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As filed with the Securities and Exchange Commission on March 31, 2000
SEC Registration No. 333-30176
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM SB-2/A-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
NMXS.com, INC.
(Name of small business issuer in its charter)
DELAWARE 7389 91-1287406
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Number) Identification No.)
incorporation or
organization)
5041 INDIAN SCHOOL ROAD NE, SUITE 200, ALBUQUERQUE, NM 87110
(505) 255-1999
(Address and Telephone Number of Principal Executive Offices)
5041 INDIAN SCHOOL ROAD NE, SUITE 200, ALBUQUERQUE, NM 87110
(Address of Principal Place of Business)
RICHARD GOVATSKI, PRESIDENT, NMXS.com, INC.
5041 INDIAN SCHOOL ROAD NE, SUITE 200, ALBUQUERQUE, NM 87110
(505) 255-1999
(Name, Address and Telephone Number of Agent for Service)
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Copies to:
Ronald N. Vance, Esq.
57 West 200 South
Suite 310
Salt Lake City, UT 84101
(801) 359-9300
(801) 359-9310 - FAX
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ________
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] __________
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------
Title of Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered Per Unit(1) Price(1) Fee
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series A Warrants
and Common Stock,
$.001 par value
per share 1,000,000 $1.25 $1,250,000 $348
Common Stock
$.001 par value
per share 20,000 $3.00 $60,000 $16
---
TOTAL $364
====
</TABLE>
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- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457 under the Securities Act of 1933.
(2) Estimated solely for purpose of calculating the registration fee
pursuant to Rule 457. This amount is based upon the average of the bid and asked
prices ($3.00) of the common stock of the Registrant as of February 7, 2000.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
SUBJECT TO COMPLETION, DATED MARCH 31, 2000
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
NMXS.com, INC.
1,000,000 Warrants and Underlying Shares
Exercise Price: $1.25 Per Share
We are distributing 1,000,000 Series A Warrants to our shareholders of
record as of the beginning of business on August 3, 1999. Each warrant entitles
the holder to purchase one share of common stock. Each warrant is exercisable at
$1.25. Our stock is quoted on the Pink Sheets under the symbol "NMXS." We may
redeem the warrants for $.01 per warrant on 30 days notice. The warrants will
expire three years following the date of this prospectus.
The warrants are being distributed to our shareholders without the
payment of any consideration. The shares of stock are being offered only to
holders of the warrants and these shares of stock will be issued upon exercise
of the warrants. The offering price of the shares is payable in cash upon
exercise of the warrants. No minimum number of warrants must be exercised, and
we cannot assure you that any warrants will be exercised. We will not pay any
underwriting discounts or other commissions in connection with the exercise of
the warrants. The only proceeds we could receive in this offering will be from
the exercise of the warrants. If all of the warrants were exercised, we would
receive $1,250,000.
Concurrently with this offering, we are registering for resale 20,000
shares to be offered by a selling security holder.
THIS OFFERING IS HIGHLY SPECULATIVE AND INVOLVES SPECIAL RISKS
CONCERNING THE COMPANY AND ITS BUSINESS. SEE "RISK FACTORS" BEGINNING ON PAGE 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
, 2000
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
Prospectus Summary
Risk Factors
Forward Looking Statements
Use of Proceeds
Dilution
Management's Discussion and Analysis of Financial Condition and Results of
Operation
Business
Management
Certain Transactions
Market Information
Principal Shareholders
Selling Shareholder
Description of Securities
Dividend Policy
Plan of Distribution
Shares Eligible For Future Sale
Legal Matters
Experts
Financial Statements
</TABLE>
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PROSPECTUS SUMMARY
OUR COMPANY
We create software solutions for the management of large volumes of
media or digital material, such as graphic images, video clips, or audio files,
over the Internet or via internal business intranets. In addition, our products
can also be used in any business sector that must deal with the management of
large volumes of graphic images, such as medicine, scientific environments, and
law enforcement.
Our principal executive offices are located at 5041 Indian School Road
NE, Suite 200, Albuquerque, NM 87110, and our telephone number at these offices
is (505) 255-1999
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Securities offered 1,000,000 warrants, each
exercisable at $1.25 per
share for three years from
the date of this prospectus
Shares outstanding at February 8, 2000 20,733,836
Shares outstanding after maximum exercise 21,733,836
Proceeds from exercise of warrants $1,250,000
Estimated offering expenses $60,000
Net proceeds to us $1,190,000
Plan of distribution The warrants will be
distributable to, and
exercisable by, shareholders
of record on August 3, 1999
</TABLE>
We intend to use the net proceeds, if any, to:
- Expand sales and advertising efforts; and
- Fund research and development of existing and new
products.
The following summary financial information has been derived from our
consolidated financial statements which appear later in this prospectus and
should be read in conjunction with those consolidated financial statements and
related notes.
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<TABLE>
<CAPTION>
For the years
ended December 31
1999 1998
---- ----
Consolidated Statement of Operations Data:
<S> <C> <C>
Sales $266,000 $196,000
Operating expenses 1,978,000 310,000
Net loss (1,687,000) (114,000)
Loss per share (.14) (.02)
Consolidated Balance Sheet Data:
Current assets $1,167,000
Total assets 1,309,000
Current liabilities 85,000
Stockholders' equity 1,224,000
</TABLE>
RISK FACTORS
We are much like a start up company and have a limited operating
history on which to evaluate our potential for future success. Other,
better financed companies may be developing similar products as ours
which could compete with our products. Such competition could
materially adversely affect our financial condition.
Although we have been established for three years, we remain a
development stage enterprise and our product was not completed and sold until
1998. We, therefore, have a limited operating history upon which you can
evaluate our business prospects. You must consider the risks and uncertainties
frequently encountered by early stage companies in new and rapidly evolving
markets. For example, we believe there may exist better-capitalized companies on
a parallel development path with similar products addressing our target markets.
While the Internet technology marketplace is extremely competitive, we have
anticipated a first-to-market advantage with our products. However, other highly
capitalized companies that have recognized the absence of digital image
management products could overwhelm our first-to-market advantage with expensive
and expansive media blitzes that create the perception of a dominant market
presence and/or superior products. If we are unsuccessful in addressing these
risks and uncertainties, our business, results of operations and financial
condition will be materially and adversely affected.
We have experienced losses of $1,687,000 for the year ended December
31, 1999 and we expect losses for the foreseeable future. Also our
operating results may fluctuate from quarter to quarter.
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To date we have incurred net losses, resulting primarily from costs
related to developing our product and attempting to establish ourselves in the
marketplace. Our short-term plans include hiring additional engineers to improve
our existing products and develop new products, hiring additional marketing
personnel, and investing in administrative personnel. We feel that these
expenses are necessary to build an organization which is capable of establishing
and maintaining a strong market position and operating effectively in that
environment. However, we will be subject to continued risks, expenses and
difficulties in our continuing software development and growth efforts. Product
development difficulties could limit sales of our product and could cause a bad
reputation in the marketplace. When a product gains a reputation for containing
operating bugs, it is often difficult to recover credibility. Additional risks
and difficulties include, but are not limited to, the following situations:
- Difficulty recruiting and retaining staff of
sufficient technical caliber to provide
adequate and on-going customer support and product
maintenance and development;
- Failure to successfully market our products through
the Internet and company representatives; and
- Catastrophic and universal hardware failure.
We offer no assurance that we will be successful in addressing or
responding to such risks and the failure to do so could have a material adverse
effect on our business, operations and financial condition. Our operating
history and the uncertain and volatile nature of the markets make predictions of
future results of operations difficult and should not be taken as indicative of
revenue growth, if any, that can be expected in the future. There is no firm
basis to estimate our expenses or the amount of revenues that planned operations
will generate and there can be no assurance that we will ever achieve
significantly increased revenues or profitable operations. Comparisons to our
previous ability to attract customers and sell products may not necessarily be
an indication of future performance.
We may encounter difficulty recruiting and retaining staff. Without
highly trained technical personnel, we may find it more difficult to
compete with other companies in our field.
We must attract and retain highly qualified technical personnel to both
maintain the current product and customer support levels and to update and
improve our products. Competition for highly qualified technical personnel,
particularly those with Internet technology-related programming skills, is
intense and there is no assurance that we will be able to attract and retain
personnel of the skill level and caliber we need to accomplish our goals.
Because they are in high demand, such technical personnel often demand large
salaries and comprehensive benefits packages that could strain our financial
resources. Technology companies generally have a higher employee turnover rate
than non-technology companies due to intense competition to attract the
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most qualified personnel. We may also be at slightly more of a disadvantage than
other software development companies because technical personnel with the
Internet technology expertise that we seek might be reluctant to relocate away
from the more financially lucrative West Coast technology centers such as
Silicon Valley.
We may face a need for additional financing, especially if our
estimates to obtain new staff or if our projected costs of product
development are incorrect. If such additional financing is required,
but unavailable, we may not be able to develop markets for our products
before others introduce competing products.
There is no assurance that the equity funding obtained will be
adequate. Substantial additional equity or debt financing may be necessary. In
such an event, we intend to seek additional financing in order to hire more
technical or sales staff or to expand our promotional capabilities. We could
seek such additional financing from a number of sources including, but not
limited to, possible further sales of equity or debt securities, bank loans,
affiliates, or other financial institutions. We have no arrangements with
respect to, or sources of, additional financing. Failure to obtain additional
financing in the future could have an adverse effect on us, including
advancement of our business plan. For example, if a significant portion of our
financial resources were exhausted in recruiting and hiring highly skilled staff
and by greater than anticipated product development costs, we would be left with
inadequate funding for developing markets for our products. We can offer no
assurance that we will be able to sell any such securities, or obtain such
financing, on terms and conditions acceptable, or favorable to us, or at all, if
and when needed by us. Any equity financing may involve substantial dilution of
the interests of the current stockholders. Any debt financing would subject us
to the risks associated with leverage, including the possible risk of an
inability to repay the debt as it comes due.
We have developed our core products using a mix of readily available
open source software development tools. Knowledgeable competitors may
be able to deduce how we have assembled our code base and be able to
develop competing products
The principal advantage in utilizing open source tools is the extremely
high degree of portability they ensure. Migrating our products from one
operating system or hardware base to another is more easily accomplished by
avoiding proprietary development tools. The risk factor inherent in the use of
such freely available tools is the fact that a sophisticated competitor might be
able to reverse engineer our work and produce similar functionality.
Our product has two unique and highly desirable features for
e-commerce, medical, and other commercial applications . Our product offers the
ability to magnify details in high-resolution graphic images. Our product also
allows rapid transmission of a portion of such an image based on user input,
significantly enhancing the responsiveness of the system to deliver images over
the Internet. The ability to perform these operations is based on a specific
graphic image file format. This file format is universally available, as it has
recently been published as an open source specification. The risk, as discussed
above, is mitigated by the five years we have
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spent developing our unique applications and we have made modifications to this
code that very significantly enhance its capabilities and flexibility. We
recognize that these significant features of our product could be a target for
imitation. Any such imitation, should it occur, could have material adverse
effects on our business, operations and financial condition.
