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Securities and Exchange Commission
Washington, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
COM-GUARD.COM, INC.
(Name of Small Business Issuer in its Charter)
Nevada 33-0879853
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2075 CORTE DEL NOGAL, SUITE B, CARLSBAD, CA 92009
(Address of principal executive offices) (Zip Code)
(760) 431-2206
(Registrant's telephone number, including area code)
Securities to be registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
N/A N/A
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON EQUITY, PAR VALUE $.001
(Title of class)
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COM-GUARD.COM, INC.
FORM 10-SB
TABLE OF CONTENTS
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NO. TITLE PAGE NO.
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PART I
Item 1. Description of Business..................................3
Item 2. Management's Discussion and Analysis or Plan of
Operations..............................................12
Item 3. Description of Property.................................15
Item 4. Security Ownership of Certain Beneficial Owners and
Management..............................................15
Item 5. Directors, Executive Officers, Promoters, and
Control Persons.........................................16
Item 6. Executive Compensation..................................17
Item 7. Certain Relationships and Related Transactions..........17
Item 8. Description of Securities...............................18
PART II
Item 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Shareholder Matters.............19
Item 2. Legal Proceedings.......................................20
Item 3. Changes in and Disagreements with Accountants...........20
Item 4. Recent Sales of Unregistered Securities.................20
Item 5. Indemnification of Directors and Officers...............22
PART F/S
Financial Statements.............................................22
PART III
Item 1. Index to Exhibits.......................................23
Item 2. Description of Exhibits.................................23
Signatures..............................................24
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Com-Guard.com, Inc. (the "Registrant" or the "Company") was
incorporated as e-World Security, Inc. in the State of Nevada on October 7,
1998. The Company's name was changed to Com-Guard.com, Inc. and filed on
April 16, 1999.
The Registrant has limited operating history. The principal business
of the Registrant is the exploitation of niche products for the microcomputer
industry that provide enhanced system security for both individual users and
network administrators. The Company's initial product, Com-Guard(TM),
includes unique software and hardware that will enable users to protect and
limit access to data; and to provide a security system against tampering and
unauthorized use of computers.
The Registrant's present business address is 2075 Corte del Nogal,
Suite B, Carlsbad, California 92009.
OVERVIEW
Com-Guard.com, Inc. will provide a group of products, called
Com-Guard(TM), to provide users of personal computers with (1) internet
security, (2) file security, and (3) internal facility security.
The Com-Guard(TM) system monitors a computer or network and detects,
through proprietary software and hardware, unauthorized attempts to use,
tamper with, or remove data or equipment. The system is designed to generate
an alarm, which can be sent to any receiving device, including pagers,
telephones, other computers, etc.
The market for Com-Guard(TM) consists of individual users and
industry. The popularity of the internet has created a need for both data
security and access limitations. Limiting access to sensitive and/or
confidential files has grown to be a need for all users of microcomputers.
Home automation, including systems to provide "internal" security to
certain areas of a home or office, represents an additional market for
Com-Guard(TM). The system, installed in a PC, has the ability to function as
an internal home security system, controlling a series of sensors to protect
against theft and intrusion, child safety, etc.
Competition to Com-Guard(TM) is limited and most data security
products are more costly. In contrast, Com-Guard(TM) will be sold (in various
configurations) for less than $150 to $200 retail.
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The Company is managed by experienced individuals who have worked in
the microcomputer industry for many years.
THE PRODUCT
Com-Guard(TM) is a PC-based hardware/software system. It provides
features to provide security for computers, networks, and home/office
environments.
PROTECTION FROM COMPUTER TAMPERING AND THEFT: Over $8 billion of computers
are stolen annually. Com-Guard(TM) provides an internal sensor in the
computer, which enables an alarm to inform the user of any movement of
the system. The system can be enabled remotely with a "clicker" device
similar to that used in automobiles, which can be carried on a key chain.
PROTECTION OF VALUABLE PC COMPONENTS FROM TAMPERING AND THEFT: While billions
are lost annually due to theft of computers, substantial theft is
attributable to tampering and theft of components, such as mice, memory,
disk drives, keyboards, etc. The Com-Guard(TM) system detects any
vibration of the system, and provides a warning alert to the owner of the
system.
PREVENT UNAUTHORIZED ACCESS TO PC: Unauthorized access to a PC can range from
children logging onto internet sites without parental knowledge or
permission, to office co-workers accessing confidential and sensitive
files from a PC without the user's knowledge or consent. Com-Guard(TM)
software allows the user to lock out certain applications, directories,
and/or files. Additionally, Com-Guard(TM) provides a log of all attempts
at unauthorized access.
INTERNAL HOME/OFFICE SECURITY FEATURES: Com-Guard(TM), through interconnected
sensors (heat, motion, video, etc.) can serve as a central internal
security system. The same alarm capabilities and event logging features
of the basic PC security system are enabled in an environment that
protects the entire environment.
BATTERY BACKUP: In the event of power failure or deliberate disconnection of
the computer, Com-Guard(TM) continues to operate with its own battery
backup on the computer hardware.
REMOTE NOTIFICATION: Com-Guard(TM) alarm signals can be routed to remote
devices such as pagers and telephones.
Com-Guard(TM) will be offered in several configurations (and
pricing) depending upon the need of the individual customer.
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THE MARKET
The U.S. personal computer industry consists of thousands of
computer manufacturers, assemblers, OEMs, and peripheral/parts producers.
Their products are sold and supported by a variety of distributors,
resellers, systems integrators, retail merchants, and service companies.
Saturating markets and increasing competition is forcing vendors to seek new
users in homes, small businesses and classrooms with revamped marketing
strategies and lower cost computers.
Shipments of personal computers (including desktops, network
servers, and portables) exceeded 25 million in 1996, while revenues were over
$60 billion, according to Dataquest. This included computers manufactured in
the United States by domestic and foreign firms, plus imported systems. PCs
with Pentium processors represented over 70 percent of shipments. In 1996,
the U.S. installed base of personal computers grew to 85 million units.
According to recent research, market growth in the 10 to 20 percent
range will continue into the new century, with annual unit shipments
approaching 60 million by the year 2002. By this time, computer use in the
United States will be substantially more pervasive, especially in homes and
educational institutions, and will impact more human activities. Consumer
sales will define the market as telecommuting, electronic commerce, digital
home "infotainment" systems, and Internet access attain high levels of market
penetration. There will be more types of computers, from single use to
multi-purpose devices, networks will be all encompassing (including in the
home), and the use of portable and wireless technologies will be widespread.
With the exception of anticipated growth in sales via electronic
commerce (the Internet, TV shopping networks, etc.), there should be minimal
shifts in market share among the various distribution channels. The outlets
with the highest projected growth through 2000 are the large computer, office
product, and consumer electronics superstores. These large retailers will
focus on providing more product support and services to their customers.
Direct response and mail order sales are also expected to do well. The
channels that may be most negatively affected by current trends toward
consolidating marketing and selling at the national level will be small
operations, like computer specialty stores and VARs, which will lose market
clout.
Major vendors are beginning to target small businesses, which form
the least penetrated, fastest growing business sector. Market drivers include
the improved availability of PCs in consumer outlets at attractive prices and
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new efforts by major vendors to address the problems faced by these
companies, most of which have limited resources and technical know-how. Sales
to the more than 6 million firms with less than 100 employees in the United
States constitute the largest share of shipments to the business sector,
rising to an estimated 42 percent by the year 2000. The small business sector
represents more than 60 percent of business employees.
Sales to the nation's 100 million U.S. households jumped
dramatically in 1994 and 1995. Growth during this period averaged 30 percent
per year. Besides price, this sector is driven by growth in telecommuting and
home businesses, improved consumer software, and more recently, the
popularity of the Internet and online information services. Vendors are
beginning to base computer designs on consumer preferences and needs and to
promote these features, rather than solely pushing technology and
performance. About 35 percent of the 100 million U.S. households owned
personal computers in 1996, while one-fourth of all PC households had
multiple computers.
Sales of PCs to educational institutions in the United States during
1996 exceeded 1.8 million units, about 8 percent of total shipments for the
year. Although there is a high number of PCs in the computer labs and
libraries of K-12 schools, personal computers have not yet visibly penetrated
the classroom for instructional purposes. Additional funding, more
curriculum-based software, lower prices, and intensified training and
technical awareness among teachers and administrators should lead to greater
growth in this sector.
National, state and local governments are a small but growing market
segment, representing about 8 percent of total units shipped in 1996 and 10
percent of server sales, according to Dataquest. Unit shipments exceeded 1.9
million and were valued over $4.3 billion. There is an estimated installed
base of over 3 million PCs in the Federal Government, over 90 percent of
which are connected to LANs. Future demand at all levels of government will
be stimulated by greater emphasis on enhancing employee productivity and the
ongoing modernization of government programs.
Networking is having an increasingly profound effect on the PC
industry, from local area networks (LANs) and wide area networks to the
Internet and intranets. Over half of the business PCs in the United States
are now connected via a LAN and 80 percent of all organizations with more
than 100 employees have a LAN installed according to International Data
Corporation ("IDC"). Networking and client/server technologies have enabled
the personal computer to play a greater role in mission-critical business
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functions, which expands its value to companies and reduces the status of
legacy mainframe and midrange systems. LAN functions are graduating from
traditional print sharing, file transfer, and e-mail uses to transaction
processing, management support, and Internet access applications. Users are
also seeking to link LANs to wider areas to accommodate regional offices and
to provide remote access to home workers.
Like multimedia in the early 1990s, the Internet is creating a
revolution in the way PCs are used in organizations and households. In 1996
the number of Internet users worldwide was estimated at 50 million, and the
number has been growing exponentially. In 1999, there were approximately 100
million users. After traditional business applications, the Internet could
historically be the biggest driver of PC sales, especially in the home, as
the World Wide Web takes on more electronic commerce and consumer
applications. Since the Internet is a global phenomenon, demand for PCs and
network servers will be stimulated in all regions. Although the United States
accounts for about two-thirds of the over 13 million host computers on the
Internet, other countries are creating sites at a fast pace, led by Japan and
Western Europe. Organization-specific intranets are also gaining popularity.
It has been estimated that over 90 percent of Fortune 1000 companies have
either established or plan to establish an intranet. These are closed or
tightly controlled networks within the Internet that are used for e-mail,
information dissemination, and other business functions.
According to Dataquest, the global market for personal computers
exceeded $168 billion in 1996. Unit shipments grew to more than 70 million,
feeding an installed base of over 228 million machines. The largest national
markets were the United States (36 percent of global shipments) and Japan (11
percent), followed by the major Western European countries. Regionally, North
America represented 39 percent of the world market, Western Europe, 23
percent, and Asia, most of the rest.
Sources used in the above analysis are: Dataquest.
(HTTP://WWW.DATAQUEST.COM); and IDC., (HTTP://WWW.IDCRESEARCH.COM).
Increased use of the internet and of enterprise-wide internal
networks increases the complexity of the IT environment, which requires the
use of IT security tools. Some of the tools used most often for network and
data security have been commercially available for over a decade. Newer
technologies - those moving away from standard hardware and software password
protection - are now being introduced to the marketplace.
