AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON November 2, 2000
REGISTRATION NO. 333-37930
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Adar Alternative One, Inc.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
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Florida 6770 Applied For
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State or other jurisdiction of PRIMARY STANDARD INDUSTRIAL I.R.S. Employer Identification No.
incorporation or organization CLASSIFICATION CODE NUMBER
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10 Troon Place
P.O. Box 289
Mashpee, MA 02649
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Michael T. Williams
2503 W. Gardner Ct.
Tampa, FL 33611
TELEPHONE: 813.831.9348
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As promptly as practicable after this registration statement becomes effective
and after the closing of the merger of the proposed merger described in this
registration statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b, under the securities act, check the following box and
list the securities act registration statement number of the earlier effective
registration statement for the same offering. *[ ] *registration number,
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the securities act, check the following box and list the securities act
registration statement number of the earlier effective registration statement
for the same offering. *[ ]
*registration number,
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. *[ ]
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CALCULATION OF REGISTRATION FEE
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Title of each Proposed
class of maximum Proposed maximum Amount of
securities to Amount to be per unit aggregate fee
be registered registered offering price offering price registration
Common Stock,
no par value 10,400,000 0.004 $44,231 (2) $100 (2)
</TABLE>
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(1) Represents an estimate of the maximum number of shares of common stock of
Registrant which may be issued to former holders of shares of common stock of
Impulse Communications pursuant to the merger described herein.
(2) As of December 31, 1999, Impulse Communications had a book value of the
shares to be registered is $44,231. In addition, Impulse Communications common
stock has no par value. Accordingly, the maximum offering price has been
determined to be the book value of the securities to be registered.
(3)This fee has been calculated pursuant to Section 6(b) of the Securities Act,
as .0264 of one percent of $44,231.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
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<PAGE>
PROSPECTUS
Adar Alternative One, Inc.
Adar Alternative One, Inc., a Florida corporation and Impulse Communications,
Inc., a Nevada corporation, have entered into a merger agreement. As a result of
the merger, each outstanding share of Impulse Communications common stock, other
than dissenting shares, as discussed later in this document, will be exchanged
for one share of Adar Alternative One common stock. When the merger closes, Adar
Alternative One will change its name to Impulse Communications and will be the
surviving corporation. It will then file to have its stock quoted on the OTC
Bulletin Board.
The following table contains comparative share information for shareholders of
Impulse Communications and Adar Alternative One immediately after the closing of
the merger.
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<S> <C> <C> <C>
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The former shareholders of The current shareholders of Total
Impulse Communications Adar Alternative One
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Number 10,008,000 400,000 10,408,000
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Percentage 96% 4% 100%
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The merger presents some risks. We suggest you review "Risk Factors" beginning
on page 6.
Neither the Securities and Exchange Commission nor any state securities
regulators have approved or disapproved the Adar Alternative One common stock to
be issued in the merger or if this / /prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus is ***.
<PAGE>
SUMMARY
This summary provides a brief overview of the key aspects of this offering. The
merger agreement is filed as an exhibit to this registration statement.
The Companies
Adar Alternative One, Inc.
2503 W. Gardner Ct.
Tampa, FL 33611
Telephone: 813/831-9348
Adar Alternative One was organized as a corporation under the laws of the state
of Florida in April 1999. Since inception, our primary activity has been
directed to organizational efforts. It was formed as a vehicle to acquire
through a registered securities offering a private company desiring to become an
SEC reporting company in order thereafter to secure a listing on the over the
counter bulletin board. Adar Alternative One has now identified Impulse
Communications as the entity Adar Alternative One wishes to acquire. Adar
Alternative One is not searching for additional acquisition candidates.
It has never offered or sold any securities in either a registered or
unregistered transaction except for issuing shares to its 15 stockholders upon
its formation.
Adar Alternative One is not currently a company which is listed for trading on
the OTC Bulletin Board. Before receiving approval for an application to be
listed on the OTC Bulletin Board, Adar Alternative One must first have this
registration statement declared effective. Public Securities, an NASD Market
Maker, has agreed to file a form 211 to secure a listing on the OTC Bulletin
Board. Adar Alternative One believes that the NASD will not approve this
application until this registration statement has been declared effective. After
this task has been accomplished, the NASD and the Market Maker must resolve all
outstanding issues that the NASD may have in order for trading to commence.
Impulse Communications, Inc.
468 Kingstown Road, #4
Wakefield, RI 02879
Phone: 401-789-0885
Fax: 401-789-1207
Impulse Communications, Inc. was originally organized as a sole
proprietorship in 1990 and reorganized as a Nevada corporation in 2000. Impulse
Communications, Inc. owns and operates websites on the Internet.
Comparison of the percentage of outstanding shares entitled to vote held by
directors, executive officers and their affiliates and the vote required for
approval of the merger
Over 90 percent of Adar Alternative One's shares are held by its directors,
executive officers and their affiliates. A majority vote of the issued and
outstanding shares is required to approve the merger. Shareholders owning more
than 90% of Adar Alternative One's common stock have executed a written consent
voting to approve the merger. No further consent or any of the shareholders of
Adar Alternative One is necessary to approve the merger under the laws of the
state of Nevada.
Approximately 97.5% of Impulse Communication's shares are held by its directors,
executive officers and their affiliates. A majority vote of the issued and
outstanding shares is required to approve the merger. Assuming consents are
secured from shareholders owning more than 50% of the stock of Impulse
Communications, shareholders who did not consent to the merger will, by
otherwise complying with Nevada corporate law, be entitled to dissenters' rights
with respect to the proposed merger. No consents will be solicited or accepted
until after the effective date of this prospectus. Based upon the ownership of
more than 50% of Impulse Communications common stock by officers, directors and
affiliates, it appears that a favorable vote is assured.
Regulatory approval required
Neither Adar Alternative One nor Impulse Communications is aware of any
governmental regulatory approvals required to be obtained with respect to the
closing of the merger, except for the filing of the articles of merger with the
offices of the secretary of state of the state of Nevada.
Dissenters' rights
Dissenters' rights of appraisal exist. In general, under Nevada law, any
shareholder who does not give consent for the merger and files a written demand
for appraisal with Impulse Communications within 10 days of the closing of the
merger will be paid the fair market value of the shares on the date of the
closing of the merger, as determined by the board of directors of Impulse
Communications. If you wish to exercise these rights, you must not consent in
writing or otherwise vote in favor of the merger, must file a written demand
within the prescribed time period, and follow other procedures. These rights the
way you exercise them are discussed in greater detail beginning on page 16.
Federal income tax consequences
Tax matters are very complicated and the tax consequences of the merger to you
will depend on the facts of your own situation. You should consult your tax
advisors for a full understanding of the tax consequences of the merger to you.
Neither Impulse Communications nor its holders of its common stock should
recognize gain or loss for federal income tax purposes as a result of the
merger.
Other Information for Impulse Communications Stockholders:
o Do not send in your Impulse Communications stock certificates now.
If the merger is completed, we will send you written instructions
for exchanging your shares.
o The merger has been structured as a tax-free reorganization. The
tax basis in your Impulse Communications common stock will
carryover and become the tax basis in your new shares of Adar
Alternative One common stock.
o Like Impulse Communications, Adar Alternative One has never
paid any dividends.
o If you have any questions about the merger, please call Eric
Borgos, at Impulse Communications, at 401-789-0885
Selected Historical Financial Information
The following selected historical financial information of Impulse
Communications and Adar Alternative One has been derived from their respective
historical financial statements, and should be read in conjunction with the
financial statements and the notes , which are included in this prospectus.
IMPULSE COMMUNICATIONS SELECTED HISTORICAL FINANCIAL INFORMATION
ADAR ALTERNATIVE ONE SELECTED HISTORICAL FINANCIAL INFORMATION
The following information concerning our financial position and operations is as
of and for the period ended December 31, 1999.