Brand identity problems could stall or compromise our market
penetration.
We believe that establishing and maintaining brand identity of our
products and services is critical to attracting new customers and retaining our
customer base of large corporations. The importance of brand recognition will
continue to increase as new competitors enter the digital asset management
marketplace. Promotion and enhancement of our brands will depend largely on our
success in continuing to provide high quality service and leading edge products
and this cannot be assured. If businesses do not associate our product names or
brands with high quality, or if we introduce new products or services that are
not favorably received, we will run the risk of compromising our product line
and decreasing the attractiveness of our products to potential new customers. In
addition, to attract and maintain customers and to promote our products in
response to competitive pressures, we may find it necessary to increase our
financial commitment substantially to create and maintain product loyalty among
our customers. If we are unable to provide high quality services, or otherwise
fail to promote and maintain our products, or if we incur excessive expenses in
an attempt to improve our services, or promote and maintain our products, our
business, results of operations and financial condition could be adversely
affected.
While we have commenced the process to protect our trade names, we have
not completed the process. Thus, others could attempt to use trade
names which we have selected. Such misappropriation of our brand
identity could cause significant confusion in the highly competitive
Internet technology marketplace and legal defense against such
misappropriation could prove costly and time-consuming.
As part of the brand identity creation process that defines our
products to be unique in the Internet technology marketplace and proprietary in
nature, we have begun the process to protect certain product names and slogans
as registered trademarks to designate exclusivity and ownership. We have engaged
a trademark attorney to complete searches on the uniqueness of some of these
brand names and slogans and she has concluded that the following names and
slogans qualify for registered trademark status and has begun the process to
register them: "AssetWare," "Zoombox," "The Look and Feel of E-commerce," "Real
Time," "Real Organized," and "Real Simple."
Although trademarked in the U.S., effective trademark, copyright or
trade secret protection may not be available in every country in which our
products may eventually be distributed. There can also be no assurance that the
steps taken by us to protect our rights to use these trademarked names and
slogans and any future trademarked names or slogans will be adequate, or that
third parties will not infringe or misappropriate our copyrights, trademarks,
service marks, and similar proprietary rights.
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We have been delisted from the OTC Electronic Bulletin Board which has
caused our stock to be less liquid.
We have been unable to meet the requirements necessary to remain
eligible for quotation on the OTC Electronic Bulletin Board. Consequently, our
common stock has been delisted from the Bulletin Board and is now being traded
on the electronic pink sheets which we believe to be a much less suitable system
for people to trade our stock.
The designation of our stock as "penny stock" will mean that it will be
more difficult to sell your shares. Our stock currently trades at less
than $5.00 per share and is designated as "penny stock."
Initially our shares will be subject to Rule 15g-9 under the Exchange
Act. That rule imposes additional sales practice requirements on broker-dealers
that sell low-priced securities designated as "penny stocks" to persons other
than established customers and institutional accredited investors. The SEC's
regulations define a "penny stock" to be any equity security that has a market
price less than $5.00 per share or with an exercise price of less than $5.00 per
share, subject to certain exceptions. Initially our stock will be a penny stock.
We cannot assure you that our shares will ever qualify for exemption from these
restrictions. For transactions covered by this rule, a broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. Consequently, the
rule may affect the ability of broker-dealers to sell our shares and may affect
the ability of holders to sell their shares in the secondary market.
Your stock will be diluted 90.4% from the exercise price.
Warrant holders who exercise their warrants will experience
immediate and substantial dilution of $1.13 in net tangible book value per
share, or approximately 90.4% of the exercise price of $1.25 per share.
FORWARD LOOKING STATEMENTS
This prospectus contains statements that plan for or anticipate the
future. Forward-looking statements include statements about the future of
operations involving the management of large volumes of media or digital
material, statements about our future business plans and strategies, and most
other statements that are not historical in nature. In this prospectus forward-
looking statements are generally identified by the words "anticipate," "plan,"
"believe," "expect," "estimate," and the like. Although we believe that any
forward-looking statements we make in this prospectus are reasonable, because
forward-looking statements involve future risks and uncertainties, there are
factors that could cause actual results to differ materially from those
expressed or implied. For example, a few of the uncertainties that could affect
the accuracy of forward-looking statements, besides the specific factors
identified in the Risk Factors section of this prospectus, include the
following:
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- Rapid changes in technology relating to the Internet;
- the continued growth and use of the Internet;
- changes in government regulations
- changes in our business strategies;
- market acceptance of our products; and
- hardware failure of a catastrophic proportion;
In light of the significant uncertainties inherent in the
forward-looking statements made in this prospectus, particularly in view of our
early stage of operations, the inclusion of this information should not be
regarded as a representation by us or any other person that our objectives and
plans will be achieved.
The Private Securities Litigation Reform Act of 1995, which provides a
"safe harbor" for similar statements by existing public companies, does not
apply to our offerings.
USE OF PROCEEDS
The net proceeds we may receive from the sale of the shares underlying
the warrants will vary depending upon the total number of warrants exercised,
and the timing of when they are exercised. We can give no assurances that any
warrants will be exercised or that we will obtain any net proceeds from exercise
of the warrants if offering expenses exceed proceeds received. Regardless of the
timing and number of warrants exercised, we expect to incur offering expenses
estimated at $60,000 for legal, accounting, printing and other costs in
connection with the offering pursuant to this prospectus.
The uses of any proceeds that we may receive from exercise of the
warrants will depend on the amounts received and the timing of their receipt. We
will have broad discretion in applying proceeds and we have presently identified
the following categories of expenditure to be allocated approximately pro rata
as follows:
- expansion of sales and advertising efforts; and
- funding of research and development of existing and
new products.
DILUTION
This dilution calculation does not give effect to the issuance of
equity instruments in January and February, 2000. Our financial statements at
December 31, 1999, show a net tangible book value of $1,224,000 or $.06 per
share. Net tangible book value per share represents the
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amount of our tangible assets (total assets less intangible assets), less
total liabilities, divided by the number of shares of common stock
outstanding. Without taking into account any further adjustments in net
tangible book value after December 31, 1999, other than to give effect to the
exercise of the 1,000,000 warrants (after deduction of offering expenses) the
pro forma net tangible book value at December 31, 1999, would have been
$2,474,000 or approximately $.12 per share of common stock, representing an
increase in net tangible book value of approximately $1,250,000 to existing
shareholders and a dilution of approximately $1.13 per share to new investors.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
GENERAL
The following discussion of our financial condition and results of
operations should be read in conjunction with our financial statements and notes
thereto appearing elsewhere in this registration statement. The matters
discussed in this registration statement contain forward-looking statements
that involve risk and uncertainties. Our actual results may differ materially
from those discussed herein.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999, COMPARED TO YEAR ENDED DECEMBER 31, 1998
Revenues for the year ended December 31, 1999 of $266,000 represents
a 36% increase over 1998. In 1998, our image management software prototype was
completed and we commenced beta testing at customer sites. 1999 reflects not
only the impact of the addition of new customer installations and monthly
service, but also a full year of service on those accounts which were installed
at various times during 1998.
Operating costs and expenses for the year ended December 31, 1999 were
$1,978,000, an increase of $1,668,000, from 1998. This increase is the result of
our focused efforts on developing, selling, installing and servicing our
proprietary product. The data management software was developed by Richard
Govatski, the company's chief executive, another systems development engineer,
and the limited use of a number of independently contracted software developers.
A full-time engineering, administrative and sales staff was hired beginning in
July, 1999. This staff has now grown to 18 employees and Mr. Govatski is the
Company's President and CEO. Common stock and common stock options valued at
approximately $852,000 were distributed beginning in August, 1999 to various
individuals as compensation for services they provided to the organization.
$120,000 was recognized as the fair value of services which had been provided by
Mr. Govatski during 1999; $90,000 was similarly recognized in 1998. During 1999,
the company moved into new office facilities. As a result, office and occupancy
expenses, consisting of office rent, utilities, office supplies, office
equipment maintenance, copying and fax costs, and telephone have increased
from approximately
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$18,000 for 1998 to approximately $54,000 for 1999. 1999 included advertising
of approximately $56,000, travel of approximately $24,000 and legal and
accounting fees of approximately $138,000. Research and development expenses
have continued to increase in the effort to develop new products. As a
result, the research and development expenses increased $59,000 from 1998, an
increase of 65%. Depreciation expense also increased substantially due to the
purchase of computer hardware and the office furniture and equipment
necessary to furnish the new facility.
LIQUIDITY AND CAPITAL RESOURCES
During the year ended December 31, 1999, we had a net cash increase
of $945,000. 1998 resulted in a net cash decrease of $1,000. Operating
activities for 1999 resulted in a net cash decrease. The net loss from
operations of $1,687,000 was reduced by non-cash expenses of $1,139,000,
consisting of distributions of stock and stock options for services, recognition
of the services provided by the founder, and depreciation. This net decrease of
$548,000, together with increases in receivables, inventory, prepaid expenses,
accounts payable and accrued expenses and a decrease in deferred revenue,
accounted for the total decrease of $706,000.
Investing activities resulted in cash decreases due to property
purchases in both 1999 and 1998 of $137,000 and $9,000, respectively. During
1999, a security deposit of $6,000 was paid for our new office facilities.
Financing activities during 1999 resulted in a cash increase of
$1,817,000 from the sale of our common stock, and was decreased by a $23,000
repayment of a note payable.
Cash requirements for the year ended December 31, 2000 will be
largely dependent on our success in selling our products and services. We
estimate that product development and support, the implementation of our
marketing plan, and the general and administrative expense to support our
operations will require approximately $1,400,000. Additional funds of
$1,090,000 have been obtained as a result of a private placement sale during
January and February 2000 of units consisting of stock and warrants. We
estimate that these funds, together with existing cash balances, will provide
the funding needed for anticipated operations during the year 2000. The total
of our available funds will be sufficient to fund anticipated expenses at our
current level of operation for the year 2000. Should anticipated revenues not
be achieved, we would be required to expend our current cash balances, reduce
our expenses, and possibly restrict or eliminate planned product development
and marketing. This could also hamper our ability to take advantage of
potential business opportunities or respond to competitive pressures. Should
our cash requirements exceed our current cash reserves, there is no assurance
that additional financing would be available to us. Should these situations
occur, they could have a material adverse effect on our operations and
financial condition.
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BUSINESS
OUR HISTORY AND BACKGROUND
We were originally incorporated under the laws of the State of Utah on
August 12, 1983, under the name "Raddatz Exploration, Inc." The name was changed
to "Renaissance Guild, Inc." on February 16, 1984, and to "C.O.N.S.E.R.V.E
Corporation" on October 3, 1985. On April 28, 1997, we changed domicile to the
State of Delaware by merging into a Delaware corporation incorporated on October
14, 1980, under the name "Costs of Owning the Newest Systems of Energy Reduction
are Virtually Eliminated, Inc." The name was changed to "Conserve, Inc." on May
11, 1999.