A recent IDC survey of businesses revealed that security is of
paramount concern in the enterprise. Increased use of the internet and
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corporate growth are among the most significant business drivers for adding
security; and there was little evidence that these pressures would change
over the next several years.
The IDC survey also covered the priority given by respondents to
securing assets. Other than virus protection, which has been addressed by
dozens of products over the past few years, the most important concern was
corruption of data and unwanted disclosure of data.
Finally, the IDC report indicated a general dissatisfaction with the
usability and integration of current security technologies, which represents
an opportunity for Com-Guard(TM) and associated technologies. Further, IDC
found price expectations to be in the $50 per user range for basic security,
which falls within the strategic plan for the Registrant.
BUSINESS STRATEGY
The Registrant's fundamental strategy is to position its
Com-Guard(TM) product as a preferable method of PC security to end-users,
businesses, and institutions worldwide.
Prior to acquiring the worldwide rights to the product, over 5,000
units of Com-Guard(TM) had been sold to companies in Korea.
Production of the product and inventory procurement have been
arranged with the original Korean developer/manufacturer. Management believes
that its costs will remain competitive with alternative sources of supply. In
any case, the Registrant does not, at this time, plan to build its own
manufacturing capability and will continue to outsource Com-Guard(TM)
inventories.
End-user marketing will focus on providing a limited version of the
product over the Registrant's internet site. In this way, the product is
exposed to a broad sector of the market that would match the profile of our
consumer. Customers could order broadened feature sets of the product direct
from the Registrant, or from resellers, who might stock the product in stores.
Com-Guard(TM) will be made available to selected resellers either as
a branded product or under private-label arrangements. The product would be
merchandised for sale with new computer systems or as an add-on product to
existing PC owners.
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The Registrant's sales force will be responsible for selling direct
to business and commercial accounts' principally Fortune 1000 companies whose
needs for the product have been validated by the research.
The Registrant will plan and execute an integrated advertising
public relations campaign to promote Com-Guard(TM), including participation
in trade shows and seminars, and frequent use of consumer and trade
publications.
COMPETITION
While many security products for the PC are available, most are
either inadequate or too costly for general consumption and use. Most
products are either costly "firewall" systems for internet management, or
software products that rely on complex encryption technologies or password
protection, which has proven both cumbersome and inadequate. Furthermore,
existing technologies do not combine the features of data security as well as
theft protection; and no PC product combines the features of Com-Guard(TM)
along with an interior security system (for home or office).
Consequently, the Registrant believes that Com-Guard(TM) is
well-positioned in features and price, which can provide it a competitive
position in a market of considerable size.
INTELLECTUAL PROPERTY
The Registrant has a patent in the United States (Application number
09/030,993), which covers the implementation of Com-Guard(TM) hardware.
Copyright applications will be filed on all software developed for the system.
EMPLOYEES
The Registrant employed a total of five (5) persons at January 30, 2000,
of whom two were in corporate administration and finance, two in engineer ing
and research and development, and one in sales and marketing.
RISK FACTORS
LACK OF OPERATIONS AND PROFITABILITY.
The Registrant is in the development-stage and commenced
pre-operating activities less than one year ago. It has no history of
operations or profits in the industries in which it participates.
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UNCERTAINTY OF COMMERCIAL SUCCESS.
Although the Registrant is optimistic about its revenue and
profitability prospects, there can be no assurance of commercial success of
its Com- Guard(TM) product. Furthermore, the computer industry is
characterized by rapid change and growth. There can be no assurance that the
Registrant will be able to keep up with the pace of technological change or
fund its growth.
COMPETITION.
The Registrant is subject to competition from other companies that
may provide the same or similar products and services. These competitors have
been in the business longer than the Registrant and may have large executive
and operating staffs. There can be no assurance that the Registrant's
prospects will not be adversely affected by competition from these companies.
NEED FOR ADDITIONAL FINANCING.
The Registrant will require additional financing in order to
establish profitable, ongoing operations; there is no assurance that such
financing will be available or, if available, that it can be obtained on
terms favorable to the Registrant.
DEPENDENCE ON MANAGEMENT.
The Registrant is largely dependent upon the efforts and abilities
of Dr. Edward W. Savarese and there can be no assurance that the Registrant
can be successful in operating the Company should the services of Dr.
Savarese be unavailable.
DIVIDENDS.
The Registrant has never paid a cash dividend on its common stock.
The Registrant is not obligated to pay a dividend on the shares being
registered hereby, nor does it anticipate payment of any dividends for the
foreseeable future. The Registrant anticipates retaining its earnings to
finance its operations, growth, and expansion.
NO ASSURANCE OF PUBLIC MARKET; POTENTIAL VOLATILITY OF STOCK PRICE.
There currently is no public trading market for the Registrant's
common stock. There can be no assurance that an active public trading market
can be established or sustained. Furthermore, if a public market for the
common stock is established, the shares could be subject to significant
fluctuations in response to operating results and other factors, many of
which are not within the control of the Registrant.
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DEPENDENCE ON PROPRIETARY TECHNOLOGY; RISKS OF THIRD PARTY
INFRINGEMENT CLAIMS.
Although the Registrant has received patent protection, there can be
no assurance that the Registrant's measures to protect its current
proprietary rights will be adequate to prevent misappropriation of such
rights or that the Registrant's competitors will not independently develop or
patent technologies that are substantially equivalent to or superior to the
Registrant's technologies. Additionally, although the Registrant believes
that its products and technologies do not infringe upon the proprietary
rights of any third parties, there can be no assurance that third parties
will not assert infringement claims against products and technologies which
the Registrant licenses, or has the rights to use, from third parties. Any
such claims, if proved, could materially and adversely affect the
Registrant's business and results of operations. In addition, though any such
claims may ultimately prove to be without merit, the necessary management
attention to, and legal costs associated with litigation or other resolution
of such claims could materially and adversely affect the Registrant's
business and results of operations.
YEAR 2000 SOFTWARE COMPLIANCE.
The Company is aware of the issues associated with the programming
code in existing computer systems related to the year 2000. The "year 2000
problem" is pervasive and complex as virtually every computer operation will
be affected in some way by the rollover of the two-digit year value to 00.
The issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
Additionally, if the Company, its customers, vendors or others with
whom it does significant business are unable to resolve external processing
issues in a timely manner, it could result in material adverse effect on the
Company.
The Company has performed an analysis of all of its products and has
determined that all such products are year 2000 compliant. In the event a
modification is required to a software driver to accommodate year 2000
modifications instituted by a manufacturer of a software package, computer
platform or operating system that the Company is currently supporting, the
Company currently plans to update that driver free-of-charge and make it
available to customers for down-loading from the Internet.
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REPORTS TO SECURITY HOLDERS
The Registrant plans to file reports with the Securities and
Exchange Commission, including quarterly and annual reports to shareholders.
Annual reports will include audited financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Planned principal operations of the Registrant have not yet
commenced, and activities to date have been limited to forming the Company,
assembling a management and consultant team, identifying markets, developing
products, and obtaining initial capitalization. The Registrant has not had
revenues from operations to date. Accordingly, the financial information
furnished with this registration statement is limited in scope.
Since the inception on October 7, 1998 through June 30, 1999, the
Registrant had income of $3,028 from interest. Costs and expenses were
$595,715, including $360,000 in purchased research and development. For the
three-month period ended September 30, 1999, the Company had interest income
of $762. Costs and expenses for the three-month period ended September 39,
1999 were $127,561.
The Registrant has fulfilled its major financial commitment of a
purchase order totaling $350,000 for inventory. Its lease of the operating
facilities, which runs through November 2001 is at a monthly cost of $1,466.
At June 30, 1999, the Registrant had working capital of $286,865,
which included $221,285 in cash. Management is seeking additional equity
financing to fund planned operations. At September 30, 1999, the Company's
working capital was $218,303, which consisted of $51,172 in cash. The
decrease in working capital and cash is attributable to operating expenses of
$127,561; a stockholder loan of $50,000, and stockholder advances of $43,416
during the three-month period ended September 30, 1999.
For the period from inception to June 30, 1999, the Registrant had a
net loss of $592,687; a loss of $0.07 per common share. The net loss for the
three-month period ended September 30, 1999 was $126,799; a net loss of $0.01
per common share. The Company has had net losses totaling $719,486 for the
period October 7, 1998 (date of inception) to September 30, 1999; $0.09 per
common share.
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PLAN OF OPERATION.
The Registrant expects to begin marketing its Com-Guard(TM) product
in the first quarter of the year 2000. The Company has adequate cash to begin
the sales and marketing process. However, it is likely that the Company will
need to raise additional capital to expand its operations during the next
twelve months, which will include the addition of employees, purchase of
inventory, and expanded advertising and promotion of its products. The
Registrant's viability is contingent upon its ability to raise additional
funds to support its sales and marketing operations. There is no assurance
the Company will obtain additional financing on terms it deems acceptable.
The implementation and expansion of the Registrant's business will
require a commitment of substantial funds. Additional funding will be
required in the future to satisfy capital requirements for the Registrant.
Issuing additional equity will result in dilution to the existing
shareholders. If adequate funds are not available, the Registrant's business
could be adversely affected since internally generated funds are not expected
to be sufficient to fund the Registrant's expansion needs in the near-term.
At present, there are no funds committed to the Registrant, and no offer for
equity or debt financing is imminent.
The market for personal computer products and services is
characterized by rapidly changing technology, frequent introductions of new
products, and evolving industry standards, which result in product
obsolescence and short product life cycles. Accordingly, the Registrant's
success is dependent upon its ability to anticipate technological changes in
the industry and to continually identify, obtain, and successfully market new
products and services that satisfy evolving technologies, customer
preferences, and industry requirements within the markets in which the
Registrant operates.
There can be no assurance that competitors will not market products
and services that have certain competitive advantages over those of the
Registrant. Furthermore, the markets for the Registrant's products may be
particularly volatile due to the changing nature of personal computer usage
and purchasing habits. The internet is changing the way technology and
technology markets are developing and sufficient data and market studies are
not available for any thorough analysis in determining the long-term
viability of the Registrant's business plan. The Registrant will rely on the
experiences of its management team to make strategic decisions with respect
to its operations. The lack of clear and reliable market information
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dramatically increases the risks of the Registrant in making correct market
assumptions.
In January 1999, the Registrant acquired the rights to certain
technology for its Com-Guard(TM) product from Kyungki System Co., Ltd., a
Korean corporation. This acquisition included the copyrights, trademarks,
patents, object codes, source codes, enhancements and updates. The Registrant
has hired engineering personnel and consultants to further develop the
technology and to prepare Com-Guard(TM) for market.
In particular, the Registrant has engaged a very seasoned and
experienced consultant in the area of microcomputers to assist the
Registrant. More specifically, Woo Young Kim was instrumental in introducing
Com-GuardTM to the Registrant and facilitated the acquisition of this
technology. Mr. Kim has continued to assist the Registrant with respect to
the production and marketing of its products.
