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GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS UNDER THE 1934 ACT
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
Westergaard.com, Inc.
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(Name of Small Business Issuer in its charter)
Delaware 52-2002729
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
560 West 43rd Street New York, New York 10036
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (212) 947-1999
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Securities to be registered under Section 12(b) of the Act:
NONE
Securities to be registered under Section 12(g) of the Act:
Common and Preferred Stock $0.001 par value
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(Title of class)
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TABLE OF CONTENTS
Part I
Item One. Description of the Business
A. Business Development
B. Business of the Issuer
Item Two. Management's Discussion and Analysis or Plan of Operations.
Item Three. Description of Properties
Item Four. Security Ownership of Certain Beneficial Owners and Management
Item Five. Directors, Executive Officers, and Control Persons
Item Six. Executive Compensation
A. Directors' Compensation
B. Compensation of Executive Officers
Item Seven. Certain Relationships and Related Transactions
Item Eight. Description of Securities
A. Common Stock
B. Preferred Stock
Part II
Item One. Market for Common Equity & Related Stockholder Matters
A. Principal Market or Markets
B. Approximate Number of Holders of Common Stock
C. Dividends
Item Two. Legal Proceedings
Item Three. Changes in and Disagreements with Accountants
Item Four. Recent Sales of Unregistered Securities
Item Five. Indemnification of Directors and Officers.
Part F/S
Financial Statements
Part III
Index to Exhibits
Signatures
Exhibits
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PART I
ITEM ONE. DESCRIPTION OF THE BUSINESS
A. BUSINESS DEVELOPMENT
Westergaard.com, Inc. ("Westergaard" or "the Company") is a Delaware
Corporation. Our principal business address is 560 West 43rd Street, New York,
New York 10036. Our telephone number is (212) 947-1999.
We were incorporated under the laws of the State of Delaware on August 15, 1996,
as "Westergaard Online Systems, Inc." On February 18, 1999, we formally changed
our name to Westergaard.com.
We have never been a party to any bankruptcy, receivership, or similar
proceeding.
B. BUSINESS OF THE ISSUER
General
We operate primarily through a wholly owned subsidiary, Westergaard Broadcasting
Network.com, Inc. ("WBN"), an early post-development stage investment research,
publishing and broadcasting venture. We engage in providing a paid
Internet-based research listing service to small cap (up to $1.5 billion
marketcap) public companies defined as "Member Affiliates." The service is
designed to assist in creating market liquidity and shareholder values for our
Member Affiliates. We believe that liquidity is equally a function of access to
accurate and timely fundamental information and analysis as it is a function of
dealer/auction market making activities.
We employ Senior Contributing Analysts with an average of more than 20 years
professional experience with institutional brokerage firms, investment bankers
and investment institutions. These analysts provide accurate, credible,
objective, and timely research and analysis characterized by sound investment
judgment that can only derive from extensive experience. Their research is
delivered to online institutional and private investors via the Internet in a
unique and original format providing a global reach and quality of investment
analysis not previously available on equal terms to private and institutional
investors.
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The "unique and original format" is the WBNcyberStation(TM) ("cyberstation"), a
service of our subsidiary Westergaard Broadcasting Network.com, Inc., which
operates two Internet broadcast channels accessible via the Universal Resource
Locator (URL) at www.westergaard.com. They are Westergaard Broadcasting
Network.com and Westergaard Portal-to-Wall Street.
The WBNcyberStation(TM)
The WBNcyberStation(TM) is an Internet publishing concept developed by John
Westergaard and associates over five years beginning in April 1995. It provides
original investment analysis and aggregates financial information for our
"Member Affiliates." The purpose of the service is:
(1) to enhance shareholder value and improve market liquidity of the common
shares of Member Affiliates by accurately defining them to the Internet
investment community and helping protect them from the effects of
misleading, fraudulent, and otherwise hostile information posted
anonymously on Internet message boards for purposes of stock manipulation
or other malicious intent;
(2) to reach out to shareholders, other investors and other stakeholders such
as customers, vendors, employees, educators and students by employing the
facilities of the Internet in conjunction with traditional media to
provide awareness of the services of WBN and Member Affiliates.
WBNcyberStations(TM) are constructed and maintained by Senior Contributing
Analysts and Editors. Each station is composed of 15 substations, which are
called "cyberstudios," of which six provide analytical information and analysis,
five "community" oriented services, and four resource links to other sites.
Visitors initially enter a "Briefing Room" where a short overview of the Member
Affiliate is presented. They then have a choice of cyberstudios to visit as
follows:
Analysis
Briefing Room - the introduction to a WBN Member Affiliate in
which its business strategy is outlined along with a one to
three year scenario of the Member Affiliate's future
prospects.
Institutional Analysis - WBN's detailed analysis, carefully
drafted after extensive due diligence by a WBN Contributing
Analyst.
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News Analysis - recent news and events impacting a Member
Affiliate's business and its prospects are presented and
commented upon by the WBN analyst.
ProVestor(TM) Plus - a co-branded product of MarketGuide, Inc.
ProVestor(TM) consists of ten to fifteen pages of carefully
crafted statistics and comparative financial data on the
Member Affiliate.
Wall St. Research - other investment research is referenced by
source and analyst coverage. Market makers, exchange
specialist firms and other pertinent information is also
carried in this section.
Archive - this space is designated to host referenced WBN
articles and other information posted or available through
hypertext links.
Community
Company Web Site - a direct hyperlink to the WBN Member
Affiliate's home page.
Meet the Analyst - biographical information on the WBN analyst
and editor responsible for covering the Member Affiliate.
Ask the Analyst - this feature is the most popular on the WBN
web site. It is in effect an e-mail bulletin board by which
readers direct questions to, and receive answers from, WBN
analysts and editors.
WBNcyberPatrol(TM) - this service links to message boards
engaged in posting commentary and information about Member
Affiliates. Hostile and misinformed postings are examined and
refuted or explained depending upon circumstances. WBN posts a
standing offer of a $5,000 reward for the identification of
any person(s) purposefully posting misleading or fraudulent
information relating to a WBN Member Affiliate.
Auditorium - this space presents slide shows and prospectively
advanced multimedia content.
Resource Links
Corporate Info - contains basic corporate information
including address, universal
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resources locators, corporate officers, directors, contact
information and investor relations representation if
applicable.
Quote & Chart - WBN provides a co-branded direct link to Big
Charts for market data including charts, stock and volume
quotations, price volume relationships and price volume
history.
SEC Edgar Online - a direct link is presented to SEC filings,
government filings and all stock exchange filings.
EPS Estimates - WBN provides a link to Quicken.com for the
latest information on Zacks earnings estimates.
Member Affiliates
Before becoming a Member Affiliate, we conduct a rigorous screening process
utilizing both professional and ethical standards. In evaluating a potential
Member Affiliate, we will conduct a through due diligence review of a company.
In performing our screening process, we will visit the proposed member affiliate
and investigate its management, its directors, and any investment bank(er) that
it is working with. In addition, we will perform a comprehensive analysis of the
company's business plan, including a determination as to what are the ideas
behind, and the feasibility of, the business plan; does the company have
sufficient management and resources to develop its business plan; and whether
the technology exists to accomplish the company's business objectives. In the
event that we are unsure whether a potential member affiliate's proposed
business plan is achievable, we will meet with the company in an effort to
redefine goals which we determine to be realistic for that company with the
desired result that the company will become a Member Affiliate. However, if we
are unsure regarding a company's proposed business, and the company cannot
justify its goals, we will not accept it to become a Member Affiliate. Member
Affiliates pay an annual listing fee for construction and maintenance of the
cyberStation of $48,000 a year, which is billed quarterly.
The Audience
We market our services to an audience of small cap oriented institutional
investors and educated, affluent private investors. These audiences are defined
by certain attributes including a long term idea-driven investment perspective,
a respect for knowledge and learning, a global perspective on social,
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political, and economic affairs as they relate to the investment decision
process, and shared values as to a commitment to honesty and integrity in the
sourcing and application of investment information. We believe this growing,
influential Internet audience will lead to acceptance of the WBNcyberStation(TM)
for web-delivered analytical investment content.
There is no user charge to investors for access 24 hours a day, seven days a
week, to WBNcyberStations(TM), Westergaard Daily Interpreter, Westergaard's
Portal-to-Wall Street, or our other services. Prior to the emergence of
Internet-based research it would not have been possible to economically produce
and deliver such a service free to all end users, if at all.
WBNcyberStation(TM) Research Components, Additional Sources of Information,
Additional Revenue Streams
In addition to a proprietary research component, each WBNcyberStation(TM)
aggregates a range of ancillary content and provides direct links to other Web
sources of relevant information. Such other sources include Market Guide
ProVestor(TM), a comprehensive analytical service, on-line sources and articles,
SEC or other government filings, market data (including price and volume data
and charts) and links to Member Affiliates' home pages. Users may directly
question our analysts by email via "Ask the Analyst." Future plans call for
introduction of multimedia presentations and facilities for user interactivity.
Our main source of revenues is the listing fee charged to Member Affiliates for
construction and maintenance of the WBNcyberStations(TM). Conferences which we,
and companies run by our founder and John Westergaard, are also a source of
revenues and profits, albeit in a declining phase as Wall Street conferencing
increasingly migrates to the Internet.
We anticipate establishing other revenue streams from multiple sources,
including but not limited to user payments for value-added services, web
advertising, co-branding/subcontracting and proposed formation of an all day
Internet-based radio station, known commonly as "webcasting." In the foreseeable
future, however, the core revenue stream will remain primarily dependent on
WBNcyberStation(TM) listing fees.
WBNcyberPatrol(TM)
We have formed WBNcyberPatrol(TM), which constitutes an integral component of
the service. The Internet contains several heavily trafficked message boards at
sites such as Yahoo!, Motley Fool, Raging Bull and Silicon Investor.
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These message boards sometimes contain thousands of postings, most of which are
anonymous. Such postings occasionally influence markets, notably in the case of
thinly traded stocks, and may be employed for purposes of stock manipulation by
the posting of misleading information and rumors. WBNcyberPatrol(TM) monitors
Member Affiliate's message boards at these locations. Misleading, erroneous,
malicious or fraudulent material is brought to the attention of the editor and
analyst assigned to the targeted Member Affiliate so that clarifications can be
posted or, if called for, remedial action taken.
We have a standing offer of a $5,000 reward for information leading to the
identification of person(s) engaged in anonymously posting fraudulent or
purposely misleading information about any Member Affiliate on Internet message
boards. We have successfully identified one party who was posting fraudulent
information about a Member Affiliate on a message board and identified this
party to the Member Affiliate. Upon finding this party's identity, the Member
Affiliate issued a cease and desist letter to the party which was effective in
restraining the party from future hostile activity. We believe that notice of
the reward may act as a deterrent to hostile postings on message boards
monitored by WBNcyberPatrol(TM).
Our Conference Series
The Westergaard Conference Series is in its 23rd year. We produce approximately
three to four conferences a year designed to introduce micromidcap public
companies (defined as up to $2 billion in market capitalization) to investment
professionals. In the past attendance at our conferences have ranged from 125 to
over 400 participating companies. Participating co-host companies are charged a
fee to present to a specified group of investment professionals in a one-day
road show format. We try to entice our Member Affiliates to participate in the
conferences by offering them a discount on the conference fees. We handle all
logistical elements of each conference including promotion and registration of
conference attendees.
Westergaard's Portal-to-Wall Street
Our Portal-to-Wall Street is an Internet portal, which can be accessed at
www.portal-to-wallstreet.com, or through a link at www.wbn.com, connects
investors to several hundred investment-related Internet sites of which many,
but not all, are reviewed by an editor. It provides a comprehensive, efficient,
one-stop gateway to financial web sites and services on the Internet. Selected
sites are reviewed and categorized examples are "Best Economic Sites," "Best
Research Sites," and "Best Internet Brokers."
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This service is designed to position us as an upscale provider of services to
the thoughtful long-term investor consistent with the audience we seek to
develop.
WBNfn
Our subsidiary, WBN, has been working with RadioWallStreet.com, a service of
Vcall (vcall.com) in broadcasting "Johnny Dotcom's Journal," a weekly one-half
hour CEO interview conducted by John Westergaard. Due to the positive response
by listeners to "Johnny's Dotcom's Journal," we anticipate in the fall of 2000
launching WBNfn, which we plan to be a daytime Internet radio station.