Our company was originally formed to engage in the business of
manufacturing and selling solar systems (reverse refrigeration) for residential
homes. In November 1985, an involuntary bankruptcy proceeding was filed against
us. The Court dismissed the involuntary petition in August 1986. In late 1986 we
ceased operations. On December 5, 1989, we renounced all of our rights to the
collateral (virtually all assets, except its patents) under the Uniform
Commercial Code and transferred our interest therein to a financial institution,
the major creditor which was in bankruptcy proceedings from May 1986 until early
1992, in satisfaction of the related debt. However, a full release from the debt
was not obtained until April 1994. On July 8, 1988, the patents were sold. Other
than as stated above we conducted no business activity until the reverse
acquisition by New Mexico Software.
On or about August 3, 1999, we entered into an agreement with New
Mexico Software, Inc., a privately-held New Mexico corporation (hereinafter "New
Mexico Software"), and the shareholders of this entity. The agreement provided
that on the closing date the shareholders of New Mexico Software would exchange
all of their shares for 11,880,000 post-reverse split shares of our company,
such that New Mexico Software would become a wholly owned subsidiary and the
shareholders of New Mexico Software would own approximately 60.7% of the
outstanding stock of our company. The closing of the reorganization agreement
was held on August 3, 1999.
Also in connection with a reorganization agreement with New Mexico
Software, we reverse split the outstanding shares at the rate of one-for-1.5,
canceled 5,725,435 outstanding shares, and issued 2,360,500 shares in a private
offering at $0.75 per share. We received gross proceeds of $1,770,375 from this
offering. As a result of the closing of the reorganization agreement, old
management resigned in favor of the current directors and officers who were
designated by New Mexico Software. The name of the company was changed to
NMXS.com, Inc. on August 3, 1999.
Unless otherwise indicated, all references to our outstanding shares
give effect to all previous stock splits.
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In conjunction with the closing of the reorganization agreement with
New Mexico Software, we declared a distribution of 1,000,000 warrants at the
rate of one-for-5.3 to all of the shareholders of record as of the beginning
of business on August 3, 1999.
In January and February 2000, we issued 1,090,000 units in a private
offering consisting of one share of common stock and a Series B Warrant to
purchase one share of common stock through January 17, 2005, at $1.00 per share.
We received gross proceeds of $1,090,000 from the offering.
Through our wholly owned subsidiary, we provide Internet
technology-based digital asset management software that is a
business-to-business solution for the efficient organization, storage, rapid
retrieval and transmission of digital assets.
HISTORY OF NEW MEXICO SOFTWARE
With the explosive growth of the Internet, e-commerce, and even the
availability of low-cost scanners, businesses have begun a mass migration of
visual images to digital formats. These graphic images, along with video and
audio clips, are collectively called digital assets. Businesses that rely on
them have a significant investment in their creation, maintenance and ability to
reproduce these assets for other uses. The growing importance of digital assets
has produced a large demand for efficient organization tools and rapid
distribution methods. New Mexico Software's software products were designed to
address this growing market need.
New Mexico Software was founded in 1994 by Richard Govatski and
incorporated in 1996. With the anticipation that digital asset management would
emerge as a crucial factor in the growth of the Internet, he and a small team of
engineers began the development of a core system that addressed the most
important requirements for a comprehensive digital asset management system.
Although the company has been in existence for five years, it was not
until very recently that we began as a start-up company in the marketplace. Our
first product, Image Assets, became operationally viable in 1998. It was not
until 1999, however, that a sales effort was undertaken and an internal
engineering, sales, and administrative staff was put into place.
WHAT NEW MEXICO SOFTWARE PRODUCTS PROVIDE CUSTOMERS
New Mexico Software operates as a single segment with NMXS.com, Inc.
to provide software for the management of digital images. While organization and
distribution of images are the core features of our products, these capabilities
are further enhanced with security and e-commerce features to provide customers
with what can be described as Internet enabling capabilities. Our software
performs all functions which are necessary for efficient, effective digital
asset management, including the following:
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- High-speed transfer of high-resolution graphic images;
- Ability to use a single image in multiple resolutions;
- Modest media storage requirements for images;
- Digital branding for security of images as intellectual
property;
- Compatibility of images with all computer platforms;
- Efficient and flexible use of one graphic image for
multiple purposes (screen viewing, direct printing, color
separations, etc.);
- Resources to build restricted access viewing salons
on the Internet;
- Search engine capable of locating and retrieving
images by color, shape, brightness, structure or texture;
- Ability to convert existing images in all graphic
formats, including medical and CAD images; and
- Photographic quality printing directly from a web
site.
What makes New Mexico Software's products unique is that they are based
on Internet technology. This provides flexibility for the software to be used in
practically any business environment-single desktop computer, workgroup,
enterprise-level networks-and on all types of computers, in any combination of
configurations: PC, Mac, or Sun Unix workstations. There are no complicated
time-consuming applications for users to learn, so there is no protracted
learning curve that proceeds productivity. Operation of the easily customizable,
turn-key product is completely transparent at the desktop because it uses the
common web browsers Netscape and Internet Explorer as the user interface.
OUR TECHNOLOGY
Organization and distribution of images are the core features of our
products. These are further enhanced with security and e-commerce features to
provide customers with what can be described as Internet enabling
capabilities. Using the technology of the Internet provides flexibility for
the software to be used in practically any business environment - single
desktop computer, workgroup, enterprise-level networks - and on all types of
computers in any combination of configurations: PC, Mac, or Sun Unix
workstations. There are no applications for consumers to learn and operation
of the easily customizable, turn-key product is completely transparent at the
desktop because it uses the common web browsers Netscape and Internet
Explorer as the user interface. Our software provides capabilities that
significantly reduce the time required to display graphic images on the
Internet. Viewing a 90MB file (such as an X-Ray) in a standard browser window
takes approximately 20 hours to transmit from the source on a conventional
56k modem using conventional methods. Our software allows the image to be
viewed in 27 seconds. We are an authorized Sprint sales agent, and by using
Sprint ION, actually downloading a 90MB file takes only 2.5 minutes. We also
have available a low cost Netra T1 server which can be remotely monitored at
our facility in Albuquerque from any place on the Net. The T1 server can be
located on the Sprint ION network and at the customer's facilities using the
digital asset management software for even faster uploading of files.
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We currently employ eight programmers and engineers tasked with adding
new features to our products and fixing any problems users might encounter.
There are risks inherent in software development including unanticipated delays,
technical problems that could mean significant deviation from original product
specifications, and hardware problems. In addition, once improvements and bug
fixes are deployed there is no assurance that they will work as anticipated or
that they will be durable in actual use by customers.
MARKETING
Our marketing effort, including print, direct mail, web advertising,
cross-linking and participation in key industry events, is being primarily
directed to advertising-associated industries, including corporate accounts and
stock photo houses. Other areas in which the management of large graphic image
and media files is a significant problem include medical and x-ray imaging,
architectural and engineering firms and various forms of e-commerce.
Our senior management have appeared as industry experts at significant
industry events including Seybold, XPlor International, Photo Marketing
Association conferences and others. We had a principal speaking engagement at
the first annual Digital Asset Management Conference (DAM) held in Orlando, FL,
in January, 2000. This semi-annual event will become the premier conference
event in the emerging asset management market.
OUR INTELLECTUAL PROPERTIES
We have several proprietary aspects to our software which we believe
make our products unique and desirable in the marketplace. Consequently, we
regard protection of the proprietary elements of our products to be of paramount
importance and we attempt to protect them by relying on trademark, service mark,
trade dress, copyright and trade secret laws, and restrictions on disclosure and
transferring of title. We have entered into confidentiality and non-disclosure
agreements with our employees and contractors in order to limit access to, and
disclosure of, our proprietary information. There can be no assurance that these
contractual arrangements or the other steps taken by us to protect our
intellectual property will prove sufficient to prevent misappropriation of our
technology or to deter independent third-party development of similar
technologies.
Although we do not believe that we infringe the proprietary rights of
third parties, there can be no assurance that third parties will not claim
infringement by us with respect to past, current, or future technologies. We
expect that participants in our markets will be increasingly subject to
infringement claims as the number of services and competitors in our industry
grows. Any such claim, whether meritorious or not, could be time-consuming,
result in costly litigation, cause service upgrade delays, or require us to
enter into royalty or licensing agreements. Such royalty or licensing agreements
may not be available on terms acceptable to us or at all. As a result, any such
claim could have a material adverse effect upon our business, results of
operations and financial condition.
<PAGE>
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GOVERNMENT REGULATION
Our company, operations, products, and services are all subject to
regulations set forth by various federal, state and local regulatory agencies.
We take measures to ensure our compliance with all such regulations as
promulgated by these agencies from time to time. The Federal Communications
Commission sets certain standards and regulations regarding communications and
related equipment.
There are currently few laws and regulations directly applicable to the
Internet. It is possible that a number of laws and regulations may be adopted
with respect to the Internet covering issues such as user privacy, pricing,
content, copyrights, distribution, antitrust and characteristics and quality of
products and services. The growth of the market for online commerce may prompt
calls for more stringent consumer protection laws that may impose additional
burdens on companies conducting business online. Tax authorities in a number of
states are currently reviewing the appropriate tax treatment of companies
engaged in online commerce, and new state tax regulations may subject us to
additional state sales and income taxes.
Because our services are accessible worldwide, other jurisdictions may
claim that we are required to qualify to do business as a foreign corporation in
a particular state or foreign country. Our failure to qualify as a foreign
corporation in a jurisdiction where it is required to do so could subject us to
taxes and penalties for the failure to qualify and could result in our inability
to enforce contracts in such jurisdictions. Any such new legislation or
regulation, or the application of laws or regulations from jurisdictions whose
laws do not currently apply to our business, could have a material adverse
effect on our business, results of operations and financial condition.
POSSIBLE COMPETITORS
Competition at this time is broad, with a number of vendors offering
single user, client/server, and intra-Internet based systems. To the best of our
knowledge, most competitive offerings provide the cataloging and searching
functionalities also found in our products, but are unable to address the
security, encryption, intellectual property protection and electronic commerce
functionalities built into our products. We believe that no competitor combines
the broad spectrum of interlocking functionalities with access to Sprint's
nation-wide fiber optic network and industry-standard hardware support offered
through our relationship with Sun Microsystems.
The digital asset management market is one of the newest in the
Information Services industry. We anticipate that, if our products become better
known as a result of our advertising efforts, competition will become more
intense as other companies seek to match our services and features. While we
have one of the longest histories of development effort behind our products, we
anticipate that other, better-capitalized companies will begin intense
development efforts to bring similar products to parity with ours. In addition
to being better capitalized, some of these
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companies also have much greater brand/company recognition as well as a
substantial existing customer base.