The dynamic nature of the personal computer market will require
additional investment by the Registrant in research and development. In order
to be competitive in the near-term and in the foreseeable future, the
Registrant will be required to continue to upgrade its existing products and
to develop new products. Such activities will require substantial additional
capital to provide for engineering personnel and infrastructure, including
the potential need for additional facilities and equipment. At present, the
Registrant is focused primarily on the introduction and technical support of
its first products. It will continue to evaluate its needs related to future
research and development activities.
The Registrant had a commitment to purchase inventory for a total of
$350,000. (Also see "Notes to Financial Statements.") The Registrant has
fulfilled this commitment from sales of Com-Guard(TM) during fiscal 2000.
There are no other material commitments for capital expenditures.
There are no known trends, events, or uncertainties, other than
those discussed above, that have had or are reasonably expected to have a
material impact on the net sales or other revenues from continuing operations
of the Registrant.
Seasonality is not expected to have a material effect on the
financial condition or results of operations of the Registrant.
Other than those discussed above, the Registrant is unaware of any
material events and uncertainties that would cause its reported financial
information not to be indicative of future operating results or of its future
financial condition. The Registrant's cost of goods and labor, now and in the
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future, is somewhat predictable and anticipated periodic increases in such
costs are not expected to have a material adverse effect on operations.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.
Certain statements contained in this report regarding matters that
are not historical facts are forward-looking statements. Because such
forward-looking statements include risks and uncertainties, actual results
may differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause actual results to differ materially
include, but are not limited to, competition, the demand for the Registrant's
products, and other factors identified from time to time in the Registrant's
filings with the Securities and Exchange Commission. The Registrant urges
readers to review the risk factors listing in this report.
The Registrant undertakes no obligation to release publicly any
revisions to forward-looking statements to reflect events or circumstances
after the date of this report or to reflect the occurrence of unanticipated
events.
ITEM 3. DESCRIPTION OF PROPERTY
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The Company occupies approximately 1,800 square feet of space in a
facility located at 2075 Corte del Nogal, Suite B, Carlsbad, CA 92002, at a
monthly rental rate of $1,466. The lease expires on November 30, 2001. Monthly
rental on this facility is subject to annual rent adjustments based on the
Consumer Price Index (CPI). The Company owns no real property.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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The following table sets forth information as to the shares of
common stock owned as of January 31, 2000. Unless otherwise indicated in the
footnotes below on the table as subject to community property laws, where
applicable, the persons as to whom the information is given has sole
investment power over the shares of common stock shown as beneficially owned.
1. Each person who in so far as the Registrant has been able to
ascertain beneficially owns more than five percent (5%) of the
outstanding shares of the Registrant.
2. Each director.
3. Each of the officers names in the summary compensation table.
4. All of the directors and officers as a group.
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TITLE OF NAME AND AMOUNT AND PERCENT OF
CLASS ADDRESS OF BENEFICIAL NATURE OF BENEFICIAL CLASS
OWNER OWNER
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Common Edward W. Savarese 5,200,000 57.5%
2003 Caracol Court
Carlsbad, CA 92009
0.08%
Common Edward H. Currie 75,000
6-57 158th Street
Whitestone, NY 11357
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
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NAME AGE POSITION TERM SERVED
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Since
Edward W. Savarese 52 President and Chief Annual Inception
Executive Officer
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Edward H. Currie 50 Director Annual June 25,
1999
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Dr. Edward W. Savarese is the founder of the Company and has been a
director and Chairman of the Board of Directors since its inception. He held
the position of Chief Executive Officer of Imaging Technologies Corporation
(formerly Personal Computer Products, Inc.) from 1982 to 1998. From 1981 to
1982, he was director of sales for SofTech Microsystems. His responsibilities
included establishing and supervising an international sales organization for
marketing a microcomputer operating system. from 1978 to 1981, Dr. Savarese
was employed by Hewlett Packard Company, first as a sales representative for
computer products, and later as district sales manager supervising a sales
force in the marketing of mini- and microcomputers. Dr. Savarese holds a
Doctorate degree from Columbia University, Teacher's College, with
specialization in educational technology and software and systems design. He
also holds a Master of Science in administration and management from Pace
University.
Dr. Edward H. Currie has been a director of the Company since June
25, 1999. He has more than twenty years of senior management experience in
domestic and international microcomputer-related software publishing and
hardware manufacturing. Since 1988, Dr. Currie has been president and
16
<PAGE>
chief executive officer of imagesoft, inc., an international software
publisher. from 1981 to 1988, he was chairman, president, and chief executive
officer of Lifeboat, a software publishing company. from 1978 to 1981, Dr.
Currie served as vice president of product management for the Microsystems
Division of Pertec Computer Corp., a supplier of magnetic tape storage
devices and microcomputer peripherals. From 1975 to 1978, he was Executive
Vice President and General Manager for MITS, the creator of the first
microcomputer personal computer, which was subsequently acquired by Pertec.
Dr. Currie is a co-founder of PC Magazine, the largest circulation magazine
on the personal computer. He also is the founder of C++ Journal and publisher
of the Postscript Journal. he has published many articles, including
technical articles in U.S. and international trade magazines. he Holds BSEE,
MS Physics, and PH.D. Physics from the University of Miami.
ITEM 6. EXECUTIVE COMPENSATION
- ------- ----------------------
There has been no executive or director who has received
compensation in excess of $100,000 since the incorporation date of the
Registrant.
OFFICER SHARE OPTIONS VALUE
<TABLE>
<CAPTION>
Option/SAR Values
- -------------------------------------------------------------------------------
Name Shares Value Number of Value of
Acquired Realized Securities Unexercised In-
Exercise Underlying the-Money
Unexercised Options/SARs at
Options/SARs at FY-End
FY-End
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
Edward W. -0- -0- 500,000 $ 10,000.00
Savarese
- -------------------------------------------------------------------------------
Edward H. -0- -0- 50,000 $ 1,000.00
Currie
- -------------------------------------------------------------------------------
</TABLE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- ------- -----------------------------------------------
There were no transactions since inception, or proposed transaction,
to which the Registrant was or is to be a party, in which any director,
executive officer, nominee for directorship, security holder or immediate
family member has a direct or indirect interest as defined by Rule 404 of
Regulation S-B.
17
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES.
- ------- --------------------------
(a) COMMON STOCK: At January 31, 2000, the Registrant had 9,571,000
shares of the common stock outstanding. The Registrant's Articles of
Incorporation, filed October 7, 1998 authorized the issuance of up to
100,000,000 of the Registrant's common equity shares with a par value of
$0.001. Holders of shares of the common stock are entitled to one vote for
each share on all matters to be voted on by the shareholders. Holders of
common stock have no cumulative voting rights. Holders of shares of common
stock are entitled to share proratably in dividends, if any, as may be
declared from time to time by the Board of Directors in its discretion, from
funds legally available therefore.
In the event of a liquidation, dissolution or winding up of the
Registrant, the holders of shares of common stock are entitled to share pro
rata all assets remaining after payments in full of all liabilities. Holders
of common stock have no preemptive rights to purchase the Registrant's common
stock. All of the outstanding shares of common stock are fully paid and
non-assessable.
(b) PREFERRED STOCK: The Registrant is also authorized to issue
preferred stock from time to time. The Registrant's Board of Directors may
fix and determine the designations, rights, preferences or other rights,
preferences or other variations of each class or series of the preferred
stock. At this time the Registrant has not issued any preferred stock.
(c) POSSIBLE CLASSIFICATION OF REGISTRANT'S SECURITIES AS A "PENNY
STOCK." By virtue of Rule 3a51-1 of the Securities Act of 1934 (the "Act"),
if the Registrant's common stock has a price of less than $5.00 per share it
will be considered a "penny stock." The perquisites required of
broker-dealers engaging in transactions involving "penny stocks" have
discouraged, or even barred, many brokerage firms from soliciting orders for
certain low priced stocks.
Still further, with respect to the trading of penny stocks,
broker-dealers have an obligation to satisfy certain special sales practice
requirements pursuant to Rule 15g-9 of the Act, including a requirement that
they make an individualized written suitability determination for the
purchase and receive the purchaser's written consent prior to the transaction.
Still even further, such broker-dealers have additional disclosure
requirements as set forth in the Securities Enforcement Act Remedies and
Penny Stock Reform Act of 1990. These disclosure requirements include the
requirement for a broker-dealer, prior to a transaction in a penny stock,
18
<PAGE>
to deliver a standardized risk disclosure document that provides information
about penny stocks and the risks of the penny stock market.
Still even further, a broker-dealer must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the
customer's account.
Accordingly, the above penny stock regulations and the associated
broker-dealer requirements will have an adverse effect on the market
liquidity of the Registrant's common stock and the ability of any present and
prospective shareholder investors to sell their securities in the secondary
market.
However, regardless of the price of the Registrant's stock, in the
event the Registrant has net tangible assets in excess of $2,000,000 and if
the Registrant has been in continuous operation for at least three (3) years,
or $5,000,000, if the Registrant has been in continuous operation for less
than three (3) years, Rule 3a51-1(g) of the Act will preclude the
Registrant's common stock from being classified as a "penny stock."
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
- ------ ---------------------------------------------------------------
AND RELATED STOCKHOLDER MATTERS.
--------------------------------
MARKET INFORMATION.
There is no public trading market for the Registrant's common stock. As
of January 31, 2000 there were 9,571,000 of shares of the Registrant's common
stock issued and outstanding. As of the date of this filing, there were
90,429,000 unissued shares of the Registrant's common stock available for
sale pursuant to Rule 144 under the Securities Act. There are 1,605,000 of
shares of common stock reserved for outstanding options and warrants to
purchase common stock.
HOLDERS.
The Registrant has approximately 65 common stock shareholders.
19
<PAGE>
DIVIDENDS.
The Registrant has never paid a cash dividend. It is the present
policy of the Registrant to retain any extra profits to finance growth and
development of the business. Therefore, the Registrant does not anticipate
paying cash dividends on its common stock in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS.
- ------ ------------------
The Company's officers and directors are aware of no threatened or
pending litigation which would have a material, adverse effect on the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
- ------- ----------------------------------------------
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
- ------- ----------------------------------------
(a) RECENT SALES: The Registrant had the following stock issuances
as described below. All such shares were sold by the officers and directors
of the Registrant and no underwriters were utilized.
1. On October 7, 1998, 5,000,000 shares of common stock were
issued for a total offering of $10,000.
2. On November 13, 1998, 700,000 shares of common stock at $.02
per share were issued in lieu of a cash payment for salary or
services.
3. On November 13, 1998, 1,740,000 shares of common stock at $.02
per share were issued for a total offering of $34,800.
4. From November 25, 1998 through January 14, 1999, 540,000 shares
of common stock at $.20 per share were issued pursuant to a
Regulation D, Rule 504 Offering for a total offering of
$108,000.
5. On January 4, 1999, a total of 25,000 common shares at $.20 per
share were issued as and for consulting services.
6. On January 14, 1999 through February 26, 1999, a total of
250,000 shares of common stock at $.20 per share were issued
pursuant to a Regulation D, Rule 504 Offering for a total
offering of $50,000.
7. On January 15, 1999, a total of 50,000 shares of common stock
at $.50 per share were issued for a total offering of $25,000.
20
<PAGE>
8. From January 20, 1999 through February 26, 2000, a total of
275,000 shares of common stock at $.50 per share were issued
pursuant to a Regulation D, Rule 504 Offering for a total
offering of $137,500.
