein.
Competition
While at least several hundred ISP's were established in the mid 1990's, only a
few today can claim any meaningful level of subscribers. No major entity has
emerged as a nationwide, unified provider of ISP and ICP services. China
Telecom, via its ChinaNet 163 and 169 services, dominates the ISP market. The
term "ChinaNet" does not describe a single ISP, with one management or ownership
structure. ChinaNet is in fact an umbrella brand used by a family of ISP's owned
and operated by the provincial telecom authorities ("PTA's"). These ISP's have
traditionally acted as autonomous and un-coordinated operating units that has
limited the effectiveness of ChinaNet's nationwide capabilities. The biggest
obstacle to the offering of a coordinated and consistent "ChinaNet" ISP service
is not capital or bandwidth, but the lack of a customer service orientation,
inadequate management resources and an inefficient and unreliable billing and
clearing system. The ChinaNet brand is still immature and it is not clear that
it will ever develop into a real brand name for ISP service.
<PAGE>
In early 1999, several leading, independent ISP's signed up as resellers of
ChinaNet services. These ISP's (including China Online, Infohighway and Homeway)
have effectively given up in their attempts to operate separately in competition
against China Telecom.
In early 2000, Singapore's Pacific Internet (Nasdaq: PCNTF) announced a JV with
Thakral Corporation to offer technical, marketing and management services to
licensed Chinese ISP's. Pacific Internet has ISP interests in Singapore, India,
Thailand the Philippines. Its investment in China is evidence that interest in
the Chinese ISP market is increasing significantly.
No single ISP has emerged in China as a leading, nationwide ISP service. This
has been due to numerous factors including lack of capital, lack of skilled
management resources and the cost disadvantages imposed by China Telecom.
Government Regulation
Overall regulation of the Internet in China is unclear, a situation which has
been exacerbated by the number of (government) players seeking to exert control
over this fast growing sector. Prior to the creation of the Ministry of Industry
and Information (MII) in March 1999, the Ministry of Post and Telecommunications
plus various provincial government authorities were responsible for the granting
of ISP licenses. These licenses were granted in the early to mid 1990's and
usually had a 5 year duration. With this 5 year period starting to expire, many
ISP's now are required to go to their respective Bureau of Industry and
Information for renewal and extension. Whilst there is no clear framework
established under the MII system, ISPs may receive new 5 year licenses upon
application.
Among other things, the recently created MII is responsible for:
>> Setting upper limits on the access charges which ISPs can charge consumers;
>> Establishing the DDN charges ISPs must pay to China Telecom; >> Establishing
the framework in which China Telecom's regulated monopoly is to be disbanded; >>
Enhancing the level of local competition in China's telecommunications industry.
ISPs and portal sites serving the mainland China market need to ensure that
content provided on the net meets certain government requirements - the
authorities do not tolerate sites that promote pornography or are deemed
anti-government in any manner whatsoever.
<PAGE>
DESCRIPTION OF PROPERTY
Qinnet does not own any real property. Qinnet is currently in the process of
establishing its head office in Glendale, California. Qinnet anticipates
entering into a lease agreement upon Qinnet finding acceptable premises on
agreeable terms.
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following information sets forth the names of the officers and directors of
Qinnet, their present positions with Qinnet, and their biographical information.
Name Age Office(s) Held
- ---- --- ----------------
Weiguo Lang Director and President
Scott Houghton Director, Secretary and Treasurer
Dr. Weiguo Lang was appointed as President and a director of Qinnet on October
26, 1999. In 1997, Dr. Lang established his first Internet service provider
operation in Chengdu, the capital of Sichuan Province, which was one of very few
earliest Internet service provider operations in China. Since then, Dr. Lang has
pursued and researched various Internet opportunities in China. From 1995 to
1998, Dr. Lang was President of Agro International, a publicly-listed Canadian
company. From 1993 thru 1994, he was a senior consultant for International
Business for the Canadian International Trade & Development Corporation. Prior
to moving to Canada to further his education, Dr. Lang was a division manager in
Heilongjiang Province, China from 1984 - 1987. Dr. Lang received M.Sc. and Ph.D.
degrees in Engineering from Canada and a B.Sc. degree from China. Most of his
work was related to computer programming and mathematical modeling and
simulation. Dr. Lang speaks fluent mandarin and resides in both China and
Canada.
Scott Houghton was appointed as Secretary and Treasurer and a director of Qinnet
on October 26, 1999. Mr. Houghton holds a Mechanical Engineering degree from the
University of New Brunswick. Mr. Houghton spent from 1995 to 1998 employed by
Turbodyne Technologies Inc. as their head of corporate and investor relations.
Previous to this, Mr. Houghton worked in the engineering and manufacturing
divisions of Spar Aerospace Ltd., where he was responsible for the design and
manufacture of several communications satellites. Mr. Houghton is a director of
Four Crown Foods Inc., a Canadian federal corporation which is a reporting
issuer under the Securities Exchange Act of 1934. Mr. Houghton has worked with
the Four Crown Foods since 1999.
<PAGE>
<TABLE>
<CAPTION>
Terms of Office
Directors of Qinnet are appointed for one year terms to hold office until the
next annual general meeting of the holders of Qinnet's Common Stock or until
removed from office in accordance with Qinnet's by-laws. Officers of Qinnet are
appointed by Qinnet's board of directors and hold office until removed by
Qinnet's board of directors.
REMUNERATION OF OFFICERS AND DIRECTORS
The following table sets forth certain information as to Qinnet's highest paid
officers and directors for its first fiscal year ended December 31, 1999. No
other compensation was paid or will be paid to any such officers or directors
other than the cash compensation set forth above under this Item 6 "Business -
Employees".
Summary Compensation Table
Name of Individual or Capacities in which Aggregate
Identity of Group Remuneration was Received Remuneration
Weiguo Lang Director and President NIL
Scott Houghton Director and Secretary NIL
Treasurer
Officers and Directors Directors and Officers NIL
of Qinnet as a Group
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS
The following table sets forth, as of April 13, 2000, the beneficial ownership
of Qinnet's Common Stock by each officer and director of Qinnet, by each person
known by Qinnet to beneficially own more than 5% of Qinnet's Common Stock
outstanding and by the officers and directors of Qinnet as a group. Except as
otherwise indicated, all shares are owned directly.
Name and address Number of Shares Percentage of
Title of class of beneficial owner of Common Stock Common Stock(1)
<S> <C> <C> <C>
Common Stock Weiguo Lang 1,032,000 79.4
Director and President
Suite B, 2889 152 Ave. N.E.
Redmond, WA 98052
Common Stock Scott Houghton NIL 0.0%
Director, Secretary
and Treasurer
Suite 201, 701 West Pender St.
Vancouver, British Columbia
Common Stock All Officers and Directors 1,032,000 79.4%
as a Group (2 persons)
</TABLE>
- --------------------------------------------------------------------------------
(1) Based on 1,300,497 shares of Common Stock of Qinnet issued and outstanding
on April 13, 2000.
<PAGE>
Interest of Management and Others in Certain Transactions
Except as disclosed below, none of the following persons has any direct or
indirect material interest in any transaction to which Qinnet is a party since
the incorporation of Qinnet during the past two years or in any proposed
transaction to which Qinnet is proposed to be a party:
(A) any director or officer of Qinnet;
(B) any proposed nominee for election as a director of Qinnet;
(C) any person who beneficially owns, directly or indirectly,
shares carrying more than 10% of the voting rights attached to
Qinnet's Common Stock; or
(D) any relative or spouse of any of the foregoing persons, or any
relative of such spouse, who has the same house as such person
or who is a director or officer of any parent or subsidiary of
Qinnet.
Qinnet has entered into the Merger Agreement with Qinnet Holdings. Each of Mr.
Weiguo Lang, the President and a director of Qinnet, and Mr. Scott Houghton,
Secretary and Treasurer and a director of Qinnet, is an officer and a director
of Qinnet Holdings. Mr. Lang does not own any of the shares of Qinnet Holdings.
Mr. Houghton does not own any of the shares of Qinnet Holdings.
COMMON STOCK OF QINNET
Under Qinnet's Certificate of Incorporation, the total number of shares of all
classes of stock that Qinnet shall have authority to issue is 50,000,000 shares
of common stock, par value $0.00001 per share (the " Common Stock"). As of April
13, 2000, a total of 1,300,497 shares of Common Stock are issued and
outstanding.
Common Stock
Holders of Common Stock have the right to cast one vote for each share held of
record on all matters submitted to a vote of holders of Common Stock, other than
votes for the election of directors. Holders of one percent (1%) of the capital
stock issued and outstanding and entitled to vote, represented in person or by
proxy, are necessary to constitute a quorum at any meeting of Qinnet's
stockholders. The vote by the holders of a majority of such outstanding shares
is required to effect certain fundamental corporate changes such as liquidation,
merger or amendment of Qinnet's Certificate of Incorporation.
Holders of Common Stock are entitled to receive dividends pro rata based on the
number of shares held, when, as and if declared by the Board of Directors, from
funds legally available therefor. In the event of the liquidation, dissolution
or winding up of the affairs of Qinnet, all assets and funds of Qinnet remaining
after the payment of all debts and other liabilities shall be distributed, pro
rata, among the holders of the Common Stock. Holders of Common Stock are not
entitled to pre-emptive or subscription or conversion rights, and there are no
redemption or sinking fund provisions applicable to the Common Stock.
<PAGE>
Share Purchase Warrants
Qinnet has not issued and does not have outstanding any warrants to purchase
shares of the Common Stock.
Options
Qinnet has issued a total of 187,000 options to purchase shares of the Common
Stock to its directors, officers and permitted consultants. Each outstanding
option is exercisable at a price of $13.00 per share. The options have been
granted by Qinnet pursuant to Qinnet's incentive stock option plan.
Convertible Securities
Qinnet has not issued and does not have outstanding any securities convertible
into shares of Common Stock or any rights convertible or exchangeable into
shares of Common Stock
Transfer Agent
Securities Transfer Corporation of Dallas, Texas is the transfer agent for the
Shares.
Market Price of and Dividends on the Registrant's Common Equity and Other
Stockholder Matters
Qinnet's Common Stock is traded on the OTC Bulletin Board under the symbol
"QNNTE". The first day in which Qinnet's shares traded was January 12, 2000. The
high and the low bid prices for Qinnet's shares for each quarter of actual
trading were:
Quarter High Low
January 10, 2000 to $17.125 $9.25
March 31, 2000
April 1, 2000 to $14.00 $13.00
April 13, 2000
The quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
As of April 13, 2000, there were 703 registered shareholders of Qinnet.
None of the holders of Qinnet's Common Stock have any right to require Qinnet to
register any shares of Qinnet's Common Stock pursuant to the 1933 Act. Qinnet
anticipates registering the shares to be issued upon completion of the Merger
Agreement by the filing of a Form S-4 registration statement under the Act.
Qinnet has not declared any dividends on its Common Stock since its inception.
There are no dividend restrictions that limit Qinnet's ability to pay dividends
on Common Stock in Qinnet's Certificate of Incorporation or By-Laws.
Legal Proceedings
Qinnet is not currently a party to any legal proceedings.
Changes in and Disagreements with Accountants
None.
Recent Sales of Unregistered Securities
Qinnet completed the issuance of 50,000 shares of its common stock to Halter
Capital Corporation on completion of the Reorganization Agreement. These shares
were issued pursuant to Section 4(2) of the Act on April 13, 2000.
<PAGE>
Qinnet has granted options to purchase a total of 187,000 shares of Common Stock
to its officers, directors, employees and permitted consultants pursuant to
Qinnet's incentive stock option plan. Each option is exercisable at a price of
$13.00 per share. The options were granted pursuant to Rule 701 of the Act.
Qinnet has not issued any other securities during the past three years.
Indemnification of Directors and Officers
The officers and directors of Qinnet are indemnified as provided under the
Delaware General Corporation Law and the Bylaws of Qinnet.
The By-laws of Qinnet provide that Qinnet will indemnify its directors and
officers to the fullest extent not prohibited by the Delaware General
Corporation Law; provided, however, that Qinnet may modify the extent of such
indemnification by individual contracts with its directors and officers; and,
provided, further, that Qinnet shall not be required to indemnify any director
or officer in connection with any proceeding (or part thereof) initiated by such
person unless (i) such indemnification is expressly required to be made by law,
(ii) the proceeding was authorized by the Board of Directors of Qinnet, (iii)
such indemnification is provided by Qinnet, in its sole discretion, pursuant to
the powers vested in Qinnet under the Nevada General Company Law or (iv) such
indemnification is required to be made pursuant to the By-laws.
The By-laws of Qinnet provide that Qinnet will advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer, of
Qinnet, or is or was serving at the request of Qinnet as a director or executive
officer of another Company, partnership, joint venture, trust or other
enterprise, prior to the final disposition of the proceeding, promptly following
request therefor, all expenses incurred by any director or officer in connection
with such proceeding upon receipt of an undertaking by or on behalf of such
person to repay said amounts if it should be determined ultimately that such
person is not entitled to be indemnified under the By-laws of Qinnet or
otherwise.
The By-laws of Qinnet provide that no advance shall be made by Qinnet to an
officer of Qinnet (except by reason of the fact that such officer is or was a
director of Qinnet in which event this paragraph shall not apply) in any action,
suit or proceeding, whether civil, criminal, administrative or investigative, if
a determination is reasonably and promptly made (i) by the Board of Directors by
a majority vote of a quorum consisting of directors who were not parties to the
proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, that the facts known to the decision-making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of Qinnet.
<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and the other information in this
Form 8-K and any other filings we may make with the United States Securities and
Exchange Commission in the future before investing in our common stock. If any
of the following risks occur, or if others occur, our business, operating
results and financial condition could be seriously harmed. The trading price of
our common stock could decline due to any of these risks, and you may lose all
or part of your investment.
RISKS RELATED TO OUR FINANCIAL CONDITION AND BUSINESS MODEL
AS WE HAVE ONLY RECENTLY COMMENCED BUSINESS OPERATIONS, WE FACE A HIGH RISK OF
BUSINESS FAILURE
Qinnet Holdings commenced business operations in 1999. We are presently in the
process of establishing our Internet service provider operations. Accordingly,
we have only a limited operating history for you to evaluate our business. You
must consider the risks, expenses and uncertainties that an early stage company
like ours faces. These risks include our ability to: (i) compete acquisitions of
Internet service provider business in China; (ii) attract the Chinese community
to use our Internet service provider operations; (iii) enter into agreements
with telecommunication providers in China to enable us to provide Internet
service provider operations; and (iv) respond effectively to competitive
pressures. If we are unsuccessful in addressing these risks, our business,
financial condition and results of operations will be materially and adversely
affected and our business may fail.