Internet radio transmissions are possible as a result of audio streaming,
meaning that a complete audio file does not have to be downloaded before music
or talk on the radio begins to broadcast. The listener does, however, need to
have a computer equip with a sound card, speakers, and an audio plug-in for the
web-browser.
WBNfn will broadcast between 9:00 a.m. and 5:00 p.m., and will carry news and
information on micromidcap stocks, including interviews with industry insiders
engaged in the micromidcap market segment, such as analysts, CEOs, brokers, and
portfolio managers. We anticipate that we will be able to offer features not
presently available to conventional television or radio stations. Specifically,
our listeners will be able to play, rewind, and fast-forward the program at
their will, allowing them to move to specific segments of interest. Listeners
will be able to access old broadcasts in our archives. Also, we also plan to
issue daily emails alerting subscribers to the day's programming for recall at
their homes that evening and we expect that our programs will be accessible
globally via the Internet.
Organization
We presently comprise one corporation, Westergaard.com, Inc. (OTCBB:WSYS) with
one wholly owned subsidiary: Westergaard Broadcasting Network.com. Inc (WBN).
Raw Materials
The use of raw materials is not now a material factor in our operations.
Competition
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We are not aware of any organization that is presently or is contemplating the
business model outlined in this document, which is the aggregation of investment
analysis and information on small and mid-cap companies, including independent,
proprietary investment analysis performed by experienced professionals,
delivered over the Internet without charge to private and institutional
investors. There is, however, no technical, financial or other barrier to entry
for some individual, group of individuals, or corporate entity to provide a
comparable service to ours. Several conventional and online brokerage and
investment banking firms and other providers of quality investment and financial
information are making research available over Internet. In addition, there are
financial news and information sources that compete for readers' and
advertisers' attentions and spending.
Many of our existing competitors, as well as potential direct competitors, have
longer operating histories, greater name recognition, larger consumer and reader
bases and greater financial, technical, research, and marketing resources than
ours. This may allow them to devote greater resources than we can to develop and
promote their services. These competitors may also engage in more research and
development, undertake more far reaching marketing campaigns, and make more
attractive offers to existing and potential clients and employees, outside
contributors, strategic partners, and advertisers. These competitors may develop
content that is equal or superior to ours or that gains greater market
acceptance than our content. It is also possible that new competitors may emerge
and rapidly acquire a significant market share. We accordingly may not be able
to compete successfully for clients, advertisers, readers, and analysts, which
could materially adversely affect our business, results of operations, and
financial condition.
Dependence on a Few Major Customers
We are primarily dependent on Member Affiliates (WBNcyberStations(TM)) for
revenues. There are at the present time (16) WBNcyberStations(TM). Although we
believe that the potential for growth in that number to be large, in which event
dependence on any single client would be proportionately lessened. However, if
we are unable to retain more Member Affiliates, we will remain dependent on our
current portfolio of Member Affiliates and be financially vulnerable if we were
to lose any of these affiliates as clients.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements, or Labor Contracts, Including Duration. We filed for trademarks for
the names of "WBNcyberStation" and "WBNcyberPatrol" on December 22,
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1998. The application is still open pending potential opposition from third
parties. If there is no opposition filed in the Office of Patent and Trademark,
we will be granted both marks. There has been no opposition filed to date.
We also filed for trademarks for the names "Johnny Dotcom" and "Johnny Dotcom's
Journal" on January 7, 2000. These applications are still open pending potential
opposition from third parties. If no opposition is filed in the Office of Patent
and Trademark, we will be granted both marks. There has been no opposition filed
to date.
Need for Government Approval
The Company does not require approval of any government agency to produce or
market its services.
Effect of Existing or Probable Government Regulations on the Business
Certain existing laws or regulations specifically regulate communications or
commerce on the Web. Moreover, laws and regulations that address issues such as
user privacy, pricing, online content regulations, taxation and the
characteristics and quality of online products and services are under
consideration by federal, state, local and foreign governments and agencies.
Several telecommunications companies have petitioned the Federal Communications
Commission to regulate Internet service providers and online services providers
in a manner similar to the regulation of long distance telephone carriers and to
impose access fees on such companies. Such regulation, if imposed, could
increase the cost of transmitting data over the web. Moreover, it could take
years to determine the extent to which existing laws relating to issues such as
intellectual property ownership and infringement, libel, obscenity, and personal
privacy are applicable to the web. The Federal Trade Commission and government
agencies in certain states have been investigating certain Internet companies
regarding their use of personal information. Any new laws regulating and/or
relating to the web, or certain application or interpretation of existing laws,
could decrease the growth in the use of the web, decrease the demand for our web
site or otherwise materially adversely affect our business.
Research and Development
Our research and development requirements primarily consist of keeping current
on developments relating to technology to support the objectives of our business
plan and other aspects of operating an Internet-based investment research,
publishing and broadcasting venture. We hired, as of January 20,
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2000, a non-executive Vice President of Business Development whose primary
responsibility is developing strategic partnerships, promoting community
business and relationships, and engaging in other common marketing tactics
designed to expand our Internet relationships. He is responsible for the "look
and feel" of the site and of developing and implementing an Internet branding
strategy.
Management and other employees all engage in "surfing" the net in the normal
pursuit of their duties. They report observations of potential strategic
interest to the CEO and the Editorial Director including, but not limited to,
examples of new applications of technology, design and other features at other
Internet web sites. We intend to embark on a redesign of our web site in the
spring of 2000 at an estimated cost of between $50,000 and $100,000.
Environmental Compliance
We do not face any environmental compliance issues or costs.
Employees
We employ eight (8) full time employees. We expect to hire additional full time
employees in the next fiscal year. In addition, we also retain eleven (11)
Senior Contributing Analysts who are compensated on a retainer basis related to
their responsibilities for the construction and maintenance of individual
WBNcyberStations(TM).
Risk Factors
Investors should be aware that there are various risks associated with us and
our business, including the ones discussed below. The following risk factors
should be carefully considered, together with other information contained in
this Form 10-SB, in evaluating us.
Our Limited Operating History Makes It Difficult To Determine Our Future
Success. We were incorporated on August 15, 1996, and launched the first
WBNcyberStation(TM) in December, 1997. Accordingly, we have a limited operating
history upon which to evaluate our business and prospects. An investor in us
should consider the risks, expenses, and difficulties associated with
developmental stage companies and information companies. These risks include,
but are not limited to, the absences of a significant operating history, lack of
market recognition, and limited banking and financial relationships.
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We May Not Be Able to Obtain the Financing and Capital Required to Maintain and
Grow Our Business. To date, we have incurred net losses, including net losses of
$581,576 and $1,165,939 for the years 1998 and 1999, respectively. As of October
31, 1999, we had an accumulated deficit of $2,423,993. We expect to incur
substantial up-front capital expenditures and operating costs in connection with
the operation and expansion of our web sites, which will result in significant
losses for the foreseeable future. There can be no assurance that we will
generate significant revenues or achieve profitable operations. Our independent
certified public accountants' report on the financial statements includes an
explanatory paragraph stating that our ability to continue our business is
dependant upon our ability to obtain additional capital, among other things,
which raises doubts about our ability to continue as a going concern.
We May Not be Able to Accomplish Our Business Plan, If We Cannot Attract and
Retain Qualified Analysts. Our future success depends substantially upon
continued efforts to recruit qualified securities analysts to evaluate and
produce institutional level investment analysis. There is fierce competition
among brokerage and investment banking firms to recruit analysts. We will focus,
as we have, primarily on recruitment of senior analysts with 20 or more years
experience with first line brokerage and investment banking firms and investment
institutions who are at a semi-retired stage in their careers or otherwise have
cause to work independently. Were the services of a significant number of our
analysts lost or were we unable to attract additional qualified analysts, our
business, results of operations, and financial condition could be materially or
adversely affected.
We Are Dependent On Key Existing And Future Personnel For Our Success. Our
success will depend to a large degree upon the efforts and abilities of our
officers and key management employees. The loss of the services of one or more
of our key employees could have a material adverse effect on our business
prospects and potential earning capacity. As our business continues to grow, we
will need to recruit and retain additional management and key employees in
virtually all phases of our operations. There can be no assurances that we will
be able to recruit or retain such new employees on terms suitable to us.
Failure to Maintain and Recruit Member Affiliate Clients May Affect Our
Profitability. Our future success is substantially dependent on maintaining and
increasing the number of micromidcap companies that subscribe for the
construction and administration of WBNcyberStations(TM). The number of
micromidcap public companies willing to pay for our services may not increase.
If the market for our services develops more slowly than anticipated, our
business, results of operations, and financial condition may be materially
adversely affected.
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Our Stock Has A Limited Trading Market, Which May Affect Our Stock's Liquidity.
Approximately 1,600,000 shares of our Common Stock are estimated to be currently
free trading. There are approximately 10,000,000 shares of our Common stock,
which are "restricted securities," subject to volume limitations and other
conditions of Rule 144 under the Securities Act. Our Common Stock currently
trades on the over-the-counter Bulletin Board ("OTCBB"). We cannot assure that
an active trading market for our stock will develop or continue. In the absence
of any readily available secondary market for our securities, holders thereof
may experience great difficulty in selling their securities at or near the price
originally paid by them.
Furthermore, Penny stocks typically are equity securities with a price of less
than $5.00 a share, other than securities registered on certain national
securities exchanges or quoted on the Nasdaq Stock Market, provided that current
price and volume information with respect to transactions in such securities are
provided by the exchange or system. Currently our Common Stock does fall under
the definition of a penny stock and is subject to Section 15(g) of the
Securities Exchange Act of 1934 and the relevant rules thereunder. The "penny
stock" rules impose additional sales practice requirements on the broker-dealers
who sell our securities to persons other than established customers and
accredited investors (generally those with assets in excess of $1,000,000 or
annual incomes exceeding $200,000 or $300,000 together with their spouse). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the risks
in the penny stock market. The broker-dealer must also provide the customer with
current bid and offer quotations for the penny stock, the compensation received
by 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. In addition, the penny stock rules generally require that prior to a
transaction in a penny stock, the broker-dealer must make a special written
determination the penny stock is a suitable investment for the purchaser and the
broker-dealer must obtain the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules and investors may find it more difficult to sell their
securities.
We Do Not Pay A Dividend On Our Common or Preferred Stock. We have not paid any
cash dividends to date, and there are no plans for paying cash dividends on our
Common Stock in the foreseeable future. Initial earnings that we realize, if
any, will be retained to finance our growth. Any future dividends, of which
there can be no assurance, will be directly dependent upon our earnings, our
financial requirements, and other factors.
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ITEM TWO. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
The following discussion of the financial condition and results of our
operations should be read in conjunction with our financial statements and
related notes appearing in Part III of this Form 10-SB. The results shown herein
are not necessarily indicative of the results to be expected in any future
periods. This discussion contains forward-looking statements based on current
expectations, which involve risks and uncertainties. Actual results and the
timing of events could differ materially from the forward-looking statements as
a result of a number of factors. For a discussion of the risk factors that could
cause actual results to differ materially from the forward-looking statements,
you should read the "Risk Factors" section of this Form 10-SB.
Overview
From our inception in 1996 through the present, we have considered ourselves a
development stage company. Our primary activities to date have consisted of the
following:
Developing a business model;
Marketing our services to smallcap companies;
Recruiting employees and analysts;
Initial planing and development of our web sites; and
Building of infrastructure of web sites.
COMPARISON OF RESULTS OF RESULTS FOR THE FISCAL YEAR ENDED OCTOBER 31, 1998 TO
THE FISCAL YEAR ENDED OCTOBER 31, 1999.
Our fiscal year ends on October 31st. Therefore, any reference to the end of the
year refers to the end of the stated fiscal year.
REVENUE. Total revenues decreased $166,838 or by 30% for 1999 to $380,528, as
compared to 1998. This is primarily due to decreasing the number of Westergaard
Conferences that we conducted in 1999 from four conferences in
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1998 to three conferences in 1999. Total revenues from our conferences in 1999
decreased by $214,598 or 52% to $196,468 compared to 1998. We decreased the
number of conferences in 1999 as a result of what we perceived to be generally
inhospitable market conditions for smallcap companies in early 1999. Revenues
from our membership fees associated with construction and maintenance of the
Cyberstations increased $334 or by .25% to $131,667 as compared to 1998.