9. From April 2, 1999 through April 5, 1999, a total of 504,500
shares of common stock at $1.00 per share were issued pursuant to
Regulation D, Rule 504 Offering for a total offering of $504,500.
10. From April 12, 1999 through October 10, 1999, a total of 116,500
shares of common stock at $1.00 per share were issued for a total
offering of $116,500.
11. From November 11, 1999 through November 24, 1999, a total of
70,000 shares of common stock at $1.00 per share were issued for
a total offering of $70,000.
12. On December 24,1999, a total of 300,000 shares of common stock at
$1.50 per share were issued for a total offering of $450,000.
(b) EXEMPTIONS FROM REGISTRATION: With respect to the issuance of
the 540,000 common shares listed at Item 4(a)4, the 250,000 shares listed at
Item 4(a)6, the 275,000 common shares listed at Item 4(a)8 and the 504,500
common share listed at Item 4(a)9, such issuances were made in reliance on
the private placement exemptions provided by Section 4(2) of the Securities
Act of 1933 as amended, (the "Act"), SEC Regulation D, Rule 504 of the Act
and Nevada Revised Statutes Sections 78.211, 78.215, 78.3784, 78.3785 and
78.3791 (collectively the "Nevada Statutes").
With respect to the issuance of the 5,000,000 common shares listed
at Item 4(a)1, the 700,000 common shares listed at Item 4(a)2, the 1,740,000
common shares listed at Item 4(a)3, the 25,000 common shares listed at Item
4(a)5, the 50,000 common shares listed at Item 4(a)7, the 116,500 common
shares listed at Item 4(a)10, the 70,000 common shares listed at Item 4(a)11,
and the 300,000 shares listed at Item 4(a)12, such issuances were made in
reliance upon the private placement exemptions provided by Section 4(2) of
the Act and the Nevada Statutes.
In each instance, each of the share purchasers had access to
sufficient information regarding the Registrant so as to make an informed
investment decision. More specifically, each purchaser signed either a
written Subscription Agreement, a Consulting Agreement, a Technology Purchase
Agreement or a Share Purchase Agreement, with respect to their financial
21
<PAGE>
status and investment sophistication wherein they warranted and represented,
among other things, the following:
1. That they had the ability to bear the economic risks of investing
in the shares of the Registrant.
2. That they had sufficient knowledge in financial, business, or
investment matters to evaluate the merits and risks of the
investment.
3. That they had a certain net worth sufficient to meet the
suitability standards of the Registrant.
4. That the Registrant has made available to them, his counsel and
his advisors, the opportunity to ask questions and that they have
been given access to any information, documents, financial
statements, books and records relative to the Registrant and an
investment in the shares of the Registrant.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Articles of Incorporation and Bylaws limit the
liability of its directors to the fullest extent permitted by Nevada
corporate securities law. Specifically, directors of the Company will not be
personally liable for monetary damages for breach of fiduciary duty as
directors, except liability for (i) any breach of the duty of loyalty to the
Company or its shareholders, (ii) acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) dividends
or other distributions of corporate assets that are in contravention of
certain statutory or contractual restrictions, (iv) violations of certain
securities laws, or (v) any transaction from which the director derives an
improper personal benefit. Liability under federal securities law is not
limited by the Articles.
PART F/S
The following financial statements are submitted pursuant to the
information required by Item 310 of Regulation S-B.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<S> <C>
FS-1 Com-Guard.com, Inc. Balance Sheet as of June 30, 1999 and
September 30, 1999.
22
<PAGE>
FS-2 Com-Guard.com, Inc. Statement of Operations from October 7,
1998 (Inception) to June 30, 1999, from Three Months Ended
September 30, 1999 and from October 7, 1998 (Inception) to
September 30, 1999.
FS-3 Com-Guard.com, Inc. Statement of Changes in Stockholders'
Equity from October 7, 1998 to June 30, 1999 and June 30,
1999 to September 30, 1999.
FS-4 Com-Guard.com, Inc. Statement of Cash Flows from October 7,
1998 (Inception) to June 30, 1999 for Three Months Ended
September 30, 1999 and from October 7, 1998 (Inception) to
September 30, 1999.
</TABLE>
PART III
ITEM 1. INDEX TO EXHIBITS.
The exhibits listed and described below in Item 2 are filed herein as
the part of this Registration Statement.
ITEM 2. DESCRIPTION OF EXHIBITS.
The following documents are filed herein as Exhibit Numbers 2, 3, 5,
6 and 7 as required by Part III of Form 1-A:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
2 CHARTER AND BY-LAWS
2.1 Certificate of Amendment of Articles of Incorporation
of e-World Security, Inc. changing name to
"COM-GUARD.COM, INC.
2.2 Articles of Incorporation of e-World Security, Inc.
2.3 By-Laws of e-World Security, Inc.
23
<PAGE>
3. NONE INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS
7. NONE VOTING TRUST AGREEMENTS
6. MATERIAL CONTRACTS
6.1 Technology Purchase Agreement
6.2 Consulting Agreement
27 FINANCIAL DATA SCHEDULE
</TABLE>
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934,
the Registrant caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized.
COM-GUARD.COM, INC.
Date: February 4, 2000 By: /s/ Edward W. Savarese
-----------------------------
EDWARD W. SAVARESE
President
24
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
COM-GUARD.COM, INC.
We have audited the accompanying balance sheet of COM-GUARD.COM, INC. (a
Nevada corporation) as of June 30, 1999 and the related statements of
operations, stockholders' equity and cash flows from Inception (October
7, 1998) through June 30, 1999. These statements are the responsibility
of the Company's management. Our responsibility is to express and opinion
on these statements based on our audit.
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 audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
COM-GUARD.COM, INC. as of June 30, 1999 and the results of its operations
and cash flows from Inception (October 7, 1998) through June 30, 1999, in
conformity with generally accepted accounting principles.
STRABALA, RAMIREZ & ASSOCIATES, INC.
Irvine, California
January 10, 2000
25
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NO. DESCRIPTION
--- -----------
<S> <C>
FS-1 COM-GUARD.COM, INC. BALANCE SHEET AS OF JUNE 30, 1999 AND
SEPTEMBER 30, 1999.
FS-2 COM-GUARD.COM, INC. STATEMENT OF OPERATIONS FROM OCTOBER 7,
1998 (INCEPTION) TO JUNE 30, 1999, FROM THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND FROM OCTOBER 7, 1998 (INCEPTION) TO
SEPTEMBER 30, 1999.
FS-3 COM-GUARD.COM, INC. STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY FROM OCTOBER 7, 1998 (INCEPTION) TO JUNE 30, 1999 AND
JUNE 30, 1999 TO SEPTEMBER 30, 1999.
FS-4 COM-GUARD.COM, INC. STATEMENT OF CASH FLOWS FROM OCTOBER 7,
1998 (INCEPTION) TO JUNE 30, 1999 FOR THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND FROM OCTOBER 7, 1998 (INCEPTION) TO
SEPTEMBER 30, 1999.
</TABLE>
<PAGE>
EXHIBIT FS-1
COM-GUARD.COM, INC. BALANCE SHEET AS OF
JUNE 30, 1999 AND SEPTEMBER 30, 1999.
<PAGE>
COM-GUARD.COM, INC.
(A Development Stage Entity)
BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, SEPT. 30,
1999 1999
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 221,285 $ 51,172
Vendor advance 50,000 50,000
Stockholder loans and advances 25,000 118,416
Prepaid expenses 2,500 2,500
--------- ---------
Total current assets 298,785 222,088
Fixed assets
Furniture and equipment 20,844 20,844
Accumulated depreciation (1,596) (3,333)
--------- ---------
Furniture and equipment, net 19,248 17,511
--------- ---------
$ 318,033 $ 239,599
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 11,920 $ 3,785
--------- ---------
Commitments and contingencies (Note 3)
Stockholders' equity
Common stock, $.001 par value:
100,000,000 shares authorized;
9,094,500 and 9,151,000 shares
issued and outstanding at June 30
and September 30, 1999 9,095 9,152
Additional paid-in capital 889,705 946,148
Accumulated deficit during development (592,687) (719,486)
--------- ---------
Total stockholders' equity 306,113 235,814
--------- ---------
$ 318,033 $ 239,599
========= =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
EXHIBIT FS-2
COM-GUARD.COM, INC. STATEMENT OF OPERATIONS
FROM OCTOBER 7, 1998 (INCEPTION) TO JUNE 30, 1999,
FROM THREE MONTHS ENDED SEPTEMBER 30, 1999 AND FROM
OCTOBER 7, 1998 (INCEPTION) TO SEPTEMBER 30, 1999.
<PAGE>
COM-GUARD.COM, INC.
(A Development Stage Entity)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
OCTOBER 7, 1998 OCTOBER 7, 1998
(INCEPTION) TO THREE MONTHS ENDED (INCEPTION) TO
JUNE 30, 1999 SEPT. 30, 1999 SEPT. 30, 1999
------------ -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues
Interest $ 3,028 $ 762 $ 3,790
----------- ----------- -----------
Costs and expenses
Purchased research and development 360,000 - 360,000
Consulting services 158,400 90,000 249,300
Travel and subsistence 28,849 17,108 45,957
Rent 15,000 7,500 22,500
Professional services 17,651 - 17,651
Depreciation 1,596 1,737 3,333
Other 14,219 10,316 24,535
----------- ----------- -----------
595,715 127,561 723,276
----------- ----------- -----------
Net loss $ (592,687) $ (126,799) $ (719,486)
=========== =========== ===========
Net loss per share available to common
stockholders
Basic and Diluted $ (0.07) $ (0.01) $ (0.09)
Weighted average number of common
shares outstanding 7,983,917 9,140,152 8,280,976
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
EXHIBIT FS-3
COM-GUARD.COM, INC. STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY FROM OCTOBER 7, 1998 (INCEPTION)
TO JUNE 30, 1999 TO SEPTEMBER 30, 1999.
<PAGE>
COM-GUARD.COM, INC.
(A Development Stage Entity)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Issuance of common stock
Cash 1,024,500 $1,025 $428,975 $ - $430,000
Services 7,510,000 7,510 101,290 - 108,800
Purchase of research and development 560,000 560 359,440 - 360,000
Net loss - - - (592,687) (592,687)
Balance, June 30, 1999 9,094,500 9,095 889,705 (592,687) $306,113
Issuance of common stock (unaudited)
Issuance of stock for cash 5,000 5 4,995 - 5,000
Issuance of stock for 51,500 52 51,448 - 51,500
services
Net loss (unaudited) - - - (126,799) $(126,799)
Balance, Sept. 30, 1999 (unaudited) 9,151,000 9,152 946,148 (719,486) $235,814
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
EXHIBIT FS-4
COM-GUARD.COM, INC. STATEMENT OF CASH FLOWS
FROM OCTOBER 7, 1998 (INCEPTION) TO JUNE 30, 1999
FOR THREE MONTHS ENDED SEPTEMBER 30, 1999 AND FROM
OCTOBER 7, 1998 (INCEPTION) TO SEPTEMBER 30, 1999.