AS WE HAVE NEVER MADE MONEY, WE EXPECT OUR LOSSES TO CONTINUE
We have never been profitable. We expect to continue to incur significant losses
for the foreseeable future as we will incur increased operating expenses while
we complete development of our Internet service provider operations prior to
realizing any revenues from our operations. If we are not able to generate
significant revenues from our Internet service provider operations, then we may
not be able to achieve profitability.
IF WE ARE NOT BE ABLE TO OBTAIN SUFFICIENT FUNDS TO ESTABLISH OUR BUSINESS, THEN
OUR BUSINESS MAY FAIL
Our business plan calls for increased expenses associated with the development
and marketing of our Internet service provider operations. We anticipate that
revenues from operations will initially not be sufficient to cover these
expenses. Accordingly, we will likely have substantial future capital
requirements after this offering. There is no assurance that we will be able to
<PAGE>
obtain additional financing. Obtaining additional financing will be subject to a
number of factors, including: (i) market conditions; (ii) our operating
performance; and (iii) investor sentiment. These factors may make the timing,
amount, terms and conditions of additional financing unattractive for us. If we
are unable to raise additional capital, we may not be able to implement our
business plan and our business may fail.
RISKS RELATED TO OUR MARKETS AND STRATEGY
IF THE INTERNET IS NOT WIDELY ACCEPTED, OUR BUSINESS WILL SUFFER
We expect to derive a portion of our revenue for the foreseeable future from
Internet service provider revenues, and to a lesser extent, from electronic
commerce. Electronic commerce and the Internet are new and rapidly evolving
markets, particularly in developing nations such as China. If the Internet is
not accepted in China, our business will suffer.
OUR BUSINESS OPERATIONS MAY BE ADVERSELY AFFECTED BY SOCIAL AND POLITICAL
CONDITIONS IN CHINA
We expect to establish our Internet service provider operations in China and to
derive a substantial portion of our revenues from the domestic Chinese market.
Social and political conditions in China may be more volatile than in developed
countries. This volatility may cause our operations to fluctuate. This
volatility could make it difficult for our business to grow, which could have an
adverse effect on our stock price. Historically, volatility has been caused by:
(i) significant governmental influence over many aspects of telecommunication
industry; (ii) political uncertainty; (iii) unexpected changes in regulatory
requirements; (iv) slow or negative growth; (v) imposition of trade barriers. We
have no control over these matters. Volatility resulting from these matters may
decrease our ability to expand our Internet service provider operations in
China, adversely affect Internet availability to Chinese consumers, create
uncertainty regarding our operating climate and adversely affect our customers'
advertising budgets, all of which may adversely impact our business.
IF THE CHINESE CURRENCY DEPRECIATES RELATIVE TO THE U.S. DOLLAR, THEN OUR
REVENUES MAY DECLINE
Our reporting currency is the U.S. dollar. We anticipate that our revenues from
operations within China will be earned in Chinese currency. Our revenues from
domestic Chinese customers will decline in value if the Chinese currency
depreciates relative to the U.S. dollar. Accordingly, our revenues may decrease
if the Chinese currency depreciates relative to the U.S. dollar, with the result
that our business operations and financial condition may be harmed.
<PAGE>
IF INTERNET USE IN CHINA DOES NOT GROW, OUR BUSINESS WILL SUFFER
The Internet market in China is in an early stage of development. Our future
success depends on the continued growth of the Internet in China. In addition,
our future success depends on the number of Chinese consumers accepting and
using the Internet increasing. Our business, financial condition and results of
operations will be materially and adversely affected if Internet usage by
resident Chinese does not continue to grow or grows more slowly than we
anticipate. Internet usage in these markets may be inhibited for a number of
reasons, including: (i) the cost of Internet access; (ii) the availability of
telecommunications infrastructure; (iii) ease of use and language barriers; and
(iv) quality of service.
UNDERDEVELOPED TELECOMMUNICATIONS INFRASTRUCTURE MAY LIMIT THE GROWTH OF THE
INTERNET IN CHINA AND ADVERSELY AFFECT OUR BUSINESS
Access to the Internet requires a relatively advanced telecommunications
infrastructure. The telecommunications infrastructure in many parts of China is
not as well-developed as in the United States or Europe. The quality and
continued development of the telecommunications infrastructure in China will
have a substantial impact on our ability to deliver our services and on the
market acceptance of the Internet in China in general. If further improvements
to the Chinese telecommunications infrastructure are not made, the Internet will
not gain broad market acceptance in China. If access to the Internet in China
does not continue to grow or grows more slowly than we anticipate, our business,
financial condition and results of operations will be materially and adversely
affected.
IF WE ARE NOT ABLE TO EFFECTIVELY MANAGE OUR EXPANDING OPERATIONS, THEN OUR
BUSINESS WILL BE HARMED
Our business plan anticipates that our business operations will undergo
significant expansion as we establish our Internet service provider operations.
This expansion will require that we hire additional personnel and establish
offices in locations within China. We anticipate that this growth will place a
significant strain on our managerial, operational and financial resources. To
accommodate this growth, we must successfully find and train additional
employees, acquire and implement new computer hardware and software systems and
establish new offices. We may not succeed with these efforts. Our failure to
expand in an efficient manner could cause our expenses to be greater than
anticipated, our revenues to grow more slowly than expected and could otherwise
have a material adverse effect on our business, financial condition and results
of operations.
IF WE ARE UNABLE TO HIRE AND RETAIN KEY PERSONNEL THAT ARE IN HIGH DEMAND, THEN
WE MAY NOT BE ABLE TO IMPLEMENT OUR BUSINESS PLAN AND OUR BUSINESS WILL SUFFER
<PAGE>
We depend on the services of our senior management and key technical personnel.
Our inability to attract and hire technical personnel could have a material
adverse effect on our business, financial condition and results of operations.
In addition, our success is largely dependent on our ability to hire highly
qualified managerial, sales and technical personnel. These individuals are in
high demand and we may not be able to attract the staff we need.
IF WE ARE NOT ABLE TO COMPETE EFFECTIVELY AGAINST OUR COMPETITORS, THEN WE MAY
NOT BE ABLE TO ACHIEVE MARKET ACCEPTANCE AND OUR BUSINESS MAY BE HARMED
There are many companies that provide Internet service provider operations in
China. Competition is intense and is expected to increase significantly in the
future because there of the potential rewards of establishing successful
Internet service provider operations in China. Competition could materially and
adversely affect our business, financial condition and results of operations. In
addition, our competitors may develop competing Internet service provider
operations that achieve greater market acceptance. It is also possible that new
competitors may emerge and acquire significant market share. Our inability to
respond to competition will have a material and adverse effect on our business,
financial condition and results of operations.
RISKS RELATED TO THE INTERNET AND OUR TECHNOLOGY INFRASTRUCTURE
IF WE EXPERIENCE UNEXPECTED NETWORK INTERRUPTIONS CAUSED BY SYSTEM FAILURES,
THEN WE MAY EXPERIENCE REDUCED VISITOR TRAFFIC, REDUCED REVENUE AND HARM TO OUR
REPUTATION
Once we commence operations, our business operations will depend on the
continued, uninterrupted operation of the computer systems and networks that
will operate our Web sites. These computer systems and networks are vulnerable
to disruptions, such as system crashes, that could cause our Web sites to cease
operation. If we experience delays and interruptions, we may lose customers with
the result that we could experience a delay in achieving revenues or a decrease
in revenues. We plan to maintain our computer servers in China and we will rely
on telecommunication systems in China for the operation and use of our Web
sites. If we fail to protect our systems against damage from fire, hurricanes,
power loss, telecommunications failure, break-ins or other events, disruptions
to our Internet service provider operations could have a material adverse effect
on our business, financial condition and results of operations.
RISKS RELATED TO LEGAL UNCERTAINTY
WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATIONS AND LEGAL
UNCERTAINTIES AFFECTING THE INTERNET WHICH COULD ADVERSELY AFFECT OUR BUSINESS
<PAGE>
Government regulation could slow the growth of the Internet in China. This could
delay growth in demand for our Internet service operations and limit the growth
of our revenues.
OUR STOCK PRICE MAY BE VOLATILE.
We anticipate that the market price of our common stock may be subject to wide
fluctuations in response to several factors, such as:
1. actual or anticipated variations in our results of operations;
2. our ability or inability to generate new revenues;
3. increased competition; and
4. conditions and trends in the Internet and electronic commerce industries.
Further, we anticipate that our common stock may be traded on the Nasdaq OTC
Bulletin Board. Companies traded on the OTC Bulletin Board have traditionally
experienced extreme price and volume fluctuations. There is no assurance that
our common stock will continue to be traded on the OTC Bulletin Board. If our
common stock is traded on the OTC Bulletin Board, our stock price may be
adversely impacted by factors that are unrelated or disproportionate to our
operating performance. The trading prices of many technology companies' stocks
are at or near historical highs and reflect price earnings ratios substantially
above historical levels. These market fluctuations, as well as general economic,
political and market conditions, such as recessions, interest rates or
international currency fluctuations may adversely affect the market price of our
common stock.
IF OUR STOCK PRICE IS VOLATILE, WE MAY BECOME SUBJECT TO SECURITIES LITIGATION
WHICH IS EXPENSIVE AND COULD RESULT IN A DIVERSION OF RESOURCES
In the past, following periods of volatility in the market price of a particular
company's securities, securities class action litigation has often been brought
against that company. Many companies in our industry have been subject to this
type of litigation in the past. We may also become involved in this type of
litigation. Litigation is often expensive and diverts management's attention and
resources, which could have a material adverse effect upon our business,
financial condition and results of operations.
TELESPACE LIMITED AND QINNET HOLDINGS CORP.
MERGER AGREEMENT AND PLAN OF MERGER
This MERGER AGREEMENT AND PLAN OF MERGER is dated January 12, 2000,
between TELESPACE LIMITED, a Delaware corporation (the "Surviving Corporation"),
and QINNET HOLDINGS CORP., a Washington corporation (the "Disappearing
Corporation"), who agree to the following, including the Recitals.
RECITALS
A. Surviving Corporation is a corporation organized and A. Surviving
Corporation is a corporation organized and existing under the laws of
the State of Delaware. The authorized capital stock of Surviving
Corporation consists of 50,000,000 share of common stock with a par
value of $.0001, of which 1,250,497 shares are issued and outstanding.
B. Disappearing Corporation is a corporation organized and B. Disappearing
Corporation is a corporation organized and existing under the laws of
the State of Washington. The authorized capital stock of Disappearing
Corporation totals 120,000,000 shares, of which 100,000,000 shares are
common stock having a par value of $.0001, and 20,000,000 shares are
preferred stock with a par value of $.0001.
C. The respective Boards of Directors of Surviving C. The respective
Boards of Directors of Surviving Corporation and Disappearing
Corporation deem it desirable and in the best interests of the
corporations and their shareholders that Disappearing Corporation be
merged into Surviving Corporation and to do so under and pursuant to
the laws of the State of Delaware.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and agreements herein
set forth, the parties hereto covenant and agree as follows:
1. Merger. As soon as all of the following events have happened (the date
of the latest of which is the "Effective Date"), Disappearing
Corporation shall be deemed to have merged with and into Surviving
Corporation, which shall survive the merger.
(a) The Board of Directors of the respective corporations shall by
resolution adopted by each board have approved this plan of
merger as provided by their respective state laws.
(b) This agreement shall have been approved by the shareholders of
the respective corporations by receiving the consents of the
holders of all or a majority of the shares of each corporation
otherwise entitled to vote thereon, without a meeting of
shareholders as provided by the laws of their respective
states and their respective articles of incorporation.
(c) Articles of Merger or the equivalent shall have been executed
in duplicate by each corporation, and shall be in the form and
in all other respects satisfy the provisions
<PAGE>
of each corporation's state law, and shall be filed with the
respective Secretarys of State; and
(d) Upon the confirmation of the filing of the certificate of
merger by the Secretary of State of the State of Delaware and
of the filing of the Articles of Merger by the Secretary of
State of the State of Washington.
5. Name and Purposes of Surviving Corporation. The name of the surviving
corporation shall be that of Surviving Corporation, as it may be
amended. The purposes for which the Surviving Corporation exists and
the nature of the business to be transacted by it are set forth in the
Articles of Incorporation of the Surviving Corporation as filed with
the Secretary of State of the State of Delaware.
6. Articles of Incorporation of Surviving Corporation. On the Effective
Date of the merger, the Certificate of Incorporation of the Surviving
Corporation, as amended to date, shall be the Certificate of
Incorporation of the Surviving Corporation until further amended as
provided by law.
7. Bylaws of Surviving Corporation. On the Effective Date of the merger,
the bylaws of the Surviving Corporation, as heretofore amended, shall
be the bylaws of the Surviving Corporation until the same shall be
altered, amended or repealed, or until new bylaws shall be adopted, in
accordance with the provisions thereof.
8. Directors and Officers of Surviving Corporation. The Board of Directors
of the Surviving Corporation shall initially consist of two directors,
who shall hold office in accordance with the Articles of Incorporation
and Bylaws of the Surviving Corporation, as in effect immediately after
the until the next annual meeting of the shareholders of the Surviving
Corporation, and until their successors shall have been duly elected
and shall have qualified, or until their earlier death, resignation, or
removal. The names and addresses of the directors are as follows:
Name Address
---- -------
Weiguo Lang Suite B, 2889 152nd N.E.
Redmond WA 98052
Scott Houghton Suite B, 2889 152nd N.E.
Redmond WA 98052
The principal officers of the Surviving Corporation, each of whom shall hold
office until his or her successor shall have been duly elected or appointed and
shall have qualified or until his or her death, resignation, or removal, and
their respective offices, and addresses, are as follows:
Office Name Address
------ ---- -------
President Scott Houghton Suite B, 2889 152nd N.E.
Redmond WA 98052
2
<PAGE>
Vice President Weiguo Lang Suite B, 2889 152nd N.E.
Redmond WA 98052
Secretary Weiguo Lang Suite B, 2889 152nd N.E.
Redmond WA 98052
Treasurer Scott Houghton Suite B, 2889 152nd N.E.
Redmond WA 98052
9. Capital Stock of Surviving Corporation. On the Effectiv Date of the
Merger, the total amount of authorized capital stock of the Surviving
Corporation, the number of shares into which the capital stock is to be
divided, and the par value of the shares are as follows:
50,000,000 share of common stock with a par value of $.00001.