OFFICE FACILITIES AND EQUIPMENT
We lease a 3,116 square foot facility in Albuquerque, New Mexico, at a
cost of approximately $3,895 per month, increasing to approximately $4,414 over
the term of the lease. The lease expires approximately July 31, 2004. The
facility provides both administration and engineering offices. It is in close
proximity to the location of the servers, and the two locations are networked
together by fiber optics. The current space provides adequate room for
expansion. It also contains an advanced telephone system which will provide the
capability needed to provide adequate customer telephone support.
We also lease a Sun Solaris computer network under a master lease which
has an option to purchase the equipment at the end of the individual leases at
the then fair market value. Monthly payments are approximately $3,000.
EMPLOYEES
As of March 21, 2000, we had 18 employees, including 9 in systems
engineering; 4 in administration; 3 in sales; and 2 in advertising. We offer and
share in the cost of health and dental insurance. A stock option plan for
employees and others was adopted on August 3, 1999. The competition for
qualified personnel in our industry and geographic location is intense, and
there can be no assurance that we will be successful in attracting, integrating,
retaining and motivating a sufficient number of qualified personnel to conduct
its business in the future. We have never had a work stoppage, and no employees
are represented under collective bargaining agreements. We consider our
relations with our employees to be good. From time to time, we also utilize
services of independent contractors for specific projects or to support our
research and development effort.
REPORTS TO OUR SECURITY HOLDERS
Our fiscal year ends on December 31st. We do not intend to furnish our
shareholders annual reports containing audited financial statements and other
appropriate reports. However, we intend to become a reporting company and file
annual, quarterly and current reports, and other information with the SEC. You
may read and copy any reports, statements or other information we file at the
SEC's public reference room at 450 fifth Street, N.W., Washington D.C. 20549.
You can request copies of these documents, upon payment of a duplicating fee, by
writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Our SEC filings are
also available to the public on the SEC Internet site at http://www.sec.gov.
<PAGE>
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MANAGEMENT
GENERAL
The following table sets forth our directors and executive officers,
their ages, and all offices and positions held with our company. A director
holds office until his successor is elected and qualified. Annual meetings to
elect directors are scheduled to be held on the 5th day of April in each year if
not a legal holiday, and if a legal holiday, then on the next succeeding day
that is not a holiday, at 10:00 am. Officers are chosen by the Board of
Directors and hold office until their successors are chosen and qualified.
Officers may be removed with or without cause by the affirmative vote of a
majority of the whole Board of Directors.
<TABLE>
<CAPTION>
Name Age Position Director Since
---- --- -------- --------------
<S> <C> <C> <C>
Richard Govatski 55 Chairman, President & CEO 1999
Marvin Maslow 62 Director 1999
Scott L. Bach 37 Director 1999
Marc Orchant 41 Vice President Marketing
Susan Blumenthal 49 Vice President Communications
Teresa B. Dickey 55 Secretary & Treasurer
</TABLE>
Set forth below is certain biographical information regarding the
Company's executive officers and directors:
RICHARD GOVATSKI has been the chairman, CEO, and president of New
Mexico Software, Inc., since 1996.
MARVIN MASLOW has been the president and chairman of Manhattan
Scientifics Inc., a shareholder of the Company, a high technology and
commercialization company, since January 1998. From September 1988 until April
1999, he was the chairman and CEO of Projectavision, Inc., a high technology
video projection manufacturing company.
SCOTT BACH has been a practicing attorney since 1987. He has been the
owner of Bach & Associates, a law firm located in New York since September 1995.
He is also a director of Manhattan Scientifics Inc., a shareholder of the
Company, and Tamarack Storage Devices, inc., a wholly owned subsidiary of
Manhattan Scientifics.
MARC ORCHANT has been employed as the vice-president of marketing for
New Mexico Software since August 1999. From March 1998 until August 1999 he was
employed by AGFA Corporation as a market development manager. From February 1989
until March 1998 he was employed by Aibus Corp., doing business as Subia, as
director of training and as operations manager.
SUSAN BLUMENTHAL has been employed by us since August 1999. From 1992
until 1999 she was employed as a consultant to StarTree, Inc. which contracted
work for us.
<PAGE>
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COMPENSATION OF DIRECTORS
Directors are permitted to receive fixed fees and other compensation
for their services as directors. The Board of Directors has the authority to fix
the compensation of directors. No amounts have been paid to, or accrued to,
directors in such capacity.
STOCK OPTION PLAN
As of the closing of the reverse acquisition with New Mexico Software,
we adopted a stock option plan, pursuant to which we are authorized to grant
options to purchase up to 3,000,000 shares of our common stock to our key
employees, officers, directors, consultants, and other agents and advisors.
Awards under the plan consist of both incentive and non-qualified options.
The plan is administered by the Board of Directors which will determine
the persons to whom awards will be granted, the number of awards to be granted
and the specific terms of each grant, including the vesting thereof, subject to
the provisions of the plan.
Persons who are eligible to participate in the plan include the
following:
- Employees, as to both incentive and non-qualified options;
- Non-employee members of the Board, as to non-qualified
options; and
- Consultants and other independent advisors, as to
non-qualified options.
In connection with qualified stock options, the exercise price of each
option may not be less than 100% of the fair market value of the common stock on
the date of grant, or 110% of the fair market value in the case of a grantee
holding more than 10% of our outstanding stock. The aggregate fair market value
of shares for which qualified stock options are exercisable for the first time
by such employee, or 10% shareholder, during any calendar year may not exceed
$100,000. Non-qualified stock options granted under the plan may be granted at a
price determined by the Board of Directors, not to be less than the fair market
value of the common stock on the date of grant.
No option may be granted to be exercised more than 10 years after the
grant date. The terms of options outstanding at the time of a persons cessation
of service, death, permanent disability, or misconduct are reduced to the
following periods, but not to exceed the original term:
- Three months after cessation of services, except by reason of
death, permanent disability, or misconduct;
- Twelve months after the optionee's death or permanent
disability; and
- Immediately upon termination for misconduct.
The plan also contains provisions affecting outstanding options in the
case of certain corporate transactions or in the event of a change of control.
If we should enter into a merger or
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consolidation, or in the event of a tender or exchange offer, in which
securities representing more than 50% of the voting control are transferred to
an outside party, or if we should sell, transfer, or dispose of all, or
substantially all of our assets, we could accelerate the vesting and termination
dates of these options. We could also elect to terminate outstanding purchase
rights associated with the options. In the alternative, the options could be
assumed and adjusted for the particular corporate transaction.
INDEMNIFICATION OF DIRECTORS, OFFICERS, AND OTHERS
Section 145 of the General Corporation Law of the State of Delaware
expressly authorizes a Delaware corporation to indemnify its officers,
directors, employees, and agents against claims or liabilities arising out of
such persons' conduct as officers, directors, employees, or agents for the
corporation if they acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the Company. Neither the
articles of incorporation nor the Bylaws of the Company provide for
indemnification of the directors, officers, employees, or agents of the Company.
The Company has not adopted a policy about indemnification. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 (the
"Act") may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
The eighth article of our Certificate of Incorporation includes
provisions to eliminate, to the fullest extent permitted by Delaware General
Corporation Law as in effect from time to time, the personal liability of our
directors for monetary damages arising from a breach of their fiduciary duties
as directors.
CERTAIN TRANSACTIONS
Richard Govatski, our president, director, and principal shareholder,
may be deemed a promoter in relation to the organization of our business. In
connection with the acquisition of New Mexico Software, Mr. Govatski exchanged
all of his shares of New Mexico Software for 5,597,000 shares in the public
company.
MARKET INFORMATION
The Common Stock of the Company did not commence trading either on the
OTC Electronic Bulletin Board or in the Pink Sheets until approximately August
1999. We were delisted from the Bulleting Board on October 21, 1999. Our stock
is currently quoted on the Pink Sheets under the symbol "NMXS." The table below
sets forth for the periods indicated the high and low bid quotations as reported
on the Internet. These quotations reflect inter-dealer prices, without retail
mark-up, mark-down, or commission and may not necessarily represent actual
transactions.
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<TABLE>
<CAPTION>
Quarter High Low
------- ---- ---
<S> <C> <C> <C>
FISCAL YEAR ENDED
DECEMBER 31, 1999 Third $3.375 $2.187
Fourth $2.25 $1.00
</TABLE>
OUTSTANDING OPTIONS, WARRANTS, AND CONVERTIBLE INSTRUMENTS
At March 21, 2000, we had outstanding 1,029,760 options which we had
granted pursuant to our stock option plan. In addition to the 1,000,000 Series A
Warrants set forth in this prospectus, we also have outstanding 1,090,000
warrants designated as Series B Warrants to purchase 1,090,000 shares of stock
at $1.00 per share, exercisable commencing August 1, 2000, until January 17,
2005. We have also granted registration rights to our securities counsel to
register up 20,000 of the outstanding restricted shares.
RECORD HOLDERS OF STOCK; TRANSFER AGENT
At February 8, 2000, we had approximately 391 shareholders of record as
reported by our transfer agent. Our transfer agent for our common stock and our
Series A Warrants is Interwest Transfer Company, Inc., 1981 East 4800 South,
Suite 100, Salt Lake City, UT 84117.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning the stock
ownership as of February 8, 2000, of each person who is known by us to be the
beneficial owner of more than five percent of our stock; by each of our
executive officers and directors; and by our executive officers and directors as
a group. Such information was furnished to us by these persons or was obtained
from information provided by the transfer agent.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership Percent of Class
- ------------------- -------------------- ----------------
Before Exercise After Exercise
--------------- --------------
<S> <C> <C> <C>
Richard Govatski 5,597,000 26.99% 25.75%
5041 Indian School Rd NE
Albuquerque, NM 87110
Manhattan Scientifics, Inc. 5,416,300(1) 26.12% 24.92%
Olympic Tower
641 5th Ave.
Suite 36 F
New York, NY 10022
<PAGE>
Page 26 of 37
Marvin Maslow(1) -0- -0- -0-
Olympic Tower
641 5th Ave.
Suite 36 F
New York, NY 10022
Scott L. Bach 40,000 * *
1 Rockefeller Plaza
New York NY 10020
Marc Orchant 30,000 * *
5041 Indian School Rd NE
Albuquerque, NM 87110
Susan Blumenthal 170,000 * *
5041 Indian School Rd NE
Albuquerque, NM 87110
Teresa B. Dickey 52,000 * *
5041 Indian School Rd NE
Albuquerque, NM 87110
Executive officers and
directors as a group
(6 persons) 5,889,000 28.4% 27.1%
</TABLE>
- ----------------------
*Represents less than 1%.
(1) These shares are held directly in the name of Manhattan
Scientifics, Inc. Mr. Maslow, one of our directors, is an officer and director
of Manhattan Scientifics, Inc., but has no beneficial interest in these shares.