<PAGE>
COM-GUARD.COM, INC.
(A Development Stage Entity)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
OCTOBER 7, 1998 THREE MONTHS OCTOBER 7, 1998
(INCEPTION) TO ENDED (INCEPTION) TO
JUNE 30, 1999 SEPT. 30, 1999 SEPT. 30, 1999
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $(592,687) $(126,799) $(719,486)
Adjustments to reconcile net loss to net
cash from operating activities
Depreciation 1,596 1,737 3,333
Stock issued for services 108,800 51,500 160,300
Stock issued for research and development 360,000 - 360,000
Changes in operating assets and liabilities
Vendor advance (50,000) - (50,000)
Stockholder advances - (43,416) (43,416)
Prepaid expenses (2,500) - (2,500)
Accounts payable and accrued liabilities 11,920 (8,135) 3,785
Net cash from operating activities (162,871) (125,113) (287,984)
Cash flows from investing activities
Stockholder loan (25,000) (50,000) (75,000)
Capital expenditures (20,844) - (20,844)
Net cash from investing activities (45,844) (50,000) (95,844)
Cash flows from financing activities
Proceeds from issuance of stock 430,000 5,000 435,000
Net increase in cash and cash equivalents 221,285 (170,113) 51,172
Cash and cash equivalents
Beginning of period - 221,285 -
End of period $ 221,285 $ 51,172 $ 51,172
Supplemental disclosure of cash flow information:
Interest paid $ - $ - $ -
Taxes paid $ - $ - $ -
"Cash and cash equivalents" include cash in checking and money market accounts.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
COM-GUARD.COM, INC.
(A Development Stage Entity)
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY. The Company was formed and incorporated in the state of Nevada
on October 7, 1998 as e-WORLD SECURITY, INC. On April 16, 1999 the Company
changed its name to COM-GUARD.COM, INC. Planned principal operations of the
Company have not yet commenced; activities to date have been limited to
forming the Company, assembling a management and consultant team, identifying
markets, developing products, and obtaining initial capitalization. The
Company intends to sell products that afford security protection to computer
hardware and software in micro computers.
ACCOUNTING ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.
SHARES ISSUED IN EXCHANGE FOR SERVICES. The fair value of shares issued in
exchange for services rendered to the Company was determined by the Company's
officers and directors.
FURNITURE AND EQUIPMENT. Furniture and equipment is stated at cost.
Additions, renovations, and improvements are capitalized. Maintenance and
repairs which do not extend asset lives are expensed as incurred.
Depreciation is provided on a straight-line basis over estimated useful lives
(3 years).
ORGANIZATION COSTS. Organization costs of approximately $10,000 have been
charged against operating income.
RESEARCH AND DEVELOPMENT. Research and development costs are expensed as
incurred. Statement of Financial Accounting Standards 86, "Accounting for the
Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed,"("FAS
86") does not materially affect the Company.
STOCK-BASED COMPENSATION. In accordance with the provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("FAS 123"), the Company has
<PAGE>
elected to follow Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") and related interpretations in
accounting for its employee stock option plans. Under APB 25, if the exercise
price of the Company's employee stock options equals or exceeds the fair
value of the underlying stock on the date of grant, no compensation is
recognized. Information regarding the Company's pro forma disclosure of
stock-based compensation pursuant to FAS 123 may be found in Note 5.
INCOME TAXES. The Company has made no provision for income taxes because of
financial statement and tax losses since its inception. A valuation allowance
has been used to offset the recognition of any deferred tax assets due to the
uncertainty of future realization. The use of any tax loss carryforward
benefits may also be limited as a result of changes in Company ownership.
NET LOSS PER COMMON SHARE. Basic loss per common share ("Basic EPS") excludes
dilution and is computed by dividing net loss available to common
shareholders (the "numerator") by the weighted average number of common
shares outstanding (the "denominator") during the period. Diluted loss per
common share ("Diluted EPS") is similar to the computation of Basic EPS
except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the dilutive potential
common shares had been issued. In addition, in computing the dilutive effect
of convertible securities, the numerator is adjusted to add back the
after-tax amount of interest recognized in the period associated with any
convertible debt. The computation of Diluted EPS does not assume exercise or
conversion of securities that would have an anti-dilutive effect on net loss
per share. In 1999, all potential common shares are anti-dilutive; therefore,
Basic EPS equals Diluted EPS.
CONCENTRATION OF CREDIT RISK. The Company maintains cash and cash equivalents
with a single financial institution. At June 30, 1999, the total of cash and
cash equivalents exceeded the Federally insured limit by $121,285. The
Company performs periodic evaluations of the relative credit standing of the
financial institution. The Company has not sustained any material credit
losses from these instruments.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The Company considers all liquid
interest-earning investments with a maturity of three months or less at the
date of purchase to be cash equivalents.
<PAGE>
Short-term investments generally mature between three months and six years
from the purchase date. All cash and short-term investments are classified as
available for sale and are recorded at market using the specific
identification method; unrealized gains and losses are reflected in other
comprehensive income. Cost approximates market for all classifications of
cash and short-term investments; realized and unrealized gains and losses
were not material.
2. PURCHASED RESEARCH AND DEVELOPMENT
On January 14, 1999, the Company acquired from Kyungki System Co., Ltd., a
Korean corporation, the right, title, and interest to certain technology
including copyrights, trademarks, patents, object codes, source codes,
enhancements, and updates or other modifications and user manuals. As
consideration for this acquisition of technology, the Company issued 560,000
shares of its common stock. The acquisition of technology is reflected in the
accompanying financial statements as purchased research and development.
3. COMMITMENTS AND CONTINGENCIES
GOING CONCERN CONTINGENCY. The Company has minimal capital resources
presently available to meet obligations that normally can be expected to be
incurred by similar companies, and with which to carry out its planned
activities. These factors raise substantial doubt about the Company's ability
to continue as a going concern. Management is seeking additional equity
financing to fund planned operations. However, there is no assurance that the
Company will be able to obtain such financing. The accompanying financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
PURCHASE COMMITMENT. On February 8, 1999, the Company issued a purchase order
totaling $350,000 for inventory. The Company has advanced $50,000 to the
vendor to finance production of the inventory, which is reflected in the
accompanying financial statements as vendor advance. The balance will be paid
upon receipt of inventory expected to be in 2000.
LEASE COMMITMENT. Under the terms of a short term leasing facility with an
officer and director, the Company owes $15,000 rent for the period July
through December 1999. In November 1999, the Company entered into an
agreement for the lease of operating facilities. The lease agreement provides
for monthly payments of $1,466 through November 2001.
<PAGE>
COM-GUARD.COM, INC.
(A Development Stage Entity)
NOTES TO FINANCIAL STATEMENTS
4. RELATED PARTY TRANSACTIONS
ORGANIZATION COSTS. The Company issued 5,000,000 shares of stock valued at
$10,000 to an officer and director for legal fees paid on behalf of the
Company.
CONSULTING SERVICES. The Company incurred $78,800 in fees from related
parties, including an officer and director, for various consulting and
administrative services. Payment was made in the form of cash ($51,800) and
stock (2,725,000 shares).
INVENTORY. The Company advanced $50,000 to a vendor and minority shareholder
for inventory production as discussed more fully in Note 3.
RENT. The Company incurred rent expense of $15,000 under a short-term
facility lease with an officer and director of the Company; an additional
$15,000 was incurred after June 30, 1999. This leasing agreement was
terminated in November 1999 in connection with the lease of facilities
discussed in Note 3.
STOCKHOLDER LOANS AND ADVANCES. From time to time, the Company loans or
advances monies to officers and directors. At June 30, 1999, the Company had
advanced $25,000 to an officer and director.
5. STOCKHOLDERS' EQUITY
STOCK OPTIONS. During the period ended June 30, 1999, the Company granted
non-qualified stock options to certain advisors, consultants, and directors,
to purchase up to 1,605,000 shares of the Company's common stock at an
exercise price equal to market value at date of grant as determined by the
Board of Directors. These options vested immediately upon grant.
The following is a summary of the stock option activity:
<TABLE>
<CAPTION>
<S> <C> <C>
Granted $0.02-$1.00 1,605,000
Exercised $0.02-$0.50 (750,000)
Outstanding, June 30, 1999 $0.02-$1.00 855,000
</TABLE>
STOCK-BASED COMPENSATION. The Company recognized no stock-based compensation
during the period ended June 30, 1999. There would be no material difference
to compensation cost had the compensation cost been computed under FAS 123.
<PAGE>
6. SUBSEQUENT EVENTS
PATENT. On July 20, 1999, the U.S. Patent and Trademark Office issued a
patent on the technology acquired for common stock as discussed in Note 2.
OPERATING LEASE. See Note 3.
COMMON STOCK. Since June 30, 1999, the Company sold 125,000 shares of stock
at $1.00 per share and 300,000 shares of stock at $1.50 per share. An
additional 51,500 shares of stock were issued for services. As of January 10,
2000, shares outstanding totaled 9,571,000.
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
2.1 Certificate of Amendment of Articles of Incorporation of
e-World Security, Inc. changing name to "COM-GUARD.COM, INC.
2.2 Articles of Incorporation of e-World Security, Inc.
2.3 By-Laws of e-World Security, Inc.
6.1 Technology Purchase Agreement
6.2 Consulting Agreement
27 Financial Data Schedule
</TABLE>
<PAGE>
EXHIBIT 2.1
Certificate of Amendment of Articles of Incorporation
of e-World Security, Inc. changing name to
"COM-GUARD.COM, INC.
<PAGE>
3393CD
- ------
CERTIFICATE OF AMENDMENT
FILED OF
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE ARTICLES OF INCORPORATION
STATE OF NEVADA
OF
APR 16 1999
No. C23592-98 e-WORLD SECURITY, INC.
/s/ Dean Heller
DEAN HELLER, SECRETARY
OF STATE
The undersigned, EDWARD W. SAVARESE does hereby certify as follows:
1. I am the sole member of the board of directors of e-WORLD SECURITY,
INC., a Nevada corporation.
2. The original Articles of Incorporation of e-WORLD SECURITY, INC.
were filed with the Secretary of State of Nevada on October 7, 1998.
3. As of the date of this certificate, no stock of the corporation has
been issued.
4. I hereby adopt the following amendment to the Articles of
Incorporation of the corporation:
ARTICLE FIRST is hereby amended to read as follows:
FIRST: The name of the corporation is:
COM-GUARD.COM, INC.
/s/ Edward W. Savarese
----------------------------------
EDWARD W. SAVARESE
Director
Page 1 of 2
<PAGE>
STATE OF CALIFORNIA )
)ss.
COUNTY OF SAN DIEGO )
On April 15th, 1999, personally appeared before me, a Notary Public,
EDWARD W. SAVARESE, proved to me on the basis of satisfactory evidence to be
the person whose name is subscribed to the foregoing Certificate of Amendment
of Articles of Incorporation and acknowledged that he executed the same.
[SEAL]
/s/ Denise I. Cox
----------------------------------
Notary Public
(Notary Stamp or Seal)
Page 2 of 2
<PAGE>
EXHIBIT 2.2
Articles of Incorporation of e-World Security, Inc.