OTHER OPERATING EXPENSES. Other operating expenses consist primarily of salary
and administrative costs as well as professional services and fees. These
expenses also include rent, office supplies, conference expenses, leases of
computer equipment, and telephone charges. Total Other Operating Costs increased
$417,525 or 37% in 1999 to $1,546,467. This was primarily due to hiring
additional employees and analysts, costs to support web site operations and
building the infrastructure of the web sites, and Internet Service Provider
costs, which amounted to $559,878.
In addition, in March of 1999 we entered in to an agreement with MarketGuide,
Inc., for ProVestor Reports, a comprehensive analytical service, that provides
on-line sources and articles, SEC or other government filings, market data, such
as price and volume data and charts on our member affiliates. Pursuant to this
agreement we pay MarketGuide $100 a month per Member Affiliate, subject to a
$2,000 per month minimum royalty fee.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses consist
primarily of the depreciation of furniture, computer equipment and software, and
telecommunications equipment. Total depreciation and amortization expense in
1998 was $14,555 and $16,352 for the year ended 1999.
LIQUIDITY AND CAPITAL RESOURCES. We have incurred losses since inception, and at
the end of the fiscal year on October 31, 1999, had an accumulated deficit of
$2,423,993. We have financed our operations primarily through private financing,
discussed later in this Form 10-SB.
Net cash used in operations increased to $1,375,333 from $111,818 for 1999 as
compared to the same period in 1998. This was primarily due to an increase in
the addition of new employees, consultants and analysts, an increase in general
and administrative expenses including hiring an executive search firm to find
our new CEO, legal and accounting fees in accordance with completing an audit,
the hiring of a Marketing Director and marketing and travel expenses associated
with marketing the product.
Our material capital commitments consist of obligations under facilities,
operating leases, and salaries of
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our employees and analysts. We anticipate that we will experience an increase in
our capital expenditures consistent with our anticipated growth in operations,
infrastructure, including redesigning our web site, upgrading our software and
in-house computers, and increasing personal. We anticipate that our costs for
the above expenditures will be approximately $90,000 to $150,000. We further
anticipate devoting additional resources to building strength in our brand name
and business model through increased marketing and advertising in both print
media and on the Internet. We expect to spend approximately $500,000 on
marketing and advertising in the year 2000.
We also plan to launch WBNfn, our Internet radio station, in the fall of 2000.
We anticipate that we will have to hire personnel for the radio station
including financial journalists and producers. We foresee payroll costs for
WBNfn will be approximately $500,000 for its first year. We anticipate that our
operating costs for the radio station will be approximately $800,000 for its
first year.
We plan to support the radio station through advertising fees. The Internet
radio station is suitable for advertisements on-air and banner advertisements.
However, there can be no assurance that we will generate sufficient revenues
from advertisements to cover our costs or make a profit. If we do not raise
sufficient funds as a result of advertisements it may have a material adverse
effect on our business, results of operations, and our financial condition.
We anticipate seeking additional funding for our operations through public or
private financing or other arrangements. Adequate funding may not be available
when needed or may not be available on terms acceptable to us. If additional
funds are raised by issuing equity securities, dilution to existing shareholders
could result. If funding is insufficient at any time in the future, we may be
unable to develop or enhance our products and services, take advantage of
business opportunities or respond to competitive pressures, any of which could
have a material adverse effect on our business, financial condition, and results
of operations.
Our limited operating history makes predictions of our future results of
operations difficult to assess. Our operations may never generate significant
revenues, and we may never achieve profitable operations. Indeed, our history of
operating losses raises doubt about our ability to continue operations. In the
years 1998 and 1999, we incurred net losses of $581,576 and $1,165,939,
respectively. As of the end of the 1999 fiscal year, we had an accumulated
deficit of $2,423,993. Based upon our projected costs for the year 2000 and our
past operating losses, we will need to obtain sufficient additional financing or
other working capital to fund our operations, if we do not obtain additional
financing or working capital, we may not be able to continue our operations. As
a result of our operating losses and
<PAGE>
anticipated expenditures, our independent certified public accountants' report
on the financial statements includes an explanatory paragraph stating there is
substantial doubt about our ability to continue our business as a going concern.
ITEM THREE. DESCRIPTION OF PROPERTIES
Our executive offices are maintained in a combination commercial/residential
building at 560 West 43rd Street, Suites 39E and 31K, New York, New York 10036.
The current rent for the two suites is $6,316.82 for 2,037 square feet. On May
26, 1999, we signed a two-year lease for these premises. The building has agreed
to rent additional space to us satisfy our growth requirements. Computer systems
are housed in suites 31K, 39E and at locations in Queens, NY and Minneapolis, MN
at $3,000 per year ($500 per month). Our Internet servers are hosted off-site at
Hi-way Technologies, Inc. (a Verio, Inc. subsidiary), 5050 Blue Lake Drive, Boca
Raton, FL 33431 and Digiweb.com, 4716 Pontiac Street, Suite 306, College Park,
MD 20740 at $5,746.32 per year (478.86 per month).
ITEM FOUR. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following sets forth the number of shares of our $.001 par value common
stock beneficially owned by (i) each person who, as of the date hereof, was
known by us to own beneficially more than five percent (5%) of our issued and
outstanding common stock; (ii) each of the named Executive Officers; (iii) the
individual Directors; and (iv) the Officers and Directors as a group. As of the
date hereof, there were 11,916,445 common shares issued and outstanding.
<TABLE>
<CAPTION>
- ------------------------ ----------------------------------- ---------------------------- ----------------------------
Title of Class Name and Address of Beneficial Amount of Beneficial Percent of Class(1)
Owner Ownership
- ------------------------ ----------------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Common John Westergaard (director) 5,565,000 47%
560 West 43rd Street,
New York, New York 10036
- ------------------------ ----------------------------------- ---------------------------- ----------------------------
Common Dov Perlysky 1,000,000 8%
9 Beachwood Drive,
Lawrence, NY 11559
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
- ------------------------ ----------------------------------- ---------------------------- ----------------------------
Common Anne Straton (officer) 480,000(2) 4%
63 East 79th Street, #3B
New York, NY 10021
- ------------------------ ----------------------------------- ---------------------------- ----------------------------
Common Derrick Ashcroft (director) 1,000(2) .01%
Flying X Ranch
HC 30 Box 66
Monticello, NM 87939
- ------------------------ ----------------------------------- ---------------------------- ----------------------------
Common Wenke B. Thoman (director) 0(2) 0%
180 East 95th Street
New York, NY 10028
- ------------------------ ----------------------------------- ---------------------------- ----------------------------
Common William R. Grant (director) 40,000(3) .03%
30 Sutton Place, Apartment 7B,
New York, New York 10022
- ------------------------ ----------------------------------- ---------------------------- ----------------------------
Common Joseph Allen (director) 0(4) 0%
235 West 48th Street
New York, NY 10036
- ------------------------ ----------------------------------- ---------------------------- ----------------------------
Common Officers and Directors as group 7,086,000 59%
- ------------------------ ----------------------------------- ---------------------------- ----------------------------
</TABLE>
(1) All percentages are rounded to the nearest one hundredth.
(2) On March 31, 1998, Directors Ashcroft and Thoman and Executive Vice
President Straton were each issued 100,000 stock options exercisable at
$1.00 per share. These options expire on March 31, 2008.
(3) Does not include 289,855 shares owned by Galen Advisors, of which
William R. Grant is a General Partner.
On May 1, 1999, Mr. Grant was issued 100,000 stock options exercisable at $3.00
per option. On the same day, he was issued 20,000 options exercisable at $0.69
per share. All 120,000 of Mr. Grant's options expire on May 1, 2009.
<PAGE>
(4) Does not include 100,000 shares owned by Allen & Caron, Inc., of which
Mr. Allen is a 75% owner.
On July 7, 1999, Mr. Allen was issued 100,000 stock options exercisable at $1.00
per share. Mr. Allen's options expire on May 1, 2009.
ITEM FIVE. DIRECTORS, EXECUTIVE OFFICERS, AND CONTROL PERSONS
Our current directors and executive officers, who will serve until the next
annual meeting, or until their successors are elected or appointed and
qualified.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
NAME AGE POSITION
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
John Westergaard 68 Chairman of Board, Publisher, Editorial Director
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Thomas J. Wojciechowski 40 President, Chief Executive Officer & Director
- -----------------------------------------------------------------------------------------------------------------
Anne H. Straton 36 Executive VP, Secretary, and Executive Editor
Derrick Ashcroft 70 Director
Wenke B. Thoman 54 Director
William R. Grant 75 Director
Joseph Allen 55 Director
</TABLE>
BACKGROUNDS OF OFFICERS AND DIRECTORS
John Westergaard, Chairman of the Board, Publisher and Editorial Director: Mr.
Westergaard is an internationally respected investment analyst and financial
writer whose professional investment career spans 43 years. He entered the
investment business in 1957 with Standard and Poor's Corporation where he served
as a member of the President's Staff. In 1962, he co-founded Equity Research
Associates, our predecessor. In 1968, Mr. Westergaard formed a New York Stock
Exchange firm. From 1978 to 1990, he served as a Managing Director of Ladenburg
Thalmann & Co. Inc., investment bankers and New York Stock Exchange members for
over 100 years. In 1984, he founded a public mutual fund,
<PAGE>
The Westergaard Fund, which was liquidated in 1987. From 1990 until the founding
of Westergaard.com, Inc. in 1996, Mr. Westergaard was engaged in founding,
managing, and editing Westergaard Publishing Corporation, a fax and directory
publishing and conference business. Mr. Westergaard is the Chairman of our
subsidiary WBN and has also served from 1998 to the present on the board of
directors for Paulson Capital Corporation, a public company.
Mr. Westergaard graduated from Williams College in 1953 and served in military
counterintelligence from 1953 to 1956. He has served as a guest panelist at the
U.S. Army and U.S. Navy War Colleges, has on numerous occasions been a featured
guest on "Wall Street Week" with Louis Rukeyser, a guest many times on CNBC,
CNN, PBS, and a featured speaker before several dozen investment analyst
societies and educational institutions, including Harvard Business School, The
Wharton School, and Yale University.
Thomas J. Wojciechowski, President/Chief Executive Officer: Mr. Wojciechowski
comes to Westergaard.com, Inc. from MoneyLine Network, Inc., an Internet startup
engaged in delivering financial services to the global institutional
marketplace. As a core member of the executive management, he was responsible
for strategic relationships, global sales and product marketing. Mr.
Wojciechowski is also the President and Chief Executive Officer of our
subsidiary WBN.
From 1983 to 1998, Mr. Wojciechowski held various executive positions with
Reuters, Ltd. From 1996 to 1998, he was Director of National Accounts, Reuters
America, Inc. and Vice President of Reality Online, a Reuters subsidiary
providing Internet based transaction solutions aimed at the individual investor.
From 1988 to 1996, he was responsible for sales and operations of Reuters'
Information Management Systems in an 18 state region. Previous to that he served
five years in Germany and Switzerland primarily in sales, marketing and product
development capacities. Mr. Wojciechowski graduated from Purdue University in
1982 with a B.S. in Electrical Engineering.
Anne H. Straton, Executive Vice President, General Manager and Executive Editor:
Ms. Straton has been a manager, writer and an editor in the communications
industry for fifteen years. Prior to joining us, Ms. Straton worked for the
United States Embassy in Bonn, Germany, where she managed the English speaking
television network, ACT Entertainment from 1994-1997. In addition to station
management, Ms. Straton wrote, directed and produced network programming,
special programs and local news. Responsible for the coordination of satellite
transmissions and special broadcasts, Ms. Straton worked with international
journalists covering the European Union. Ms. Straton is also the Executive Vice
President of our subsidiary WBN.
<PAGE>
From 1993-1994, Ms. Straton worked for CNN International in London and ongoing
from 1987-1997 co-wrote, directed and produced documentary and feature films
through her film production company, foureyesfilms. She received a Master of
Arts in International Communication from the European Institute for
International Communication in Maastricht, The Netherlands in 1993, and a
Bachelor of Arts in from the University of Vermont in 1985.