10. Conversion of Outstanding Securities on Merger.
(a) On the Effective Date of the Merger, by virtue of the Merger
and without any action on the part of any holder of the shares
of stock of Disappearing Corporation, each issued and
outstanding share of the common stock of Disappearing
Corporation shall be exchanged for one (1) share of common
stock, fully paid and nonassessable, of the Surviving
Corporation.
(b) Any shareholders of Disappearing Corporation wh object to
Merger and comply with the requirements of applicable law
concerning the rights of dissenting shareholders to receive
fair value for their shares shall not have their shares
converted but such shares shall become the right to receive
such consideration as may be due those shareholders pursuant
to applicable law, provided that the shares of any such
dissenting shareholders who subsequently withdraw their
objections after the Effective Date, in accordance applicable
law, shall be deemed to be converted, as of the Effective
Date, into the right to receive the shares of the Surviving
Corporation.
3. Exchange of Certificates.
(a) On or after the Effective Date of the merger, unless the Board
of Directors of Surviving Corporation provides otherwise, each
holder of a certificate or certificates representing
outstanding common stock of Disappearing Corporation shall be
entitled, upon the surrender of such certificate or
certificates at the office of the Surviving Corporation
designated for the purpose, to receive in exchange therefor a
certificate or certificates representing the number of full
shares of common stock of the Surviving Corporation as
provided in paragraph 7 hereof. Until so surrendered, each
outstanding certificate which, prior tot he Effective Date of
the merger, represented shares of common stock of Disappearing
Corporation shall be deemed for all purposes to evidence only
the ownership of the common stock of the Surviving Corporation
as the same shall have been continued.
(b) If a certificate for any share or shares of stock of the
Surviving Corporation is to be issued in the name other than
that in which the certificate for shares surrendered for
3
<PAGE>
exchange shall be registered, it shall be a condition of such
exchange that the certificate so surrendered shall be properly
endorsed for transfer.
3. Prohibited Actions of Constituent Corporations. Between the date hereof
and the Effective Date of the merger, neither party will, except with
the prior written consent of the other:
(a) Issue or sell any stock, bonds or other corporate securities;
(b) Incur any obligation or liability (absolute or contingent),
except current liabilities incurred, and obligations under
contracts entered into in the ordinary course of business;
(c) Discharge or satisfy any lien or encumbrance or pay any
obligation or liability (absoluteor contingent) other than
current liabilities incurred in the ordinary course of
business;
(d) Make any dividend or other payment or distribution to its
shareholders or purchaser or redeem any shares of its common
stock;
(e) Mortgage, pledge, create a security interest in or subject to
lien or other encumbrance any of its assets, tangible or
intangible;
(f) Sell or transfer any of its tangible assets or cancel any
debts or claims except in each case in the ordinary course of
business;
(g) Sell, assign, or transfer any trademark, trade name, patent or
other intangible assets;
(h) Waive any right of any substantial value; or
(i) Enter into any transaction other than in the ordinary course
of business.
10. Effect of Merger. On the Effective Date of the merger (the Effective
Date shall be the date upon which all of the conditions enumerated in
Paragraph 1 have been satisfied), Disappearing Corporation shall cease
to exist separately and shall be merged with and into Surviving
Corporation in accordance with the provisions of this agreement and in
accordance with the provisions of and with the effect provided in
applicable law, as amended. As provided therein, on the Effective Date
of the merger the Surviving Corporation shall possess all the rights,
privileges, and powers; franchises of both a public and a private
nature of each of the merging corporations; and all property, real,
personal and mixed, and all debts due on whatever account, including
subscriptions to shares, and all other choses in action, and all and
every other interest of or belonging to or due to each of the
corporations so merged, shall be taken and deemed to be transferred to
and vested in such single corporation without further act or deed; and
the title to any real estate, or any interest therein, vested in either
of such corporations shall not revert or be in any way impaired by
reason of such merger.
11. Further Instruments. From time to time, as and when requested by the
Surviving Corporation or by its successors or assigns, Disappearing
Corporation will execute and deliver, or cause to be executed and
delivered, all such deeds and other instruments; or will
4
<PAGE>
take or cause to be taken such further or other action as the Surviving
Corporation may deem necessary or desirable in order to vest in and
confirm to the Surviving Corporation title to possession of all its
property, rights, privileges, powers, and franchises and otherwise to
carry out the intent and purposes of this agreement.
12. Capital. On the Effective Date of the merger, the share of common stock
of the Surviving Corporation as the same shall have been continued and
into which the outstanding shares of Disappearing Corporation shall
have been converted, in accordance with the provisions of paragraphs 7
and 8 hereof, shall be issued and outstanding.
13. Principal Offices. The location of the principal office of the
Surviving Corporation shall be Suite B, 2880 152nd N.E., Redmond WA
98052.
14. Abandonment of Merger. This agreement may be terminated and the merger
provided for hereby abandoned: (i) by votes of the Board of Directors
of both corporations at any time prior to the Effective Date of the
merger; (ii) by vote of the Board of Directors of either corporation at
any time prior to the Effective Date of the merger if (a) a material
breach shall exist with respect to the written representations and
warranties made by the other corporation in connection with the merger,
or (b) the other corporation, without prior written consent of the
terminating corporation, takes any action prohibited by this agreement.
15. Right of Amendment. The Surviving Corporation hereby reserves the
right, following the Effective Date of the merger, to amend, alter,
change or repeal any provision contained in its Articles of
Incorporation, as from time to time amended, and any provision
contained in this agreement, in the manner now or hereafter prescribed
by law or by such Articles, as from time to time amended.
IN WITNESS WHEREOF, parties hereto have caused this agreement to be
signed in their corporate names by the undersigned all as of the day and year
first above written.
TELESPACE LIMITED, a Delaware corporation
By: /s/ Scott Houghton
- ------------------------------------------------
Scott Houghton
Secretary and Director
QINNET HOLDINGS CORP.,
a Washington corporation
By: /s/ Scott Houghton
- -------------------------------------------------
Scott Houghton, President and Director
{8901510026} {FILED
MAY 31, 1989
SECRETARY OF STATE}
CERTIFICATE OF INCORPORATION
SPECIALISTICS INC.
I, the undersigned natural person of the age of eighteen (18) years or more,
acting as Incorporator of a corporation under the General Corporation Law of
Delaware, do hereby adopt the following Articles of Incorporation for such
CORPORATION.
ARTICLE I
NAME
The name of the CORPORATION is SPECIALISTICS INC.
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The address of the CORPORATION's registered office in the State of Delaware is
THE COMPANY CORPORATION, 725 Market Street, in the City of Wilmington, and
County of New Castle. The name of its registered agent at such address is THE
COMPANY CORPORATION.
ARTICLE III
PURPOSES
The purposes of which the CORPORATION is organized are:
A. To purchase, receive by way of gift, subscribe for, invest in, and in all
other ways acquire, import, lease, possess, maintain, handle on consignment,
own, hold for investment or otherwise, use, enjoy, exercise, operate, manage,
conduct, perform, make, borrow, contract in respect of, trade and deal in, sell,
exchange, let, lend, export, mortgage, pledge, deed in trust, hypothecate,
encumber, transfer, assign and in all other ways dispose of, design, develop,
invent, improve, equip, repair, alter, fabricate, assemble, build, construct,
operate, manufacture, plant, cultivate, produce, market and in all other ways
(whether like or unlike any of the foregoing), deal in and with property of
every kind and character, real, personal, or mixed, tangible or intangible,
wherever situated and however held, including, but not limited to, money,
credits, choses in action, securitites, stocks, bonds, warrants, script,
certificates, debentures, mortgages, notes, commercial paper, and other
obligations and evidences of indebtedness of any government or subdivision or
agency thereof, documents of title and accompanying rights, and every other kind
and character of personal property, real property (improved and unimproved), and
the products and avails thereof, and every character of interest therein and
appurtenance thereto, including, but not limited to, mineral, oil, gas and water
rights, all or any part of any going business and its incidents, franchises,
subsidies, characters, concessions, grants, rights, powers, or privileges,
granted or conferred by any government or subdivision or agency thereof, and any
interest in or part of any of the foregoing and to exercise in respect thereof
all of the rights, powers, privileges, and immunities of individual owners or
holders thereof.
<PAGE>
B. To establish, maintain, and conduct any sales, service or merchandising
business in all its aspects for the purpose of selling, purchasing, licensing,
renting, leasing, operating, franchising, and otherwise dealing with personal
services, instruments, machines, appliances, inventions, trademarks, tradenames,
patents, privileges, processes, improvements, copyright and personal property of
all kinds and descriptions.
C. To serve as manager, consultant, representative, agent or advisor for other
persons, associations, corporations, partnerships and firms.
D. To purchase, take, receive, lease or otherwise acquire, own, hold, use,
improve, and otherwise deal in and with, sell, convey, mortgage, pledge, lease,
exchange, transfer and otherwise dispose of liens, real estate, real property,
chattels real and estates, interests, and rights and equities of all kinds of
lands; and to engage in the business of managing, supervising and operating real
property, buildings and structures to negotiate and consummate for itself or for
others leases with respect to such properties, to enter into contracts and
arrangements either as principal or as agent for the maintenance, repair and
improvement of any property managed, supervised, or operated by the CORPORATION;
to engage in and conduct or authorize, license and permit others to engage in
and conduct any business or activity incident, necessary, advisable or
advantageous to the ownership of property, buildings, and the structures,
managed, supervised or operated by the CORPORATION.
E. To enter into or become an associate, member, shareholder, or partner in any
firm, association, partnership (whether limited, general or otherwise), company,
joint stock company, syndicate or corporation, domestic or foreign, formed or to
be formed to accomplish any lawful purpose, and to allow or cause the title to
any estate, right or interest in any property (whether real, personal or mixed),
owned, acquired, controlled, or operated by or in which the CORPORATION has an
interest, to remain or be vested or registered in the name of or operated by any
firm, association, partnership (whether limited, general or otherwise), company,
joint stock company, syndicate, or corporation, domestic or foreign, formed to
accomplish any of the purposes enumerated herein.
F. To acquire the goodwill, rights, assets and property, and to undertake or
assume the whole, or any part of, the obligations for liabilities of any person,
firm, association or corporation.
G. To hire and employ agents, servants, and employees, to enter into agreements
of employment and collective bargaining agreements, and to act as agent,
contractor, factor, or otherwise, either alone or in company with others.
H. To promote or aid in any manner, financially or otherwise, any person, firm,
association, or corporation, including its employees, officers and directors if
such aid reasonably may be expected to benefit, directly or indirectly, the
CORPORATION.
I. To let concessions to others to do any of the things that this CORPORATION is
empowered to do, and to enter into, make, perform, and carry out, contracts and
arrangements of every kind and character with any person, firm, association, or
corporation, or any government or authority or subdivision or agency thereof.
J. To carry on any business whatsoever that this CORPORATION may deem proper or
convenient in connection with any of the foregoing purposes or otherwise, or
that it may deem calculated, directly or indirectly, to improve the interest of
this CORPORATION, and to have and to exercise all powers conferred by the laws
of the State of Delaware on corporations formed under the laws pursuant to which
and under which this CORPORATION is formed, as such laws are now in effect or
may at any time hereafter be amended, and to do any and all things hereinabove
set forth to the same extent and as fully as natural persons might or could do,
either alone or in connection with other persons, firms, associations, or
corporations, and in any part of the world.
<PAGE>
K. To transact any business and to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of
Delaware, as amended, or which may be authorized in the future by amendment
thereto.
L. The foregoing statement of purposes shall be construed as a statement of both
purposes and powers, shall be liberally construed in aid of the powers of this
CORPORATION, and the powers and purposes stated in each clause shall not, except
where otherwise stated, be limited or restricted by any term of provision of any
other clause, and shall be regarded not only as independent purposes, but the
purposes and powers stated shall be construed distributively as each object
expresses, and the enumeration as to specific powers shall not be construed as
to limit in any manner the aforesaid general powers, but are in furtherance of,
and in addition to and not in limitation of said general powers.
ARTICLE IV
SHARES OF STOCK
The total number of shares of stock which the CORPORATION shall have authority
to issue is Fifty Million (50,000,000) shares of Common stock, and Ten Million
(10,000,000) shares of Preferred Stock. The par value of each of such shares is
(0.00001) amounting in the aggregate to Six Hundred Dollars ($600).
ARTICLE V
INCORPORATOR
The name and mailing address of the Incorporator of the CORPORATION is as
follows:
Kevin B. Halter, Jr. - 7441 Marvin D. Love Freeway, Suite 2000, Dallas, Texas
75237
ARTICLE VI
DIRECTORS
The name and mailing address of each person who is to serve as a director of the
CORPORATION until the first annual meeting of the shareholders of the
CORPORATION or until their successor is elected and qualified is as follows:
Kevin B. Halter, Jr. - 7441 Marvin D. Love Freeway, Suite 2000, Dallas, Texas
75237
ARTICLE VII
DURATION
The period of duration of the CORPORATION is perpetual.
ARTICLE VII
ELECTION OF DIRECTORS
Elections of directors of the Corporation need not be by written ballot unless
the By-Laws of the CORPORATION shall so provide.
<PAGE>
ARTICLE IX
MEETINGS OF SHAREHOLDERS
Meetings of shareholders of the CORPORATION may be held within or without the
State of Delaware, as the By-Laws of the CORPORATION may provide.
ARTICLE X
AMENDMENTS
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 the Delaware statues, and all rights conferred upon
shareholders herein are granted subject to this reservation.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of
forming a corporation pursuant to the General Corporation Law of the State of
Delaware, does make this certificate, hereby declaring and certifying that this
is my act and deed and the facts herein stated are true, and accordingly have
hereunto set my hand this 30th day of May, 1989.
/s/ Kevin B. Halter, Jr.
- ----------------------------
Kevin B. Halter, Jr.
{STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 03/09/1993
930695007 - 2197882}
CERTIFICATE
FOR RENEWAL AND REVIVAL OF CERTIFICATE OF INCORPORATION
Specialistics Inc., a corporation organized under the laws of Delaware,
the Certificate of Incorporation of which was filed in the office of the
Secretary of State on the 31st day of May, 1989 and thereafter voided for
non-payment of taxes, now desiring to procure a revival of its Certificate of
Incorporation, hereby certifies as follows:
1. The name of the corporation is Specialistics Inc.
2. Its registered office in the State of Delaware is located at Corporation
Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle and
the name of its registered agent at such address is The Corporation Trust
Company.
3. The date when revival of the Certificate of Incorporation of this corporation
is to commence is the 28th day of February, 1991, same being prior to the date
the Certificate of Incorporation became void. Revival of the Certificate of
Incorporation is to perpetual.