SELLING SHAREHOLDER
Up to 20,000 shares issued previously by us may be offered for resale
by Ronald N. Vance, P.C. We will not receive any of the proceeds from the sale
of these securities. Mr. Vance is acting as counsel for us in this offering and
the shares previously issued to him are for services rendered in connection with
this offering. Mr. Vance beneficially owns no other shares and will not
beneficially own any of our securities if these shares are sold.
The sale of the shares by the selling security holder may be effected
from time to time in transactions in the over-the-counter market or in
negotiated transactions or otherwise. These transactions may include block
transactions by or for the account of the selling security holders.
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Sales may be made at fixed prices which may be changed, at market prices, if
any, prevailing at the time of sale, or at negotiated prices.
The selling security holder may effect these transactions by selling
his shares directly to purchasers, through broker-dealers acting as agents for
him or to broker-dealers who may purchase the securities as principals and
thereafter sell the securities from time to time in the over-the-counter market,
if any, in negotiated transactions or otherwise. These broker-dealers, if any,
may receive compensation in the form of discounts, concessions or commissions
from the selling security holder or the purchasers for whom the broker dealers
may act as agents or to whom they may sell as principals or otherwise, which
compensation as to a particular broker-dealer may exceed customary commissions.
Under applicable rules and regulations under the Securities Exchange
Act, any person engaged in the distribution of the selling security holder's
shares may not simultaneously engage in market making activities with respect to
any of our securities for a period of at least two, and possibly nine, business
days prior to the start of any distribution.
The selling security holder and broker-dealers, if any, acting in
connection with these sales might be deemed to be underwriters within the
meaning of Section 2(11) of the Securities Act and any commission received by
them and any profit on the resale of the securities might be deemed to be
underwriting discounts and commissions under the Securities Act.
DESCRIPTION OF SECURITIES
COMMON STOCK
We are presently authorized to issue 50,000,000 shares of $.001 par
value common stock. At February 8, 2000, we had 20,733,836 shares of common
stock outstanding. The holders of our common stock are entitled to equal
dividends and distributions when, as, and if declared by the Board of Directors
from funds legally available therefor. No holder of any shares of common stock
has a preemptive right to subscribe for any of our securities, nor are any
common shares subject to redemption or convertible into other of our securities,
except for outstanding options described above. Upon liquidation, dissolution or
winding up, and after payment of creditors and preferred stockholders, if any,
the assets will be divided pro-rata on a share-for-share basis among the holders
of the shares of common stock. All shares of common stock now outstanding are
fully paid, validly issued and non-assessable. Each share of common stock is
entitled to one vote with respect to the election of any director or any other
matter upon which shareholders are required or permitted to vote. Holders of our
common stock do not have cumulative voting rights, so the holders of more than
50% of the combined shares voting for the election of directors may elect all of
the directors if they choose to do so, and, in that event, the holders of the
remaining shares will not be able to elect any members to the Board of
Directors.
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PREFERRED STOCK
We are authorized to issue up to 500,000 shares of $.001 par value
preferred stock. Under our Certificate of Incorporation, the Board of Directors
will have the power, without further action by the holders of the common stock,
to designate the relative rights and preferences of the preferred stock, and to
issue the preferred stock in one or more series as designated by the Board of
Directors. The designation of rights and preferences could include preferences
as to liquidation, redemption and conversion rights, voting rights, dividends or
other preferences, any of which may be dilutive of the interest of the holders
of the common stock or the preferred stock of any other series. The issuance of
preferred stock may have the effect of delaying or preventing a change in
control of our company without further shareholder action and may adversely
affect the rights and powers, including voting rights, of the holders of common
stock. In certain circumstances, the issuance of preferred stock could depress
the market price of the common stock.
SERIES A WARRANTS
We declared a warrant distribution of common stock purchase warrants to
all stockholders of record as of the beginning of business on August 3, 1999, a
date immediately preceding closing the acquisition with New Mexico Software. The
warrants will be distributed on the effective date of this prospectus. We will
distribute a total of 1,000,000 warrants PRO RATA to these shareholders who
owned shares on August 3, 1999. The warrants will be distributed on the basis of
one warrant for each 5.3 shares owned on this date and will be exercisable for
one share of common stock. The warrants will be exercisable for a period of
three years from the date of this prospectus, subject to redemption by us. The
distribution of the warrants and the purchase of the shares of common stock
underlying the warrants must be registered with the Securities and Exchange
Commission prior to the warrants becoming exercisable. Therefore, we have filed
the registration statement of which this prospectus is a part. The warrants are
exercisable at $1.25 per share subject to our right to lower the price at any
time.
Only stockholders of record as of the Warrant Record Date are entitled
to the distribution of the warrants, which distribution is being made to said
stockholders without monetary consideration. The warrants are nontransferable.
The warrants are redeemable by the Company at any time regardless of
whether a registration statement has been filed or declared effective and
regardless of whether the registration statement is then current, upon thirty
(30) days written notice, at a price of $.01 per warrant. Any warrant holder who
does not exercise his warrants prior to the redemption date, as set forth on our
notice of redemption, will forfeit his right to purchase the shares underlying
the warrants. After the redemption date, any outstanding warrants referred to in
the notice of redemption will become void and will be canceled. If we do not
redeem the warrants, they will expire at the conclusion of the exercise period,
unless we extend the period.
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We may extend the exercise period of the Warrants at any time provided
we give written notice of the extension to the warrant holders prior to their
expiration date. We do not presently contemplate any extensions of the exercise
period.
The Warrants contain anti-dilution provisions with respect to the
occurrence of certain events, such as stock splits or stock dividends. The
anti-dilution provisions do not apply in the event of a merger or acquisition.
In the event of a liquidation, dissolution or winding-up of our company, warrant
holders will not be entitled to participate in our assets. Warrant holders have
no voting, preemptive, liquidation or other rights of a stockholder, and no
dividends may be declared on the warrants.
The Warrants may be exercised by surrendering the warrant certificate
evidencing the warrants to be exercised, with the exercise form included therein
duly completed and executed, and paying to us the exercise price per share in
cash or check. Stock certificates will be issued as soon thereafter as
practicable.
The Warrants are not exercisable unless the warrants and the shares of
stock underlying the warrants are registered. We have filed with the Securities
and Exchange Commission a registration statement with respect to the issuance of
the stock underlying the warrants. This prospectus is part of such registration
statement and the date of this prospectus is the effective date of the
registration statement. The effective date of the registration statement is the
commencement date for determining the exercise period of the warrants. We will
also seek to register or qualify the common stock issuable upon the exercise of
the warrants under the Blue Sky laws of all states in which holders of the
warrants may reside.
The warrants will not be exercisable by, and may not be distributed to,
stockholders residing in states where the distribution or exercise is prohibited
without registration in said states and where we are unable to meet the
registration requirements of the state.
DIVIDEND POLICY
We have not declared or paid any cash dividends as yet on the common
stock and the Board of Directors has not yet decided on a dividend policy.
Whether dividends will be paid will be determined by the Board of Directors and
will necessarily depend on our earnings, financial condition, capital
requirements and other factors. The Board of Directors has no current plans to
declare any dividends in the foreseeable future.
PLAN OF DISTRIBUTION
This prospectus relates to the distribution of 1,000,000 redeemable
warrants and 1,000,000 shares of our common stock underlying these warrants. As
soon as practicable after the date of this prospectus, the warrants will be
distributed to the record holders of our common stock as of the beginning of
business on August 3, 1999. The warrants were not distributed and
<PAGE>
Page 30 of 37
did not constitute an offer by us to sell the shares of common stock prior to
the date of this prospectus.
The distribution of the warrants will be managed without an
underwriter, and the shares of stock to be issued upon exercise of the warrants
will be issued by our officers without any discount, sales commissions or other
compensation being paid to anyone in connection with the distribution. In
connection therewith, we will pay the costs of preparing, mailing and
distributing this prospectus to the holders of our common stock. Brokers,
nominees, fiduciaries and other custodians will be requested to forward copies
of this prospectus to the beneficial owners of securities held of record by them
on August 3, 1999, and such custodians will be reimbursed for their expenses.
There is no assurance that any of the warrants will be exercised and
that any of the shares of common stock will be sold. All funds received upon the
exercise of any warrants will be immediately available to us for our use.
Our transfer agent will act as the warrant agent for the Series A
Warrants. Warrants may be exercised in whole or in part by presentation of the
warrant certificate, with the purchase form on the reverse side thereof filled
out and signed at the bottom thereof, together with payment of the exercise
price and any applicable taxes at the principal office of Interwest Transfer
Co., Inc., 1981 East 4800 South, Suite 100, Salt Lake City, Utah 84117. Payment
of the exercise price shall be made in lawful money of the United States of
America by wire transfer or check payable to the order of "Interwest Transfer
Co.--NMXS.com, Inc. Escrow Account." All holders of warrants will be given an
independent right to exercise their purchase rights. If, as, and when properly
completed and duly executed notices of exercise are received by the warrant
agent, together with the warrant certificates being surrendered and full payment
of the exercise price in cleared funds, the checks or other funds will be
delivered to us, and the warrant agent will promptly issue certificates for the
underlying common stock. It is presently estimated that certificates for the
shares of common stock will be available for delivery in Salt Lake City, Utah,
at the close of business on the tenth business day after the receipt of all
required documents and funds.
SHARES ELIGIBLE FOR FUTURE SALE
At February 8, 2000, we had 20,733,836 outstanding shares. In addition,
if all of the 1,000,000 warrants being issued were exercised, the shares issued
upon exercise will, subject to any applicable state law restrictions on
secondary trading, be freely tradeable without restriction under the Securities
Act, except that any shares purchased by our affiliates will be subject to the
resale limitations of Rule 144.
Of the shares outstanding at February 8, 2000, approximately 18,145,514
shares are "restricted" within the meaning of Rule 144 under the Securities Act,
and only 20,000 are being registered for resale. Of this number, approximately
131,242 shares may be eligible for immediate sale in the public market without
restriction under Rule 144(k). In the reverse acquisition
<PAGE>
Page 31 of 37
transaction between us and New Mexico Software which closed on August 3, 1999,
we issued 11,880,000 restricted shares to the shareholders of New Mexico
Software. These shares will be available for resale beginning approximately
August 3, 2000.
In general, under Rule 144, as currently in effect, any person who has
beneficially owned restricted shares for at least one year, is entitled to sell,
within any three-month period, a number of shares that does not exceed the
greater of 1% of our then outstanding shares, or the average weekly trading
volume of our stock during the four calendar weeks immediately preceding the
date on which notice of the sale is filed with the Commission. Sales pursuant to
Rule 144 are also subject to certain requirements relating to manner of sale,
notice and availability of current public information about us. A person who is
not deemed to have been an affiliate at any time during the 90 days immediately
preceding the sale and whose restricted shares have been fully-paid for two
years since the later of the date they were acquired from us, or the date they
were acquired from one of our affiliates, may sell these restricted shares under
Rule 144(k) without regard to the limitations and requirements described above.