Derrick Ashcroft, Director: Mr. Ashcroft owns and operates a 75,000 acre
commercial cattle ranch in New Mexico and sits on the board directors of Golf
Entertainment, Inc., Leasing Edge Corp., LEC Technologies, Inc., and Omap
Holdings, Inc. He served as Chairman of Cardiopet from 1988 to 1995, previously
held various executive positions including President, with several ventures
marketing tax-driven leasing transactions, and from 1961 to 1980 founded and
built one of the largest typesetting and graphic communications groups in
Europe. He was educated at Magdalen College in Oxford with an M.A. in History
and served as an officer in the Royal Artillery.
Wenke B. Thoman, Director: Ms. Thoman is the Vice President of Industrial
Mineral Holdings, Inc., a company engaged in importing minerals from the
Mediterranean and producing high temperature insulation in Georgia and
Louisiana. From 1990 to 1995, she served as Chairman of Rain Hill Group, a
consulting firm specializing in corporate development issues. She served as VP
Corporate Finance at Paine Webber from 1987-1990, VP Merger and Acquisitions at
American Can Company from 1985-1987, VP Investment Banking at Donaldson Lufkin &
Jenrette from 1980 - 1985 and Director of Corporate Development at Chargeurs SA,
a diversified French company from 1977 to 1979. She currently serves as Director
of various companies and non-profit organizations. Ms. Thoman was born in Norway
and raised in Canada. She received her MBA from INSEAD, France in 1977 and
attended McGill University in Canada from 1964-1966.
William R. Grant, Director: Mr. Grant is Chairman of Galen Associates, a venture
capital firm focused on the healthcare industry with currently over $1 billion
under management. Mr. Grant serves on the board of directors of OSI Corp. Until
recently, he served as non-executive Vice-Chairman of SmithKline Beecham and
currently is on the boards of Allergan, Flex-Foot, Bank Audi, Vasogen, MiniMed,
Ocular Sciences and Witco Chemical Corporation. Prior to establishing Galen in
1989, Mr. Grant was Chairman of MacKay-Shields Financial, an investment
management and venture investment firm from 1987 - 1989. He began his career as
a drug and chemical analyst with Smith Barney, eventually becoming the firm's
President. Mr. Grant graduated in 1949 from Union College on whose board of
trustees he currently serves.
<PAGE>
Joseph Allen, Director: Joseph Allen is founder and principal owner of Allen &
Caron (formerly South Coast Communications), an investor relations firm based in
Irvine, California and New York City. Prior to its founding in 1988, Mr. Allen
served two years as Vice President/Corporate Affairs of General Automation,
Inc., as president and principal of Allen & McGarvey, a corporate and financial
relations agency from 1981 - 1987, and previous to that as Vice President of
Bozell & Jacobs in charge of their Newport Beach and Los Angeles offices from
1979 - 1981. Earlier in his career, Mr. Allen was employed in publishing with
Sage Publications, a publisher of scholarly journals. He has written four books,
of which "Systems in Action" (Scott Foresman) was used in the course study at
leading graduate schools of management. Mr. Allen has lectured on public
relations at UCLA Anderson Graduate School of Management and UCLA Extension. Mr.
Allen serves on the board of directors for Ophthalmic Imaging Systems, Inc.
ITEM SIX. EXECUTIVE COMPENSATION
A. DIRECTORS' COMPENSATION
Directors receive compensation of $200 per board meeting and are reimbursed for
out-of-pocket expenses incurred while attending board meetings.
B. COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the current salaries for our named Executive
Officers:
SUMMARY COMPENSATION TABLE. The following table sets forth certain summary
information concerning the compensation paid to our CEO and other executive
officers.
<PAGE>
<TABLE>
<CAPTION>
Long Term Compensation
----------------------------- -----------
Annual Compensation Awards Payouts
- -------------------------------------------------------------------------------- ----------------------------- -----------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities All
Name Other Restricted Under- LTIP Other
And Annual stock lying Payouts Compe-
Principal Compen- Award(s) Options/ ($) nsation
Position sation ($) SARs (#) ($)
Position Year Salary($) Bonus($) ($)
- -------------------------------------------------------------------------------- ----------------------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John Westergaard 1/1/99-1/1/00 $166,000 ____ ____ ______ ____ ____
Chairman, Director
and Editorial Director
Tom Wojciechowski: 11/29/99 - $200,000 $100,000 500,000 options @ $0.80
President,
CEO and Director
Anne Straton 1/1/99-1/1/00 $72,000 ____ ____ _____ ____ ____
Executive Vice
President, Secretary,
Managing Editor 100,000 options @ $1.00
</TABLE>
Option/SAR Grants in Last Fiscal Year. The following table sets fourth summary
information concerning the issuance of options during the last fiscal year. No
stock appreciation rights (SAR) have been granted.
<TABLE>
<CAPTION>
(Individual Grants)
- ----------------------------------------------------------------------------------------------------------------
Name Number of Percent of total Exercise or Expiration Market
Securities options/SARs base price date Price on
Underlying granted to ($/Sh) Date of
Options/SARs employees in Grant
Granted (#) fiscal year
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(a)..........................(b)................(c).....................(d)............(e)............(f).....
Tom Wojciechowski 500,000 82% $0.80 11/29/09 $1.43
</TABLE>
<PAGE>
ITEM SEVEN. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following transactions have been undertaken within the last two years with
related parties.
Westergaard Publishing Corp., a separate New York Corporation which was founded
by John Westergaard, is currently in the process of being dissolved. During all
times that Westergaard Publishing was incorporated, John Westergaard was an
officer, a director and a shareholder. An asset that Westergaard Publishing held
was 1,445,000 shares of Westergaard.com. Upon dissolution it was determined by
the shareholders of Westergaard Publishing, John Westergaard and Dov Perlysky,
that 1,355,000 shares of Westergaard.com would be distributed as 355,000 shares
to John Westergaard and 1,000,000 to Dov Perlysky. The 1,000,000 shares that Mr.
Perlysky received made him a beneficial owner of Westergaard.com providing him
with an 8% interest. The remaining 95,000 were distributed as compensation to
the following: 50,000 shares to Strain Consulting, Inc., for consulting
services; 25,000 to A. Joseph Tandet for legal services; 10,000 shares to Robert
Arnold as compensation for legal advice; and 5,000 shares to Alvin Rosen for
accounting services.
During the year ended October 31, 1998, Westergaard Publishing Corporation
transferred to us securities valued at approximately $93,000 in full settlement
for a $50,000 noninterest-bearing loan from us. As a result of this transaction,
we recognized a capital contribution of approximately $42,000 which represents
the excess value of securities received over the affiliated receivable.
We have unpaid expense reimbursements made by Westergaard Publishing Corporation
on behalf of us and an outstanding loan balance of $50,000 from Westergaard
Publishing Corporation. The loan bears interest of 8% per annum and does not
have a scheduled repayment date.
In connection with a short-term financing during year ended October 31, 1999, we
issued 20,000 options, with fair market value of approximately $62,200, to a
William R. Grant a member of our Board of Directors for services rendered.
In connection with the offering of our common stock completed during the period
ended October 31, 1997, during the year ended October 31, 1998, we granted
500,000 options to James Goldberg, a consultant, who assisted with the offering.
The fair value of such options was approximately $335,000 at grant date.
<PAGE>
ITEM EIGHT. DESCRIPTION OF SECURITIES
A. COMMON STOCK
The total number of shares of Common Stock that we have the authority to issue
is 100,000,000 at $0.001 par value. As of the date hereof, 11,916,445 common
shares were issued and outstanding. Holders of shares of Common Stock are
entitled to one vote for each share on all matters to be voted on by the
shareholders, including the election of directors. Thus, holders of more than
50% of the shares voting for the election of directors can elect all of the
directors, if they so choose.
B. PREFERRED STOCK
On February 15, 2000, our shareholder approved a proposed amendment to our
Certificate Incorporation allowing the issuance of 10,000,000 Shares of
Preferred Stock in such series and designations as the Board may form time to
time approve.
PART II
ITEM ONE. MARKET FOR COMMON EQUITY & RELATED STOCKHOLDER MATTERS
A. PRINCIPAL MARKET OR MARKETS
NASDAQ OTC Bulletin Board
Our securities began trading on the Nasdaq Bulletin Board under the symbol
"WSYS" on June 12, 1997. During the prior two fiscal years the low and high bid
prices as reflected by interdealer quotations were:
- ------------------------------------ -------------------------- ---------------
QUARTER Low Bid High Bid
- ------------------------------------ -------------------------- ---------------
- ------------------------------------ -------------------------- ---------------
3rd Quarter '97 1 5/8 2 7/8
- ------------------------------------ -------------------------- ---------------
4th Quarter `97 1 2
- ------------------------------------ -------------------------- ---------------
1st Quarter '98 5/8 15/16
- ------------------------------------ -------------------------- ---------------
2nd Quarter '98 1/2 3/4
- ------------------------------------ -------------------------- ---------------
3rd Quarter '98 1/4 9/16
- ------------------------------------ -------------------------- ---------------
4th Quarter '98 43/246 2 3/4
- ------------------------------------ -------------------------- ---------------
1st Quarter '99 1 5/16 6 3/8
- ------------------------------------ -------------------------- ---------------
2nd Quarter '98 15/16 1 7/8
- ------------------------------------ -------------------------- ---------------
<PAGE>
3rd Quarter '99 1/2 1 3/16
- ------------------------------------ -------------------------- ---------------
4th Quarter '99 9/16 1 5/8
- ------------------------------------ -------------------------- ---------------
1st Quarter '00 to date 5/8 1 1/8
- ------------------------------------ -------------------------- ---------------
B. APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK
As of the date hereof, a total of 11,916,445 shares of our common stock were
outstanding. Of these, 1,603,975 are free trading and 10,312,470 are investment
shares.
The number of holders of record of our common stock is estimated to be 155. Of
these 89 are listed by our transfer agent and the balance are thought to hold
shares purchased in the market and held in brokerage accounts.
C. DIVIDENDS
The holders of our common stock are entitled to receive such dividends as may be
declared by our Board of Directors. No dividends on the common stock were paid
by us during the periods reported herein nor do we anticipate paying dividends
on our common shares in the foreseeable future.
ITEM TWO. LEGAL PROCEEDINGS
At this time we are the subject of a Securities and Exchange Commission formal
investigation which was authorized in February 1998. To date, the Securities and
Exchange Commission has not made any findings against the us or any of our
officers, directors, or employees nor has the Securities and Exchange Commission
made any allegations against any individual. We are not involved in any other
litigation and are not aware of any pending litigation or the possibility of
future litigation, which could adversely affect us or our shareholders.
The allegations of the Securities and Exchange Commission formal investigation
are that we and our present and former employees may have received cash, stock,
stock options, and other consideration from issuers in exchange for providing
favorable research on those issuers without proper disclosure of the received
consideration. There have been no findings by the Securities and Exchange
Commission against the Company or any present or former employee. Currently, we
display on our web site a disclaimer
<PAGE>
allowing visitors to the site to review compensation the Company, our employees,
and our officers receive for their services. Neither the Company, its employees,
or its Contributing Analysts accept, cash, stock, stock options or other
consideration for services rendered or for any other purpose.
ITEM THREE. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
We have not had any disagreements on accounting and financial disclosures with
our accounting firm during the reporting period or during the preparation of its
audited financial statements for the years ending October 31, 1998, and October
31, 1999.
ITEM FOUR. RECENT SALES OF UNREGISTERED SECURITIES
We have issued the following unregistered common stock in the three-year period
preceding the date of this Registration Statement:
On October 31, 1996, we initiated a Regulation D 504 Offering of 1,000,000
shares of common stock at $1.00 per share. The offering was fully subscribed and
closed and the shares began trading publicly on the Nasdaq OTC Bulletin Board on
June 7, 1997.
On January 15, 1999, the Company initiated Regulation D 506 private placement of
our securities, pursuant to which we offered 2,926,514 shares of common stock at
$0.69 per share. As of the closing date of the offering, 2,926,514 shares were
subscribed.