Total assets $ 0
Total liabilities 0
Equity 79
Sales 0
Net loss 79
Net loss per share 0.00
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS OF IMPULSE COMMUNICATIONS AND
ADAR ALTERNATIVE ONE
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UNAUDITED PRO FORMA COMBINED BALANCE SHEET
COMPARATIVE PER SHARE DATA
RISK FACTORS
RISKS CONCERNING IMPULSE COMMUNICATIONS.
The majority of our revenues come from commissions generated by sales of
products and services by third party providers whose products we represent and
to whom we refer customers from our websites. Actions taken by these providers
reduce our revenues.
We receive sales commissions from third-party providers for products and
services we sell. These commissions account for approximately 90% of our
revenues.
Our sales commissions may be reduced by a number of actions of these providers,
including the following:
o Third-parties may increase the price of the products and services they
provide, which could lead to reduces sales and reduced commissions paid
to us.
o Many third-party providers may compete with us for customers and may
decide to terminate their relationship with us.
o Our contracts with third-party providers are exclusively short-term and
may be canceled with no notice.
o Many third-party providers may sell their products directly a lower
cost.
Our third party providers have no contracts with their customers. Thus, our
customers can quickly and easily stop buying the products and services on which
our commissions are based, which would reduce our revenues.
We derive a significant portion of our revenues from commissions generated by
sales of products and services on websites operated by our third party providers
on the Internet. A significant number of these sales of products and services on
the Internet will be made to customers with no contracts. As a result, many of
our product and service customers could cease purchasing from websites operated
by our third party providers quickly and without penalty. If customers stop
purchasing the products and services offered on websites operated by our third
party providers in any quarter, our income could be reduced or eliminated.
The new and, rapidly evolving nature of selling our various products and
services and those of our third party providers on the Internet makes the
ultimate demand for the sale of our various products and services and those of
our third party providers on the Internet upon which we receive our sales
commissions uncertain. Any reduction in demand will reduce our revenues.
As an exclusively online commerce company, we face increased risks,
uncertainties, expenses and difficulties. The sale of our various products and
services and those of our third party providers on the Internet is a relatively
new approach to the sale of our various products and services and those of our
third party providers. Our future revenues and profits will be substantially
dependent upon the widespread acceptance of the Internet and online services a
medium for commerce by consumers. Rapid growth in the use of and interest in the
World Wide Web, the Internet and online products and services providers is a
recent phenomenon. This acceptance and use may not continue. Because global
commerce and the online exchange of information is new and evolving, we cannot
predict whether the Web will prove to be a viable commercial marketplace in the
long term.
In order to expand our customer base, we must appeal to and acquire consumers
who historically have used traditional means of commerce to purchase goods. If
we fail to do so, our revenues will be reduced.
Customers of traditional businesses selling our various products and services
and those of our third party providers may be reluctant or slow to purchase our
various products and services and those of our third party providers on the
Internet, which would adversely effect the ability of websites operated by our
third party providers to sell our various products and services and those of our
third party providers on the Internet, upon which our sales commissions are
based.
Even if the Internet is accepted, concerns about fraud, privacy and other
problems may mean that a sufficiently broad base of consumers will not adopt the
Internet as a medium of commerce. These concerns may increase as additional
publicity over privacy issues over the Internet increases. Market acceptance for
recently introduced products or services over the Internet is highly uncertain,
and there are few proven products or services. If there is not sufficient market
acceptance or if market acceptance declines for these or other reasons, our
revenues will be reduced.
A significant barrier to online commerce and communications is the secure
transmission of confidential information over public networks. Websites operated
us or by our third party providers' security measures may not prevent security
breaches. The failure by websites operated by us or third party providers to
prevent security breaches could harm our business.
Advances in computer capabilities, new discoveries in the field of cryptography,
or other developments may result in a compromise or breach of the technology
used by us to protect customer transaction data. Any compromise of our security
could harm our reputation and, therefore, our business. In addition, a party who
is able to circumvent security measures could misappropriate proprietary
information or cause interruptions in operations.
The success of our various products and services and those of our third party
providers will depend largely on the development and maintenance of the Web
infrastructure. Problems with development and maintenance of the web
infrastructure could decrease users or growth of users or costs of our website,
which could reduce our revenues.
Our success depends in part maintenance of a reliable network backbone with the
necessary speed, data capacity and security, as well timely development of
complementary products such as high speed modems, for providing reliable Web
access to our various products and services and those of our third party
providers. The Web has experienced, and is likely to continue to experience,
significant growth in the numbers of customers and amount of traffic. If the Web
continues to experience increased numbers of customers, increased frequency of
use or increased bandwidth requirements, the Web infrastructure may be unable to
support the demands placed on it.
A key element of our strategy is to generate a high volume of traffic on, and
use of, our Web site. Our revenues depend on the number of customers who use our
Web site to access our various products and services and those of our third
party providers. Any systems interruptions that result in the unavailability of
our or our third party providers' Web sites or reduced order fulfillment
performance would reduce the volume of goods sold and the attractiveness of our
product and service offerings, which could reduce or eliminate our income.
In addition, the performance of the Web may be harmed by increased customers or
bandwidth requirements. If sufficient bandwidth is not available, there may be a
slower than anticipated growth of the internet as a means of commerce. If it
costs customers more to access the internet, there may be fewer users than we
anticipate. If it costs e-commerce retailers more to maintain their sites,
prices may increase and demand may decrease.
The possibility of large-scale technical difficulties or service interruption or
damage from earthquakes, floods, fires, power loss, telecommunication failures
and similar events interruptions could reduce our revenues.
The Web has experienced a variety of outages and other delays as a result of
damage to portions of its infrastructure, and it could face outages and delays
in the future. These outages and delays could reduce the level of Web usage as
well as the level of traffic and the processing of commerce on websites operated
by our third party providers. In addition, the Web could lose its viability due
to delays in the development or adoption of new standards and protocols to
handle increased levels of activity or due to increased governmental regulation.
The infrastructure and complementary services necessary to make the Web a viable
commercial marketplace for the long term may not be developed successfully or in
a timely manner.
If system failures were sustained or repeated, our reputation and the
attractiveness of our various products and services and those of our third party
providers could be impaired. Sales of our various products and services and
those of our third party providers are heavily dependent on the integrity of the
software and hardware systems supporting it. Heavy stress placed on systems
could cause them to operate at unacceptably low speed or fail. Failure of our
systems could also be caused by online service providers, record keeping and
data processing functions performed by third parties and third-party software
such as Internet browsers, databases and load balancing software. Additionally,
a natural disaster, power or telecommunications failure or act of war may cause
extended systems failure. Computer viruses or unauthorized access to or sabotage
of our network by a third party could also result in system failures or service
interruptions.
Our success, in particular our ability to successfully receive and fulfill
orders and provide high quality customer service, largely depends on the
efficient and uninterrupted operation of our computer and communications
systems. If our computer and communications systems are inadequate or fail to
perform, our revenues could be reduced.
Substantially all of our management systems are located at our office. We
contract with a third party for mission critical Internet connectivity, and
these systems are located at a variety of locations throughout the U.S. We do
not have a formal disaster recovery plan and do not carry sufficient business
interruption insurance to compensate us for losses that may occur.
Our revenues may be reduced due to litigation resulting from the sale of our
various products and services and those of our third party providers,
particularly those with adult-oriented content, on one or more our websites or
those sites operated by our third party providers.
The law relating to the liability of providers of online products and services
providers for the activities of their customers or their service is currently
unsettled. Because the websites operated by our third party providers sell our
various products and services and those of our third party providers for which
we receive a commission, we could be liable for faulty our various products and
services and those of our third party providers or for our various products and
services and those of our third party providers provided by others.