<PAGE>
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
OCT 0 7 1999
No. C23592-98
---------
/s/Dean Heller
DEAN HELLER SECRETARY OF STATE
ARTICLES OF INCORPORATION
OF
e-WORLD SECURITY. INC.
FIRST. The name of the corporation is: e-WORLD SECURITY, INC.
SECOND. Its registered office in the State of Nevada is located at
2533 North Carson Street, Carson City, Nevada 89706 that this Corporation may
maintain an office, or offices, in such other place within or without the State
of Nevada as may be from time to time designated by the Board of Directors, or
by the By-Laws of said Corporation, and that this Corporation may conduct all
Corporation business of every kind and nature, including the holding of all
meetings of Directors and Stockholders, outside the State of Nevada as well as
within the State of Nevada
THIRD. The objects for which this Corporation is formed are: To engage
in any lawful activity, including, but not limited to the following: `
(A) Shall have such rights, privileges and powers as may be conferred upon
corporations by any existing law.
(B) May at any time exercise such rights, privileges and powers, when not
inconsistent with the purposes and objects for which this corporation is
organized.
1
<PAGE>
(C) Shall have power to have succession by its corporate name for the
period limited in its certificate or articles of incorporation, and when no
period is limited, perpetually, or until dissolved and its affairs wound up
according to law.
(D) Shall have power to sue and be sued in any court of law or equity.
(E) Shall have power to make contracts.
(F) Shall have power to hold, purchase and convey real and personal estate
and to mortgage or lease any such real and personal estate with its franchises.
The power to hold real and personal estate shall include the power to take the
same by devise or bequest in the State of Nevada, or in any other state,
territory or country.
(G) Shall have power to appoint such officers and agents as the affairs of
the corporation shall require, and to allow them suitable compensation.
(H) Shall have power to make By-Laws not inconsistent with the constitution
or laws of the United States, or of the State of Nevada, for the management,
regulation and government of its affairs and property, the transfer of its
stock, the transaction of its business, and the calling and holding of meetings
of its stockholders.
(I) Shall have power to wind up and dissolve itself, or be wound up or
dissolved.
(J) Shall have power to adopt and use a common seal or stamp, and alter the
same at pleasure. The use of a seal or stamp by the corporation on any corporate
documents is not necessary. The corporation may use a seal or stamp, if it
desires, but such use or nonuse shall not in any way affect the legality of the
document.
(K) Shall have power to borrow money and contract debts when necessary for
the transaction of its business, or for the exercise of its corporate rights,
privileges or franchises,
2
<PAGE>
or for any other lawful purpose of its incorporation; to issue bonds, promissory
notes, bills of exchange, debentures, and other obligations and evidences of
indebtedness, payable at a specified time or times, or payable upon the
happening of a specified event or events, whether secured by mortgage, pledge or
otherwise, or unsecured, for money borrowed, or in payment for property
purchased, or acquired, or for any other lawful object.
(L) Shall have power to guarantee, purchase, hold, sell, assign, transfer,
mortgage, pledge or otherwise dispose of the shares of the capital stock of, or
any bonds, securities or evidences of the indebtedness created by, any other
corporation or corporations of the State of Nevada, or any other state or
government, and, while owners of such stock, bonds, securities or evidences of
indebtedness, to exercise all the rights, powers and privileges of ownership,
including the right to vote, if any.
(M) Shall have power to purchase, hold, sell and transfer shares of its own
capital stock, and use therefor its capital, capital surplus, surplus, or other
property or fund.
(N) Shall have power to conduct business, have one or more offices, and
hold, purchase, mortgage and convey real and personal property in the State of
Nevada, and in any of the several states, territories, possessions and
dependencies of the United States, the District of Columbia, and any foreign
countries.
(O) Shall have power to do all and everything necessary and proper for the
accomplishment of the objects enumerated in its certificate or articles of
incorporation, or any amendment thereof, or necessary or incidental to the
protection and benefit of the corporation, and, in general, to carry on any
lawful business necessary or incidental to the attainment of the
3
<PAGE>
objects of the corporation, whether or not such business is similar in nature to
the objects set forth in the certificate or articles of incorporation of the
corporation, or any amendment thereof.
(P) Shall have power to make donations for the public welfare or for
charitable, scientific or educational purposes.
(Q) Shall have power to enter into partnerships, general or limited, or
joint ventures, in connection with any lawful activities, as may be allowed by
law.
FOURTH. That the total number of common stock authorized that may be
issued by the Corporation is ONE HUNDRED MILLION (100,000,000) shares of stock
with a par value of $.001 (ONE TENTH OF ONE PERCENT). Said shares may be issued
by the corporation from time to time for such considerations as may be fixed by
the Board of Directors.
Preferred Stock may also be issued by the Corporation from time to time in
one or more series and in such amounts as may be determined by the Board of
Directors. The designations, voting rights, amounts of preference upon
distribution of assets, rates of dividends, premiums of redemption, conversion
rights and other variations, if any, the qualifications, limitations or
restrictions thereof, shall be such as are fixed by the Board of Directors,
authority so to do being hereby expressly granted, and as are stated and
expressed in a resolution or resolutions adopted by the Board of Directors
providing for the issue of such series of Preferred Stock.
FIFTH. The governing board of this corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the By-Laws of this
Corporation, providing that the number of directors shall not be reduced to
fewer than one (1).
4
<PAGE>
The name and post office address of the first board of Directors shall be
one (1) in number and listed as follows:
NAME POST OFFICE ADDRESS
---- -------------------
Brent Buscay 2533 North Carson Street
Carson City, Nevada 89706
SIXTH. The capital stock, after the amount of the subscription price,
or par value, has been paid in, shall not be subject to assessment to pay the
debts of the corporation.
SEVENTH. The name and post office address of the Incorporator signing
the Articles of Incorporation is as follows:
NAME POST OFFICE ADDRESS
---- -------------------
Brent Buscay 2533 North Carson Street
Carson City, Nevada 89706
EIGHTH. The resident agent for this corporation shall be:
LAUGHLIN ASSOCIATES, INC.
The address of said agent, and, the registered or statutory address of this
corporation in the state of Nevada, shall be:
2533 North Carson Street
Carson City, Nevada 89706
NINTH. The corporation is to have perpetual existence.
TENTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
Subject to the By-Laws, if any, adopted by the Stockholders, to make,
alter or
5
<PAGE>
amend the By-Laws of the Corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in; to authorize and cause to be executed, mortgages and
liens upon the real and personal property of this Corporation.
By resolution passed by a majority of the whole Board, to designate one (1)
or more committees, each committee to consist of one or more of the Directors of
the Corporation, which, to the extent provided in the resolution, or in the
By-Laws of the Corporation, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the Corporation.
Such committee, or committees, shall have such name, or names, as may be stated
in the By-Laws of the Corporation, or as may be determined from time to time by
resolution adopted by the Board of Directors.
When and as authorized by the affirmative vote of the Stockholders holding
stock entitling them to exercise at least a majority of the voting power given
at a Stockholders meeting called for that purpose, or when authorized by the
written consent of the holders of at least a majority of the voting stock issued
and outstanding, the Board of Directors shall have power and authority at any
meeting to sell, lease or exchange all of the property and assets of the
Corporation, including its good will and its corporate franchises, upon such
terms and conditions as its board of Directors deems expedient and for the best
interests of the Corporation.
ELEVENTH. No shareholder shall be entitled as a matter of right to
subscribe for or receive additional shares of any class of stock of the
Corporation, whether now or hereafter authorized, or any bonds, debentures or
securities convertible into stock, but such
6
<PAGE>
additional shares of stock or other securities convertible into stock may be
issued or disposed of by the Board of Directors to such persons and on such
terms as in its discretion it shall deem advisable.
TWELFTH. No director or officer of the Corporation shall be personally
liable to the Corporation or any of its stockholders for damages for breach of
fiduciary duty as a director or officer involving any act or omission of any
such director or officer; provided, however, that the foregoing provision shall
not eliminate or limit the liability of a director or officer (i) for acts or
omissions which involve intentional misconduct, fraud or a knowing violation of
law, or (ii) the payment of dividends in violation of Section 78.300 of the
Nevada Revised Statutes. Any repeal or modification of this Article by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director or
officer of the Corporation for acts or omissions prior to such repeal or
modification.
THIRTEENTH. This Corporation reserves the right to amend, alter,
change or repeal any provision contained in the Articles of Incorporation, in
the manner now or hereafter prescribed by statute, or by the Articles of
Incorporation, and all rights conferred upon Stockholders herein are granted
subject to this reservation.
7
<PAGE>
I, THE UNDERSIGNED, being the Incorporator hereinbefore named for the
purpose of forming a Corporation pursuant to the General Corporation Law of the
State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand this 29th day of February, 1998.
/s/ Brent Buscay
----------------
Brent Buscay
STATE OF NEVADA )
) SS:
CARSON CITY )
On this 19th day of February, 1998 in Carson City, Nevada, before me, the
undersigned, a Notary Public in and for Carson City, State of Nevada, personally
appeared:
Brent Buscay
Known to me to be the person whose name is subscribed to the foregoing document
and acknowledged to me that he executed the same.
/s/Terri L. Conetto
------------------- [NOTARY SEAL]
Notary Public
I, Laughlin Associates, Inc. hereby accept as Resident Agent for the previously
named Corporation.
February 19. 1998 /s/Brent Buscay
---------------
Date Vice President
8
<PAGE>
EXHIBIT 2.3
By-Laws of e-World Security, Inc.
<PAGE>
e-WORLD SECURITY, INC.
BY-LAWS
ARTICLE I MEETINGS OF SHAREHOLDERS
1. Shareholders' Meetings shall be held in the office of the corporation,
at Carson City, NV, or at such other place or places as the Directors shall,
from time to time, determine.
2. The annual meeting of the shareholders of this corporation shall be held
at 11:00 a.m., on the 7th day of October of each year beginning in 1999, at
which time there shall be elected by the shareholders of the corporation a Board
of Directors for the ensuing year, and the shareholders shall transact such
other business as shall properly come before them. If the day fixed for the
annual meeting shall be a legal holiday such meeting shall be held on the next
succeeding business day.
3. A notice signed by any Officer of the corporation or by any person
designated by the Board of Directors, which sets forth the place of the annual
meeting, shall be personally delivered to each of the shareholders of record, or
mailed postage prepaid, at the address as appears on the stock book of the
corporation, or if no such address appears in the stock book of the corporation,
to his last known address, at least ten (10) days prior to the annual meeting.
Whenever any notice whatever is required to be given under any article of
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after the time of the meeting of the
shareholders, shall be deemed equivalent to proper notice.
<PAGE>
4. A majority of the shares issued and outstanding, either in person or
by proxy, shall constitute a quorum for the transaction of business at any
meeting of the shareholders.
5. If a quorum is not present at the annual meeting, the shareholders
present, in person or by proxy, may adjourn to such future time as shall be
agreed upon by them, and notice of such adjournment shall be mailed, postage
prepaid, to each shareholder of record at least ten (10) days before such date
to which the meeting was adjourned; but if a quorum is present, they may adjourn
from day to day as they see fit, and no notice of such adjournment need be
given.