ITEM FIVE. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Articles of Incorporation limit, to the maximum extent permitted by law, the
personal liability of directors and officers for damages for breach of any duty
owed to us or to our shareholders. The Articles of Incorporation provide further
that we shall have the power, in our by-laws or in any resolution of our
stockholders or directors, to undertake to indemnify our officers and directors
against any contingency or peril as may be determined to be in our best
interest, and in conjunction therewith, to procure, at our expense, policies of
insurance. Quotations on a Director's and Officer's Insurance Policy, and an
Errors and Omissions Policy are currently being sought.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
WESTERGAARD.COM, INC.
Date:
----------------------
By:
------------------------------------
Thomas J. Wojciechowski, President
Chief Executive Officer
------------------------------------
Anne H. Straton, Executive Vice President
<PAGE>
PART F/S
FINANCIAL STATEMENTS.
Attached are audited financial statements for the Company for the period
ending December 31, 1999. The following financial statements are attached to
this report and filed as a part thereof.
1) Independent Auditors' Report
2) Financial Statements as of October 31, 1999
4) Notes to Consolidated Financial Statements as of October 31, 1999
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
WESTERGAARD.COM, INC. AND SUBSIDIARY
October 31, 1999
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and the Board of Directors of
Westergaard.com, Inc.
We have audited the consolidated balance sheet of Westergaard.com, Inc. and
Subsidiary (the "Company") as of October 31, 1999, and the related consolidated
statements of operations, shareholders' equity (deficit), comprehensive income
and cash flows for the years ended October 31, 1999 and 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Westergaard.com, Inc. and Subsidiary as of October 31, 1999, and the
consolidated results of their operations and their consolidated cash flows for
the years ended October 31, 1999 and 1998, in conformity with generally accepted
accounting principles.
As discussed in Note C, the Company restated its financial statements for the
year ended October 31, 1998.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note H, the Company is
experiencing difficulty in generating sufficient cash flow to meet its
obligations and sustain its operations, which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note H. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
New York, New York
December 10, 1999
<PAGE>
Westergaard.com, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEET
October 31, 1999
(as restated)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 626,164
Investment in securities, at market 15,787
Accounts receivable 49,000
Employee advances 20,765
------------
Total current assets 711,716
NONCURRENT ASSETS
Property and equipment (less accumulated
depreciation and amortization of $33,715) 62,934
Other assets 8,714
------------
Total noncurrent assets 71,648
------------
Total assets $ 783,364
============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 136,290
Deferred revenues 122,000
Due to affiliate 60,033
Other liabilities 45,993
------------
Total current liabilities 364,316
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, par value $.001; 100,000,000 shares
authorized; 11,916,445 shares issued and outstanding 11,916
Additional paid-in capital 2,861,275
Accumulated deficit (2,423,993)
Accumulated other comprehensive loss (30,150)
------------
Total shareholders' equity 419,048
------------
Total liabilities and shareholders' equity $ 783,364
============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Westergaard.com, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended October 31,
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
(as restated)
<S> <C> <C>
Revenues
Member fee income (net of fees waived of $76,000 $ 131,667 $ 131,333
and $22,000 in 1999 and 1998, respectively)
Conferences (net of fees waived of $54,000 and 196,468 411,066
$18,000 in 1999 and 1998, respectively)
Realized gain from investment in securities 3,783
Other 52,393 1,184
------------ ------------
Total revenues 380,528 547,366
Operating expenses
Conference expense 93,706 181,375
Compensation and benefits 507,230 431,150
Professional services 320,429 166,122
Rent and occupancy 65,224 58,939
General and administrative expenses 559,878 285,750
Miscellaneous expense 5,606
------------ ------------
Total expenses 1,546,467 1,128,942
------------ ------------
NET LOSS $(1,165,939) $ (581,576)
============ ============
Loss per share
Basic and diluted $(0.10) $(0.06)
==== =====
Weighted-average common shares outstanding
Basic and diluted 11,307,592 8,993,975
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Westergaard.com, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
Common stocks Accumulated
Par Additional Accumu- other
------ paid-in lated comprehensive
Shares value capital deficit income (loss) Total
------- ------- ------------ ----------- -----------------------------
(as (as (as
restated) restated) restated)
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1997 8,993,975 $ 8,994 $ 742,981 $ (676,478) $ - $ 75,497
Capital contributed 42,516 42,516
------
Net loss (581,576) (581,576)
Unrealized depreciation on
investment in securities (34,922) (34,922)
---------- ---------- ----------- -------- ------------
Balance at October 31, 1998 8,993,975 8,994 785,497 (1,258,054) (34,922) (498,485)
Issuance of common shares 2,922,470 2,922 2,013,578 2,016,500
Fair value of stock options issued 62,200 62,200
Net loss (1,165,939) (1,165,939)
Unrealized appreciation on
investment in securities 4,772 4,772
---------- ---------- ---------- ----------- --------- ------------
Balance at October 31, 1999 11,916,445 $11,916 $2,861,275 $(2,423,993) $(30,150) $ 419,048
========== ========== ======== ============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Westergaard.com, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year ended October 31,
<TABLE>
<CAPTION>
1999 1998
---------------- -------------
(as restated)
-------------
<S> <C> <C>
Comprehensive income
Net loss $(1,165,939) $(581,576)
Other comprehensive income (loss)
Unrealized depreciation on investment in securities (30,150) (34,922)
----------- ---------
Comprehensive income (loss) $(1,196,089) $(616,498)
=========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Westergaard.com, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended October 31,
<TABLE>
<CAPTION>
1999 1998
---------------- -------------
(as restated)
-------------
<S> <C> <C>
Cash flows from operating activities
Net loss $(1,165,939) $(581,576)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization 16,352 14,555
Short-term financing cost - fair value of stock options issued 62,200
Realized gain on investment in securities (3,783)
Changes in operating assets and liabilities
(Increase) in employee advances (4,125) (12,090)
(Increase) in accounts receivable (49,000) -
Decrease in other assets 7,020
(Decrease) increase in accounts payable and
accrued expenses (106,349) 164,991
(Decrease) increase in deferred revenues (24,135) 99,135
(Decrease) increase in due to affiliate (50,000) 99,600
(Decrease) increase in other liabilities (54,337) 100,330
------------- ----------
Net cash used in operating activities (1,375,333) (111,818)
------------- ----------
Cash flows from investing activities
Proceeds from sale of investment in securities 50,362
Purchase of fixed assets (26,018) (3,584)
------------- ----------
Net cash (used in) provided by investing activities (26,018) 46,778
------------ ----------
Cash flows from financing activities
Proceeds from issuance of stock 2,016,500 20,000
------------- ----------
Net cash provided by financing activities 2,016,500 20,000
------------- ----------
NET INCREASE (DECREASE) IN CASH 615,149 (45,040)
Cash at beginning of year 11,015 56,055
------------- ----------
Cash at end of year $ 626,164 $ 11,015
============ ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $10,849
=======
Noncash investing activities
Securities received in settlement of affiliated receivable $ 50,000
==========
Noncash financing activities
Value of securities contributed in excess of affiliated receivable $ 42,516
==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1999 and 1998
NOTE A - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
1. Organization
Westergaard.com, Inc. (formerly known as Westergaard Online Systems,
Inc.)(the "Company"), a Delaware company, was organized on August 15,
1996 and commenced operations on October 1, 1996. The Company was
formed to engage in the business of online publishing on the Internet,
primarily for the purpose of providing investment research on publicly
traded Micro-Mid Cap companies. Additionally, the Company publishes a
directory of publicly traded health care companies and sponsors
conferences focusing on Micro-Mid Cap companies.
The consolidated financial statements include the assets,
liabilities and results of operations of the Company's subsidiary,
Westergaard Broadcasting Network, Inc. All intercompany balances and
transactions have been eliminated.
2. Investments in Securities
The Company's investments in securities are categorized as
available-for-sale securities, as defined by Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." These securities consist of equity
securities and are stated at fair value, which is estimated based on
quoted market prices, when available. If a quoted price is not
available, fair value is estimated using quoted market prices for
similar financial instruments. Unrealized holding gains and losses are
reflected as a net amount in a separate component of shareholders'
equity until realized. Realized gains and losses on sales of investmens
in securities are determined on a specific identification basis.
3. Property and Equipment
Property and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are computed on a
straight-line basis over the estimated useful life of the asset.
Computer equipment and furniture are depreciated over 5 to 7 years.
Computer software is amortized over 3 years. Leasehold improvements are
amortized over the lives of their respective leases or the service
lives, whichever is shorter.
4. Stock-Based Compensation
The Company, as permitted by Statement of Financial Accounting
Standards No. 123 ("SFAS No. 123"), "Accounting for Stock-Based
Compensation," has elected to account for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles
Board Opinion
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
October 31, 1999 and 1998
NOTE A (continued)
No. 25 ("APB 25"), "Accounting for Stock Issued to Employees." Accordingly,
compensation cost for common share options is measured as the excess, if
any, of the quoted market price of the Company's common shares at the date
of grant over the amount an employee must pay to acquire the common shares.
The Company has adopted the disclosure requirements of SFAS No. 123.
5. Earnings Per Share
Earnings per share are calculated under the provisions of Statement of
Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings per
Share." SFAS No. 128 requires the presentation and disclosure of basic
earnings per share, and, if applicable, diluted earnings per share.
Basic earnings per share are computed by dividing income available to
common shareholders by the weighted-average number of common shares
outstanding during the period. Diluted earnings per share are based on
the weighted-average number of common and common equivalent shares
outstanding. The calculation takes into account the shares that may be
issued upon exercise of stock options, reduced by the shares that may
be repurchased with the funds received from the exercise, based on the
average price during the year. In computing diluted earnings per share,
only potential common shares that are dilutive (those that reduce
earnings per share or increase loss per share) are included. Exercise
of stock options is not assumed if the result would be antidilutive,
such as when a loss from continuing operations is reported.
6. Revenue Recognition
Conference revenue is recognized when the conference is presented.
Funds received in advance are treated as deferred revenue until the
service is provided.
The Company receives fees from its members for CyberStation services to
be provided over one-year contracts. Such fees are treated as deferred
revenue and are recognized as fee income over the course of the
contract.
7. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
October 31, 1999 and 1998
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
NOTE B - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Computer equipment $ 67,922
Computer software 1,738
Telecommunications equipment 13,795
Furniture and fixtures 13,194
--------
96,649
Less accumulated depreciation and amortization (33,715)
--------
$ 62,934
========
NOTE C - RELATED PARTY TRANSACTIONS
During the year ended October 31, 1998, Westergaard Publishing Corporation
("Publishing"), an affiliated entity under common control, transferred to
the Company securities valued at approximately $93,000 in full settlement
for a $50,000 noninterest-bearing loan from the Company. As a result of
this transaction, the Company recognized as a capital contribution
approximately $42,000 which was the excess value of the securities received
over the affiliated receivable. The Company had previously recorded this
excess as a gain in the statement of operations. As a result of this
correction, the Company restated its financial statements for the year
ended October 31, 1998.
Included in due to affiliate are liabilities in connection with unpaid
expense reimbursements made by Publishing on behalf of the Company and an
outstanding loan balance of $50,000 from Publishing. The loan bears
interest of 8% per annum. The loan does not have a scheduled repayment
date.
NOTE D - STOCK OPTIONS AND STOCK-BASED COMPENSATION
The Company has a Stock Option Plan (the "Plan") which provides an
opportunity for participants to obtain a proprietary interest in the
Company through the grant of nonqualified stock options to purchase shares
of Common Stock of the Company. The Plan authorizes the
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
October 31, 1999 and 1998
issuance of options to purchase up to an aggregate of 5,000,000 shares
of Common Stock, with vesting periods of up to four years and maximum
option terms of ten years. The Plan is administered by a committee
which is comprised of members of the Board of Directors.