Any resulting litigation could:
o Be costly for us.
o Divert management attention from the operation of our business.
o Result in increased costs of doing business.
o Lead to adverse judgment.
o Otherwise harm our business.
We do not plan to carry general liability insurance. If we become liable for any
of these claims, our revenues may be reduced and we may be forced to implement
new measures to reduce our exposure to this liability. This may require us to
expend substantial resources and to discontinue some product or service
offerings. In addition, the increased attention focused upon liability issues as
a result of these lawsuits could harm our reputation or otherwise impact the
growth of our business.
Many of our third party service providers have websites with adult content.
Federal and State governments, along with various religious and children's
advocacy groups, consistently propose and pass legislation aimed at restricting
provision of, access to, and content of sexually explicit adult entertainment.
Because the majority of our revenues comes from this business, any restriction
could harm our business.
These groups also may file lawsuits against providers of adult entertainment,
encourage boycotts against these providers and mount negative publicity.
Although websites operated by us and our third party providers do not knowingly
sell a product that has been judged to be obscene or illegal worldwide,
including the U.S., there can be no assurance that these sales will not be
subject to successful legal attacks in the future.
Government inquiries may lead to charges or penalties which could reduce our
revenues.
The sale of our various products and services and those of our third party
providers on the Internet is a relatively new field and legally unsettled.
Consequently, we may receive inquiries from local, state and federal governments
on our consumer practices. Should these inquiries lead to civil or criminal
charges against us, we would likely be harmed by negative publicity, the costs
of litigation, the diversion of management time and other negative effects, even
if we ultimately prevail. Our revenues would certainly be reduced if we were not
to prevail in any legal action.
New and existing regulation of the Internet could reduce our revenues.
We are subject to the same federal, state and local laws as other companies
conducting business on the Internet. Today there are relatively few laws
specifically directed towards online products and services providers. However,
due to the increasing popularity and use of the Internet and online products and
services providers, it is possible that laws and regulations will be adopted
with respect to the Internet or online products and services providers. These
laws and regulations could cover issues such as online contracts, user privacy,
freedom of expression, pricing, fraud, content and quality of our various
products and services and those of our third party providers, taxation,
advertising, intellectual property rights and information security.
We are not currently subject to direct regulation by any domestic or foreign
governmental agency, other than regulations applicable to businesses generally,
export control laws and laws or regulations directly applicable to online
commerce. However, the growth and development of the market for online commerce
may prompt calls for more stringent consumer protection laws that may impose
additional burdens on those companies conducting business online. The adoption
of additional laws or regulations may decrease the growth of the Internet or
other online products and services providers, which could, in turn, decrease the
demand for our various products and services and those of our third party
providers and increase our cost of doing business, or otherwise could reduce or
eliminate our revenues.
Applicability to the Internet of existing laws governing issues such as property
ownership, copyrights and other intellectual property issues, taxation, libel,
obscenity and personal privacy is uncertain. The vast majority of these laws
were adopted prior to the advent of the Internet and related technologies and,
as a result, do not contemplate or address the unique issues of the Internet and
related technologies. These laws could be applied to us in a way that would
reduce our revenues.
Those laws that do reference the Internet, such as the recently passed Digital
Millennium Copyright Act, have not yet been interpreted by the courts and their
applicability and reach are therefore uncertain. One or more states may attempt
to impose these regulations upon us in the future, which could harm our
business.
Several states have proposed legislation that would limit the uses of personal
user information gathered online or require online products and services
providers to establish privacy policies. The Federal Trade Commission also has
recently settled a proceeding with one online service regarding the manner in
which personal information is collected from customers and provided to third
parties. Changes to existing laws or the passage of new laws intended to address
these issues could directly affect the way we do business or could create
uncertainty in the marketplace. This could reduce demand for our various
products and services and those of our third party providers, increase the cost
of doing business as a result of litigation costs or increased service delivery
costs, or otherwise harm our business.
In addition, because our various products and services and those of our third
party providers are accessible worldwide, and we facilitate sales of goods to
customers worldwide, foreign jurisdictions may claim that we are required to
comply with their laws. Our failure to comply with foreign laws could subject us
to penalties ranging from fines to bans on our ability to offer our various
products and services and those of our third party providers.
In the United States, companies are required to qualify as foreign corporations
in states where they are conducting business. If we are required to qualify and
don't, our profits could be reduced.
As an Internet company, it is unclear in which states we are actually conducting
business. Our failure to qualify as a foreign corporation in a jurisdiction
where we are required to do so could subject us to taxes and penalties for the
failure to qualify and could result in our inability to enforce contracts in
those jurisdictions. Any new legislation or regulation, or the application of
laws or regulations from jurisdictions whose laws do not currently apply to our
business, could reduce our revenues.
Our business may be subject to sales and other taxes. Our profits would be
reduced if we had to pay these taxes.
We do not plan to collect sales or other similar taxes on goods or our various
products and services and those of our third party providers sold through our
websites. One or more states may seek to impose sales tax collection obligations
on companies such as ours that engage in or facilitate online commerce. Several
proposals have been made at the state and local level that would impose
additional taxes on the sale of goods and our various products and services and
those of our third party providers through the Internet. These proposals, if
adopted, could substantially impair the growth of electronic commerce, and could
diminish our opportunity to derive financial benefit from our activities.
The U.S. federal government recently enacted legislation prohibiting states or
other local authorities from imposing new taxes on Internet commerce for a
period of three years. This tax moratorium will last only for a limited period
and does not prohibit states or the Internal Revenue Service from collecting
taxes on our income, if any, or from collecting taxes that are due under
existing tax rules. A successful assertion by one or more states or any foreign
country that we should collect sales or other taxes on the exchange of
merchandise on our system could harm our business.
Our gross profit margins may be reduced if the mix of products we sell changes
or if we offer discounts or promotions.
We realize higher gross margins from adult oriented products, which currently
account for about 70% of our revenues, than we do from the sales of non
adult-oriented products. We also may from time to time offer discount pricing
and special promotions, which periodically may reduce our gross margins. Any
change in product mix of any promotions or discounts could hurt our gross
margins and operating results in future periods.
We need to pay fees of $10 per domain name each year to retain the rights to use
the name. We anticipate purchasing additional domain names. We may be unable to
pay the fees necessary to keep our existing names or add additional domain names
and websites using these names to take advantage of potential increased customer
transactions or market opportunities, which would reduce our revenues or slow
our revenue growth.
We anticipate that we will keep all existing domain names, purchase additional
domain names for development and be develop additional websites for which we
already own the domain names and to take advantage of the potential growth of
our customer base and new market opportunities. We cannot guarantee that we will
have the resources to keep or develop our existing domain names or purchase
additional domain names to accommodate our anticipated growth.
Our future performance will be substantially dependent on the continued services
of our president and CEO. Our revenues could be reduced if we lost his services.
Our future performance also will depend on our ability to retain our president
and CEO, Eric Borgos. The loss of our President and CEO could harm our business.
We do not have a long-term employment agreement with our president and CEO, and
we do not maintain a key person life insurance policy on him.
Our management has significant control over stockholder matters, which may
impact the ability of minority stockholders to influence our activities.
Our officers and directors and their families control the outcome of all matters
submitted to a vote of the holders of common stock, including the election of
directors, amendments to our certificate of incorporation and approval of
significant corporate transactions. These persons will beneficially own, in the
aggregate, approximately 97.5% of our outstanding common stock. This
consolidation of voting power could also have the effect of delaying, deterring
or preventing a change in control of Impulse Communications that might be
beneficial to other stockholders.
The price of our stock may fall if, after the merger, our insiders sell a large
number of their shares. It may also fall if non-insiders sell their shares as
well.