4. This corporation was duly organized under the laws of Delaware and carried on
the business authorized by its Certificate of Incorporation until the 1st day of
March, 1991, at which time its Certificate of Incorporation became inoperative
and void for non-payment of taxes and this Certificate for Renewal and Revival
is filed by authority of the duly elected directors of the corporation in
accordance with the laws of Delaware.
IN WITNESS WHEREOF, said Specialistics Inc. in compliance with Section 312 of
Title 8 of the Delaware Code has caused this Certificate to be signed by Timothy
P. Halter its last and acting President, and attested by Kevin B. Halter, Jr.,
its last and acting Secretary, this 2nd day of March, 1993. Specialistics Inc.
By: /s/ Timothy P. Halter
----------------------------------
Timothy P. Halter
Last and Acting President
ATTEST:
By: /s/ Kevin B. Halter, Jr.
- ------------------------------------
Kevin B. Halter, Jr.
Last and Acting Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Specialistics Inc, a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by the unanimous written
consent of its members, filed with the minutes of the Board", adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of Specialistics Inc.
be amended by changing the name of the Corporation, Article I Article
thereof so that, as amended, said Article shall be and read as follows:
"The name of the Corporation is Eastern Group International Co., Ltd."
SECOND: That in lieu of a meeting and vote of stockholders, the Board of
Directors have given written consent to said amendment in accordance with the
provisions of Section 141 of the General Corporation Law of the State of
Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Section 141 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, said Specialistics Inc. has caused this certificate to be
signed by Kevin B. Halter, Jr., its Secretary, this 18th day of July, 1996.
Specialistics, Inc.
By: /s/ Kevin B. Halter, Jr.
- ----------------------------------------
Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EASTERN GROUP INTERNATIONAL CO., LTD.
Pursuant to Section 242 of the Delaware General Corporation Law (the "DGCL"),
Eastern Group International Co., Ltd., a Delaware corporation (the
"Corporation"), for the purposes of amending its Certificate of Incorporation,
DOES HEREBY CERTIFY AS FOLLOWS:
FIRST, that the Corporation's Certificate of Incorporation is amended by
deleting in its entirety existing Article I and inserting the following in lieu
thereof:
"The name of the Corporation is "TeleSpace Limited"
SECOND, that this Certificate of Amendment of the Corporation's Certificate of
Incorporation has been duly adopted by the Board of Directors of the Corporation
in accordance with the provisions of Section 242 of the DGCL and has been
approved by the written consent of the holders of a majority of the
Corporation's issued and outstanding Common Stock in accordance with the
provisions of Section 228 of the DGCL. Written notice of such approval of this
Certificate of Amendment of the Corporation's Certificate of Incorporation has
been given in accordance with the provisions of Section 228 of the DGCL to those
holders of Common Stock who have not so approved this Certificate of Amendment.
****
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to
be signed by Kevin B. Halter, Jr., its President and Secretary as of the 27th
day of December, 1996.
EASTERN GROUP INTERNATIONAL CO., LTD.
By: /s/Kevin B. Halter, Jr.
- ----------------------------------------
Name: Kevin B. Halter, Jr.
Title: President and Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Telespace Limited, a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Telespace Limited
resolutions were duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, That the Certificate of Incorporation of this corporation be
amended by changing Article 5 thereof so that, as amended, said Article
5 shall be and read in its entirety as follows:
"The amount of total authorized capital stock the Corporation shall
have the authority to issue is 50,000,000 shares of Common Stock,
each having a par value of $0.0001, all of the same class, and
10,000,000 shares of Preferred Stock, each having a par value of
$0.0001. Each one share of the Corporation's Common Stock issued and
outstanding immediately prior to the effective date of this Amendment
shall be and hereby is automatically changed without further action
into one-seventh (1/7) of a fully paid and non-assessable share of
the Corporation's Common Stock, provided that no fractional shares
shall be issued pursuant to such a change. The Corporation shall
issue each stockholder who would otherwise be entitled to receive a
fractional share as a result of such change one full share of the
Corporation's Common Stock."
SECOND: That thereafter, pursuant to resolution of the Board of Directors, a
special meeting of the stockholders of the corporation was duly called and held,
upon notice in accordance with Section 222 of the General Corporation Law of the
State of Delaware at which meeting the necessary number of shares as required by
statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Telespace Limited has caused this certificate to be
signed by Kevin B. Halter, Jr., its Secretary as of the 18th day of June, 1996.
TELESPACE LIMITED
By: /s/ Kevin B. Halter, Jr.
----------------------------------------
Name: Kevin B. Halter, Jr.
Title: Secretary
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
TELESPACE LIMITED, a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Telespace Limited
resolutions were duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, That the Certificate of Incorporation of this corporation be
amended by changing Article IV thereof so that, as amended, said
Article IV shall be and read in its entirety as follows:
"The total number of shares of stock that the Corporation shall
authority to issue is 50,000,000 shares of Common Stock, with a par
value of $0.0001, all of the same class. Each one share of the
Corporation's Common Stock issued and outstanding immediately prior
to the effective date of this Amendment shall be and hereby is
automatically changed without further action into one-eighth (1/8) of
a fully paid and non-assessable share of the Corporation's Common
Stock, provided that no fractional shares shall be issued pursuant to
such a change. The Corporation shall issue to each stockholder who
would otherwise be entitled to receive a fractional share one full
share of the Corporation's Common Stock."
SECOND: That thereafter, pursuant to resolution of the Board of Directors, a
special meeting of the stockholders of the corporation was duly called and held,
upon notice in accordance with Section 222 of the General Corporation Law of the
State of Delaware at which meeting the necessary number of shares as required by
statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Telespace Limited has caused this certificate to be
signed by Winston H. Lee, its President and Secretary as of the 29th day of
July, 1999.
TELESPACE LIMITED
By: /s/ Winston Lee
----------------------------------------
Winston Lee, President & Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TELESPACE LIMITED
TELESPACE LIMITED, a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify:
1. That the sole Director of the Corporation by written consent, filed with the
minutes of the Board of Directors, adopted a proposed amendment to the
Certificate of Incorporation of the Corporation, declared said amendment to be
advisable, and called a special meeting of the Stockholders of the Corporation
for consideration thereof. The resolution setting forth the proposed amendment
to the Certificate of Incorporation is as follows:
RESOLVED, That the Certificate of Incorporation of the Corporation be
amended by amending Article I thereof to change the name of the
Corporation so that, as amended, said Article shall read as follows:
"The name of the Corporation is qinnet.com, Inc."
2. That in lieu of a meeting and vote of the Stockholders of the Corporation,
the holder of no less than the minimum number of shares of stock required to
authorize or take such action, under applicable statues and under the
Corporation's Certificate of Incorporation and Bylaws approved and adopted the
foregoing resolution by written consent, pursuant to Section 228 of the General
Corporation Code.
3. That said amendment was duly adopted in accordance with Section 242 of the
General Corporation Law of the State of Delaware.
In witness whereof, Telespace Limited has caused this Certificate to be signed
by its duly-appointed officer as of December 14, 1999.
TELESPACE LIMITED
By: /s/Weiguo Lang
----------------------------------------
Its: President
----------------------------------------
BYLAWS
OF
QINNET.COM, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation
in the State of Delaware shall be in the City of Dover, County of Kent.
Section 2. Other Offices. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
Section 4. Place of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
Section 5. Annual Meeting.
(a) The annual meeting of the stockholders of the corporation, for the
purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
<PAGE>
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.
(c) Only persons who are confirmed in accordance with the procedures
set forth in this paragraph (c) shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote in the
election of directors at the meeting who complies with the notice procedures set
forth in this paragraph (c). Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the corporation in accordance with the provisions
of paragraph (b) of this Section 5. Such stockholder's notice shall set forth
(i) as to each person, if any, whom the stockholder proposes to nominate for
election or re-election as a director: (A) the name, age, business address and
<PAGE>
residence address of such person, (B) the principal occupation or employment of
such person, (c) the class and number of shares of the corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder, and (E) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the 1934 Act (including without limitation such person's written consent
to being named in the proxy statement, if any, as a nominee and to serving as a
director if elected); and (ii) as to such stockholder giving notice, the
information required to be provided pursuant to paragraph (b) of this Section 5.
At the request of the Board of Directors, any person nominated by a stockholder
for election as a director shall furnish to the Secretary of the corporation
that information required to be set forth in the stockholder's notice of
nomination which pertains to the nominee. No person shall be eligible for
election as a director of the corporation unless nominated in accordance with
the procedures set forth in this paragraph (c). The chairman of the meeting
shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if he should so determine, he shall so declare at the meeting, and
the defective nomination shall be disregarded.
(d) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
Section 6. Special Meetings.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption), and shall be held at such place, on such date, and at
such time as the Board of Directors, shall determine.
(b) If a special meeting is called by any person or persons other than
the Board of Directors, the request shall be in writing, specifying the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board of Directors, the Chief Executive
Officer, or the Secretary of the corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The Board of
Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty
(120) days after the date of the receipt of the request. Upon determination of
the time and place of the meeting, the officer receiving the request shall cause
notice to be given to the stockholders entitled to vote, in accordance with the
provisions of Section 7 of these Bylaws. If the notice is not given within sixty
(60) days after the receipt of the request, the person or persons requesting the
meeting may set the time and place of the meeting and give the notice. Nothing
contained in this paragraph (b) shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the Board
of Directors may be held.
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Section 7. Notice of Meetings. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
Section 8. Quorum. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of not less than one percent (1%) of the outstanding shares of stock
entitled to vote shall constitute a quorum for the transaction of business. In
the absence of a quorum, any meeting of stockholders may be adjourned, from time
to time, either by the chairman of the meeting or by vote of the holders of a
majority of the shares represented thereat, but no other business shall be
transacted at such meeting. The stockholders present at a duly called or
convened meeting, at which a quorum is present, may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. Except as otherwise provided by law,
the Certificate of Incorporation or these Bylaws, all action taken by the
holders of a majority of the votes cast, excluding abstentions, at any meeting
at which a quorum is present shall be valid and binding upon the corporation;
provided, however, that directors shall be elected by a plurality of the votes
of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors. Where a separate vote by a class
or classes or series is required, except where otherwise provided by the statute
or by the Certificate of Incorporation or these Bylaws, a majority of the
outstanding shares of such class or classes or series, present in person or
represented by proxy, shall constitute a quorum entitled to take action with
respect to that vote on that matter and, except where otherwise provided by the
statute or by the Certificate of Incorporation or these Bylaws, the affirmative
vote of the majority (plurality, in the case of the election of directors) of
the votes cast, including abstentions, by the holders of shares of such class or
classes or series shall be the act of such class or classes or series.
Section 9. Adjournment and Notice of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
<PAGE>
Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
Section 11. Joint Owners of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section 217(b).
If the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
Section 12. List of Stockholders. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list 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 (10) 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
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
Section 13. Action Without Meeting. No action shall be taken by the
stockholders except at an annual or special meeting of stockholders called in
accordance with these Bylaws or without the unanimous written consent of all
stockholders.
Section 14. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
<PAGE>
(b) The Board of Directors of the corporation shall be entitled to make
such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
Section 15. Number and Qualification. The authorized number of
directors of the corporation shall be not less than one (1) nor more than twelve
(12) as fixed from time to time by resolution of the Board of Directors;
provided that no decrease in the number of directors shall shorten the term of
any incumbent directors. Directors need not be stockholders unless so required
by the Certificate of Incorporation. If for any cause, the directors shall not
have been elected at an annual meeting, they may be elected as soon thereafter
as convenient at a special meeting of the stockholders called for that purpose
in the manner provided in these Bylaws.
Section 16. Powers. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
Section 17. Election and Term of Office of Directors. Members of the
Board of Directors shall hold office for the terms specified in the Certificate
of Incorporation, as it may be amended from time to time, and until their
successors have been elected as provided in the Certificate of Incorporation.
Section 18. Vacancies. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholder vote, be filled
only by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Bylaw in the case
of the death, removal or resignation of any director.
<PAGE>
Section 19. Resignation. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office for the unexpired
portion of the term of the director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
Section 20. Removal. Subject to the Certificate of Incorporation, any
director may be removed by:
(a) the affirmative vote of the holders of a majority of the
outstanding shares of the Corporation then entitled to vote, with or without
cause; or
(b) the affirmative and unanimous vote of a majority of the directors
of the Corporation, with the exception of the vote of the directors to be
removed, with or without cause.
Section 21. Meetings.
(a) Annual Meetings. The annual meeting of the Board of Directors shall
be held immediately before or after the annual meeting of stockholders and at
the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) Regular Meetings. Except as hereinafter otherwise provided, regular
meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the state
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
(c) Special Meetings. Unless otherwise restricted by the Certificate of
Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors.
(d) Telephone Meetings. Any member of the Board of Directors, or of any
committee thereof, may participate in a meeting by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting by such means
shall constitute presence in person at such meeting.
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(e) Notice of Meetings. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
facsimile, telegraph or telex, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) Waiver of Notice. The transaction of all business at any meeting of
the Board of Directors, or any committee thereof, however called or noticed, or
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
Section 22. Quorum and Voting.
(a) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time in accordance with the Certificate of Incorporation, a
quorum of the Board of Directors shall consist of a majority of the exact number
of directors fixed from time to time by the Board of Directors in accordance
with the Certificate of Incorporation provided, however, at any meeting whether
a quorum be present or otherwise, a majority of the directors present may
adjourn from time to time until the time fixed for the next regular meeting of
the Board of Directors, without notice other than by announcement at the
meeting.
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
Section 23. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 24. Fees and Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
<PAGE>
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
Section 25. Committees.
(a) Executive Committee. The Board of Directors may by resolution
passed by a majority of the whole Board of Directors appoint an Executive
Committee to consist of one (1) or more members of the Board of Directors. The
Executive Committee, to the extent permitted by law and provided in the
resolution of the Board of Directors 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, including without limitation the power or authority
to declare a dividend, to authorize the issuance of stock and to adopt a
certificate of ownership and merger, 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 or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), 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 bylaws of the corporation.
(b) Other Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board of Directors, from time to time appoint such
other committees as may be permitted by law. Such other committees appointed by
the Board of Directors shall consist of one (1) or more members of the Board of
Directors and shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committees, but in no
event shall such committee have the powers denied to the Executive Committee in
these Bylaws.
(c) Term. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to the provisions of subsections (a)
or (b) of this Bylaw may at any time increase or decrease the number of members
of a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any 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.
<PAGE>
(d) Meetings. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
Section 26. Organization. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
Section 27. Officers Designated. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer, the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Direction. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
<PAGE>
Section 28. Tenure and Duties of Officers.