NOTE D (continued)
Information regarding the stock options is summarized below:
<TABLE>
<CAPTION>
November 1, 1998 to October 31, 1999 November 1, 1997 to October 31, 1998
------------------------------------ ------------------------------------
Weighted- Weighted-
average average
Number exercise Number exercise
of options price of options price
----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Outstanding at November 1, 1,002,500 $1.50 - -
Options granted 1,280,000 1.07 1,402,500 $1.36
Options cancelled (775,000) 0.69 (400,000) 1.00
-------- ----------
Outstanding at October 31, 1,507,500 $1.55 1,002,500 $1.50
========= ==== ========= ====
Exercisable at October 31, 1,184,000 $1.56 737,500 $1.68
========= ==== ======= ====
</TABLE>
In connection with a short-term financing, the Company, during year ended
October 31, 1999, issued 20,000 options, with fair market value of
approximately $62,200, to a member of the Board of Directors for services
rendered. In connection with the offering of the Company's common stock
completed during the period ended October 31, 1997, the Company, during the
year ended October 31, 1998, granted 500,000 options to a consultant who
assisted with the offering. The fair value of such options was
approximately $335,000 at grant date.
SFAS No. 123 established the financial accounting and reporting standards
for stock-based compensation. It defines a fair value method of accounting
for an employee stock option or similar equity instrument. SFAS No. 123
also gives entities the choice between adopting the fair value method or
continuing to use the intrinsic value method under APB 25 with footnote
disclosures of the pro forma effects as if the fair value method had been
adopted. The Company has opted for the latter approach. Accordingly, no
compensation expense has been recognized for the stock options. Had the
compensation expense for the Company's stock options been determined based
on the fair value at the grant date for awards during the years ended
October 31, 1999 and 1998 consistent with the provisions of SFAS No. 123,
the Company's results of operations would have been reduced to the pro
forma amounts indicated below:
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
October 31, 1999 and 1998
NOTE D (continued)
<TABLE>
<CAPTION>
Year ended October 31,
------------------------------------
1999 1998
----------------- --------------
<S> <C> <C>
Net loss - as reported $(1,165,939) $(539,060)
Net loss - pro forma (4,438,187) (608,060)
Loss per share - as reported $(.10) $(.06)
Loss per share - pro forma (.39) (.07)
</TABLE>
The fair value of each option grant is established on the date of grant
using the Black-Scholes option pricing model with the following
assumptions:
<TABLE>
<CAPTION>
Year ended October 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Expected dividend yield - -
Expected stock price volatility 157% 108%
Expected life of options 9 years 9 years
</TABLE>
The risk-free interest rate used in the valuation of the option grants
ranged from 5.26% to 6.69% for the year ended October 31, 1999, and from
5.11% to 5.58% for the year ended October 31, 1998, depending on the
expiration date of the options.
The weighted-average fair value of options granted for the years ended
October 31, 1999 and 1998 were $2.70 and $0.63, respectively. During the
year ended October 31, 1999, the Company granted stock options whose
exercise prices were either above or below the underlying stock's fair
market value at the date of grant as indicated in the schedule below:
<TABLE>
<CAPTION>
Year ended October 31, 1999 Year ended October 31, 1998
--------------------------- ---------------------------
Weighted- Weighted- Weighted- Weighted-
average average fair average average fair
Stock options granted exercise price value exercise price value
---------------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Exercise price exceeds market
price of stock at grant date $1.00 $0.48 $1.36 $0.65
Exercise price less than market
price of stock at grant date 1.09 3.11
</TABLE>
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
October 31, 1999 and 1998
NOTE D (continued)
The following summarizes information about the stock options outstanding at
October 31, 1999:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
------------------------------ ----------------------------
Weighted-
Number average Number
outstanding remaining Weighted- exercisable Weighted-
Range of at contractual average at average
exercise October 31, life exercise October 31, exercise
prices 1999 (years) price 1999 price
------------- --------------- ------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C>
$0.69 - $1 822,500 7.73 $0.95 584,000 $0.94
$1.01 - $2 500,000 8.42 2.00 500,000 2.00
$2.01 - $3 185,000 9.28 3.00 100,000 3.00
---------- ----------
$0.69 - $3 1,507,500 1,184,000
========= =========
</TABLE>
NOTE E - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109"), which requires an
asset and liability approach to financial accounting and reporting for
income taxes. Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or deductible amounts in
the future, based on enacted tax laws and rates applicable to the periods
in which the differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax assets
to the amount expected to be realized. The tax effect of the temporary
differences at October 31, 1999 is as follows:
<TABLE>
<CAPTION>
October 31, October 31,
1999 1998
------------- -------------
<S> <C> <C>
Deferred tax asset
Net operating loss benefit $ 1,079,000 $ 570,000
Less valuation allowance (1,079,000) (570,000)
----------- ---------
Net deferred tax asset $ - 0 - $ - 0 -
============= =========
</TABLE>
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
October 31, 1999 and 1998
NOTE E (continued)
At October 31, 1999, the Company has carryforward losses which are
available to offset future Federal and state taxable income. Such losses
expire as follows:
Net operating loss Expiration date
$ 617,000 10/31/2017
543,000 10/31/2018
1,170,000 10/31/2019
-----------
$ 2,330,000
===========
NOTE F - COMMITMENTS AND CONTINGENCIES
1. Operating Leases
The Company is obligated to make payments under noncancellable operating
leases expiring in 1999. Such leases contain renewable options which allow
the Company to renew the lease for two additional years at the end of each
lease period. Total future minimum rental payments under these operating
leases were approximately $94,000 at October 31, 2000. Total rental
expenses for the years ended October 31, 1999 and 1998 were approximately
$61,000 and $59,000, respectively.
2. SEC Investigation
The Company is currently subject to a formal order of investigation dated
February 13, 1998 pursuant to Rule 79a) of the Securities and Exchange
Commission (the "SEC") Rules relating to investigations. The investigation
concerns certain allegations that the Company may have failed to make
appropriate disclosures on its Web pages.
The SEC took testimony of Company's Chief Executive Officer on October
1, 1998 and interviewed at least two of the Company's corporate
clients. The Company is unaware of any activity since October 1, 1998
by the SEC in this matter. The
<PAGE>
Westergaard.com, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
October 31, 1999 and 1998
Company has fully cooperated with the investigation and has reviewed
with the SEC staff members its disclosure polices. The Company cannot
predict whether this investigation will result in any type of formal
enforcement action and whether any such action might have an adverse
effect on the financial condition of the Company.
NOTE G - EARNINGS PER SHARE
The weighted-average shares used in computing earnings per share were
11,307,597 and 8,993,975, respectively, for the years ended October 31,
1999 and 1998. As the Company had net operating loss from continuing
operations, the effect of stock options outstanding at October 31, 1999 and
1998 is antidilutive and is therefore not part of the computation of
diluted earnings per share.
NOTE H - GOING CONCERN MATTERS
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements during the years ended October 31, 1999 and 1998, the Company
incurred losses of $1,165,939 and $581,576, respectively. The Company's
continuing operating losses and insufficient cash flow to meet its
operating needs are factors, among others, which may indicate that the
Company will be unable to continue as a going concern for a reasonable
period of time.
The financial statements do not include any adjustments relating to the
recoverability of assets and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis, to
obtain additional financing as may be required, and ultimately to attain
profitability. The Company currently anticipates conducting a private
offering of preferred stock in the fiscal year of 2000 in order to raise
additional capital required to fund operations for the foreseeable future
and implement its business plan. In the event that the Company is not able
to obtain such additional outside financing, the Company would scale back
its growth plans and business operations to allow it to continue without
the additional capital. Specifically, the Company would eliminate or delay
plans to pursue formation of an online radio station, limit its marketing
and advertising budget, and, if necessary, scale down its payroll expenses.
<PAGE>
PART III
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
(2) Articles of Incorporation and By-laws:
2.1** Certificate of Incorporation
2.2** By-Laws
- ------------
** Filed herewith
<PAGE>
CERTIFICATE OF INCORPORATION
<PAGE>
OF
Westergaard Broadcasting Network wbn.com, inc.
ARTICLE I
Name
The name of the corporation is Westergaard Broadcasting
Network wbn.com, inc., (the "Corporation").
ARTICLE II
Registered Office and Registered Agent
The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
ARTICLE III
Corporate Purpose
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware (the "General Corporation Law").
<PAGE>
ARTICLE IV
Capital Stock
The total number of shares of all classes of stock that the
Corporation shall have authority to issue is 100,000,000 all of which shall be
shares of Common Stock, par value $.01 per share.
ARTICLE V
Directors
(1) Elections of directors of the Corporation need not be by
written ballot, except and to the extent provided in the By-laws of the
Corporation.
(2) To the fullest extent permitted by the General Corporation
Law as it now exists and as it may hereafter be amended, no director of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director.
<PAGE>
ARTICLE VI
Indemnification of Directors, Officers and Others
(1) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person seeking
indemnification did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(2) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
(3) To the extent that a director, officer, employee or agent
of the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Sections (1) and (2) of this
Article VI, or in defense of any claim, issue or matter
<PAGE>
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
(4) Any indemnification under Sections (1) and (2) of this
Article VI (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in such Sections (1) and
(2). Such determination shall be made (a) by the Board of Directors of the
Corporation by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (b) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders of the Corporation.
(5) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation authorized in this Article VI. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board of Directors of the
Corporation deems appropriate.
(6) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other sections of this Article VI shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any law, by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office.
(7) The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of Section 145 of the General Corporation
Law.
(8) For purposes of this Article VI, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents so that any person who is or was a director, officer, employee or agent
<PAGE>
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article VI with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(9) For purposes of this Article VI, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves service by, such director,
officer, employee or agent with respect to any employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article VI.
(10) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article VI shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE VII
By-Laws
The directors of the Corporation shall have the power to
adopt, amend or repeal by-laws.
ARTICLE VIII
Reorganization
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
ARTICLE IX
Amendment
The Corporation reserves the right to amend, alter, change or
repeal any provision of this Certificate of Incorporation, in the manner now or
hereafter prescribed by law, and all rights conferred on stockholders in this
Certificate of Incorporation are subject to this reservation.
<PAGE>
ARTICLE X
Incorporator
The name and mailing address of the sole incorporator is as
follows:
Name Mailing Address
---- ---------------
Christine M. Kozel Shearman & Sterling
599 Lexington Avenue, Room 1679
New York, NY 10022
I, THE UNDERSIGNED, being the sole incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, do make this Certificate of
Incorporation, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand this
12th day of March, 1998.
--------------------------
Christine M. Kozel
<PAGE>
AMENDED
BY-LAWS
OF
WESTERGAARD.com, inc.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
Section Page
ARTICLE I OFFICES
1.01. Registered Office.................................................................................1
-----------------
1.02. Other Offices.....................................................................................1
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ARTICLE II MEETINGS OF STOCKHOLDERS
2.01. Annual Meetings...................................................................................1
---------------
2.02. Special Meetings..................................................................................1
----------------
2.03. Notice of Meetings................................................................................2
------------------
2.04. Waiver of Notice..................................................................................2
----------------
2.05. Adjournments......................................................................................2
------------
2.06. Quorum............................................................................................3
------
2.07. Voting............................................................................................3
------
2.08. Proxies...........................................................................................3
-------
2.09. Stockholders' Consent in Lieu of Meeting..........................................................3
----------------------------------------
ARTICLE III BOARD OF DIRECTORS
3.01. General Powers....................................................................................4
--------------
3.02. Number and Term of Office.........................................................................4
-------------------------
3.03. Resignation.......................................................................................4
-----------
3.04. Removal...........................................................................................4
-------
3.05. Vacancies.........................................................................................4
---------
3.06. Meetings..........................................................................................5
--------
3.07. Committees of the Board...........................................................................6
-----------------------
3.08. Directors' Consent in Lieu of Meeting.............................................................7
-------------------------------------
3.09. Action by Means of Telephone or Similar Communications Equipment..................................7
----------------------------------------------------------------
3.10. Compensation......................................................................................7
------------
ARTICLE IV OFFICERS
4.01. Officers..........................................................................................7
--------
4.02. Authority and Duties..............................................................................7
--------------------
4.03. Term of Office, Resignation and Removal...........................................................7
---------------------------------------
4.04. Vacancies.........................................................................................8
---------
4.05. The Chairman......................................................................................8
------------
4.06. The President/CEO.................................................................................8
-----------------
4.07. Vice Presidents...................................................................................8
---------------
4.08. The Secretary.....................................................................................8
-------------
4.09 Assistant Secretaries.............................................................................9
---------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
4.10. The Treasurer.....................................................................................9
-------------
ARTICLE V CHECKS, DRAFTS, NOTES, AND PROXIES
5.01. Checks, Drafts and Notes..........................................................................9
------------------------
5.02. Execution of Proxies..............................................................................9
--------------------
ARTICLE VI SHARES AND TRANSFERS OF SHARES
6.01. Certificates Evidencing Shares...................................................................10
------------------------------
6.02. Stock Ledger.....................................................................................10
------------
6.03. Transfers of Shares..............................................................................10
-------------------
6.04. Addresses of Stockholders........................................................................10
-------------------------
6.05. Lost, Destroyed and Mutilated Certificates.......................................................11
------------------------------------------
6.06. Regulations......................................................................................11
-----------
6.07. Fixing Date for Determination of Stockholders of Record..........................................11
-------------------------------------------------------
ARTICLE VII SEAL
7.01. Seal.............................................................................................11
----
ARTICLE VIII FISCAL YEAR
8.01. Fiscal Year......................................................................................12
-----------
ARTICLE IX INDEMNIFICATION AND INSURANCE
9.01. Indemnification...................................................................................12
---------------
9.02. Insurance for Indemnification....................................................................14
-----------------------------
ARTICLE X AMENDMENTS
10.01. Amendments......................................................................................14
----------
</TABLE>
<PAGE>
AMENDED
BY-LAWS
OF
WESTERGAARD.COM, INC.