After the merger, our principal executive officer will own 9,750,000 restricted
shares. These shares may only be sold in compliance with Rule 144, except that
there is no one year holding period because these shares are being issued under
this registration statement. After the merger, 52 non-insider beneficial owners
will own an aggregate of 658,000 shares, including those retained by existing
shareholders of Adar Alternative One. These non-insiders are not subject to the
restrictions of Rule 144, and all of these non-insider shares may be sold
immediately, except for the 91 day waiting period imposed on existing
shareholders of Adar Alternative One.
Rule 144 generally provides that a person owning shares subject to the Rule who
has satisfied or is not subject to a one year holding period for the restricted
securities may sell, within any three month period (provided we are current in
our reporting obligations under the Exchange Act) subject to some manner of
resale provisions, an amount of restricted securities which does not exceed the
greater of 1% of a company's outstanding common stock or the average weekly
trading volume in these securities during the four calendar weeks prior to the
sale.
A sale of shares by these security holders, whether under Rule 144 or otherwise,
may have a depressing effect upon the price of our common stock in any market
that might develop after the merger.
We will be subject to penny stock rules that may make it more difficult for you
to sell your shares.
Broker-dealer practices in connection with transactions in "penny stocks" are
regulated by certain penny stock rules adopted by the Securities and Exchange
Commission. Penny stocks generally are equity securities with a price of less
than $5.00. 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 also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held
in the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock, the broker-dealer make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive 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. As our shares immediately following the closing of the merger
and listing of our stock will be subject to subject to such penny stock rules,
our shareholders will in all likelihood find it more difficult to sell their
securities.
MERGER APPROVALS
In February, 2000, Sidney J. Golub as the sole member of our board of directors
approved the merger proposal. All of our stockholders approved the merger
proposal at the same time.
On February, 2000, your board of directors unanimously approved the merger
proposal. Assuming consents are secured from shareholders owning more than 50%
of the stock of Impulse Communications, Inc., shareholders who did not consent
to the merger will, by otherwise complying with Florida corporate law, be
entitled to dissenters' rights with respect to the proposed merger. No consents
will be solicited or accepted until after the effective date of this prospectus.
Based upon the ownership of more than 50% of Impulse Communications common stock
by officers, directors and affiliates, it appears that a favorable vote is
assured.
MERGER TRANSACTIONS
The merger agreement provides each outstanding share of Impulse Communications
common stock, other than dissenting shares, as discussed later in this document,
will be exchanged for one share of Adar Alternative One common stock. The
following table contains comparative share information for shareholders of
Impulse Communications and Adar Alternative One immediately after the closing of
the merger.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
----------------- -------------------------------- ------------------------------- --------------------
The former shareholders of The current shareholders of Total
Impulse Communications Adar Alternative One
----------------- -------------------------------- ------------------------------- --------------------
----------------- -------------------------------- ------------------------------- --------------------
Number 10,008,000 400,000 10,408,000
----------------- -------------------------------- ------------------------------- --------------------
----------------- -------------------------------- ------------------------------- --------------------
Percentage 96% 4% 100%
----------------- -------------------------------- ------------------------------- --------------------
</TABLE>
The agreement provides that at the closing of the merger, Adar Alternative One
will
o Reincorporate in Nevada
o Change its name to Impulse Communications, Inc.
o Adopt Impulse Communications, Inc. articles and bylaws
o Elect, effective upon the effectiveness of the merger, a new board of
directors to consist of the current director of Impulse Communications.
The agreement provides that Impulse Communications, Inc.'s shareholders who vote
against the merger are entitled to dissenters' rights with respect to the
proposed the receipt shares of Adar Alternative One common stock as set forth in
Nevada law. The agreement also provides for the payment to us of a merger fee in
the amount of $125,000.
None of the shares of Adar Alternative One common stock outstanding prior to the
closing of the merger will be converted or otherwise modified in the merger and
all of these shares not otherwise returned to us as provided in the merger
agreement will be outstanding capital stock of Adar Alternative One after the
closing of the merger.
The merger will be consummated promptly after this prospectus is declared
effective by the SEC and upon the satisfaction or waiver of all of the
conditions to the closing of the merger. The merger will become effective on the
date and time a properly executed articles of merger are filed with the offices
of the secretary of state of Nevada. Thereafter, Impulse Communications, Inc.
will be merged and Adar Alternative One, with the result that Impulse
Communications, Inc. will cease to exist and Adar Alternative One will be the
surviving corporation in the merger.
Fractional shares.
As of the date of this prospectus, there were no fractional shares of Impulse
Communications, Inc.'s common stock outstanding. Because each outstanding share
of Impulse Communications, Inc.'s common stock will be entitled to receive one
share of Adar Alternative One's common stock under the terms of the merger
agreement, there will be no fractional shares issued in the merger.
Bulletin board listing
Adar Alternative One will be subject to the reporting requirements of the
securities exchange act of 1934 after the merger as a result of its filing of a
form 8-A electing to be a reporting company subject to the requirements of the
1934 act.
Upon closing of the merger, Adar Alternative One will seek to become listed on
the over the counter bulletin board under the symbol "IMPU". If and when listed,
the Impulse Communications, Inc.'s shareholders will hold shares of a
publicly-traded Nevada corporation subject to compliance with the reporting
requirements of the exchange act. Because the state of incorporation, articles
and bylaws of Adar Alternative One will be the same as those of Impulse
Communications, Inc. prior to the merger, the rights of shareholders of Impulse
Communications, Inc. will not change as a result of the merger.
Background of the merger
As discussed under Adar Alternative One Business, Adar Alternative One was
formed as a vehicle to acquire through a registered securities offering a
private company desiring to become an SEC reporting company in order thereafter
to secure a listing on the over the counter bulletin board. Adar Alternative One
agreed to acquire Impulse Communications because this was Impulse
Communication's objective.
Although other methods of achieving its objectives were available, including
alternate forms of SEC registration statements, Impulse Communications chose the
method involving a reverse merger with Adar Alternative One because it believes
the optimal way for it to achieve its objectives of becoming an SEC reporting
company in order thereafter to secure a listing on the over the counter bulletin
board is:
o To be acquired by an acquisition company
o To have securities to be issued to its shareholders upon the merger
registered on Form S-4
o To have that registration statement declared effective before holding a
formal vote on the proposed merger
Impulse Communications also believes this method is the optimal way for it to:
o Increase the visibility of Impulse Communication's business, which
could be helpful in further developing and commercializing Impulse
Communication's products.
Impulse Communications believes that public, trading companies have greater
visibility than private companies.
o Facilitate Impulse Communication's ability to raise capital in the
public markets.
Impulse Communications believes that public, trading companies have an easier
time raising capital than private companies.
o Potentially improve Impulse Communication's stockholders' ability to
sell their shares in the over-the-counter market.
Impulse Communications believes that public, trading companies provide greater
investor liquidity than private companies.
Contacts between the Parties
In April, 1999, Mr. Sidney J. Golub of The Adar Group retained Williams Law
Group, P.A. to form an acquisition corporation to secure an operating company to
acquire. At the request of Adar, as the attorney who formed the corporation and
is a resident of the state of Florida, Mr. Williams agreed to serve as president
and director of the corporation on behalf of an out of state client for whom the
corporation was formed solely as a matter of administrative convenience until an
acquisition candidate was identified. It was agreed with the client that
thereafter, he would resign and Mr. Golub would serve as president and director.
Upon formation, Mr. Williams and Mr. Golub were issued 1,000,000 shares each. Of
the $125,000 merger fee to be paid to us by Impulse Communications under the
terms of the merger agreement, Mr. Golub will receive $50,000 for his role as
current president and director. The remaining $75,000 will be paid to Williams
Law Group for legal services in preparing this registration statement.