(a) General. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(b) Duties of Chairman of the Board of Directors. The Chairman of the
Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) Duties of President. The President shall preside at all meetings of
the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the corporation,
the President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
(d) Duties of Vice Presidents. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) Duties of Secretary. The Secretary shall attend all meetings of the
stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
<PAGE>
(f) Duties of Chief Financial Officer. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
Section 29. Delegation of Authority. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
Section 30. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
Section 31. Removal. Any officer may be removed from office at any
time, either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
Section 32. Execution of Corporate Instrument. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
<PAGE>
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All
other instruments and documents requiting the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person .or persons as the Board of Directors shall authorize so
to do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
Section 33. Voting of Securities Owned by the Corporation. All stock
and other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
<PAGE>
ARTICLE VII
SHARES OF STOCK
Section 34. Form and Execution of Certificates. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
Section 35. Lost Certificates. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
Section 36. Transfers.
(a) Transfers of record of shares of stock of the corporation shall be
made only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
<PAGE>
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
Section 37. Fixing Record Dates.
(a) 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, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. 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 adjourned meeting.
(b) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is filed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
Section 38. Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
Section 39. Execution of Other Securities. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
<PAGE>
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
Section 40. Declaration of Dividends. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to law
at any regular or special meeting. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation.
Section 41. Dividend Reserve. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
Section 42. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
<PAGE>
ARTICLE XI
INDEMNIFICATION
Section 43. Indemnification of Directors, Executive Officers, Other
Officers, Employees and Other Agents.
(a) Directors Officers. The corporation shall indemnify its directors
and officers to the fullest extent not prohibited by the Delaware General
Corporation Law; provided, however, that the corporation may modify the extent
of such indemnification by individual contracts with its directors and officers;
and, provided, further, that the corporation shall not be required to indemnify
any director or officer in connection with any proceeding (or part thereof)
initiated by such person unless (i) such indemnification is expressly required
to be made by law, (ii) the proceeding was authorized by the Board of Directors
of the corporation, (iii) such indemnification is provided by the corporation,
in its sole discretion, pursuant to the powers vested in the corporation under
the Delaware General Corporation Law or (iv) such indemnification is required to
be made under subsection (d).
(b) Employees and Other Agents. The corporation shall have power to
indemnify its employees and other agents as set forth in the Delaware General
Corporation Law.
(c) Expense. The corporation shall advance to any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer, of
the corporation, or is or was serving at the request of the corporation as a
director or executive officer of another corporation, partnership, joint
venture, trust or other enterprise, prior to the final disposition of the
proceeding, promptly following request therefor, all expenses incurred by any
director or officer in connection with such proceeding upon receipt of an
undertaking by or on behalf of such person to repay said mounts if it should be
determined ultimately that such person is not entitled to be indemnified under
this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
officer of the corporation (except by reason of the fact that such officer is or
was a director of the corporation in which event this paragraph shall not apply)
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, if a determination is reasonably and promptly made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to the proceeding, or (ii) if such quorum is not obtainable,
or, even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, that the facts known to the
decision-making party at the time such determination is made demonstrate clearly
and convincingly that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation.
<PAGE>
(d) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and officers
under this Bylaw shall be deemed to be contractual rights and be effective to
the same extent and as if provided for in a contract between the corporation and
the director or officer. Any right to indemnification or advances granted by
this Bylaw to a director or officer shall be enforceable by or on behalf of the
person holding such right in any court of competent jurisdiction if (i) the
claim for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his claim. In
connection with any claim for indemnification, the corporation shall be entitled
to raise as a defense to any such action that the claimant has not met the
standard of conduct that make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed. In connection with any claim by an officer of the corporation (except
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such officer is or was a director of
the corporation) for advances, the corporation shall be entitled to raise a
defense as to any such action clear and convincing evidence that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed in the best interests of the corporation, or with respect to any
criminal action or proceeding that such person acted without reasonable cause to
believe that his conduct was lawful. Neither the failure of the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct. In any suit brought by a director or
officer to enforce a right to indemnification or to an advancement of expenses
hereunder, the burden of proving that the director or officer is not entitled to
be indemnified, or to such advancement of expenses, under this Article XI or
otherwise shall be on the corporation.
(e) Non-Exclusivity of Rights. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
(f) Survival of Rights. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) Insurance. To the fullest extent permitted by the Delaware General
Corporation Law, the corporation, upon approval by the Board of Directors, may
purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Bylaw.
<PAGE>
(h) Amendments. Any repeal or modification of this Bylaw shall only be
prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and officer to the full
extent not prohibited by any applicable portion of this Bylaw that shall not
have been invalidated, or by any other applicable law.
(j) Certain Definitions. For the purposes of this Bylaw, the following
definitions shall apply:
(i) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation,
prosecution, defense, settlement, arbitration and appeal of, and the
giving of testimony in, any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative.
(ii) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness
fees, fines, amounts paid in settlement or judgment and any other costs
and expenses of any nature or kind incurred in connection with any
proceeding.
(iii) The term the "corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger
which, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers, and employees or
agents, so that any person who is or was a director, officer, employee
or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer,
employee or agent or another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the
provisions of this Bylaw with respect to the resulting or surviving
corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(iv) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include,
without limitation, situations where such person is serving at the
request of the corporation as, respectively, a director, executive
officer, officer, employee, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
(v) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include
any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee
benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this Bylaw.
<PAGE>
ARTICLE XII
NOTICES
Section 44. Notices.
(a) Notice to Stockholders. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.
(b) Notice to directors. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
(c) Affidavit of Mailing. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) Time Notices Deemed Given. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing, and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at time of transmission.
(e) Methods of Notice. It shall not be necessary that the same method
of giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) Failure to Receive Notice. The period or limitation of time within
which any stockholder may exercise any option or right, or enjoy any privilege
or benefit, or be required to act, or within which any director may exercise any
power or right, or enjoy any privilege, pursuant to any notice sent him ill the
manner above provided, shall not be affected or extended in any manner by the
failure of such stockholder or such director to receive such notice.
(g) Notice to Person with Whom Communication Is Unlawful. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
require and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
<PAGE>
(h) Notice to Person with Undeliverable Address. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE XII
AMENDMENTS
Section 45. Amendments. The Board of Directors shall have the power to
adopt, amend, or repeal Bylaws as set forth in the Articles of Incorporation.
<PAGE>
ARTICLE XIV
LOANS TO OFFICERS
Section 46. Loans to Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
Declared as the By-Laws of Qinnet.com, Inc. as of the 11th day of April, 2000.
Signature of Officer: /s/ Scott Houghton
Name of Officer: SCOTT HOUGHTON
Position of Officer: Secretary and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0001100891
<NAME> Internet Corporation of America
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> DEC-31-2000
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> (10)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> (1028)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1028)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1028)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1028)
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS INDEX
Qinnet.com, Inc. Page
<S> <C>
Annual Financial Statements
Report of Independent Certified Public Accountants F-2
Balance Sheets as of March 31, 2000, December 31, 1999 and 1998 F-3
Statements of Operations and Comprehensive Income
for the three months ended March 31, 2000, for the years ended December 31,
1999 and 1998, and for the period May 31, 1989 (date of inception)
to March 31, 2000 F-4
Statement of Changes in Stockholders' Equity
for the period from May 31, 1989 (date of inception)
to March 31, 2000 F-5
Statements of Cash Flows
for the three months ended March 31, 2000, for the years ended December 31,
1999 and 1998, and for the period May 31, 1989 (date of inception)
to March 31, 2000 F-9
Notes to Financial Statements F-10
Interim Financial Statements
Independent Accountant's Report F-13
Balance Sheets as of March 31, 2000 and 1999 F-14
Statements of Operations and Comprehensive Income
for the three months ended March 31, 2000 and 1999 F-15
Statements of Cash Flows
for the three months ended March 31, 2000 and 1999 F-16
Notes to Financial Statements F-17
Internet Corporation of America
Annual Financial Statements
Report of Independent Certified Public Accountants F-21
Balance Sheets as of December 31, 1999 and 1998 F-22
Statements of Operations and Comprehensive Income
for the years ended December 31, 1999 and 1998 F-23
Statement of Changes in Stockholders' Equity
for the years ended December 31, 1999 and 1998 F-24
Statements of Cash Flows
for the years ended December 31, 1999 and 1998 F-25
Notes to Financial Statements F-26
Interim Financial Statements
Independent Accountant's Report F-27
Balance Sheets as of March 31, 2000 and 1999 F-28
Statements of Operations and Comprehensive Income
for the three months ended March 31, 2000 and 1999 F-29
Statements of Cash Flows
for the three months ended March 31, 2000 and 1999 F-30
Notes to Financial Statements F-31
Pro forma financial statements F-33
- ------------------------------
</TABLE>
F-1
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Qinnet.Com, Inc.
(formerly TeleSpace, Limited)
We have audited the accompanying balance sheets of Qinnet.Com, Inc. (formerly
TeleSpace, Limited) (a Delaware corporation and a development stage company) as
of March 31, 2000, December 31, 1999 and 1998 and the related statements of
operations and comprehensive income, changes in stockholders' equity and cash
flows for the three months ended March 31, 2000 and for each of the years ended
December 31, 1999 and 1998 and for the period from May 31, 1989 (date of
inception) through March 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Qinnet.Com, Inc. (formerly
TeleSpace, Limited) (a development stage company) as of March 31, 2000, December
31, 1999 and 1998, and the results of its operations and its cash flows for the
three months ended March 31, 2000 and each of the years ended December 31, 1999
and 1998 and for the period from May 31, 1989 (date of inception) through
December 31, 1999, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has no viable operations or significant assets
and is dependent upon significant shareholders to provide sufficient working
capital to maintain the integrity of the corporate entity. These circumstances
create substantial doubt about the Company's ability to continue as a going
concern and are discussed in Note A. The financial statements do not contain any
adjustments that might result from the outcome of these uncertainties.
/s/ S. W. HATFIELD, CPA
-------------------
S. W. HATFIELD, CPA
Dallas, Texas
April 10, 2000
Use our past to assist your future sm
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
F-2
<PAGE>
<TABLE>
<CAPTION>
QINNET.COM , INC.
(formerly TeleSpace Limited)
(a development stage company)
BALANCE SHEETS
March 31, 2000, December 31, 1999 and 1998
March 31,December 31,December 31,
2000 1999 1998
---------------------------------
<S> <C> <C> <C>
ASSETS
Cash on hand and in bank $ 50,000 $ 50,000 $ --
======== ======== ========
LIABILITIES $ -- $ -- $ --
-------- -------- --------
STOCKHOLDERS' EQUITY Preferred stock - $0.00001 par value
10,000,000 shares authorized; none
issued and outstanding -- -- --
Common stock - $0.00001 par value
50,000,000 shares authorized
1,250,248 shares issued and outstanding 13 13 13
Additional paid-in capital 50,147 50,147 50,147
Contributed capital 5,358 5,358 5,358
Deficit accumulated during
the development stage (5,518) (5,518) (5,518)
-------- -------- --------
50,000 50,000 50,000
Stock subscription receivable -- -- (50,000)
-------- -------- --------
Total stockholders' equity 50,000 50,000 --
-------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 50,000 $ 50,000 $ --
======== ======== ========
</TABLE>
The accompanying footnotes are an integral part of these financial statements.
F-3
<PAGE>
QINNET.COM , INC.
(formerly TeleSpace Limited)
(a development stage company)
STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME Three months ended March 31,
2000, Years ended December 31, 1999 and 1998
Period from May 31, 1989 (date of inception) through June 30, 1999
Period from
May 31, 1989
(date of
Three months inception)
ended Year ended Year ended through
March 31, December 31, December 31, March 31,
2000 1999 1998 2000
--------- --------- --------- ---------
Revenues $ -- $ -- $ -- $ --
--------- --------- --------- ---------
Expenses
Rent and management fees -- -- -- 4,000
Other expenses -- -- -- 1,433
Amortization of
organization costs -- -- -- 85
--------- --------- --------- ---------
Total expenses -- -- -- 5,518
--------- --------- --------- ---------
Net Loss -- -- -- (5,518)
Other Comprehensive Income -- -- -- --
--------- --------- --------- ---------
Comprehensive Loss $ -- $ -- $ -- $ (5,518)
========= ========= ========= =========
Loss per weighted-average share
of common stock outstanding
computed on net loss - basic
and fully diluted nil nil nil nil
========= ========= ========= =========
Weighted-average number of
shares of common stock
outstanding - basic and
fully diluted 1,250,498 1,250,498 1,250,498 568,090
========= ========= ========= =========
The accompanying footnotes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
QINNET.COM , INC.
(formerly TeleSpace Limited)
(a development stage company)
STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY Period from May 31, 1989
(date of inception) through March 31, 2000
Deficit
accumulated
Additional Stock during the
Common Stock paid-in Contributed subscription development
------------
Shares Amount capital capital receivable stage Total
----------- ----------- ----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of stock at formation
on May 31, 1989 16,000,000 $ 160 $ -- $ -- $ -- $ -- $ 160
Effect of one for seven reverse
split on June 27, 1996 (13,714,000) (137) 137 -- -- -- --
Effect of one for eight reverse
split on July 29, 1999 (1,999,752) (20) 20 -- -- -- --
Capital contributed to
support development -- -- -- 1,460 -- -- 1,460
Net loss for the period -- -- -- -- -- (1,545) (1,545)
----------- ----------- ----------- ----------- ------------- ----------- -----------
Balances at December 31, 1989 286,248 3 157 1,460 -- (1,545) 75
Capital contributed to
support development -- -- -- 1,700 -- -- 1,700
Net loss for the year -- -- -- -- -- (1,717) (1,717)
----------- ----------- ----------- ----------- ------------- ----------- -----------
Balances at December 31, 1990 286,248 $ 3 $ 157 $ 3,160 $ -- $ (3,262) $ 58
=========== =========== =========== =========== ============= =========== ===========
</TABLE>
- Continued -
The accompanying footnotes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
QINNET.COM , INC.