ARTICLE I
OFFICES
SECTION 1.01. Registered Office. The registered office of
Westergaard.com,inc. (the "Corporation") in the State of Delaware shall be at
the principal office of The Corporation Trust Company in the City of Wilmington,
County of New Castle, and the registered agent in charge thereof shall be The
Corporation Trust Company.
SECTION 1.02. Other Offices. The Corporation may also have an
office or offices at any other place or places within or without the State of
Delaware as the Board of Directors of the Corporation (the "Board") may from
time to time determine or the business of the Corporation may from time to time
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01. Annual Meetings. The annual meeting of
stockholders of the Corporation for the election of directors of the Corporation
("Directors"), and for the transaction of such other business as may properly
come before such meeting, shall be held at such place, date and time as shall be
fixed by the Board and designated in the notice or waiver of notice of such
annual meeting; provided, however, that no annual meeting of stockholders need
be held if all actions, including the election of Directors, required by the
General Corporation Law of the State of Delaware (the "General Corporation Law")
to be taken at such annual meeting are taken by written consent in lieu of
meeting pursuant to Section 2.09 hereof.
SECTION 2.02. Special Meetings. Special meetings of
stockholders for any purpose or purposes may be called by the Board or the
Chairman of the Board, the President/Chief Executive Officer (the
"President/CEO") or the Secretary of the Corporation or
<PAGE>
by the recordholders of at least a majority of the shares of common stock of the
Corporation issued and outstanding ("Shares") and entitled to vote thereat, to
be held at such place, date and time as shall be designated in the notice or
waiver of notice thereof.
SECTION 2.03. Notice of Meetings. (a) Except as otherwise
provided by law, written notice of each annual or special meeting of
stockholders stating the place, date and time of such meeting and, in the case
of a special meeting, the purpose or purposes for which such meeting is to be
held, shall be given personally or by first-class mail (airmail in the case of
international communications) to each recordholder of Shares (a "Stockholder")
entitled to vote thereat, not less than 10 nor more than 60 days before the date
of such meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail, postage prepaid, directed to the
Stockholder at such Stockholder's address as it appears on the records of the
Corporation. If, prior to the time of mailing, the Secretary of the Corporation
(the "Secretary") shall have received from any Stockholder a written request
that notices intended for such Stockholder are to be mailed to some address
other than the address that appears on the records of the Corporation, notices
intended for such Stockholder shall be mailed to the address designated in such
request.
(b) Notice of a special meeting of Stockholders may be given
by the person or persons calling the meeting, or, upon the written request of
such person or persons, such notice shall be given by the Secretary on behalf of
such person or persons. If the person or persons calling a special meeting of
Stockholders give notice thereof, such person or persons shall deliver a copy of
such notice to the Secretary. Each request to the Secretary for the giving of
notice of a special meeting of Stockholders shall state the purpose or purposes
of such meeting.
SECTION 2.04. Waiver of Notice. Notice of any annual or
special meeting of Stockholders need not be given to any Stockholder who files a
written waiver of notice with the Secretary, signed by the person entitled to
notice, whether before or after such meeting. Neither the business to be
transacted at, nor the purpose of, any meeting of Stockholders need be specified
in any written waiver of notice thereof. Attendance of a Stockholder at a
meeting, in person or by proxy, shall constitute a waiver of notice of such
meeting, except when such Stockholder attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business on the grounds that the notice of such meeting was inadequate or
improperly given.
SECTION 2.05. Adjournments. Whenever a meeting of
Stockholders, annual or special, is adjourned to another date, time or place,
notice need not be given of the adjourned meeting if the date, time and place
thereof are announced at the meeting at which the adjournment is taken. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be
<PAGE>
given to each Stockholder entitled to vote thereat. At the adjourned meeting,
any business may be transacted which might have been transacted at the original
meeting.
SECTION 2.06. Quorum. Except as otherwise provided by law or
the Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), the recordholders of a majority of the Shares entitled to vote
thereat, present in person or by proxy, shall constitute a quorum for the
transaction of business at all meetings of Stockholders, whether annual or
special. If, however, such quorum shall not be present in person or by proxy at
any meeting of Stockholders, the Stockholders entitled to vote thereat may
adjourn the meeting from time to time in accordance with Section 2.05 hereof
until a quorum shall be present in person or by proxy.
SECTION 2.07. Voting. Each Stockholder shall be entitled to
one vote for each Share held of record by such Stockholder. Except as otherwise
provided by law or the Certificate of Incorporation, when a quorum is present at
any meeting of Stockholders, the vote of the recordholders of a majority of the
Shares constituting such quorum shall decide any question brought before such
meeting.
SECTION 2.08. Proxies. Each Stockholder entitled to vote at a
meeting of Stockholders or to express, in writing, consent to or dissent from
any action of Stockholders without a meeting may authorize another person or
persons to act for such Stockholder by proxy. Such proxy shall be filed with the
Secretary before such meeting of Stockholders or such action of Stockholders
without a meeting, at such time as the Board may require. No proxy shall be
voted or acted upon more than three years from its date, unless the proxy
provides for a longer period.
SECTION 2.09. Stockholders' Consent in Lieu of Meeting. Any
action required by the General Corporation Law to be taken at any annual or
special meeting of Stockholders, and any action which may be taken at any annual
or special meeting of Stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the recordholders of Shares having not less
than the minimum number of votes necessary to authorize or take such action at a
meeting at which the recordholders of all Shares entitled to vote thereon were
present and voted.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. General Powers. The business and affairs of the
Corporation shall be managed by the Board, which may exercise all such powers of
the Corporation and do
<PAGE>
all such lawful acts and things as are not by law, the Certificate of
Incorporation or these By-laws directed or required to be exercised or done by
Stockholders.
SECTION 3.02. Number and Term of Office. The number of
Directors shall be no fewer than five (5) directors at any given time and no
more than eight (8), or such other number as shall be fixed from time to time by
the Board. Directors need not be Stockholders. Directors shall be elected at the
annual meeting of Stockholders or, if, in accordance with Section 2.01 hereof,
no such annual meeting is held, by written consent in lieu of meeting pursuant
to Section 2.09 hereof, and each Director shall hold office until his successor
is elected and qualified, or until his earlier death or resignation or removal
in the manner hereinafter provided.
SECTION 3.03. Resignation. Any Director may resign at any time
by giving written notice to the Board, the Chairman of the Board of the
Corporation (the "Chairman") or the Secretary. Such resignation shall take
effect at the time specified in such notice or, if the time be not specified,
upon receipt thereof by the Board, the Chairman or the Secretary, as the case
may be. Unless otherwise specified therein, acceptance of such resignation shall
not be necessary to make it effective.
SECTION 3.04. Removal. Any or all of the Directors may be
removed, with or without cause, at any time by vote of the recordholders of a
majority of the Shares then entitled to vote at an election of Directors, or by
written consent of the recordholders of Shares pursuant to Section 2.09 hereof.
SECTION 3.05. Vacancies. Vacancies occurring on the Board as a
result of the removal of Directors without cause may be filled only by vote of
the recordholders of a majority of the Shares then entitled to vote at an
election of Directors, or by written consent of such recordholders pursuant to
Section 2.09 hereof. Vacancies occurring on the Board for any other reason,
including, without limitation, vacancies occurring as a result of the creation
of new directorships that increase the number of Directors, may be filled by
such vote or written consent or by vote of the Board or by written consent of
the Directors pursuant to Section 3.08 hereof. If the number of Directors then
in office is less than a quorum, such other vacancies may be filled by vote of a
majority of the Directors then in office or by written consent of all such
Directors pursuant to Section 3.08 hereof. Unless earlier removed pursuant to
Section 3.04 hereof, each Director chosen in accordance with this Section 3.05
shall hold office until the next annual election of Directors by the
Stockholders and until his successor shall be elected and qualified.
SECTION 3.06. Meetings. (a) Annual Meetings. As soon as
practicable after each annual election of Directors by the Stockholders, the
Board shall meet for the purpose of organization and the transaction of other
business, unless it shall have transacted all such business by written consent
pursuant to Section 3.08 hereof.
<PAGE>
(b) Other Meetings. Other meetings of the Board shall be
held at such times as the Chairman, the President/CEO of the Corporation, the
Secretary or a majority of the Board shall from time to time determine.
(c) Notice of Meetings. The Secretary shall give written
notice to each Director of each meeting of the Board, which notice shall state
the place, date, time and purpose of such meeting. Notice of each such meeting
shall be given to each Director, if by mail, addressed to him at his residence
or usual place of business, at least two days before the day on which such
meeting is to be held, or shall be sent to him at such place by telecopy,
telegraph, cable, or other form of recorded communication, or be delivered
personally or by telephone not later than the day before the day on which such
meeting is to be held. A written waiver of notice, signed by the Director
entitled to notice, whether before or after the time of the meeting referred to
in such waiver, shall be deemed equivalent to notice. Neither the business to be
transacted at, nor the purpose of any meeting of the Board need be specified in
any written waiver of notice thereof. Attendance of a Director at a meeting of
the Board shall constitute a waiver of notice of such meeting, except as
provided by law.
(d) Place of Meetings. The Board may hold its meetings at such
place or places within or without the State of Delaware as the Board or the
Chairman may from time to time determine, or as shall be designated in the
respective notices or waivers of notice of such meetings.
(e) Quorum and Manner of Acting. One-third of the total number
of Directors then in office (but in no event less than two if the total number
of directorships, including vacancies, is greater than one and in no event a
number less than one-third of the total number of directorships, including
vacancies) shall be present in person at any meeting of the Board in order to
constitute a quorum for the transaction of business at such meeting, and the
vote of a majority of those Directors present at any such meeting at which a
quorum is present shall be necessary for the passage of any resolution or act of
the Board, except as otherwise expressly required by law, the Certificate of
Incorporation or these By-laws. In the absence of a quorum for any such meeting,
a majority of the Directors present thereat may adjourn such meeting from time
to time until a quorum shall be present.
(f) Organization. At each meeting of the Board, one of the
following shall act as chairman of the meeting and preside, in the following
order of precedence:
(i) the Chairman;
(ii) any Director chosen by a majority of the Directors
present.
<PAGE>
The Secretary or, in the case of his absence, any person (who shall be an
Assistant Secretary, if an Assistant Secretary is present) whom the chairman of
the meeting shall appoint shall act as secretary of such meeting and keep the
minutes thereof.
SECTION 3.07. Committees of the Board. The Board may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more Directors. The Board may
designate one or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of such committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another Director
to act at the meeting in the place of any such absent or disqualified member.