In January, 2000, Mr. Eric Borgos, president of Impulse Communications contacted
Mr. Golub through his website. In February, 2000, Mr. Golub indicated that his
acquisition company, Adar Alternative One, would be willing to enter into a
business combination with Impulse Communications. Drafting of this registration
statement began immediately thereafter, during which time there were various
discussions in which representatives of Adar Alternative One and Impulse
Communications agreed upon the basic structure, terms and conditions of the
merger. In connection with the merger, Adar Alternative One agreed to effect a
reverse split so that Mr. Williams' Account and Mr. Golub will each own 200,000
shares prior to the closing of the merger. A definitive merger agreement is
currently being drafted.
Neither of the respective boards of Directors of Adar Alternative One or Impulse
Communications, Inc. requested or received, or will receive, an opinion of an
independent investment banker as to whether the merger is fair, from a financial
point of view, to Adar Alternative One and its stockholders Impulse
Communications, Inc. and its shareholders.
Interests of Certain Persons in the Merger
Upon the closing of the merger, the current director and executive officer of
Impulse Communications will become the director and executive officer of the
surviving corporation.
Material Federal Income Tax Consequences
The following discussion summarizes all the material federal income tax
consequences of the merger. This discussion is based on currently existing
provisions of the Internal Revenue code of 1986, existing and proposed Treasury
Regulations and current administrative rulings and court decisions, all of which
are subject to change. Any change, which may or may not be retroactive, could
alter the tax consequences to the Impulse Communications shareholders, as
described below.
We have addressed this opinion to most of the typical shareholders of companies
such as Impulse Communications. However, some special categories of shareholders
listed below will have special tax considerations that need to be addressed by
their individual tax advisors:
o Dealers in securities
o Banks
o Insurance companies
o Foreign persons
o Tax-exempt entities
o Taxpayers holding stock as part of a conversion, straddle, hedge or
other risk reduction transaction
o Taxpayers who acquired their shares in connection with stock option or
stock purchase plans or in other compensatory transactions
We also do not address the tax consequences of the merger under foreign, state
or local tax laws.
We strongly urge to consult their own tax advisors as to the specific
consequences of the merger to them, including the applicable federal, state,
local and foreign tax consequences of the merger in their particular
circumstances.
Neither Adar Alternative One Industry Co. nor Impulse Communications has
requested, or will request, a ruling from the Internal Revenue Service, IRS,
with regard to any of the federal income tax consequences of the merger. The tax
opinions will not be binding on the IRS or preclude the IRS from adopting a
contrary position.
It is the opinion of Williams Law Group, P.A., counsel to Adar Alternative One
Industry Co., that the merger will constitute a reorganization under Section
368(a) of the code. The tax description set forth below has been prepared and
reviewed by Williams Law Group, and in their opinion, to the extent the
description relates to statements of law, it is correct in all material
respects. In a prior filing of a similar transaction with the Securities and
Exchange Commission, the staff requested us to add a statement that the
following tax consequences are implicit in the firm's opinion that the merger is
a 368(a) reorganization.
As a result of the merger's qualifying as a reorganization, the following
federal income tax consequences will, under currently applicable law, result:
o No gain or loss will be recognized for federal income tax purposes by
the holders of Impulse Communications common stock upon the receipt of
Adar Alternative One Industry Co. common stock solely in exchange for
Impulse Communications common stock in the merger, except to the extent
that cash is received by the exercise of dissenters' rights.
o The aggregate tax basis of the Adar Alternative One Industry Co. common
stock received by Impulse Communications shareholders in the merger
will be the same as the aggregate tax basis of the Impulse
Communications common stock surrendered in merger.
o The holding period of the Adar Alternative One Industry Co. common
stock received by each Impulse Communications shareholder in the merger
will include the period for which the Impulse Communications common
stock surrendered in merger was considered to be held, provided that
the Impulse Communications common stock so surrendered is held as a
capital asset at the closing of the merger.
o A holder of Impulse Communications common stock who exercises
dissenters' rights for the Impulse Communications common stock and
receives a cash payment for the shares generally will recognize capital
gain or loss, if the share was held as a capital asset at the closing
of the merger, measured by the difference between the shareholder's
basis in the share and the amount of cash received, provided that the
payment is not essentially equivalent to a dividend within the meaning
of Section 302 of the code or does not have the effect of a
distribution of a dividend within the meaning of Section 356(a)(2) of
the code after giving effect to the constructive ownership rules of the
code.
o Neither Adar Alternative One Industry Co. nor Impulse Communications
will recognize gain solely as a result of the merger.
o There is a continuity of interest for IRS purposes with respect to the
business of Impulse Communications. This is because shareholders of
Impulse Communications have represented to us that they will not, under
a plan or intent existing at or prior to the closing of the merger of
the merger, dispose of so much of their Impulse Communications common
stock in anticipation of the merger, plus the Adar Alternative One
Industry Co. common stock received in the merger that the Impulse
Communications shareholders, as a group, would no longer have a
significant equity interest in the Impulse Communications business
being conducted by Adar Alternative One Industry Co. after the merger.
Our opinion is based upon IRS ruling guidelines that require eighty
percent continuity, although the guidelines do not purport to represent
the applicable substantive law.
A successful IRS challenge to the reorganization status of the merger would
result in significant tax consequences. For example,
o Impulse Communications would recognize a corporate level gain or
loss on the deemed sale of all of its assets equal to the
difference between
o the sum of the fair market value, as of the closing of the merger,
of the Adar Alternative One Industry Co. common stock issued in
the merger plus the amount of the liabilities of Impulse
Communications assumed by Adar Alternative One Industry Co.
and
o Impulse Communication's basis in the assets
o Impulse Communications shareholders would recognize gain or loss
with respect to each share of Impulse Communications common stock
surrendered equal to the difference between the shareholder's
basis in the share and the fair market value, as of the closing of
the merger, of the Adar Alternative One Industry Co. common stock
received in merger therefore.
In this event, a shareholder's aggregate basis in the Adar Alternative One
Industry Co. common stock so received would equal its fair market value and the
shareholder's holding period for this stock would begin the day after the merger
is consummated.
Even if the merger qualifies as a reorganization, a recipient of Adar
Alternative One Industry Co. common stock would recognize income to the extent
if, among other reasons any shares were determined to have been received in
merger for services, to satisfy obligations or in consideration for anything
other than the Impulse Communications common stock surrendered. Generally,
income is taxable as ordinary income upon receipt. In addition, to the extent
that Impulse Communications shareholders were treated as receiving, directly or
indirectly, consideration other than Adar Alternative One Industry Co. common
stock in merger for Impulse Communication's shareholder's common stock, gain or
loss would have to be recognized.
Termination.
At any time prior to closing, the merger agreement may be terminated, and the
merger abandoned under certain circumstances, including:
o By mutual consent of Adar Alternative One and Impulse
Communications
o By either party if any of the other party's representations and
warranties contained in the merger agreement shall be or shall
have become inaccurate, or if any of the other party's covenants
contained in the merger agreement shall have been breached
o By either party if a court of competent jurisdiction or other
governmental body shall have issued a final and nonappealable
order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or
otherwise prohibiting the merger
o By Impulse Communications if the consents have been solicited and
the merger agreement shall not have been adopted and approved by
the required vote
o By Impulse Communications if Impulse Communications reasonably
determines that the timely satisfaction of any condition to its
obligations to consummate the merger has become impossible or
unlikely.
Dissenters' Rights
The following summary of dissenters' rights under Nevada law is qualified in its
entirety by reference to section 92, Nevada Statutes, but includes all material
aspects of that section. Adar Alternative One has filed copies of these statutes
as exhibits to the registration statement.