Restricted shares may not be resold under Rule 144 until ninety days from the
date of this prospectus, regardless of when the one year holding period expires.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for
us by Ronald N. Vance, Attorney at Law, Salt Lake City, Utah. Mr. Vance is the
selling shareholder set forth in this prospectus. Mr. Vance owns 20,000 shares
of our common stock which is being registered for resale as described above.
EXPERTS
Our financial statements for the years ended December 31, 1999 and
1998, included in this prospectus have been audited by Richard A. Eisner &
Company, LLP, ("Eisner") Indepedent Certified Public Accountants as indicated
in their report. The financial statements audited by Eisner have been included
in reliance upon the authority of said firm as experts in accounting and
auditing.
FINANCIAL STATEMENTS
We have attached to this prospectus copies of our audited financial
statements as of December 31, 1999 and 1998.
<PAGE>
[Eisner letterhead]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
NMXS.com, Inc.
We have audited the accompanying consolidated balance sheet of
NMXS.com, Inc. and subsidiary (a development stage enterprise) as of
December 31, 1999, and the related consolidated statements of
operations, stockholders' equity (capital deficiency) and cash flows
for the years ended December 31, 1999 and 1998 and the amounts for each
of the years ended December 31, 1999, 1998, 1997 and 1996, included in
the cumulative amounts for the period from April 2, 1996 (inception)
through December 31, 1999. These consolidated 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 audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present
fairly, in all material respects, the consolidated financial position
of NMXS.com, Inc. and subsidiary as of December 31, 1999 and the
consolidated results of their operations and their consolidated cash
flows for the years ended December 31, 1999 and 1998 and the amounts
for each of the years ended December 31, 1999, 1998, 1997 and 1996,
included in the cumulative amounts for the period from April 2, 1996
(inception) through December 31, 1999, in conformity with generally
accepted accounting principles.
/s/ Richard A. Eisner & Company, LLP
Florham Park, New Jersey
February 24, 2000
F-1
<PAGE>
NMXS.com, INC.
(a development stage enterprise)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 977,000
Restricted cash 37,000
Note receivable 20,000
Accounts receivable 77,000
Inventory 7,000
Prepaid expenses and other assets 4,000
Officer advances 45,000
-----------
Total current assets 1,167,000
Furniture and equipment - net 136,000
Security deposits 6,000
-----------
$ 1,309,000
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 38,000
Deferred revenue 10,000
Loan payable 37,000
-----------
Total current liabilities 85,000
-----------
Commitments
STOCKHOLDERS' EQUITY
Capital stock $.001 par value:
Preferred stock, authorized 500,000 shares; issued and outstanding -
none
Common stock, authorized 50,000,000 shares; 19,593,836 shares deemed issued
and outstanding, 50,000 shares issuable 19,000
Additional paid-in capital 3,083,000
Deficit accumulated during the development stage (1,878,000)
-----------
Total stockholders' equity 1,224,000
-----------
$ 1,309,000
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS F-2
<PAGE>
NMXS.com, INC.
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
YEAR ENDED (APRIL 2,1996)
DECEMBER 31, THROUGH
----------------------------------- DECEMBER 31,
1999 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 266,000 $ 196,000 $ 539,000
------------ ------------ ------------
Operating costs and expenses:
Cost of services 177,000 119,000 305,000
General and administrative 1,651,000 100,000 1,805,000
Research and development 150,000 91,000 332,000
------------ ------------ ------------
Total operating costs
and expenses 1,978,000 310,000 2,442,000
------------ ------------ ------------
Other income (expense):
Interest income 26,000 26,000
Interest expense (1,000) (1,000)
------------ ------------ ------------
25,000 25,000
------------ ------------ ------------
NET LOSS/COMPREHENSIVE LOSS $ (1,687,000) $ (114,000) $ (1,878,000)
============ ============ ============
Basic and diluted loss per share:
Weighted average number of
common shares outstanding 11,878,000 5,737,700
============ ============
Basic and diluted loss per
share $ (.14) $ (.02)
====== =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS F-3
<PAGE>
NMXS.com, INC.
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
(NOTES A AND F)
<TABLE>
<CAPTION>
DEFICIT
COMMON STOCK ACCUMULATED
$.001 PAR VALUE ADDITIONAL DURING THE
----------------------------- PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Initial issuance of shares to founder
For $1,000 118,800 $ 1,000 $ 1,000
----------- ------------ ------------
BALANCE, DECEMBER 31, 1996 118,800 1,000 1,000
Fair value of services provided by founder 75,000 75,000
Net loss/comprehensive loss $ (77,000) (77,000)
----------- ------------ ------------ ------------
BALANCE, DECEMBER 31, 1997 118,800 76,000 (77,000) (1,000)
Fair value of services provided by founder 90,000 90,000
Net loss/comprehensive loss (114,000) (114,000)
----------- ------------ ------------ ------------
BALANCE, DECEMBER 31, 1998 118,800 $ 0 166,000 (191,000) (25,000)
Issuance of shares - June 5,416,300 5,000 95,000 100,000
Special distribution of shares to
Founder - June 5,618,900 6,000 (6,000)
Issuance of shares at $.75 per share
For consulting services - July 726,000 1,000 544,000 545,000
Shares deemed issued in connection
With reverse acquisition - August 5,333,336 5,000 (5,000)
Issuance of shares at $.75 per share,
Net of issuance costs - August 2,360,500 2,000 1,715,000 1,717,000
Issuance of stock options at fair value
For consulting services - August 267,000 267,000
Estimated value of services provided by
Founder 120,000 120,000
Shares issued for legal services provided
to the Company - December 20,000 40,000 40,000
Shares issuable at $2.94 per share for
Consulting services 147,000 147,000
Net loss/comprehensive loss (1,687,000) (1,687,000)
----------- ------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1999 19,593,836 $ 19,000 $ 3,083,000 $ (1,878,000) $ 1,224,000
=========== ============ ============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS F-4
<PAGE>
NMXS.com, INC.
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(APRIL 2, 1996)
YEAR ENDED DECEMBER THROUGH
--------------------------------- DECEMBER 31,
1999 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,687,000) $ (114,000) $(1,878,000)
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Common stock issued for services 732,000 732,000
Stock options issued for services 267,000 267,000
Fair value of services provided by founder 120,000 90,000 285,000
Depreciation 20,000 3,000 25,000
Changes in:
Notes receivable (20,000) (20,000)
Accounts receivable (53,000) (24,000) (77,000)
Inventory (7,000) (7,000)
Prepaid expenses and other assets (4,000) (4,000)
Officer advances (29,000) (11,000) (45,000)
Accounts payable and accrued expenses (17,000) 20,000 38,000
Deferred revenue (28,000) 38,000 10,000
----------- ----------- -----------
Net cash (used in) provided by
operating activities (706,000) 2,000 (674,000)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets (137,000) (9,000) (161,000)
Security deposits (6,000) (6,000)
----------- ----------- -----------
Net cash used in investing activities (143,000) (9,000) (167,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan from (repayment to) stockholder (23,000) 6,000
Proceeds from note payable 37,000 37,000
Net proceeds from issuance of common stock 1,817,000 1,818,000
Restricted cash (37,000) (37,000)
----------- ----------- -----------
Net cash provided by
financing activities 1,794,000 6,000 1,818,000
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 945,000 (1,000) 977,000
Cash and cash equivalents, beginning of period 32,000 33,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 977,000 $ 32,000 $ 977,000
=========== =========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS F-5
<PAGE>
NMXS.com, INC.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE A - ORGANIZATION AND OPERATIONS
NMXS.com, Inc. (formerly Conserve, Inc.) ("Conserve") and its wholly-owned
subsidiary New Mexico Software, Inc. (collectively "the Company"), a development
stage enterprise, operates in a single business segment that develops and
markets proprietary internet technology-based software for the management of
digital high-resolution graphic images, video clips and audio recordings. The
Company believes that its software has major applications for the media,
advertising, publishing, medical, entertainment, e-commerce and university
markets.
In August 1999, NMXS.com, Inc., then a non-operating public corporation with
nominal net assets (a development state enterprise) acquired all of the
outstanding common stock of New Mexico Software, Inc. (a development enterprise)
("NMS") in a transaction that gave the stockholders of NMS actual control of the
combined company. For accounting purposes, the acquisition has been treated as a
capital stock transaction rather than a business combination. This transaction
has been recorded as a recapitalization of NMS with NMS as the acquiror
("Reverse Acquisition") and no goodwill or other intangible was recognized. The
historical financial statements prior to the date of the reverse acquisition are
those of NMS with the accounting acquiror's capital deficiency prior to the
acquisition having been retroactively restated (i.e. recapitalized) for the
equivalent number of shares received in the transaction and the difference
between the par value of Conserve's and NMS's stock recorded as an offset to
additional paid-in capital. The historical deficit accumulated during the
development stage of NMS is being carried forward after the reverse acquisition.
Loss per share has similarly been restated for all periods prior to the reverse
acquisition to represent the number of equivalent shares received by NMS's
stockholders.
NMS, a New Mexico corporation, was formed in April 1996. NMS was formed to
develop and market proprietary internet technology-based software as currently
conducted by the Company.
On August 3, 1999, Conserve issued to the stockholders of NMS 11,880,000 shares
of Conserve's common stock in exchange for all of the shares of NMS with NMS
becoming a wholly-owned subsidiary of Conserve. In connection with this
transaction, Conserve changed its name to NMXS.com.
The Company has commenced principal business operations. However, the Company
has not achieved a level of sales that it deems significant relative to its
business plan. Since its inception, NMS, and more recently, the Company, has
been engaged in developing sales channels for its existing products as well as
coordinating research and development efforts in the continuing development of
its products and raising funds. The Company conducts its operations primarily in
the United States.
There is no assurance that the Company's research and development and marketing
efforts will be successful, or that the Company will achieve significant sales
of any such products. The Company has incurred net losses since its inception.
In addition, the Company operates in an environment of rapid change in
technology and is dependent upon the services of its employees and its
consultants. If the Company is unable to successfully bring its technologies to
commercialization, it is unlikely that the Company could continue its business.
As further described in Note K[2], the Company subsequently raised $1,090,000 in
a private placement offering. The proceeds from the offering along with the
existing cash balance is estimated to provide sufficient liquidity to meet the
working capital requirements of the Company through January 1, 2001.
F-6
<PAGE>
NMXS.com, INC.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1] PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary. All material intercompany accounts and
transactions have been eliminated.
[2] REVENUE RECOGNITION:
Maintenance contract revenue is recognized on a straight-line basis over
the life of the respective contract. The Company also derives revenue from
the sale of third party hardware and software. Consulting revenue is
recognized when the services are rendered.