Any committee of the Board, to the extent provided in the resolution of the
Board designating such committee, shall have and may exercise all the powers and
authority of the Board in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; provided, however, that no such committee shall
have such power or authority in reference to amending the Certificate of
Incorporation (except that such a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board as provided in Section 151(a) of the General Corporation Law, fix
the designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes of stock of the Corporation or fix the number of
shares of any series of stock or authorize the increase or decrease of the
shares of any series), adopting an agreement of merger or consolidation under
Section 251 or 252 of the General Corporation Law, recommending to the
Stockholders the sale, lease or exchange of all or substantially all the
Corporation's property and assets, recommending to the Stockholders a
dissolution of the Corporation or the revocation of a dissolution, or amending
these By-laws; provided further, however, that, unless expressly so provided in
the resolution of the Board designating such committee, no such committee shall
have the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the General Corporation Law. Each committee of the Board shall keep regular
minutes of its proceedings and report the same to the Board when so requested by
the Board.
SECTION 3.08. Directors' Consent in Lieu of Meeting. Any
action required or permitted to be taken at any meeting of the Board or of any
committee thereof may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by all the members of the Board or such committee and such
consent is filed with the minutes of the proceedings of the Board or such
committee.
SECTION 3.09. Action by Means of Telephone or Similar
Communications Equipment. Any one or more members of the Board, or of any
committee thereof, may
<PAGE>
participate in a meeting of the Board or such committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
SECTION 3.10. Compensation. Unless otherwise restricted by the
Certificate of Incorporation, the Board may determine the compensation of
Directors. In addition, as determined by the Board, Directors may be reimbursed
by the Corporation for their expenses, if any, in the performance of their
duties as Directors. No such compensation or reimbursement shall preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor.
ARTICLE IV
OFFICERS
SECTION 4.01. Officers. The officers of the Corporation
shall be the Chairman, the President/CEO, the Secretary and the Treasurer and
may include one or more Vice Presidents. Any two or more offices may be held by
the same person.
SECTION 4.02. Authority and Duties. All officers shall have
such authority and perform such duties in the management of the Corporation as
may be provided in these By-laws or, to the extent not so provided, by
resolution of the Board.
SECTION 4.03. Term of Office, Resignation and Removal. (a)
Each officer shall be appointed by the Board and shall hold office for such term
as may be determined by the Board. Each officer shall hold office until his
successor has been appointed and qualified or his earlier death or resignation
or removal in the manner hereinafter provided. The Board may require any officer
to give security for the faithful performance of his duties.
(b) Any officer may resign at any time by giving written
notice to the Board, the Chairman, the President/CEO or the Secretary. Such
resignation shall take effect at the time specified in such notice or, if the
time be not specified, upon receipt thereof by the Board, the Chairman, the
President/CEO or the Secretary, as the case may be. Unless otherwise specified
therein, acceptance of such resignation shall not be necessary to make it
effective.
(c) All officers and agents appointed by the Board shall be
subject to removal, with or without cause, at any time by the Board or by the
action of the recordholders of a majority of the Shares entitled to vote
thereon.
<PAGE>
SECTION 4.04. Vacancies. Any vacancy occurring in any office
of the Corporation, for any reason, shall be filled by action of the Board.
Unless earlier removed pursuant to Section 4.03 hereof, any officer appointed by
the Board to fill any such vacancy shall serve only until such time as the
unexpired term of his predecessor expires unless reappointed by the Board.
SECTION 4.05. The Chairman. The Chairman shall have the power
to call special meetings of Stockholders, to call special meetings of the Board
and, if present, to preside at all meetings of Stockholders and all meetings of
the Board. The Chairman shall perform all duties incident to the office of
Chairman of the Board and all such other duties as may from time to time be
assigned to him by the Board or these By-laws.
SECTION 4.06. The President/CEO. The President/CEO shall be
the chief executive officerof the Corporation and shall have general and active
management and control of the business and affairs of the Corporation, subject
to the control of the Board, and shall see that all orders and resolutions of
the Board are carried into effect. The President/CEO shall perform all duties
incident to the office of President/CEO and all such other duties as may from
time to time be assigned to him by the Board or these By-laws.
SECTION 4.07. Vice Presidents. Vice Presidents, if any, in
order of their seniority or in any other order determined by the Board, shall
generally assist the President/CEO and perform such other duties as the Board or
the President/CEO shall prescribe, and in the absence or disability of the
President/CEO, shall perform the duties and exercise the powers of the
President/CEO.
SECTION 4.08. The Secretary. The Secretary shall, to the
extent practicable, attend all meetings of the Board and all meetings of
Stockholders and shall record all votes and the minutes of all proceedings in a
book to be kept for that purpose, and shall perform the same duties for any
committee of the Board when so requested by such committee. He shall give or
cause to be given notice of all meetings of Stockholders and of the Board, shall
perform such other duties as may be prescribed by the Board, the Chairman or the
President/CEO and shall act under the supervision of the Chairman. He shall keep
in safe custody the seal of the Corporation and affix the same to any instrument
that requires that the seal be affixed to it and which shall have been duly
authorized for signature in the name of the Corporation and, when so affixed,
the seal shall be attested by his signature or by the signature of the Treasurer
of the Corporation (the "Treasurer") or an Assistant Secretary or Assistant
Treasurer of the Corporation. He shall keep in safe custody the certificate
books and stockholder records and such other books and records of the
Corporation as the Board, the Chairman or the President/CEO may direct and shall
perform all other duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Board, the Chairman or
the President/CEO.
<PAGE>
SECTION 4.09. Assistant Secretaries. Assistant Secretaries of
the Corporation ("Assistant Secretaries"), if any, in order of their seniority
or in any other order determined by the Board, shall generally assist the
Secretary and perform such other duties as the Board or the Secretary shall
prescribe, and, in the absence or disability of the Secretary, shall perform the
duties and exercise the powers of the Secretary.
SECTION 4.10. The Treasurer. The Treasurer shall have the care
and custody of all the funds of the Corporation and shall deposit such funds in
such banks or other depositories as the Board, or any officer or officers, or
any officer and agent jointly, duly authorized by the Board, shall, from time to
time, direct or approve. He shall disburse the funds of the Corporation under
the direction of the Board and the President/CEO. He shall keep a full and
accurate account of all moneys received and paid on account of the Corporation
and shall render a statement of his accounts whenever the Board, the Chairman or
the President/CEO shall so request. He shall perform all other necessary actions
and duties in connection with the administration of the financial affairs of the
Corporation and shall generally perform all the duties usually appertaining to
the office of treasurer of a corporation. When required by the Board, he shall
give bonds for the faithful discharge of his duties in such sums and with such
sureties as the Board shall approve.
ARTICLE V
CHECKS, DRAFTS, NOTES, AND PROXIES
SECTION 5.01. Checks, Drafts and Notes. All checks, drafts and
other orders for the payment of money, notes and other evidences of indebtedness
issued in the name of the Corporation shall be signed by such officer or
officers, agent or agents of the Corporation and in such manner as shall be
determined, from time to time, by resolution of the Board.
SECTION 5.02. Execution of Proxies. The Chairman or the
President/CEO, or, in the absence or disability of both of them, any Vice
President, may authorize, from time to time, the execution and issuance of
proxies to vote shares of stock or other securities of other corporations held
of record by the Corporation and the execution of consents to action taken or to
be taken by any such corporation. All such proxies and consents, unless
otherwise authorized by the Board, shall be signed in the name of the
Corporation by the Chairman, the President/CEO or any Vice President.
ARTICLE VI
SHARES AND TRANSFERS OF SHARES
<PAGE>
SECTION 6.01. Certificates Evidencing Shares. Shares shall be
evidenced by certificates in such form or forms as shall be approved by the
Board. Certificates shall be issued in consecutive order and shall be numbered
in the order of their issue, and shall be signed by the Chairman, the
President/CEO or any Vice President and by the Secretary, any Assistant
Secretary, the Treasurer or any Assistant Treasurer. If such a certificate is
manually signed by one such officer, any other signature on the certificate may
be a facsimile. In the event any such officer who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to hold such
office or to be employed by the Corporation before such certificate is issued,
such certificate may be issued by the Corporation with the same effect as if
such officer had held such office on the date of issue.
SECTION 6.02. Stock Ledger. A stock ledger in one or more
counterparts shall be kept by the Secretary, in which shall be recorded the name
and address of each person, firm or corporation owning the Shares evidenced by
each certificate evidencing Shares issued by the Corporation, the number of
Shares evidenced by each such certificate, the date of issuance thereof and, in
the case of cancellation, the date of cancellation. Except as otherwise
expressly required by law, the person in whose name Shares stand on the stock
ledger of the Corporation shall be deemed the owner and recordholder thereof for
all purposes.
SECTION 6.03. Transfers of Shares. Registration of transfers
of Shares shall be made only in the stock ledger of the Corporation upon request
of the registered holder of such shares, or of his attorney thereunto authorized
by power of attorney duly executed and filed with the Secretary, and upon the
surrender of the certificate or certificates evidencing such Shares properly
endorsed or accompanied by a stock power duly executed, together with such proof
of the authenticity of signatures as the Corporation may reasonably require.
SECTION 6.04. Addresses of Stockholders. Each Stockholder
shall designate to the Secretary an address at which notices of meetings and all
other corporate notices may be served or mailed to such Stockholder, and, if any
Stockholder shall fail to so designate such an address, corporate notices may be
served upon such Stockholder by mail directed to the mailing address, if any, as
the same appears in the stock ledger of the Corporation or at the last known
mailing address of such Stockholder.
SECTION 6.05. Lost, Destroyed and Mutilated Certificates. Each
recordholder of Shares shall promptly notify the Corporation of any loss,
destruction or mutilation of any certificate or certificates evidencing any
Share or Shares of which he is the recordholder. The Board may, in its
discretion, cause the Corporation to issue a new certificate in place of any
certificate theretofore issued by it and alleged to have been mutilated, lost,
stolen or destroyed, upon the surrender of the mutilated certificate or, in the
case of loss, theft or destruction of the certificate, upon satisfactory proof
of such loss, theft or destruction, and the Board may, in its discretion,
require the recordholder of the Shares evidenced by the lost, stolen or
destroyed certificate or his legal representative to give the Corporation a bond
sufficient to indemnify the
<PAGE>
Corporation against any claim made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
SECTION 6.06. Regulations. The Board may make such other rules
and regulations as it may deem expedient, not inconsistent with these By-laws,
concerning the issue, transfer and registration of certificates evidencing
Shares.
SECTION 6.07. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the Stockholders entitled to
notice of or to vote at any meeting of Stockholders or any adjournment thereof,
or to express consent to, or to dissent from, corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board may fix, in advance, a record date, which
shall not be more than 60 nor less than 10 days before the date of such meeting,
nor more than 60 days prior to any other such action. A determination of the
Stockholders entitled to notice of or to vote at a meeting of Stockholders shall
apply to any adjournment of such meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.
ARTICLE VII
SEAL
SECTION 7.01. Seal. The Board may approve and adopt a
corporate seal, which shall be in the form of a circle and shall bear the full
name of the Corporation, the year of its incorporation and the words "Corporate
Seal Delaware".
ARTICLE VIII
FISCAL YEAR
SECTION 8.01. Fiscal Year. The fiscal year of the
Corporation shall end on the thirty-first day of December of each year unless
changed by resolution of the Board.
ARTICLE IX
INDEMNIFICATION AND INSURANCE
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SECTION 9.01. Indemnification. (a) The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent
of the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Section 9.01(a) and (b) of these
By-laws, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under Section 9.01(a) and (b) of these
By-laws (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is
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proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 9.01(a) and (b) of these By-laws. Such
determination shall be made (i) by the Board by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (ii) if such a quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders of the Corporation.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation pursuant to this Article IX. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board deems appropriate.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, other Sections of this Article IX shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any law, by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office.
(g) For purposes of this Article IX, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article IX with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(h) For purposes of this Article IX, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves service by, such director,
officer, employee or agent with respect to any employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article IX.
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(i) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article IX shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
SECTION 9.02. Insurance for Indemnification. The Corporation
may purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of Section 145 of the General Corporation Law.
ARTICLE X
AMENDMENTS
SECTION 10.01. Amendments. Any By-law (including these
By-laws) may be adopted, amended or repealed by the vote of the recordholders of
a majority of the Shares then entitled to vote at an election of Directors or by
written consent of Stockholders pursuant to Section 2.09 hereof, or by vote of
the Board or by a written consent of Directors pursuant to Section 3.08 hereof.