Impulse Communications stockholders who oppose the proposed merger will have the
right to receive payment for the value of their shares as set forth in sections
92a.300 through 92a.500 of the Nevada law. The dissenters' rights will be
available only to stockholders of Impulse Communications who refrain from voting
in favor of the merger.
Voting against the merger will not constitute notifying Impulse Communications
of the intention to demand payment if the merger is closed.
A stockholder must exercise dissenters' rights for all of the shares that he or
she owns.
Since the vote to authorize the merger will take place by written consent,
Impulse Communications will be required to notify by mail those stockholders
who, by virtue of having refrained from voting in favor of the merger, are
entitled to payment for their shares. Dissenters notices must be sent no later
than ten days after consummation of the merger. The notice must
o State where demand for payment must be sent
o State when certificates must be deposited
o State the restrictions on transfer of shares that are not evidenced
by a certificate once demand has been made
o Supply a form on which to demand payment
o Set a date by which demand must be received
o Include a copy of the relevant portions of the Nevada law
Unless a stockholder acquired his or her shares after Impulse Communications
sends the dissenters notices, Impulse Communications must calculate the fair
market value of the shares plus interest, and within 30 days of the date Impulse
Communications receives the demand, pay this amount to any stockholder that
properly exercised dissenters' rights and deposited certificates with Impulse
Communications. If Impulse Communications does not pay within 30 days, a
stockholder may enforce in court Impulse Communication's obligation to pay. The
payment must be accompanied by
o Impulse Communication's interim balance sheet,
o A statement of the fair market value of the shares,
o An explanation of how the interest was calculated,
o A statement of dissenters' right to demand payment, and
o A copy of the relevant portions of the Nevada Law.
Within 30 days of when Impulse Communications pays a dissenting stockholder for
his or her shares, the stockholder has the right to challenge Impulse
Communication's calculation of the fair market value of the shares and interest
due, and must state the amount that he or she believes to represent the true
fair market value and interest of the shares. If Impulse Communications and the
stockholder are not able to settle on an amount, Impulse Communications may
petition a court within 60 days of making payment to the dissenting stockholder.
If Impulse Communications does not either settle with the stockholder or
petition a court for a determination within 60 days, Impulse Communications is
obligated to pay the stockholder the amount demanded that exceeds Impulse
Communication's calculation of fair market value plus interest. All dissenters
are entitled to judgment for the amount by which the fair market value of their
shares is found to exceed the amount previously remitted, with interest.
It is a condition to Impulse Communication's obligations to consummate the
merger that the holders of no more than 10% of the outstanding shares of Impulse
Communication's common stock are entitled to dissenters' rights. If demands for
payment are made with respect to more than 10%, of the outstanding shares of
Impulse Communication's common Stock, and, as a consequence more than 10% of the
shareholders of Impulse Communication's become entitled to exercise dissenters'
rights, then Impulse Communications will not be obligated to consummate the
merger.
Accounting Treatment
For accounting purposes, the merger will be treated as an acquisition by a
predecessor corporation.
Merger Procedures
Unless otherwise designated by a Impulse Communications shareholder on the
transmittal letter, certificates representing shares of Adar Alternative One
common stock issued to Impulse Communications shareholders will be issued and
delivered to the tendering Impulse Communications shareholder at the address on
record with Impulse Communications . In the event of a transfer of ownership of
shares of Impulse Communications common Stock represented by certificates that
are not registered in the transfer records of Impulse Communications , the
shares may be issued to a transferee if the certificates are delivered to the
transfer agent, accompanied by all documents required to evidence the transfer
and by evidence satisfactory to the transfer agent that any applicable stock
transfer taxes have been paid. If any certificates shall have been lost, stolen,
mislaid or destroyed, upon receipt of
o An affidavit of that fact from the holder claiming the certificates
to be lost, mislaid or destroyed.
o The bond, security or indemnity as the parent corporation and the merger
agent may reasonably require.
o Any other documents necessary to evidence and effect the bona fide
merger, the transfer agent shall issue to holder the shares into which
the shares represented by the lost, stolen, mislaid or destroyed.
o Certificates have been converted.
Neither Adar Alternative One, Impulse Communications , nor the transfer agent is
liable to a holder of Impulse Communication's common stock for any amounts paid
or property delivered in good faith to a public official under any applicable
abandoned property law. Adoption of the merger agreement by the Impulse
Communication's shareholders constitutes ratification of the appointment of the
transfer agent.
After the closing of the merger, holders of certificates will have no rights
with respect to the shares of Impulse Communications common stock represented
thereby other than the right to surrender the certificates and receive in merger
the shares of Adar Alternative One common stock to which the holders are
entitled.
IMPULSE COMMUNICATION, INC.'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements included herein for the first 6 months ending June 30th
2000 and 1999.
Cautionary Statement
This registration statement on Form S-4 contains "forward-looking
statements", as defined by the Private Securities Litigation Reform Act of 1995,
in order to provide investors with prospective information about the Company.
For this purpose, any statements which are not statements of historical fact may
be deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes", "anticipates", "plans", "expects" and similar expressions are
intended to identify forward-looking statements. There are a number of important
factors which could cause the Company's actual results and events to differ
materially from those indicated by the forward-looking statements. These factors
include, without limitation, those set forth below under the caption "Certain
Factors That May Affect Future Results".
Results of Operations
Total revenues increased 55% to $789,280 for the 6 month's ending June
30th, 2000 from $510,181 for the same period in 1999. The increase was primarily
due to an increase in the number of new web sites we created by the company in
this period. The percentage of revenue by product segment has not changed
significantly as compared to the same period last year.
Our costs of revenues increased 98% to $517,877 for the 6 months ending
June 30th, 2000 from $261,537 for the same period in 1999. The increase is
primarily related to the increased number of web sites we now offer. These
expenses include the purchase of several thousand new domain names and
implementation of new dedicated servers for hosting these sites. There were also
significant web design costs asociated with setting up these sites.
Operating expenses increased 1376% to $103,344 for the 6 months ending June
30th, 2000 from $7,003 for the same period in 1999. This large increase is
mainly due to the legal costs associated with going public.
As a result of the foregoing our net income before distributions to our
president and income taxes decreased 36% to $150,552 for the 6 months ended June
30th, 2000 from $236,124 for the same period in 1999.
Liquidity and Capital Resources
Our working capital increased 17% to $91,434 at June 30th, 2000 from
$78,230 at June 30th, 1999. During the first 6 months ending June 30th, 2000 we
generated approximately $246,601 in cash from operations of which we distributed
$20,000 to our president.
Cash Flow Outlook
During 2000, we expect that our principal sources of cash to fund our
business activities will be from operating activities and will be sufficient for
the year.
Qualitative and Quantitative
We do not engage in investing in or trading market risk sensitive
instruments. We also do not purchase, for investing, hedging, or for purposes
"other than trading," instruments that are likely to expose us to market risk,
whether interest rate foreign currency exchange, commodity price or equity price
risk, except as noted in the following paragraph. We have not entered into any
forward or future contracts, purchased any options or entered into any interest
rate swaps. Additionally, we do not currently engage in foreign currency trading
transactions to manage exposure for transactions denominated in currencies other
than U.S. dollars.
IMPULSE COMMUNICATIONS BUSINESS
In 1990, Impulse Communications was formed as a sole proprietorship and
reorganized as a Nevada corporation in 2000. We own and operate more than 5000
websites on the World Wide Web.
Here are some significant events in our history:
o We were originally formed to provide computer consulting services such
as installations of business automation software, computerized
accounting systems, contact management software and point of sale
systems.
o From 1995-1997, with the increasing acceptance of the Internet, our
focus shifted to designing and hosting websites, while at the same time
developing several websites of our own, such as invention.com,
cashflow.com, findcash.com and sexmall.com.
o In the same time period, we also purchased 60 domain names from Network
Solutions, a company that registers domain names for the Internet.
o Since 1998, we have focused exclusively on developing new websites
using the domain names we already own and continue to purchase new
domain names each month for future development.