(formerly TeleSpace Limited)
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY- CONTINUED Period from May 31, 1989
(date of inception) through March 31, 2000
Deficit
accumulated
Additional Stock during the
Common Stock paid-in Contributed subscription development
------------
Shares Amount capital capital receivable stage Total
------- ------- ------- ------- ------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1990 286,248 $ 3 $ 157 $ 3,160 $ -- $(3,262) $ 58
Capital contributed to
support development -- -- -- 1,298 -- -- 1,298
Net loss for the year -- -- -- -- -- (1,315) (1,315)
------- ------- ------- ------- ------------- ------- -------
Balances at December 31, 1991 286,248 3 157 4,458 -- (4,577) 41
Capital contributed to
support development -- -- -- 900 -- -- 900
Net loss for the year -- -- -- -- -- (941) (941)
------- ------- ------- ------- ------------- ------- -------
Balances at December 31, 1992 286,248 3 157 5,358 -- (5,518) --
Net loss for the year -- -- -- -- -- -- --
------- ------- ------- ------- ------------- ------- -------
Balances at December 31, 1993 286,248 3 157 5,358 -- (5,518) --
Net loss for the year -- -- -- -- -- -- --
------- ------- ------- ------- ------------- ------- -------
Balances at December 31, 1994 286,248 $ 3 $ 157 $ 5,358 $ -- $(5,518) $ --
======= ======= ======= ======= ============= ======= =======
</TABLE>
- Continued -
The accompanying footnotes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
QINNET.COM , INC.
(formerly TeleSpace Limited)
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY- CONTINUED Period from May 31, 1989
(date of inception) through March 31, 2000
Deficit
accumulated
Additional Stock during the
Common Stock paid-in Contributed subscription development
------------
Shares Amount capital capital receivable stage Total
---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1994 286,248 $ 3 $ 157 $ 5,358 $ -- $ (5,518) $ --
Net loss for the year -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- -----------
Balances at December 31, 1995 286,248 3 157 5,358 -- (5,518) --
Issuance of common stock
to new majority stockholder 7,714,000 77 49,923 -- (50,000) -- --
Effect of one for eight reverse
split on July 29, 1999 (6,750,000) (67) 67 -- -- -- --
Net loss for the year -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- -----------
Balances at December 31, 1996 1,250,248 13 50,147 5,358 (50,000) (5,518) --
Net loss for the year -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- -----------
Balances at December 31, 1997 1,250,248 13 50,147 5,358 (50,000) (5,518) --
Net loss for the year -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- -----------
Balances at December 31, 1998 1,250,248 $ 13 $ 50,147 $ 5,358 $ (50,000) $ (5,518) $ --
========== ========== ========== ========== ========== ========== ===========
</TABLE>
- Continued -
The accompanying footnotes are an integral part of these financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
QINNET.COM , INC.
(formerly TeleSpace Limited)
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY- CONTINUED Period from May 31, 1989
(date of inception) through March 31, 2000
Deficit
accumulated
Additional Stock during the
Common Stock paid-in Contributed subscription development
------------
Shares Amount capital capital receivable stage Total
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1998 1,250,248 $ 13 $ 50,147 $ 5,358 $ (50,000) $ (5,518) $ --
Collection of stock
subscription receivable -- -- -- -- 50,000 -- 50,000
Net loss for the period -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Balances at December 31, 1999 1,250,248 13 50,147 5,358 -- (5,518) 50,000
Net loss for the period -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Balances at March 31, 2000 1,250,248 $ 13 $ 50,147 $ 5,358 $ -- $ (5,518) $ 50,000
========= ========= ========= ========= ========= ========= =========
</TABLE>
The accompanying footnotes are an integral part of these financial statements.
F-8
<PAGE>
<TABLE>
<CAPTION>
QINNET.COM , INC.
(formerly TeleSpace Limited)
(a development stage company)
STATEMENTS OF CASH FLOWS
Three months ended March 31, 2000, Years ended
December 31, 1999 and 1998 Period from May 31,
1989 (date of inception) through March 31, 2000
Period from
May 31, 1989
Three months (date of inception)
ended Year ended Year ended through
March 31, December 31, December 31, March 31,
2000 1999 1998 2000
------ -------- ------ --------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net loss for the period $ -- $ -- $ -- $ (5,518)
Adjustments to reconcile
net loss to net cash
provided by operating
activities
Payment of
organization costs -- -- -- (85)
Amortization of
organizational costs -- -- -- 85
------ -------- ------ --------
Net cash used in
operating activities -- -- -- (5,518)
------ -------- ------ --------
Cash Flows from Investing Activities -- -- -- --
------ -------- ------ --------
Cash Flows from Financing Activities
Issuance of common stock -- -- -- 160
Collection of stock subscription
receivable -- 50,000 -- 50,000
Capital contributed to
support development -- -- -- 5,358
------ -------- ------ --------
Net cash provided by
financing activities -- 50,000 -- 55,518
------ -------- ------ --------
Increase in Cash -- 50,000 -- 50,000
Cash at beginning of period -- -- -- --
------ -------- ------ --------
Cash at end of period $ -- $ 50,000 $ -- $ 50,000
====== ======== ====== ========
Supplemental Disclosure of
Interest and Income Taxes Paid
Interest paid for the period $ -- $ -- $ -- $ --
====== ======== ====== ========
Income taxes paid for the period $ -- $ -- $ -- $ --
====== ======== ====== ========
</TABLE>
The accompanying footnotes are an integral part of these financial statements.
F-9
<PAGE>
QINNET.COM , INC.
(formerly TeleSpace Limited)
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
NOTE A - Organization and Description of Business
Qinnet.com, Inc. (Company) was incorporated on May 31, 1989 as Specialistics,
Inc. under the laws of the State of Delaware, as a wholly-owned subsidiary of
Debbie Reynolds Hotel and Casino, Inc. (formerly Halter Venture Corporation), a
publicly-owned corporation (DRHC). The Company has had no substantial operations
or substantial assets since inception. The business purpose of the Company is to
seek out and obtain a merger, acquisition or outright sale transaction whereby
the Company's stockholders will benefit. The Company has not engaged in any
negotiations from inception and has not undertaken any steps to initiate the
search for a merger or acquisition candidate. In anticipation of various
business combination transactions which did not reach completion, the Company
changed its corporate name to Eastern Group International, Ltd. on July 18, 1996
and TeleSpace Limited on December 27, 1996, respectively.
The Company changed its corporate name to Qinnet.Com, Inc. on December 14, 1999.
In October 1992, DRHC divested itself of 100% of its holdings in the Company by
distributing 100% of the issued and outstanding stock of the Company to DRHC
stockholders. The then majority stockholder of DRHC became the majority
stockholder of the Company. This stockholder then continued to maintain the
corporate status of the Company and provides all nominal working capital support
on the Company's behalf.
The Company has no assets or business operations through March 13, 2000.
Accordingly, the Company is considered in the development stage and, as such,
has generated no significant operating revenues and has incurred cumulative
operating losses of approximately $5,500. Accordingly, the Company is fully
dependent upon management and/or significant stockholders to provide sufficient
working capital to preserve the integrity of the corporate entity during this
phase. It is the intent of management and significant stockholders to provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity.
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 B - Summary of Significant Accounting Policies
1. Cash and cash equivalent
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
2. Organization costs
Organization costs were amortized over a five year period from inception
using the straight-line basis.
F-10
<PAGE>
QINNET.COM , INC.
(formerly TeleSpace Limited)
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE B - Summary of Significant Accounting Policies - Continued
3. Income taxes
For the period May 31, 1989 (date of inception) through December 31, 1990,
the Company was included in the consolidated income tax return of DRHC. For
the two years ended December 31, 1992 and 1991, respectively, the Company
(and its parent, DRHC) were included in the consolidated income tax return
of the Company's majority stockholder. As of December 31, 1993, the Company
began filing its own separate federal income tax return. The Company has no
net operating loss carryforwards available to offset financial statement or
tax return taxable income in future periods.
4. Loss per share
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of March 31, 2000, December 31, 1999 and
1998, the Company had no warrants and options outstanding which could be
deemed to be dilutive.
NOTE C - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
NOTE D - Related Party Transactions
For the period May 31, 1989 (date of inception) through September 30, 1992, DRHC
provided office space and management services to the Company for a fee of $100
per month. Total expenses under this arrangement aggregated $4,000 for the total
period.
NOTE E - Common Stock Transactions
On June 27, 1996, the Company's Board of Directors approved and effected a one
for seven reverse stock split. Further, on July 29, 1999, the Company's Board
of Directors approved and effected a one for eight reverse stock
split. All issued and outstanding share and per share amounts reflect the
cumulative effect of both reverse splits as of the first day of the first period
presented.
F-11
<PAGE>
QINNET.COM , INC.
(formerly TeleSpace Limited)
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE E - Common Stock Transactions - Continued
On November 27, 1996, the Company executed a Stock Purchase Agreement
(Agreement) with Telespace, Ltd., a privately-owned corporation. The Agreement
calls for Telespace, Ltd. to pay$50,000 for approximately 7,714,000 pre-reverse
split shares of restricted, unregistered common stock to be utilized in
facilitating a proposed reverse merger with a privately owned corporation. The
use of the proceeds is intended to pay for various reorganization,
recapitalization and other fees and expenses related to the change in ownership
control and proposed acquisition transaction. This amount was satisfied in full
on December 31, 1999
NOTE F - Merger Transactions
On July 1, 1999, the Company entered into a merger agreement with AmeriCom USA,
Inc. (AmeriCom), a publicly-owned Delaware corporation, whereby the Company
would exchange one share of its common stock for each issued and outstanding
share of common stock of AmeriCom (approximately 33,265,756 shares). The Company
would be the surviving entity of the merger transaction. Additionally, the
Company would assume all obligations related to issued and outstanding stock
options of AmeriCom and the AmeriCom Option Plan. This transaction did not
consummate and the Company has no further obligations thereunder.
As of March 13, 2000, the Company has an agreement in principle to merge with
Qinnet Holdings Corp. (a Washington State corporation), a privately-owned
corporation controlled by the Company's controlling shareholder. As of this
date, the proposed merger has not been completed. Due to common control and
ownership of the two merging corporations, this transaction will be accounted
for on an "as-if-pooled" basis in accordance with Interpretation #39 of
Accounting Principles Board Opinion #16 whereby the combined financial
statements of the merged entities will become the historical financial
statements of the Company. In anticipation of this merger transaction, the
Company changed its corporate name to Qinnet.com, Inc. on December 14, 1999.
F-12
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
Independent Accountant's Report
Board of Directors and Shareholders
Qinnet.com, Inc.
We have reviewed the accompanying balance sheets of Qinnet.com, Inc. (a Delaware
corporation) as of March 31, 2000 and 1999 and the accompanying statement of
operations and comprehensive income and statement of cash flows for the three
months ended March 31, 2000 and 1999. These financial statements are prepared in
accordance with the instructions for Form 10-QSB, as issued by the U. S.
Securities and Exchange Commission, and are the sole responsibility of the
company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression on an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company is dependent upon its majority shareholder to
maintain the corporate status of the Company and to provide all nominal working
capital support on the Company's behalf. Because of the Company's lack of
operating assets, its continuance is fully dependent upon the majority
shareholder's continuing support. This situation raises a substantial doubt
about the Company's ability to continue as a going concern. The majority
shareholder intends to continue the funding of nominal necessary expenses to
sustain the corporate entity. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ S. W. HATFIELD, CPA
--------------------
S. W. HATFIELD, CPA
Dallas, Texas
April 13, 2000
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
F-13
<PAGE>
Qinnet.com, Inc.
(formerly TeleSpace Limited)
(a development stage company)
Balance Sheets
March 31, 2000 and 1999
(Unaudited)
March 31, March 31,
2000 1999
--------- ---------
ASSETS
Cash on hand and in bank $ 50,000 $ --
======== ========
LIABILITIES $ -- $ --
-------- --------
STOCKHOLDERS' EQUITY Preferred stock - $0.00001 par value
10,000,000 shares authorized; none
issued and outstanding -- --
Common stock - $0.00001 par value
50,000,000 shares authorized
1,250,248 shares issued and outstanding 13 13
Additional paid-in capital 50,147 50,147
Contributed capital 5,358 5,358
Deficit accumulated during
the development stage (5,518) (5,518)
-------- --------
50,000 50,000
Stock subscription receivable -- (50,000)
-------- --------
Total stockholders' equity 50,000 --
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 50,000 $ --
======== ========
The financial information included herein has been prepared by management
without audit by independent certified public accountants. See accompanying
accountants' review report. The accompanying notes are an integral part of these
financial statements.
F-14
<PAGE>
Qinnet.com, Inc.
(formerly TeleSpace Limited)
(a development stage company)
Statements of Operations and Comprehensive Income
Three months ended March 31, 2000 and 1999
Period from May 31, 1989 (date of inception) through June 30, 1999
(Unaudited)
Period from
May 31, 1989
Three months Three months (date of inception)
ended ended through
March 31, March 31, March 31,
2000 1999 2000
Revenues $ -- $ -- $ --
--------- --------- ---------
Expenses
Rent and management fees -- -- 4,000
Other expenses -- -- 1,433
Amortization of
organization costs -- -- 85
--------- --------- ---------
Total expenses -- -- 5,518
--------- --------- ---------
Net Loss -- -- (5,518)
Other Comprehensive Income -- -- --
--------- --------- ---------
Comprehensive Loss $ -- $ -- $ (5,518)
========= ========= =========
Loss per weighted-average share
of common stock outstanding
computed on net loss - basic
and fully diluted nil nil nil
========= ========= =========
Weighted-average number of
shares of common stock
outstanding - basic and
fully diluted 1,250,498 1,250,498 568,090
========= ========= =========
The financial information included herein has been prepared by management
without audit by independent certified public accountants. See accompanying
accountants' review report. The accompanying notes are an integral part of these
financial statements.
F-15
<PAGE>
<TABLE>
<CAPTION>
Qinnet.com, Inc.
(formerly TeleSpace Limited)
(a development stage company)
Statements of Cash Flows
Three months ended March 31, 2000 and 1999
Period from May 31, 1989 (date of inception) through June 30, 1999
(Unaudited)
Period from
May 31, 1989
Three months Three months (date of inception)
ended ended through
March 31, March 31, March 31,
2000 1999 2000
-------- ------ --------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net loss for the period $ -- $ -- $ (5,518)
Adjustments to reconcile net loss to
net cash provided by operating activities
Payment of organization costs -- -- (85)
Amortization of organizational costs -- -- 85
-------- ------ --------
Net cash used in operating activities -- -- (5,518)
-------- ------ --------
Cash Flows from Investing Activities -- -- --
-------- ------ --------
Cash Flows from Financing Activities
Issuance of common stock -- -- 160
Collection of stock subscription receivable 50,000 -- 50,000
Capital contributed to support development -- -- 5,358
-------- ------ --------
Net cash provided by financing activities 50,000 -- 55,518
-------- ------ --------
Increase in Cash 50,000 -- 50,000
Cash at beginning of period -- -- --
-------- ------ --------
Cash at end of period $ 50,000 $ -- $ 50,000
======== ====== ========
Supplemental Disclosure of
Interest and Income Taxes Paid
Interest paid for the period $ -- $ -- $ --
======== ====== ========
Income taxes paid for the period $ -- $ -- $ --
======== ====== ========
</TABLE>
The financial information included herein has been prepared by management
without audit by independent certified public accountants. See accompanying
accountants' review report. The accompanying notes are an integral part of these
financial statements.