6. Special meetings of the shareholders may be called at anytime by the
President; by all of the Directors provided there are no more than three, or if
more than three, by any three Directors; or by the holder of a majority share of
the capital stock of the corporation. The Secretary shall send a notice of such
called meeting to each shareholder of record at least ten (10) days before such
meeting, and such notice shall state the time and place of the meeting, and the
object thereof. No business shall be transacted at a special meeting except as
stated in the notice to the shareholders, unless by unanimous consent of all
shareholders present, either in person or by proxy.
7. Each shareholder shall be entitled to one vote for each share of stock
in his own name on the books of the corporation, whether represented in person
or by proxy.
8. At all meetings of shareholders, a shareholder may vote by proxy
executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting.
9. The following order of business shall be observed at all meetings
of the
<PAGE>
shareholders so far as is practicable:
a. Call the roll;
b. Reading, correcting, and approving of the
minutes of the previous meeting;
c. Reports of Officers;
d. Reports of Committees;
e. Election of Directors;
f. Unfinished business; and
g. New business.
10. Unless otherwise provided by law, any action required to be taken at a
meeting of the shareholders, or any other action which may be taken at a meeting
of the shareholders, may be taken without a meeting if a consent in writing,
setting forth the action to be taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.
ARTICLE II STOCK
1. Certificates of stock shall be in a form adopted by the Board of
Directors and shall be signed by the President and Secretary of the corporation.
2. All certificates shall be consecutively numbered; the name of the person
owning the shares represented thereby, with the number of such shares and the
date of issue shall be entered on the company's books.
3. All certificates of stock transferred by endorsement thereon shall be
surrendered by cancellation and new certificates issued to the purchaser or
assignee.
4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession,
<PAGE>
assignment or authority to transfer, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, and cancel the old
certificate; every such transfer shall be entered on the transfer book of the
corporation.
5. The corporation shall be entitled to treat the holder of record of any
share as the holder in fact thereof, and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of this state.
ARTICLE III DIRECTORS
1. A Board of Directors, consisting of at least one (1) person shall be
chosen annually by the shareholders at their meeting to manage the affairs of
the corporation. The Directors' term of office shall be one (1) year, and
Directors may be re-elected for successive annual terms.
2. Vacancies on the Board of Directors by reason of death, resignation or
other causes shall be filled by the remaining Director or Directors choosing a
Director or Directors to fill the unexpired term.
3. Regular meetings of the Board of Directors shall be held at 1:00 p.m.,
on the 7th day of October of each year beginning in 1999 at the office of the
company at Carson City, NV, or at such other time or place as the Board of
Directors shall by resolution appoint; special meetings may be called by the
President or any Director giving ten (10) days notice to each Director. Special
meetings may also be called by execution of the appropriate waiver of notice and
called when executed by a majority of the Directors of the company. A majority
of the Directors shall constitute a quorum.
4. The Directors shall have the general management and control of the
business and
<PAGE>
affairs of the corporation and shall exercise all the powers that may be
exercised or performed by the corporation, under the statutes, the Articles of
Incorporation, and the By-Laws. Such management will be by equal vote of each
member of the Board of Directors with each Board member having an equal vote.
5. The act of the majority of the Directors present at a meeting at which
a quorum is present shall be the act of the Directors.
6. A resolution, in writing, signed by all or a majority of the members of
the Board of Directors, shall constitute action by the Board of Directors to
effect therein expressed, with the same force and effect as though such
resolution had been passed at a duly convened meeting; and it shall be the duty
of the Secretary to record every such resolution in the Minute Book of the
corporation under its proper date.
7. Any or all of the Directors may be removed for cause by vote of the
shareholders or by action of the Board. Directors may be removed without cause
only by vote of the shareholders.
8. A Director may resign at any time by giving written notice to the Board,
the President or the Secretary of the corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the Board
or such Officer, and the acceptance of the resignation shall not be necessary to
make it effective.
9. A Director of the corporation who is present at a meeting of the
Directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless his dissent shall be entered in the
minutes of the meeting or unless he shall file his written dissent to such
action with the person acting as the Secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered mail to the
Secretary of the
<PAGE>
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a Director who voted in favor of such action.
ARTICLE IV OFFICERS
1. The Officers of this company shall consist of: a President, one or more
Vice Presidents, Secretary, Treasurer, and such other officers as shall, from
time to time, be elected or appointed by the Board of Directors.
2. The PRESIDENT shall preside at all meetings of the Directors and the
shareholders and shall have general charge and control over the affairs of the
corporation subject to the Board of Directors. He shall sign or countersign all
certificates, contracts and other instruments of the corporation as authorized
by the Board of Directors and shall perform all such other duties as are
incident to his office or are required by him by the Board of Directors.
3. The VICE PRESIDENT shall exercise the functions of the President during
the absence or disability of the President and shall have such powers and such
duties as may be assigned to him, from time to time, by the Board of Directors.
4. The SECRETARY shall issue notices for all meetings as required by the
By-Laws, shall keep a record of the minutes of the proceedings of the meetings
of the shareholders and Directors, shall have charge of the corporate books, and
shall make such reports and perform such other duties as are incident to his
office, or properly required of him by the Board of Directors. He shall be
responsible that the corporation complies with Section 78.105 of the Nevada
Revised Statutes and supplies to the Nevada Resident Agent or Registered Office
in Nevada, any and all amendments to the corporation's Articles of Incorporation
and any and all amendments or changes to the By-Laws of the corporation. In
compliance with Section 78.105, he will also supply to the Nevada Resident Agent
or Registered Office in Nevada, and maintain,
<PAGE>
a current statement setting out the name of the custodian of the stock ledger or
duplicate stock ledger, and the present and complete Post Office address,
including street and number, if any, where such stock ledger or duplicate stock
ledger is kept.
5. The TREASURER shall have the custody of all monies and securities of the
corporation and shall keep regular books of account. He shall disburse the funds
of the corporation in payment of the just demands against the corporation, or as
may be ordered by the Board of Directors, making proper vouchers for such
disbursements and shall render to the Board of Directors, from time to time, as
may be required of him, an account of all his transactions as Treasurer and of
the financial condition of the corporation. He shall perform all duties incident
to his office or which are properly required of him by the Board of Directors.
6. The RESIDENT AGENT shall be in charge of the corporation's registered
office in the State of Nevada, upon whom process against the corporation may be
served and shall perform all duties required of him by statute.
7. The salaries of all Officers shall be fixed by the Board of Directors
and may be changed, from time to time, by a majority vote of the Board.
8. Each of such Officers shall serve for a term of one (1) year or until
their successors are chosen and qualified. Officers may be re-elected or
appointed for successive annual terms.
9. The Board of Directors may appoint such other Officers and Agents, as it
shall deem necessary or expedient, who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined,
from time to time, by the Board of Directors.
10. Any Officer or Agent elected or appointed by the Directors may be
removed by
<PAGE>
the Directors whenever in their judgment the best interests of the corporation
would be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed.
11. A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the Directors for the unexpired
portion of the term.
ARTICLE V INDEMNIFICATION OF OFFICERS AND DIRECTORS
The corporation shall indemnify any and all of its Directors and Officers,
and its former Directors and Officers, or any person who may have served at the
corporation's request as a Director or Officer of another corporation in which
it owns shares of capital stock or of which it is a creditor, against expenses
actually and necessarily incurred by them in connection with the defense of any
action, suit or proceeding in which they, or any of them, are made parties, or a
party, by reason of being or having been Director(s) or Officer(s) of the
corporation, or of such other corporation, except, in relation to matters as to
which any such Director or Officer or former Director or Officer or person shall
be adjudged in such action, suit or proceeding to be liable for negligence or
misconduct in the performance of duty. Such indemnification shall not be deemed
exclusive of any other rights to which those indemnified may be entitled, under
By-Law, agreement, vote of shareholders or otherwise.
ARTICLE VI DIVIDENDS
The Directors may, from time to time, declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE VII WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any shareholder or Director of the corporation under the provisions of
these By-Laws or under the
<PAGE>
provisions of the Articles of Incorporation, a waiver thereof in writing, signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
ARTICLE VIII AMENDMENTS
1. Any of these By-Laws may be amended by a majority vote of the
shareholders at any annual meeting or at any special meeting called for that
purpose.
2. The Board of Directors may amend the By-Laws or adopt additional
By-Laws, but shall not alter or repeal any By-Laws adopted by the shareholders
of the company.
CERTIFIED TO BE THE BY-LAWS OF:
e-WORLD SECURITY, INC.
BY:/s/ Carmine J. Bua
------------------
CARMINE J. BUA,
Secretary
<PAGE>
EXHIBIT 6.1
Technology Purchase Agreement
<PAGE>
3393K
- -----
TECHNOLOGY PURCHASE AGREEMENT
THIS TECHNOLOGY PURCHASE AGREEMENT (the "Agreement") is entered into and,
effective as of January 14, 1999 by and between KYUNGKI SYSTEM CO., LTD., a
Korean corporation ("KSC"). and E-WORLD SECURITY, INC., a Nevada corporation
("E-WORLD" or the "COMPANY")
1. RECITALS
This Agreement is entered into with reference to and in contemplation of
the following facts, circumstances and representations:
1. KSC is the owner of that certain proprietary computer technology
which affords security protection to computer hardware and software
in micro computers and which is collectively referred to herein as
"COMGUARD."
2. E-WORLD is a private corporation which presently plans to submit an
application for listing on the NASD OTC Bulletin Board.
3. E-WORLD desires to acquire COMGUARD pursuant to the terms and
conditions as set forth herein in this Agreement.
2. PURCHASE OF COMGUARD
2.1 NATURE AND EXTENT OF COMGUARD: The nature of and extent of COMGUARD
shall consist of all of the right, title and interest to COMGUARD, including
but not limited to all copyrights, trademarks, patents, object codes, source
codes, enhancements, updates or ether modifications and user manuals, and as
more specifically set forth and described in the attached Exhibit "A".
2.2 CONSIDERATION FOR PURCHASE OF COMGUARD: In consideration of the
purchase of COMGUARD, by E-WORLD, E-WORLD agrees to issue to KSC a total of
ONE HUNDRED SIXTY THOUSAND (160,000) shares of E-WORLD common stock (the
"E-WORLD Shares").
Page 1 of 6
<PAGE>
2.3 NATURE OF E-WORLD SHARES: The E-WORLD Shares shall be issued
pursuant to Regulation D, Rule 504 of the Securities Act of 1933 as amended.
2.4 PRIVATE SALE ACKNOWLEDGMENT: The parties acknowledge and agree that
the issuance of the E-WORLD Shares is being undertaken as a private sale
pursuant to Regulation D, Rule 504 of the Securities Act of 1933, as amended,
and Nevada Revised Statutes Chapters 28 and 90, and is not being transacted
via a broker-dealer and/or in the public market place.
3. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The COMPANY represents and warrants to KSC as follows:
3.1 ORGANIZATION: E-WORLD is a corporation duly incorporated and validly
existing under the laws of Nevada and is in good standing with respect to all
of its required Nevada corporation filings.