Most of our revenue comes from selling products over the Internet. Instead of
selling these products directly, we receive commissions from other companies for
sales generated by customer we refer. Almost all of our products are offered at
discount prices, which allows us to gain market share. Products sold include
o Books
o Music
o Insurance
o Travel
o Sexually oriented adult entertainment items
o Flowers
o Cars
o Food
o Vitamins
The companies that pay us a commission provide the products and do the
order-taking and shipping. About 70% of our revenue is from sexually oriented
adult entertainment websites, with the other 30% from traditional websites.
We are also involved in the following activities:
o Operating Virtual Malls
o Sales of Our Own Services
o Developing Web Pages for Distributors of Network Marketing or
Multi-Level Marketing Companies
o Sale of Domain Names
Industry Overview
The Internet has emerged as a global medium enabling millions of people
worldwide to share information, communicate and conduct business electronically.
International Data Corporation, a research firm that covers information
technology markets and trends, estimates that the number of Web users will grow
from approximately 150 million worldwide in 1998 to approximately 500 million
worldwide by the end of 2003.
The growing adoption of the Web represents an enormous opportunity for
businesses to conduct commerce over the Internet. International Data Corporation
estimates that commerce over the Internet will increase from approximately $40
billion worldwide in 1998 to approximately $900 billion worldwide in 2003.
According to Forrester Research, a research firm that analyzes technology
changes and their impact on business, consumers and society, annual
business-to-consumer e-commerce is estimated to grow from $8 billion in 1998 to
$108 billion in 2003, and, business-to-business e-commerce is expected to grow
from $43 billion in 1998 to $1.33 trillion in 2003.
While companies initially focused on facilitating and conducting transactions
between businesses over the Internet, the business-to-consumer market has also
become a significant market and is rapidly growing. These companies typically
use the Internet to offer standard products and services that can be easily
described with graphics and text and do not necessarily require physical
presence for purchase, such as books, CDs, videocassettes, automobiles, home
loans, airline tickets and online banking and stock trading. The Internet gives
these companies the opportunity to develop one-to-one relationships with
customers worldwide from a central location without having to make the
significant investments required to build a number of local retail presences or
develop the printing and mailing infrastructure associated with traditional
direct marketing activities.
E-commerce is growing at such a high rate because the number of Internet users
worldwide is growing rapidly. Nua Internet Surveys, a company that tracks
Internet usage, estimates that as of January, 2000, there are 248.6 million
Internet users. This represents only about 5% of the world's population. As
additional users connect to the Internet, the market increases. Also, we believe
consumers are becoming more accustomed to making online purchases. Our
experience indicates consumer believe they are able to find lower prices and a
larger selection of products by using the Internet rather than their local
stores. We believe consumers are becoming increasingly secure with using credit
cards to purchase items online.
The Adult Entertainment Industry
Despite nearly two decades of intense political campaigning against the adult
industry, consumer purchases of adult entertainment products have increased
dramatically. The industry that has come to be known broadly as adult
entertainment began its transformation two decades ago, with the advent of home
video recorders and home videos. That revolution marked the beginning of the end
of red-light districts in cities, where adult bookstores, X-rated theatres, peep
shows, dingy strip joints and street prostitution once flourished.
During the 1980s, the availability of adult movies on videocassette and on cable
television helped to legitimize the consumption of explicit material by putting
it in the home setting. The result has been the legitimization of industry
products by other businesses not traditionally associated with the adult
entertainment industry. Video stores, long distance telephone carriers,
satellite providers, cable companies, and even mutual funds, earn significant
returns by supplying or investing in adult entertainment either directly or
indirectly.
The distribution of sexually explicit material is intensely competitive.
Hundreds of companies now produce and distribute films to wholesalers and
retailers, as well as directly to the consumer. According to industry sources,
in 1978 some 100 hard-core feature films were produced at a typical cost in
today's dollars of approximately $350,000, while in 1997 nearly 8,000 new
hard-core videos were released, some costing as little as a few thousand dollars
to produce.
According to an industry report which appeared in US News and World Report,
February 10, 1997, Americans spent over $8 billion in 1996 on hard-core videos,
peep-shows, live sex acts, adult cable programming, sexual devices, Internet
adult entertainment and sexually explicit magazines. This amount is much larger
than Hollywood's domestic box office receipts and larger than all the revenues
generated by rock and country music recordings. The mainstream Hollywood film
industry collects some $6 billion per year; the recorded music industry $8
billion; theater, opera and ballet $1.7 billion.
Inter@ctive Week, a publication that tracks Internet usage, recently evaluated
the adult entertainment business at $1 billion annually for banner advertising,
subscriptions, videoconferencing and products A more conservative figure from
Forrester Research Inc. is $185 million in adult online entertainment in 1998,
up from $101 million in 1996 and $137 million in 1997.
Given the nature of the industry, financial data on Web porn are sketchy at
best. But experts estimate it rakes in $700 million to $1 billion a year. That
doesn't count the tons of loose change collected by amateur purveyors in online
erotica. (The Dallas Morning News - 12/1/99). Today's legal porn business is a
$56 billion global industry. (Forbes 06-14-1999) ----------------------- ------
Estimates of the number of sex sites are as diverse as estimates for traffic and
revenue. A recent search using the new Google.com search engine yielded 596,000
sites when the word sex was searched for. The adult age verification service,
Adultcheck, one of many on the Internet, lists 80,000 participating adult
entertainment sites. According to WebSideStory's Adult 10000, a website that
tracks online consumers, there were 13,673 sites listed, averaging 16,041,825
visitors per day on August 5, 1998.
Pay sites have most of the adult content on the Internet, but free sites abound.
Advertising from pay sites supports most of the free sites.
Adult Entertainment Revenues Projected for the Internet
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Year Total Online Retail Total Online Entertainment Adult Entertainment
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1997 $2.4 billion $298 million $137 million
1998 $4.8 billion $591 million $185 million
1999 $7.9 billion $1.14 billion $235 million
2000 $12.1 billion $1.92 billion $296 million
</TABLE>
Source: Forrester Research Inc., People & Technology Strategies Report, October,
1997.
The tremendous growth of the Internet, including chat rooms and websites
dedicated to adult entertainment, has resulted in millions of potential
customers accessing these sites from the relative privacy of their personal
computers worldwide.
Explicit adult entertainment websites have become controversial issues, with
little being resolved. The websites have created debates about free speech
versus child protection; free enterprise versus social good, and free markets
versus fair business practices. Parents, politicians, clergy and Internet
providers are all struggling with how to best protect children while allowing
adults to set their own standards of behavior and taste. The access to most of
the adult entertainment websites is far from being regulated. There are,
however, both specialized websites that offer to verify the potential users' age
an/or to block entry to the site for underage potential users.
Our Products and Services
Selling Products and Services of Others
Most of the Impulse Communications' revenue comes from commissions generated by
selling products and services from other companies, such as:
o Books, at bookshopper.com.
o Music, at buycds.com.
o Insurance, at insureme.com.
o Travel, at cheapvacations.com.
o Sexually explicit items, at sexmall.com.
To represent products and services, we fill out an online form to signup as an
affiliate, giving our name and address for them to send payments to. They also
have a terms and conditions page posted on the web site, which we check an box
online saying we agree. There are never any signup fees or commitments, and
either party can terminate the affiliate agreement at any time.
We then set up web pages with links to our third party providers. When someone
clicks on the link and is transported to the provider, our name is embedded in
the link. We are then paid a commission on each referral.