F-16
<PAGE>
Qinnet.com, Inc.
(formerly TeleSpace Limited)
(a development stage company)
Notes to Financial Statements
Note A - Organization and Description of Business
Qinnet.com, Inc. (Company) was incorporated on May 31, 1989 as Specialistics,
Inc. under the laws of the State of Delaware, as a wholly-owned subsidiary of
Debbie Reynolds Hotel and Casino, Inc. (formerly Halter Venture Corporation), a
publicly-owned corporation (DRHC). The Company has had no substantial operations
or substantial assets since inception. The business purpose of the Company is to
seek out and obtain a merger, acquisition or outright sale transaction whereby
the Company's stockholders will benefit. The Company has not engaged in any
negotiations from inception and has not undertaken any steps to initiate the
search for a merger or acquisition candidate. In anticipation of various
business combination transactions which did not reach completion, the Company
changed its corporate name to Eastern Group International, Ltd. on July 18, 1996
and TeleSpace Limited on December 27, 1996, respectively.
The Company changed its corporate name to Qinnet.Com, Inc. on December 14, 1999.
In October 1992, DRHC divested itself of 100% of its holdings in the Company by
distributing 100% of the issued and outstanding stock of the Company to DRHC
stockholders. The then majority stockholder of DRHC became the majority
stockholder of the Company. This stockholder then continued to maintain the
corporate status of the Company and provides all nominal working capital support
on the Company's behalf.
The Company has no assets or business operations through March 13, 2000.
Accordingly, the Company is considered in the development stage and, as such,
has generated no significant operating revenues and has incurred cumulative
operating losses of approximately $5,500. Accordingly, the Company is fully
dependent upon management and/or significant stockholders to provide sufficient
working capital to preserve the integrity of the corporate entity during this
phase. It is the intent of management and significant stockholders to provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity.
During interim periods, the Company follows the accounting policies set forth in
its annual financial statements accompanying this document. The information
presented herein does not include all disclosures required by generally accepted
accounting principles and the users of financial information provided for
interim periods should refer to the annual financial information and footnotes
contained in its Annual Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 on Form 10-KSB when reviewing the interim financial results
presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the instructions for Form 10-QSB, are unaudited and
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, results of
operations and cash flows of the Company for the respective interim periods
presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full fiscal year
ending December 31, 2000.
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.
F-17
<PAGE>
Qinnet.com, Inc.
(formerly TeleSpace Limited)
(a development stage company)
Notes to Financial Statements - Continued
Note B - Summary of Significant Accounting Policies
1. Cash and cash equivalents
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
2. Organization costs
Organization costs were amortized over a five year period from inception
using the straight-line basis.
3. Income taxes
For the period May 31, 1989 (date of inception) through December 31, 1990,
the Company was included in the consolidated income tax return of DRHC. For
the two years ended December 31, 1992 and 1991, respectively, the Company
(and its parent, DRHC) were included in the consolidated income tax return
of the Company's majority stockholder. As of December 31, 1993, the Company
began filing its own separate federal income tax return. The Company has no
net operating loss carryforwards available to offset financial statement or
tax return taxable income in future periods.
4. Loss per share
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of March 31, 2000, December 31, 1999 and
1998, the Company had no warrants and options outstanding which could be
deemed to be dilutive.
Note C - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Note D - Related Party Transactions
For the period May 31, 1989 (date of inception) through September 30, 1992, DRHC
provided office space and management services to the Company for a fee of $100
per month. Total expenses under this arrangement aggregated $4,000 for the total
period.
F-18
<PAGE>
Qinnet.com, Inc.
(formerly TeleSpace Limited)
(a development stage company)
Notes to Financial Statements - Continued
Note E - Common Stock Transactions
On June 27, 1996, the Company's Board of Directors approved and effected a one
for seven reverse stock split. Further, on July 29, 1999, the Company's Board
of Directors approved and effected a one for eight reverse stock
split. All issued and outstanding share and per share amounts reflect the
cumulative effect of both reverse splits as of the first day of the first period
presented.
On November 27, 1996, the Company executed a Stock Purchase Agreement
(Agreement) with Telespace, Ltd., a privately-owned corporation. The Agreement
calls for Telespace, Ltd. to pay$50,000 for approximately 7,714,000 pre-reverse
split shares of restricted, unregistered common stock to be utilized in
facilitating a proposed reverse merger with a privately owned corporation. The
use of the proceeds is intended to pay for various reorganization,
recapitalization and other fees and expenses related to the change in ownership
control and proposed acquisition transaction. This amount was satisfied in full
on December 31, 1999
Note F - Merger Transactions
On July 1, 1999, the Company entered into a merger agreement with AmeriCom USA,
Inc. (AmeriCom), a publicly-owned Delaware corporation, whereby the Company
would exchange one share of its common stock for each issued and outstanding
share of common stock of AmeriCom (approximately 33,265,756 shares). The Company
would be the surviving entity of the merger transaction. Additionally, the
Company would assume all obligations related to issued and outstanding stock
options of AmeriCom and the AmeriCom Option Plan. This transaction did not
consummate and the Company has no further obligations thereunder.
As of March 13, 2000, the Company has an agreement in principle to merge with
Qinnet Holdings Corp. (a Washington State corporation), a privately-owned
corporation controlled by the Company's controlling shareholder. As of this
date, the proposed merger has not been completed. Due to common control and
ownership of the two merging corporations, this transaction will be accounted
for on an "as-if-pooled" basis in accordance with Interpretation #39 of
Accounting Principles Board Opinion #16 whereby the combined financial
statements of the merged entities will become the historical financial
statements of the Company. In anticipation of this merger transaction, the
Company changed its corporate name to Qinnet.com, Inc. on December 14, 1999.
F-19
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Internet Corporation of America
We have audited the accompanying balance sheets of Internet Corporation of
America (a Delaware corporation and a wholly-owned subsidiary of Halter Capital
Corporation) as of December 31, 1999 and 1998 and the related statements of
operations and comprehensive income, changes in stockholders' equity and cash
flows for each of the years then ended, respectively. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Internet Corporation of America
as of December 31, 1999 and 1998, and the results of its operations and its cash
flows for each of the years then ended, respectively, in conformity with
generally accepted accounting principles.
S. W. HATFIELD, CPA
Dallas, Texas
January 3, 2000 (except for Note E
as to which the date is January 12, 2000)
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
F-20
<PAGE>
<TABLE>
<CAPTION>
INTERNET CORPORATION OF AMERICA
(a wholly-owned subsidiary of Halter Capital Corporation)
BALANCE SHEETS
December 31, 1999 and 1998
1999 1998
------- -------
<S> <C> <C>
ASSETS
Current Assets
Cash on hand and in bank $ -- $ 40
------- -------
Total Assets $ -- $ 40
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Due to parent company $ 205 $ --
------- -------
Commitments and Contingencies
Stockholder's Equity Common stock - $0.00001 par value
100,000,000 shares authorized
1,000,000 issued and outstanding 10 10
Additional paid-in capital 1,090 1,090
Accumulated deficit (1,305) (1,060)
------- -------
Total stockholders' equity (205) 40
------- -------
Total Liabilities and Stockholder's Equity $ -- $ 40
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
INTERNET CORPORATION OF AMERICA
(a wholly-owned subsidiary of Halter Capital Corporation)
STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME Years ended
December 31, 1999 and 1998
1999 1998
----------- -----------
Revenues $ -- $ --
----------- -----------
Expenses
General and administrative expenses 245 180
----------- -----------
Net Loss (245) (180)
Other Comprehensive Income -- --
----------- -----------
Comprehensive Income $ (245) $ (180)
=========== ===========
Net loss per weighted-average
share of common stock
outstanding, calculated on
Net Loss - basic and fully diluted nil nil
=========== ===========
Weighted-average number of shares
of common stock outstanding 1,000,000 1,000,000
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
<TABLE>
<CAPTION>
INTERNET CORPORATION OF AMERICA
(a wholly-owned subsidiary of Halter Capital Corporation)
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY Years ended
December 31, 1999 and 1998
Additional
Common Stock paid-in Accumulated
---------------------
Shares Amount capital deficit Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balances at January 1,
1998, as reported 100,000 $ 1 $ 999 $ (880) $ 120
Effect of January 12, 2000
10 for 1 forward stock spilt 900,000 9 (9) -- --
--------- --------- --------- --------- ---------
Balances at January 1, 1999,
as restated 1,000,000 10 990 (880) 120
Capital contributed by parent
to support corporate entity -- -- 100 -- 100
Net loss for the year -- -- -- (180) (180)
--------- --------- --------- --------- ---------
Balances at December 31, 1998 1,000,000 10 1,090 (1,060) 40
Net loss for the year -- -- -- (245) --
--------- --------- --------- --------- ---------
Balances at December 31, 1999 1,000,000 $ 10 $ 1,099 $ (1,305) $ (205)
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
INTERNET CORPORATION OF AMERICA
(a wholly-owned subsidiary of Halter Capital Corporation)
STATEMENTS OF CASH FLOWS
Years ended December 31, 1999 and 1998
1999 1998
----- -----
Cash Flows from Operating Activities
Net loss for the period $(245) $(180)
Adjustments to reconcile net loss to
net cash provided by operating activities -- --
----- -----
Net cash used in operating activities (245) (180)
----- -----
Cash Flows from Investing Activities -- --
----- -----
Cash Flows from Financing Activities
Cash advanced by parent company 205 --
Cash contributed by parent to support corporate entity -- 100
----- -----
Net cash used in financing activities 205 100
----- -----
Decrease in Cash (40) (80)
Cash at beginning of period 40 120
----- -----
Cash at end of period $-- $ 40
===== =====
Supplemental Disclosure of
Interest and Income Taxes Paid
Interest paid for the period $-- $--
===== =====
Income taxes paid for the period $-- $--
===== =====
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
INTERNET CORPORATION OF AMERICA
(a wholly-owned subsidiary of Halter Capital Corporation)
NOTES TO FINANCIAL STATEMENTS
NOTE A - Organization and Description of Business
Internet Corporation of America (Company) was incorporated on August 23, 1995
under the laws of the State of Delaware as a wholly-owned subsidiary of Halter
Capital Corporation.
The Company has never had any operations or assets since inception. The current
business purpose of the Company is to seek out and obtain a merger, acquisition
or outright sale transaction whereby the Company's stockholders will benefit.
The Company is not engaged in any negotiations and has not undertaken any steps
to initiate the search for a merger or acquisition candidate.
The Company is fully dependent upon its current management and/or significant
stockholders to provide sufficient working capital to preserve the integrity of
the corporate entity during this phase. It is the intent of management and
significant stockholders to provide sufficient working capital necessary to
support and preserve the integrity of the corporate entity.
The Company has a year end of December 31 and follows the accrual method of
accounting.
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 B - Summary of Significant Accounting Policies
1. Cash and cash equivalents
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
2. Income taxes
The Company provides deferred income taxes, where material, based on the
asset and liability method under the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". At December
31, 1999 and 1998, respectively, the deferred tax asset and deferred tax
liability accounts, consisting solely of temporary differences in
accumulated depreciation, were not material to the financial statements and
no valuation allowance was provided against deferred tax assets.
The Company files its income tax returns as a component of its parent
company's consolidated tax return. Accordingly, all net operating losses
are offset against the tax liabilities of the Company's parent. No net
operating loss carryforwards exist as of December 31, 1999 and 1998,
respectively.
F-25
<PAGE>
INTERNET CORPORATION OF AMERICA
(a wholly-owned subsidiary of Halter Capital Corporation)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE B - Summary of Significant Accounting Policies - Continued
3. Loss per share
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of December 31, 1999 and 1998, the Company
has no warrants and/or options issued and outstanding.
NOTE C - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
NOTE D - Related Party Transactions
As of December 31, the Company's parent company had advanced funds totaling
approximately $205 for operating capital. The advances are due upon demand and
are non-interest bearing.
NOTE E - Common Stock Transactions
On January 12, 2000, the Company filed a Certificate of Amendment to the
Certificate of Incorporation with the State of Delaware to authorize the
issuance of up to 100,000,000 shares of common stock at $0.00001 par value, to
eliminate all references and authorization to issue Preferred Stock and to
effect a ten (10) for one (1) forward stock split. The issued and outstanding
shares of common stock shown in the accompanying financial statements reflect
the effect of the forward stock split as if the split had occurred as of the
beginning of the first period presented in the accompanying financial
statements.
F-26
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
Independent Accountant's Report
Board of Directors and Shareholders
Internet Corporation of America
We have reviewed the accompanying balance sheets of Internet Corporation of
America (a Delaware corporation) as of March 31, 2000 and 1999 and the
accompanying statement of operations and comprehensive income and statement of
cash flows for the three months ended March 31, 2000 and 1999. These financial
statements are prepared in accordance with the instructions for Form 10-QSB, as
issued by the U. S. Securities and Exchange Commission, and are the sole
responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression on an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company is dependent upon its majority shareholder to
maintain the corporate status of the Company and to provide all nominal working
capital support on the Company's behalf. Because of the Company's lack of
operating assets, its continuance is fully dependent upon the majority
shareholder's continuing support. This situation raises a substantial doubt
about the Company's ability to continue as a going concern. The majority
shareholder intends to continue the funding of nominal necessary expenses to
sustain the corporate entity. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ S. W. HATFIELD, CPA
----------------------
S. W. HATFIELD, CPA
Dallas, Texas
April 13, 2000
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
F-27
<PAGE>
Internet Corporation of America
Balance Sheets
March 31, 2000 and 1999
(Unaudited)
March 31, March 31,
2000 1999
------- -------
ASSETS
Current Assets
Cash on hand and in bank $ -- $ --
------- -------
Total Assets $ -- $ --
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Due to former parent company $ -- $ 205
------- -------
Commitments and Contingencies
Stockholder's Equity Common stock - $0.00001 par value
100,000,000 shares authorized
1,000,000 issued and outstanding 10 10
Additional paid-in capital 2,323 1,090
Accumulated deficit (2,333) (1,345)
------- -------
Total stockholders' equity -- (205)
------- -------
Total Liabilities and Stockholder's Equity $ -- $ --
======= =======
The financial information included herein has been prepared by management
without audit by independent certified public accountants. See accompanying
accountants' review report. The accompanying notes are an integral part of these
financial statements.