3.2 VALIDLY ISSUED AND AUTHORIZED SHARES: That the E-WORLD Shares will
be validly authorized and issued by the COMPANY, they will be fully paid and
non-assessable and that they will be issued in full compliance with all
federal and state securities laws.
3.3 CORPORATE AUTHORITY: The officers or representatives of the COMPANY
executing this Agreement represent that they have been authorized to execute
this Agreement pursuant to a resolution of the Board of Directors of the
E-WORLD.
4. REPRESENTATIONS OF KSC
KSC represents and warrants to E-WORLD as follows:
4.1 COMGUARD OWNERSHIP: That KSC is the owner, beneficially and of
record, of COMGUARD and that said technology is free and clear of all liens,
encumbrances, claims, charges and restrictions.
Page 2 of 6
<PAGE>
4.2 TRANSFERABILITY OF COMGUARD SHARES: That KSC has the full power to
transfer COMGUARD to E-WORLD without obtaining the consent or approval of any
other person or governmental agency.
4.3 PERFORMANCE IN ACCORDANCE WITH THE SPECIFICATIONS: That COMGUARD
will perform in accordance with the specifications set forth in Exhibit "A."
4.4 FIT FOR PARTICULAR PURPOSE: That COMGUARD will be fit for the
particular purposes specified by E-WORLD under normal use and service.
4.5 FREE OF DEFECTS: That COMGUARD is free of defects in design,
materials and workmanship and that a computer system will have the ability to
perform the necessary functions within a reasonable period of time.
4.6 INDEMNIFICATION: KSC shall indemnify and hold harmless E-WORLD from
and against any claims, including reasonable legal fees and expenses, based
upon infringement of any United States copyright, patent or trademark by
COMGUARD.
4.7 ORGANIZATION: KSC is a corporation duly incorporated and validly
existing under the laws of Korea and is in good standing with respect to all
of its regulatory filings.
4.8 NO LIENS: That KSC has not received a notice of any assignment,
lien, encumbrance, claim or charge against COMGUARD.
4.9 CORPORATE AUTHORITY: The officers or representatives of KSC
executing this Agreement represent that they have been authorized to execute
this Agreement pursuant to a resolution of the Boards of Directors of KSC.
5. COOPERATION, ARBITRATION, INTERPRETATION,
MODIFICATION AND ATTORNEY FEES
5.1 COOPERATION OF PARTIES: The parties further agree that they will do
all things necessary to accomplish and facilitate the purpose of this
Agreement and that they will sign and execute any and all documents necessary
to bring about and perfect the purposes of this Agreement.
Page 3 of 6
<PAGE>
5.2 ARBITRATION: The parties hereby submit all controversies, claims and
matters of difference arising out of this Agreement to arbitration in San
Diego, California according to the rules and practices of the American
Arbitration Association from time to time in force. This submission and
agreement to arbitrate shall be specifically enforceable. The Agreement shall
further be governed by the laws of the State of Nevada.
5.3 INTERPRETATION OF AGREEMENT: The parties agree that should any
provision of this Agreement be found to be ambiguous in any way, such
ambiguity shall not be resolved by construing such provisions or any part of
or the entire Agreement in favor of or against any party herein, but rather
by construing the terms of this Agreement fairly and reasonable in accordance
with their generally accepted meaning.
5.4 MODIFICATION OF AGREEMENT: This Agreement may be amended or modified
in any way at any time by an instrument in writing stating the manner in
which it is amended or modified and signed by each of the parties hereto. Any
such writing amending or modifying this Agreement shall be attached to and
kept with this Agreement.
5.5 ATTORNEY FEES: If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of the Agreement, the successful or prevailing party shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it may be
entitled.
5.6 ENTIRE AGREEMENT: This Agreement constitutes the entire Agreement
and understanding of the parties hereto with respect to the matters herein
set forth, and all prior negotiations, writings and understandings relating
to the subject matter of this Agreement are merged herein and are superseded
and canceled by this Agreement.
5.7 COUNTERPARTS: This Agreement may be signed in one or more
counterparts.
Page 4 of 6
<PAGE>
5.8 FACSIMILE TRANSMISSION SIGNATURES: A signature received pursuant to
a facsimile transmission shall be sufficient to bind a party to this
Agreement.
KYUNGKI SYSTEM CO., LTD.
DATED: , 1999 BY: /s/ Seung Chan Kim
---------- ----------------------------------
SEUNG CHAN KIM
President
E-WORLD SECURITY, INC.
DATED: , 1999 BY: /s/ Edward W. Savarese
---------- ----------------------------------
EDWARD W. SAVARESE
President
Page 5 of 6
<PAGE>
EXHIBIT "A"
Page 6 of 6
<PAGE>
THE UNITED STATES OF AMERICA
TO ALL TO WHOM THESE PRESENTS SHALL COME:
UNITED STATES DEPARTMENT OF COMMERCE
UNITED STATES PATENT AND TRADEMARK OFFICE
July 15, 1998
THIS IS TO CERTIFY THAT ANNEXED HERETO IS A TRUE COPY FROM THE RECORDS OF THE
UNITED STATES PATENT AND TRADEMARK OFFICE OF THOSE PAPERS OF THE BELOW
IDENTIFIED PATENT APPLICATION THAT MET THE REQUIREMENTS TO BE GRANTED A
FILING DATE UNDER 35 USC 111.
APPLICATION NUMBER: 09/030,993
FILING DATE: FEBRUARY 26, 1998
[SEAL]
By Authority of the
COMMISSIONER OF PATENTS AND TRADEMARKS
/s/ Wanda Montgomery
WANDA MONTGOMERY
Certifying Officer
<PAGE>
EXHIBIT 6.2
Consulting Agreement
<PAGE>
3393K
- -----
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is entered into and effective
as of January 1, 1999 by and between WOO YOUNG KIM (the "CONSULTANT"), and
E-WORLD SECURITY, INC., a Nevada corporation ("E-WORLD").
1. RECITALS
This Agreement is entered into with reference to and in contemplation of
the following facts, circumstances and representations:
1. E-WORLD desires to engage the services of the CONSULTANT to assist
it with respect to the implementation of its Business Plan.
2. The CONSULTANT desires to provide such consulting and management
services to E-WORLD as an independent contractor and pursuant to
the terms and conditions set forth herein.
2. NATURE AND EXTENT OF CONSULTING SERVICES
2.1 TERM OF AGREEMENT: This Agreement shall be for a term of three (3)
years and shall terminate on December 31, 2001.
2.2 DUTIES OF CONSULTANT: CONSULTANT shall be required to render
consulting and management services in connection with the E-WORLD Business
Plan. Such services shall include but not necessarily be limited to
consulting with the Board of Directors, officers And advisors of E-WORLD
concerning the Business Plan in general, to assist E-WORLD in locating and
evaluating business opportunities and proprietary technologies, and to
provide cultural assistance and translation services with respect to Korean
business affairs.
2.3 DEVOTION TO DUTY: CONSULTANT agrees to devote such time as is
reasonable on an "as needed" basis with respect to the subject consulting and
management services. CONSULTANT is free to represent or perform services for
other clients, provided it does not interfere with his duties under this
Agreement.
Page 1 of 4
<PAGE>
2.4 COMPENSATION: In consideration of the services rendered pursuant to
this Agreement, E-WORLD agrees to issue to CONSULTANT a total of FOUR HUNDRED
THOUSAND (400,000) shares of E-WORLD common stock (the "E-WORLD Shares").
2.5 NATURE OF E-WORLD SHARES: The E-WORLD Shares shall be issued
pursuant to Regulation D, Rule 504 of the Securities Act of 1933 as amended.
2.6 PRIVATE SALE ACKNOWLEDGMENT: The parties acknowledge and agree that
the issuance of the E-WORLD Shares is being undertaken as a private sale
pursuant to Regulation D, Rule 504 of the Securities Act of 1933, as amended,
and Nevada Revised Statutes Chapters 78 and 90, and is not being transacted
via a broker-dealer and/or in the public market place.
2.7 CAPACITY AND STATUS OF CONSULTANT: The capacity and status of
CONSULTANT with respect to E-WORLD is that of an independent contractor and
CONSULTANT is not to be considered as either an agent. officer or employee of
E-WORLD for any purpose whatsoever.
2.8 NONDISCLOSURE OF INFORMATION: CONSULTANT agrees that it will not at
any time, in any fashion, form or manner, either directly or indirectly,
divulge, disclose or communicate to any person, firm or corporation, in any
manner whatsoever, any information of any kind, nature, or description
concerning any matters affecting or relating to the business of E-WORLD.
2.9 ASSIGNMENT OF AGREEMENT: Due to the personal nature of the services
to be rendered by the CONSULTANT, this Agreement may not be assigned by the
CONSULTANT without the prior written consent of E-WORLD but said Agreement
will inure to the benefit of and be binding on the E-WORLD successors and
assigns.
3. COOPERATION, ARBITRATION, INTERPRETATION,
MODIFICATION AND ATTORNEY FEES
3.1 COOPERATION OF PARTIES: The parties further agree that they will do
all things necessary to accomplish and facilitate the purpose of this
Agreement and that they will sign and execute any and all documents necessary
to bring about and perfect the purposes of this Agreement.
Page 2 of 4
<PAGE>
3.2 ARBITRATION: The parties hereby submit all controversies, claims and
matters of difference arising out of this Agreement to arbitration in San
Diego, California according to the rules and practices of the American
Arbitration Association from time to time in force. This submission and
agreement to arbitrate shall de specifically enforceable. The Agreement shall
further be governed by the laws of the State of Nevada.
3.3 INTERPRETATION OF AGREEMENT: The parties agree that should any
provision of this Agreement be found to be ambiguous in any way, such
ambiguity shall not be resolved by construing such provisions or any part of
or the entire Agreement in favor of or against any party herein, but rather
by construing the terms of this Agreement fairly and reasonable in accordance
with their generally accepted meaning.
3.4 MODIFICATION OF AGREEMENT: This Agreement may be amended or modified
in any way at anytime by an instrument in writing stating the manner in which
it is amended or modified and signed by each of the parties hereto. Any such
writing amending or modifying this Agreement shall be attached to and kept
with this Agreement.
3.3 ATTORNEY FEES: If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of the Agreement, the successful or prevailing party shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it may be
entitled.
3.6 ENTIRE AGREEMENT: This Agreement constitutes the entire Agreement
and understanding of the parties hereto with respect to the matters herein
set forth, and all prior negotiations, writings and understandings relating
to the subject matter of this Agreement are merged herein and are superseded
and canceled by this Agreement.
3.7 COUNTERPARTS: This Agreement may be signed in one or more
counterparts.
Page 3 of 4
<PAGE>
3.8 FACSIMILE TRANSMISSION SIGNATURE: A signature received pursuant to a
facsimile transmission shall be sufficient to bind a party to this Agreement.
DATED: , 1999 BY: /s/ Woo Young Kim
---------- ----------------------------------
WOO YOUNG KIM
E-WORLD SECURITY, INC.
DATED: , 1999 BY: /s/ Edward W. Savarese
---------- ----------------------------------
EDWARD W. SAVARESE
President
Page 4 of 4
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<PAGE>
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<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 221,285
<SECURITIES> 0
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0
0
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