The cost of maintenance revenue, consists of staff payroll, outside
services, equipment rental, communication costs and supplies and is
expensed as incurred.
[3] CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid instruments purchased with a
maturity of three months or less to be cash equivalents. Cash equivalents
totaled approximately $977,000 as of December 31, 1999. The Company
maintains its cash and cash equivalents at one financial institution.
[4] INVENTORY:
Inventory consists of software for resale. Inventory is stated at the
lower of cost (first-in, first-out method) or market.
[5] FURNITURE AND EQUIPMENT:
Furniture and equipment are recorded at cost. The cost of maintenance and
repairs is charged against results of operations as incurred. Depreciation
is charged against results of operations using the straight-line method
over the estimated economic useful life.
[6] INCOME TAXES:
The Company recognizes deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined on the basis of the differences
between the tax basis of assets and liabilities and their respective
financial reporting amount ("temporary differences") at enacted tax rates
in effect for the years in which the differences are expected to reverse.
Prior to the acquisition of NMS by NMXS.com, Inc., NMS was an S
corporation as defined in the Internal Revenue Code. Upon the consummation
of this transaction, NMS Subchapter S status was terminated. The
accumulated losses through the date of acquisition which amounted to
$32,000 was reported on the individual income tax return of the former
stockholder of NMS and therefore is not available to the Company.
F-7
<PAGE>
NMXS.com, INC.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[7] PER SHARE DATA:
The basic and diluted per share data has been computed on the basis of the
net loss available to common stockholders for the period divided by the
historic weighted average number of shares of common stock adjusted for
the retroactive treatment of common shares issued to the founder
(historical number of shares represents the shares issued by Conserve to
NMS' stockholders in connection with the reverse merger) immediately prior
to the reverse acquisition. Weighted average number of shares also
includes 50,000 shares issuable as of December 31, 1999 which were issued
subsequently. (See Note H). All potentially dilutive securities (see Note
F) have been excluded from the computations since they would be
antidilutive.
[8] RESEARCH AND DEVELOPMENT EXPENSES:
Costs of research and development activities are expensed as incurred.
[9] ADVERTISING EXPENSES:
The Company expenses advertising costs which consist primarily of direct
mailings, promotional items and print media, as incurred. Advertising
expenses amounted to $55,000, for both the year ended December 31, 1999
and for the cumulative period April 2, 1996 (inception) through December
31, 1999.
[10] USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period.
F-8
<PAGE>
NMXS.com, INC.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[11] STOCK-BASED COMPENSATION:
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("FAS 123") allows companies to either expense
the estimated fair value of stock options and warrants, or to continue
following the intrinsic value method set forth in Accounting Principles
Board Opinion 25, "Accounting for Stock Issued to Employees" ("APB 25")
but disclose the pro forma effects on net income had the fair value of the
options and warrants been expensed. The Company has elected to apply APB
25 in accounting for its stock based incentive plans. Equity instruments
issued to non-employees are measured based on their fair values.
[12] SOFTWARE DEVELOPMENT:
The Company accounts for computer software development costs in accordance
with Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed. As such, all costs incurred prior to the product
achieving technological feasibility are expensed as research and
development costs. Technological feasibility is generally achieved upon
satisfactory beta test results. Upon achieving technological feasibility,
programming costs are capitalized and amortized over the economic useful
live which is estimated to be two years.
[13] RENTAL EXPENSE:
The Company has recognized the total minimum rental payments due under the
lease on a straight-line basis over the lease term.
NOTE C - RESTRICTED CASH
The Company acquired a certificate of deposit in the amount of $37,000 to
collateralize a company note payable for the same amount. Interest is compounded
on a quarterly basis at an annual percentage yield of 5.3%. (See Note E).
NOTE D - FURNITURE AND EQUIPMENT
Furniture and equipment as of December 31, 1999 consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Computers $ 74,000
Furniture, fixtures and equipment 80,000
Leasehold improvements 7,000
--------
161,000
Accumulated depreciation (25,000)
--------
$136,000
========
</TABLE>
NOTE E - PROMISSORY NOTE
The Company has a $37,000 promissory note expiring on August 31, 2000. The
principal balance and all accrued, unpaid interest is due on this date. Interest
is payable on a quarterly basis at a rate of 7.2% per annum.
F-9
<PAGE>
NMXS.com, INC.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE F - CAPITAL TRANSACTIONS
COMMON STOCK:
The following common stock transactions include the effects of restating of
stockholders' equity for the shares received in the recapitalization as a result
of the reverse acquisition. The exchange rate of such shares was 118.8 Conserve
common shares for each NMS common share. Accordingly, there were 11,880,000
common shares outstanding immediately prior to consummating the reverse
acquisition.
Effective April 2, 1996, the Company issued 118,800 shares of common stock to
the founder for a capital contribution.
During 1999, the Company effected the following stock transactions:
In June 1999, in contemplation of the anticipated reverse acquisition, the
Company adjusted its capitalization in order to facilitate the exchange of
shares required as part of the acquisition transaction. Prior to this
adjustment, the founding shareholder owned 100% (1,000 pre-exchange common
shares) (118,800 shares giving effect to the exchange) of NMS. In connection
with this adjustment, the Company distributed 47,297 pre-exchange common
shares (5,618,900 shares giving effect to the exchange) to the founding
stockholder. As a result of this distribution, the founding shareholder's
overall ownership percentage did not change. This event resulted in no charge
and has been recorded in a manner similar to a recapitalization.
In June 1999, issued 5,416,300 shares of common stock for $100,000 in
accordance with a stock purchase agreement.
In July 1999, issued 726,000 shares of common stock with a fair market value
of $.75 per share for consulting services.
In August 1999, in accounting for the reverse acquisition transaction, the
Company was deemed to have issued 5,333,336 million common shares for the net
monetary assets of Conserve which was nominal. These shares represented the
common shares outstanding immediately prior to the reverse acquisition.
In August 1999, issued 2,360,500 shares of its common stock at $.75 per share
in a private placement offering, net of issuance costs of $53,000.
On December 28, 1999, the Company issued 20,000 shares of common stock to one
individual valued at $40,000 in exchange for services.
STOCK OPTIONS:
On August 3, 1999, the Company adopted its 1999 Stock Option Plan (the
"Plan"). Under the Plan, incentive and non-qualified stock options may be
granted to key employees and consultants at the discretion of the Board of
Directors. Any incentive option granted under the Plan will have an exercise
price of not less than 100% of the fair market value of the shares on the
date on which such option is granted. With respect to an incentive option
granted to a Participant who owns more than 10% of the total combined voting
stock of the Company or of any parent or subsidiary of the Company, the
exercise price for such option must be at least 110% of the fair market value
of the shares subject to the option on the date on which the option is
granted. A non-qualified option granted under the Plan (i.e., an option to
purchase the common stock that does not meet the Internal Revenue Code's
requirements for incentive options) must have an exercise price of not less
than 100% of the fair market value of the stock on the date of grant. A
maximum of 3,000,000 options can be awarded under the Plan. The terms of
grant permit a noncash exercise.
F-10
<PAGE>
NMXS.com, INC.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE F - CAPITAL TRANSACTIONS (CONTINUED)
Disclosures required by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"), including pro
forma operating results had the Company prepared its financial statements in
accordance with the fair value based method of accounting for stock-based
compensation prescribed therein are shown below.
Exercise prices and weighted-average contractual lives of stock options
outstanding as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------- ---------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
----------- ------------- -------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
$ .75 452,000 4.6 $ .75 37,500 $ .75
$.825 120,000 4.6 $.825 10,000 $.825
</TABLE>
During the year ended December 31, 1999, the Company issued 572,000 options. The
most recent quoted market price of the Company's common shares was $3 per share
at the date of grant. The total fair value of such options approximated
$1,385,000. There were no options outstanding prior to August 3, 1999. The
charge for the 47,500 options that vested during 1999 approximated $267,000
which are reflected in the statement of operations for the year ended December
31, 1999 in general and administrative expense.
The fair value of each option granted has been estimated on the date of grant
using the Black-Scholes option pricing model. The weighted average fair value of
the options granted during 1999 was $2.42. The following weighted average
assumptions were used in computing the fair value of option grants for 1999.
Weighted average risk-free interest rate of 5.50%; zero dividend yield,
volatility of the Company's common stock of 40% and an expected life of the
options of five years. The options vest ratably over a five year period.
NOTE G - INCOME TAXES
The Company has a deferred tax asset as of December 31, 1999 of $593,000 which
was calculated using a federal statutory rate of 34% and a state statutory rate
of 6%. The deferred tax asset represents a benefit from net operating loss
carryforwards of $213,000 and deferred compensation of $380,000, which is
reduced by a valuation allowance of approximately $593,000 since the future
realization of such tax benefit is not presently determinable.
As of December 31, 1999, the Company has a net operating loss carryforward of
$562,000 expiring in 2019 for federal income tax purposes. In the event of
potential future ownership changes (Note A), Internal Revenue Code Section 382
limits the amount of such net operating loss carryforward available to offset
future taxable income.
F-11
<PAGE>
NMXS.com, INC.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE H - RELATED PARTY TRANSACTIONS
OFFICER ADVANCES:
Represents non-interest bearing advances to the Chief Executive Officer who is a
principal stockholder of the Company. The amount is to be repaid by December 31,
2000.
OFFICER COMPENSATION:
During 1999 and 1998, the Company has recorded the fair value of services
provided by the Company's chief executive officer in the amounts of $120,000 and
$90,000, respectively in the statement of operations with a corresponding
increase to additional paid-in capital.
In August 1999, the Company agreed to issue 50,000 common shares to a former
officer of the Company. The fair value of such shares amounting to $147,000 has
been recorded in the statement of operations for the year ended December 31,
1999.
NOTE RECEIVABLE:
Represents an amount due from a related party of which the chief executive
officer and principal stockholder of the Company is a member of the Board of
Directors. The note was repaid in February 2000.
MANAGEMENT SERVICES:
An officer and stockholder of a significant stockholder was hired in September
1999 and provides management and consulting services to the Company at an annual
rate of $60,000. The amount charged to operations for the year ended December
31, 1999 amounted to $20,000.
NOTE I - COMMITMENTS
LEASES:
The Company leases office space and office equipment under operating leases.
Future minimum lease payments as of December 31, 1999 are as follow:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
----------------
<S> <C>
2000 $ 90,000
2001 68,000
2002 69,000
2003 69,000
2004 42,000
</TABLE>
Rent expense for the years ended December 31, 1999 and 1998 amounted to $33,000
and $5,000, respectively.