F-28
<PAGE>
Internet Corporation of America
Statements of Operations and Comprehensive Income
Three months ended March 31, 2000 and 1999
(Unaudited)
Three months Three months
ended ended
March 31, March 31,
2000 1999
Revenues $ -- $ --
----------- -----------
Expenses
General and administrative expenses 1,028 245
----------- -----------
Net Loss (1,028) (245)
Other Comprehensive Income -- --
----------- -----------
Comprehensive Income $ (1,028) $ (245)
=========== ===========
Net loss per weighted-average
share of common stock
outstanding, calculated on
Net Loss - basic and fully diluted nil nil
=========== ===========
Weighted-average number of shares
of common stock outstanding 1,000,000 1,000,000
=========== ===========
The financial information included herein has been prepared by management
without audit by independent certified public accountants. See accompanying
accountants' review report. The accompanying notes are an integral part of these
financial statements.
F-29
<PAGE>
<TABLE>
<CAPTION>
Internet Corporation of America
Statements of Cash Flows
Three months ended March 31, 2000 and 1999
(Unaudited)
Three months Three months
ended ended
March 31, March 31,
2000 1999
------- -------
<S> <C> <C>
Cash Flows from Operating Activities
Net loss for the period $(1,028) $ (245)
Adjustments to reconcile net loss to
net cash provided by operating activities -- --
------- -------
Net cash used in operating activities (1,028) (245)
------- -------
Cash Flows from Investing Activities -- --
------- -------
Cash Flows from Financing Activities
Cash advanced by parent company 1,028 205
Cash contributed by parent to support corporate entity -- --
------- -------
Net cash used in financing activities 1,028 205
------- -------
Decrease in Cash -- (40)
Cash at beginning of period -- 40
------- -------
Cash at end of period $ -- $ --
======= =======
Supplemental Disclosure of
Interest and Income Taxes Paid
Interest paid for the period $ -- $ --
======= =======
Income taxes paid for the period $ -- $ --
======= =======
Supplemental Disclosure of Non-Cash
Investing and Financing Activities
Advances from former parent shareholder
contributed as additional capital $ 1,233 $ --
======= =======
</TABLE>
The financial information included herein has been prepared by management
without audit by independent certified public accountants. See accompanying
accountants' review report. The accompanying notes are an integral part of these
financial statements.
F-30
<PAGE>
Internet Corporation of America
Notes to Financial Statements
NOTE A - Organization and Description of Business
Internet Corporation of America (Company) was incorporated on August 23, 1995
under the laws of the State of Delaware as a wholly-owned subsidiary of Halter
Capital Corporation.
The Company has never had any operations or assets since inception. The current
business purpose of the Company is to seek out and obtain a merger, acquisition
or outright sale transaction whereby the Company's stockholders will benefit.
The Company is not engaged in any negotiations and has not undertaken any steps
to initiate the search for a merger or acquisition candidate. During April 1999,
the Company experienced a change in control and became a wholly-owned subsidiary
of Qinnet.com, Inc., a publicly-owned Delaware corporation.
The Company is fully dependent upon its current management and/or significant
stockholders to provide sufficient working capital to preserve the integrity of
the corporate entity during this phase. It is the intent of management and
significant stockholders to provide sufficient working capital necessary to
support and preserve the integrity of the corporate entity.
The Company has a year end of December 31 and follows the accrual method of
accounting.
During interim periods, the Company follows the accounting policies set forth in
its annual audited financial statements contained elsewhere in this document.
The information presented herein does not include all disclosures required by
generally accepted accounting principles and the users of financial information
provided for interim periods should refer to the annual financial information
and footnotes contained in its annual audited financial statements contained
elsewhere in this document when reviewing the interim financial results
presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the instructions for Form 10-QSB, are unaudited and
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, results of
operations and cash flows of the Company for the respective interim periods
presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full fiscal year
ending December 31, 2000.
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 B - Summary of Significant Accounting Policies
1. Cash and cash equivalents
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
F-31
<PAGE>
Internet Corporation of America
Notes to Financial Statements - Continued
NOTE B - Summary of Significant Accounting Policies - Continued
2. Income taxes
The Company provides deferred income taxes, where material, based on the
asset and liability method under the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". At March 31,
2000 and 1999, respectively, the deferred tax asset and deferred tax
liability accounts, consisting solely of temporary differences in
accumulated depreciation, were not material to the financial statements and
no valuation allowance was provided against deferred tax assets.
For periods through December 31, 1998,. the Company filed its income tax
returns as a component of its former parent company's consolidated tax
return. Accordingly, all net operating losses are offset against the tax
liabilities of the Company's parent. For the year ended December 31, 1999,
the Company filed a separate income tax return. Pursuant to Section 338 of
the Internal Revenue Code, the Company will have no net operating loss
carryforwards for use in future periods as a result of the change in
control of the Company.
3. Loss per share
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of March 31, 2000 and 1999, the Company
has no warrants and/or options issued and outstanding.
NOTE C - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
NOTE D - Related Party Transactions
As of March 31, 2000 and December 31, 1999, the Company's former parent company
had advanced funds totaling approximately $1,233 for operating capital. These
advances were forgiven on March 31, 2000 and recorded as additional paid-in
capital in the accompanying financial statements.
NOTE E - Common Stock Transactions
On January 12, 2000, the Company filed a Certificate of Amendment to the
Certificate of Incorporation with the State of Delaware to authorize the
issuance of up to 100,000,000 shares of common stock at $0.00001 par value, to
eliminate all references and authorization to issue Preferred Stock and to
effect a ten (10) for one (1) forward stock split. The issued and outstanding
shares of common stock shown in the accompanying financial statements reflect
the effect of the forward stock split as if the split had occurred as of the
beginning of the first period presented in the accompanying financial
statements.
F-32
<PAGE>
QINNET.COM, INC.
INTRODUCTION TO PROFORMA CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
On April 13, 2000, Qinnet.com, Inc. acquired 100% of the issued and outstanding
common stock of Internet Corporation of America for $50,000 cash and the
issuance of 50,000 shares of restricted, unregistered shares of Qinnet.com,
Inc.'s common stock. This transaction made Internet Corporation of America a
wholly-owned subsidiary of Qinnet.com, Inc.
This transaction was entered into under a Plan of Reorganization (Reorganization
Agreement) by and between Internet Corporation of America and Qinnet.com, Inc.
Upon the effectiveness of the Reorganization Agreement, pursuant to Rule
12g-3(a) of the General Rules and Regulations of the U. S. Securities and
Exchange Commission, Qinnet.com, Inc. became the successor issuer to Internet
Corporation of America for reporting purposes under The Securities Exchange Act
of 1934 ('34 Act) and elects to report under the '34 Act, effective April 14,
2000.
The Proforma Consolidated Balance Sheets as of December 31, 1999 and March 31,
2000 and the Proforma Consolidated Statements of Operations and Comprehensive
Income for the year ended December 31, 1999 and the three months ended March 31,
2000 present the consolidated results of continuing operations of Qinnet.com,
Inc. and Internet Corporation of America.
The acquisition of Internet Corporation of America by Qinnet.com, Inc. is
accounted for as a purchase in accordance with Accounting Principles Board
Opinion #16, "Business Combinations".
These proforma statements include all material adjustments necessary to present
proforma historical results of the above described transactions. The proforma
information does not purport to be indicative of the financial position or the
results of operations which would have actually been obtained if the acquisition
transactions had actually been consummated on the dates indicated. In addition,
the proforma financial information does not purport to be indicative of the
financial position or results of operations that may be obtained in the future.
The proforma information has been prepared by Qinnet.com, Inc. and all
calculations have been made by the Company based on assumptions deemed
appropriate in the circumstances by the Company. Certain of these assumptions
are set forth under the Notes to Proforma Consolidated Financial Information.
The proforma financial information should be read in conjunction with the
historical Financial Statements and Notes thereto of Qinnet.com, Inc. and the
historical Financial Statements and Notes thereto of Internet Corporation of
America.
F-33
<PAGE>
<TABLE>
<CAPTION>
Qinnet.com, Inc.
(a development stage company)
Proforma Consolidated Balance Sheet
December 31, 1999
Internet
Qinnet,com, Corporation
Inc. of America Adjustments Consolidated
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
Cash on hand and in bank $ 50,000 $ -- $(50,000) $ --
Goodwill -- -- 50,000 50,000
-------- -------- -------- --------
Total Assets $ 50,000 $ -- $ -- $ 50,000
======== ======== ======== ========
LIABILITIES
Due to former parent company $ -- $ 205 $ -- $ 205
-------- -------- -------- --------
STOCKHOLDERS' EQUITY
Common stock - $0.00001 par value
50,000,000 shares authorized
1,250,248 shares issued and
outstanding 13 -- 1 14
Common stock - $0.00001 par value
100,000 shares authorized
1,000,000 shares issued and
outstanding -- 10 (10) --
Additional paid-in capital 50,147 1,090 (1,091) 50,146
Contributed capital 5,358 -- -- 5,358
Accumulated deficit (5,518) (1,305) 1,305 (5,518)
-------- -------- -------- --------
Total stockholders' equity 50,000 (205) 205 50,000
-------- -------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 50,000 $ -- $ -- $ 50,000
======== ======== ======== ========
</TABLE>
The accompanying notes to pro forma consolidated financial information are an
integral part of these pro forma consolidated financial statements.
F-34
<PAGE>
<TABLE>
<CAPTION>
Qinnet.com, Inc.
(a development stage company)
Proforma Consolidated Statements of Operations and Comprehensive Income
Year ended December 31, 1999
Qinnet,com, Internet
Inc. Corporation
of America Adjustments Consolidated
------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues $ -- $ -- $ -- $ --
------ ----------- ---------- -----------
Expenses
General and
administrative expenses -- 245 -- 245
------ ----------- ---------- -----------
Total expenses -- 245 -- 245
------ ----------- ---------- -----------
Net Loss -- (245) -- (245)
Other Comprehensive Income -- -- -- --
------ ----------- ---------- -----------
Comprehensive Loss $ -- $ (245) $ -- $ (245)
====== =========== ========== ===========
Loss per weighted-average share
of common stock outstanding
computed on net loss - basic
and fully diluted nil nil
=== ===
Weighted-average number of
shares of common stock
outstanding - basic and
fully diluted 1,250,498 1,300,498
========== ===========
</TABLE>
The accompanying notes to pro forma consolidated financial information are an
integral part of these pro forma consolidated financial statements.
F-35
<PAGE>
<TABLE>
<CAPTION>
Qinnet.com, Inc.
(a development stage company)
Proforma Consolidated Balance Sheet
March 31, 2000
Internet
Qinnet.com, Corporation
Inc. of America Adjustments Consolidated
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
Cash on hand and in bank $ 50,000 $ -- $(50,000) $ --
Goodwill -- -- 50,000 50,000
-------- -------- -------- --------
Total Assets $ 50,000 $ -- $ -- $ 50,000
======== ======== ======== ========
LIABILITIES
Due to former parent company $ -- $ -- $ -- $ --
-------- -------- -------- --------
STOCKHOLDERS' EQUITY
Common stock - $0.00001 par value
50,000,000 shares authorized
1,250,248 shares issued and
outstanding 13 -- 1 14
Common stock - $0.00001 par value
100,000 shares authorized
1,000,000 shares issued and
outstanding -- 10 (10) --
Additional paid-in capital 50,147 2,323 (2,324) 50,146
Contributed capital 5,358 -- -- 5,358
Accumulated deficit (5,518) (2,333) 2,333 (5,518)
-------- -------- -------- --------
Total stockholders' equity 50,000 -- -- 50,000
-------- -------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 50,000 $ -- $ -- $ 50,000
======== ======== ======== ========
</TABLE>
The accompanying notes to pro forma consolidated financial information are an
integral part of these pro forma consolidated financial statements.
F-36
<PAGE>
<TABLE>
<CAPTION>
Qinnet.com, Inc.
(a development stage company)
Proforma Consolidated Statements of Operations and Comprehensive Income
Three months ended March 31, 2000
Internet
Qinnet.com, Corporation
Inc. of America Adjustments Consolidated
------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues $ -- $ -- $ -- $ --
------ ----------- ---------- -----------
Expenses
General and
administrative expenses -- 1,028 -- 1,028
------ ----------- ---------- -----------
Total expenses -- 1,028 -- 1,028
------ ----------- ---------- -----------
Net Loss -- (1,028) -- (1,028)
Other Comprehensive Income -- -- -- --
------ ----------- ---------- -----------
Comprehensive Loss $ -- $ (1,028) $ -- $ (1,028)
====== =========== ========== ===========
Loss per weighted-average share
of common stock outstanding
computed on net loss - basic
and fully diluted nil nil
=== ===
Weighted-average number of
shares of common stock
outstanding - basic and
fully diluted 1,250,498 1,300,498
========== ===========
</TABLE>
The accompanying notes to pro forma consolidated financial information are an
integral part of these pro forma consolidated financial statements.
F-37
<PAGE>
QINNET.COM, INC.
NOTES TO PROFORMA CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
The Proforma Consolidated Balance Sheets as of December 31, 1999 and March 31,
2000 and the Proforma Consolidated Statements of Operations for the year ended
December 31, 1999 and the three months ended March 31, 2000 are derived from the
historical Balance Sheets and Statements of Operations of Qinnet.com, Inc. and
the Balance Sheets and Statements of Operations of Internet Corporation of
America.
The proforma information reflects the adjustments to record the acquisition of
Internet Corporation of America on April 13, 2000. This transaction is recorded
pursuant to the requirements of Accounting Principles Board Opinion #16,
"Business Combinations", and is accounted for as a purchase.
The proforma information does not purport to be indicative of the financial
position or the results of operations which would have actually been obtained if
the acquisition transactions had actually been consummated on the dates
indicated. In addition, the proforma financial information does not purport to
be indicative of the financial position or results of operations that may be
obtained in the future.
The proforma financial information should be read in conjunction with the
historical Financial Statements and Notes thereto of Qinnet.com, Inc. and the
historical Financial Statements and Notes thereto of Internet Corporation of
America.
The footnotes depicted on the Proforma Consolidated Financial Information are
described below:
(1) Payment of $50,000 cash and the Issuance of 50,000 shares of restricted,
unregistered common stock of Qinnet.com, Inc. to acquire 100.0% of the
issued and outstanding shares of Internet Corporation of America. The fair
value of the consideration exchanged exceeded the fair value of the assets
acquired by approximately $50,000.
F-38