F-12
<PAGE>
NMXS.com, INC.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE I - COMMITMENTS (CONTINUED)
WARRANTS:
In conjunction with the closing of the reverse merger, the Company declared a
distribution of 1,000,000 warrants at the rate of one warrant for each 5.3
common shares held by the stockholders of record as of the beginning of business
on August 3, 1999. The warrants have an exercise price of $1.25 per share and a
three year contractual life from date of issuance. The warrants are redeemable
by the Company for $.01 per warrant subject to 30 days written notice at any
time the closing bid price of the stock equals or exceeds 300% of the exercise
price of the warrant for ten consecutive trading days. The warrants will be
issued upon the Company's Form SB-2 filing being declared effective. The value
ascribed to these warrants will be determined utilizing the Black-Scholes model
and recorded as a dividend distribution at the effective date of the
registration statement.
EMPLOYMENT AGREEMENT:
On December 10, 1999, the Company entered into an employment and noncompetition
agreement with a stockholder to act in the capacity of President and Chief
Executive Officer. The term of the employment agreement is for three years and
the noncompetition agreement is for one year with both agreements commencing on
January 1, 2000. The agreement allows for a one year renewal option unless
terminated by either party. Base salary is $120,000 per annum with available
additional cash compensation as defined in the agreement.
NOTE J - MAJOR CUSTOMERS
During the year ended December 31, 1999, four customers accounted for 33%, 30%,
17% and 15% of the Company's revenue. During the year ended December 31, 1998,
one customer accounted for 82% of the Company's revenue.
As of December 31, 1999, balances due from three customers comprised 43%, 13%
and 12% of total accounts receivable.
As of December 31, 1998, balances due from two customers comprised 50% and 46%
of total accounts receivable.
NOTE K - SUBSEQUENT EVENTS
[1] STOCK OPTIONS:
In January 2000, the Company granted approximately 308,000 stock options
with an exercise price of $2.125 with a contractual life of ten years and
a two year vesting period to employees.
[2] CAPITAL TRANSACTIONS:
The Company issued, in January and February 2000, in connection with a
private placement offering 1,090,000 units at $1 per unit consisting of
one share of common stock and one Series B warrant to purchase one share
of common stock at $1.00 per share exercisable for a period of up to five
years from date of issuance.
F-13
<PAGE>
NMXS.com, INC.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE K - SUBSEQUENT EVENTS (CONTINUED)
[3] COMMITMENT:
Effective January 1, 2000, the Company entered into an agreement with a
third party to provide legal services to the Company in exchange for an
initial grant of 150,000 options at an exercise price similar to prices
for employee grants. In accordance with the agreement, legal counsel will
earn as a retainer fee an automatic vesting of 1,000 options each month
services are rendered and will earn additional vesting of stock options
for services rendered based on a calculation defined in the agreement. A
charge for the fair value of such options will be determined when
services are rendered.
F-14
<PAGE>
Page 32 of 37
[OUTSIDE BACK COVER]
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary
Risk Factors
Forward Looking Statements
Use of Proceeds
Dilution
Management's Discussion and Analysis of Financial Condition and Results of Operation
Business
Management
Certain Transactions
Market Information
Principal Shareholders
Selling Shareholder
Description of Securities
Dividend Policy
Plan of Distribution
Shares Eligible For Future Sale
Legal Matters
Experts
Financial Statements
</TABLE>
Until _____, 2000, (ninety days after the date of this prospectus) all
dealers that effect transactions in these securities may be required to deliver
a prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE>
Page 33 of 37
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 1. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
expressly authorizes a Delaware corporation to indemnify its officers,
directors, employees, and agents against claims or liabilities arising out of
such persons' conduct as officers, directors, employees, or agents for the
corporation if they acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the Company. Neither the
articles of incorporation nor the Bylaws of the Company provide for
indemnification of the directors, officers, employees, or agents of the Company.
The Company has not adopted a policy about indemnification.
The eighth article of our Certificate of Incorporation includes
provisions to eliminate, to the fullest extent permitted by Delaware General
Corporation Law as in effect from time to time, the personal liability of our
directors for monetary damages arising from a breach of their fiduciary duties
as directors.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable.
Item 2. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses in connection
with the offering described in the registration statement:
<TABLE>
<CAPTION>
<S> <C>
Registration Fee $359
Blue Sky Fees $3,000
Accounting Fees and Expenses $25,000
Legal Fees and Expenses $20,000
Printing and Engraving $5,000
Transfer Agent Fees $3,000
Miscellaneous $3,641
------
Total Expenses $60,000
=======
</TABLE>
Item 3. Undertakings
(a) The Company hereby undertakes that it will:
(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to (i) include any
prospectus required by Section
<PAGE>
Page 34 of 37
10(a)(3) of the Securities Act of 1933; (ii) reflect in the prospectus any facts
or events which, individually or together, represent a fundamental change in the
information in the registration statement; and (iii) include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement.
(2) For the purpose of determining liability under the Securities
Act of 1933, treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the securities at
that time shall be the initial BONA FIDE offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(b) The Company will provide to the underwriter at the closing specified
in the underwriting agreement certificates in such denominations and registered
in such names as required by the underwriter to permit prompt delivery to each
purchaser.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(d) The Company will:
(1) For determining any liability under the Act, treat the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in the form of a prospectus filed by
the Company under Rule 424(b) (1) or (4) or 497(h) under the Act as part of this
registration statement as of the time the Commission declared it effective.
(2) For any liability under the 1933 Act, treat each post-effective
amendment that contains a form of prospectus as a new registration statement for
the securities offered in the registration statement, and that the offering of
the securities at that time as the initial bona fide offering of those
securities.
<PAGE>
Page 35 of 37
Item 4. Unregistered Securities Issued or Sold Within Three Years
In August 1999, the Company issued 11,880,000 shares of Common Stock of
the Company to the shareholders of New Mexico Software, Inc. The shares were
issued in a reverse acquisition transaction between the Company and New Mexico
Software, in which such shareholders exchanged all of their shares for the
shares of the Company. Such securities were issued without registration under
the Securities Act by reason of the exemption from registration afforded by the
provisions of Section 4(2) thereof, and Rule 506, as transactions by an issuer
not involving any public offering. Each of the shareholders of New Mexico
Software delivered appropriate investment representations to the Company with
respect to such transaction and consented to the imposition of restrictive
legends upon the certificates evidencing such securities. No underwriting
discounts or commissions were paid in connection with such issuance.
Also in August 1999 the Company issued 2,360,500 shares to 44
accredited investors in a private placement of its shares. Such securities were
issued without registration under the Act by reason of the exemption from
registration afforded by the provisions of Section 4(2) thereof, and Rule 506,
as transactions by an issuer not involving any public offering. Such investors
delivered appropriate investment representations to the Company with respect to
such transaction and consented to the imposition of restrictive legends upon the
certificates evidencing such securities. No underwriting discounts or
commissions were paid in connection with such issuance.
Also in August 1999 the Company granted options to purchase 572,000
shares pursuant to the Company's stock option plan. The options were granted to
seven persons without registration under the Act by reason of the exemption from
registration afforded by the provisions of Rule 701 promulgated by the
Securities and Exchange Commission. Each of these persons was either an employee
of the Company or a business consultant who provided bona fide services which
were not in connection with the offer or sale of securities in a capital raising
transaction and not directly or indirectly to promote or maintain a market for
the Company's securities. No underwriting discounts or commissions were paid in
connection with such issuances.
In January 2000 the Company granted options to purchase 457,760 shares
pursuant to the Company's stock option plan. The options were granted to 15
persons without registration under the Act by reason of the exemption from
registration afforded by the provisions of Rule 701 promulgated by the
Securities and Exchange Commission. Each of these persons was an employee of the
Company. No underwriting discounts or commissions were paid in connection with
such issuances.
In January 2000 the Company issued 50,000 shares to James Kurzmack in
settlement of termination of his employment with the Company. Such securities
were issued without registration under the Act by reason of the exemption from
registration afforded by the provisions of Section 4(2) thereof as a transaction
by an issuer not involving any public offering. Mr. Kurzmack delivered
appropriate investment representations to the Company with respect to such
transaction and consented to the imposition of restrictive legends upon the
certificates evidencing
<PAGE>
Page 36 of 37
such securities. No underwriting discounts or commissions were paid in
connection with such issuance. Mr. Kurzmack was deemed to be a sophisticated
investor.
In January and February 2000 the Company sold 1,090,000 units at $1.00
per unit to 24 accredited investors in a private placement of its shares. The
units consisted of one share of common stock and one Series B Warrant to
purchase one share of stock at $1.00, exercisable commencing August 1, 2000,
through January 17, 2005. Such securities were issued without registration under
the Act by reason of the exemption from registration afforded by the provisions
of Section 4(2) thereof, and Rule 506, as transactions by an issuer not
involving any public offering. Such investors delivered appropriate investment
representations to the Company with respect to such transaction and consented to
the imposition of restrictive legends upon the certificates evidencing such
securities. No underwriting discounts or commissions were paid in connection
with such issuance.
Item 5. Exhibits
The exhibits set forth in the following index of exhibits are filed as
a part of this registration statement.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Location
<S> <C> <C>
2.1 Reorganization agreement dated August 3, 1999 *
3.1 Articles of Incorporation, as amended *
3.2 By-Laws of the Company currently in effect *
4.1 Form of Common Stock Certificate *
4.2 Form of Series A Warrant Certificate *
4.3 Form of Warrant Agency Agreement for Series A Warrants *
4.4 Form of Series B Warrant Certificate *
5.1 Opinion re Legality *
10.1 Sun Microsystems Lease *
10.2 Building Lease *
10.3 Form of Employee Confidentiality Agreement *
10.4 Stock Option Plan *
21.1 List of subsidiaries *
23.1 Consent of Richard A. Eisner & Company, LLP
23.2 Consent of Ronald N. Vance (contained in
Exhibit 5.1 above) --
</TABLE>
*Filed as an exhibit with the original filing of the
registration statement of the Company on Form SB-2 on February 11, 2000 (SEC
File No. 333-30176).
<PAGE>
Page 37 of 37
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned in the city of
Albuquerque, State of New Mexico, on the 31st day of March 2000.
NMXS.com, Inc.
By: /s/ Richard Govatski, President and Chief
Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Date: March 31, 2000 /s/ Richard Govatski, Director
Date: March 31, 2000 /s/ Marvin Maslow, Director
Date: March 31, 2000 /s/ Scott L. Bach, Director
Date: March 31, 2000 /s/ Teresa Dickey, Principal Financial
Officer
Date: March 31, 2000 /s/ Robert A. Armstrong, Controller
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the use in this A-1 to the Registration Statement on Form
SB-2 of our report dated February 24, 2000 with respect to our audit of the
financial statements of NMXS.com, Inc. as of December 31, 1999 and for the years
ended December 31, 1999 and 1998 and the amount for each of the years ended
December 31, 1999, 1998, 1997 and 1996 included in the cumulative amounts for
the period from April 2, 1996 (inception) through December 31, 1999 and to the
reference to our firm under the caption "Experts" in the prospectus.
/s/ Richard A. Eisner & Company, LLP
Florham Park, NJ
March 31, 2000