Our broad-based commission structure allows us to appeal to both consumers and
businesses who buy products and services over the Internet. The actual selling
process, including tallying of commissions, is handled automatically by each
website's software. Because we only refer customers and do not sell products
directly, we maintain no inventory.
Although products sold by our third party providers may be returned for credit,
we generally do not receive our commissions until the time limit for these
returns has passed.
Virtual Malls
We also run several virtual malls, such as inventing.com for inventors and
cashflow.com for network marketers. A virtual mall is analogous to a physical
mall. It is a website where various companies in a specific industry or group
pay monthly rental fees to be listed on the site and available to visitors to
the site.
Selling Our Services
Some of the websites we own include:
o Bored.com is a free site that receives approximately 70,000 visitors
per day who are looking for fun and interesting things to do on the
Internet. This site generates about $35,000 a month in profits. We are
paid a commission from sales generated by the banner ads and some of
the text links on the page. It is listed as one of the top 1000 web
sites on the Internet by PC Data Online
o Bored.com Email offers free bored.com email accounts. More than 45,000
people have signed up in the first two months of operation. This
service generates about $300 a month in profits. We are paid a
commission from sales from the banner ad people see while they read
their email.
o Findinfo.com--A search engine that searches more than 300 million
websites to help users find what they're looking for. We plan to
develop this into a major search engine portal, similar to Yahoo,
AltaVista, Excite and Hotbot.
o Healthstore.com--A health and nutrition store that offers over 14,000
vitamins and herbs at discount prices.
o Findjobs.com offers free automated tools to help visitors to the site
find a job. Users can use our Job Finder Robot to retrieve job listings
from the top Internet employment websites in one large search. Our Job
Search Manager then allows users to browse those search results, save
the specific jobs that interest them or apply for those jobs online.
After several months of operations, Findjobs.com already has over
12,000 registered users. This site generates approximately $100 in
profits per month.
o Healthdeals.com automatically searches 11 online health and vitamin
stores to find the best price products users want to purchase. We make
a 5-10% commission from sales at each of the 11 stores. This site
generates about $100 a month in profits.
o Findcash.com allows users to find out for free if they are owed
unclaimed money by the government. Users then pay $10 for information
on how to collect the money they are owed. This site generates about
$5000 a month in profits.
o Textbookhound.com features an intelligent search agent that compares
used and new textbook pricing at over 20 major online textbook stores.
It also shows users which stores have the books in-stock. This site
generates about $1000 a month in profits. even the nature of the
industry, financial data on Web porn are sketchy at best. We are paid a
commission by the online bookstore for each book sold.
o ToyHound.com automatically searches the top 20 online toy stores to
find the best price on products. The site also allows children to make
a wish list of toys they want and email this list to their parents and
relatives. This site generates about $100 a month in profits.
o Sexmaniac.com is the Internet's largest sexually oriented adult
entertainment search engine, with more than 100,000 adult Web page
listings. Many of the listings that appear in sexmaniac.com are sites
that generate commissions for us. These sites are programmed to appear
at the top of the search results list shown to each user. This site
generates about $1000 a month in profits.
o Nudephotos.com is an adult entertainment site offering over 700,000
sexually explicit adult entertainment photos, 50,000 online adult
entertainment movies, dozens of sexually oriented games, 10,000 erotic
stories, free phone sex, and more. This is a pay site, which means that
users must pay, usually by credit card, to access the site. This site
generates about $300 a month in profits.
o Pornomovies.com offers several thousand mail order adult entertainment
videos at wholesale prices. We are paid a commission on each movie
sold. This site generates about $2000 a month in profits.
o Getnames.com is a list of over 5000 domain names we currently own that
are for sale. Sale of domain names account for about $2000 a month in
profits.
o Cyberinfo.com - A free service that allows users to create free
business or personal web sites, with no knowledge of html needed.
Web Pages for Distributors of Network Marketing or Multi-Level Marketing
Companies
We have also developed automated software that allows us to offer low-priced Web
pages to distributors of network marketing or multi-level marketing companies.
We create one main website for the company, and our software automatically
creates a personalized copy of the website for each distributor. We are
currently working with:
o Coastal Vacations, at www.getcoastal.com.
------------------
o Electrum, at www.electrumonline.com
This service generates about $500 a month in profits.
Selling Advertising Space
A smaller portion of our income, about $500 a month, comes from selling
advertising space on websites we create. These sites offer free information to
Web surfers. Some of these sites include:
o http:www.zoos.com
o http:www.dumb.com
o http:www.mteverest.com
o http:www.stopstress.com
o http:www.comedyclub.com
These sites generate revenue from the advertising banners at the top of each
page.
Sale of Domain Names
We also offer for sale a portion of our 5000-plus domain names through domain
name brokers. Until recently, we did not actively try to sell our domain names.
Recent domain name sales directly by us, without a broker, include
o Payme.com for $40,000
o Chargecards.com, for $21,000
o Getdomains.com, for $10,008
o Musicroom.com, for $5000
o Cancerdrugs.com/cancercures.com/beatcancer.com, for $25,000 total
o Myprivates.com, for $2,500
o Optionsdata.com for $1,500
o indiansex.com - $15000
o filmreviews.com - $3000
o sportsbetting.net - $8500
o gotoafrica.com - $7500
o findbuilders.com - $4000
o onlineathletes.com - $3000
o academicstore.com - $5000
o buypanties.com and 4panties.com - $16,000 for both
We currently have the domain name buywine.com listed with a wine domain name
broker for $500,000. A selection of our domain names listed for sale, including
asking price, with GreatDomains.com, another domain name broker, includes:
o 4bets.com, $50,000
o 4books.com, $100,000
o 4computers.com, $200,000
o 4gamblers.com, $50,000
o 4marketing.com, $50,000
o 4printing.com, $100,000
o 4seminars.com, $40,000
o 4shoppers.com, $50,000
o 4software.com, $100,000
o 4textbooks.com, $200,000
o 4webpages.com, $200,000
o buyalcohol.com, $25,000
o buycdroms.com, $20,000
o buycds.com, $250,000
o buycontacts.com, $50,000
o buypetfood $100,000
o buypresents.com, $50,000
o buyprograms.com, $100,000
o cashflow.com, $100,000
o cdsavings.com, $35,000
o cheapmovies.com, $50,000
o cheapvacations.com, $100,000
o coffeelovers.com, $25,000
o comedyclub.com, $50,000
o drugdeals.com, $100,000
o getbusiness.com, $100,000
o getflowers.com, $100,000
o getmortgages.com, $100,000
o getorders.com, $25,000
o getperfume $50,000
o getpublicity.com, $50,000
o getsex.com, $250,000
o hotdate.com, $100,000
o hotelbargains.com, $30,000
o moveme.com, $20,000
o mteverest.com, $25,000
o nudephotos.com, $250,000
o nudeteens.com, $250,000
o orderdrugs.com, $100,000
o orderforms.com, $50,000
o ordervideos.com, $50,000
o pcbargains.com, $100,000
o pcpricing.com, $50,000
o pickstocks.com, $30,000
o placebets.com, $100,000
o popcds.com, $30,000
o pornomall.com, $25,000
o pornomovies.com, $500,000
o softwaredeals.com, $100,000
o ticketdeals.com, $25,000
o tradecheap $25,000
o videobargains.com, $25,000
o videoslots.com, $100,000
o zoos.com, $25,000
Revenue by Market Segment
Our approximate amount and percentage of revenue by product segment is as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
-------------------------------------- ------------ -------------------------------
Commissions (both adult and $937.344 92.0%
non-adult) [1]
-------------------------------------- ------------ -------------------------------
-------------------------------------- ------------ -------------------------------
Virtual Malls 2,400 .2
-------------------------------------- ------------ -------------------------------
-------------------------------------- ------------ -------------------------------
Direct Sales of Products and Services 49,443
4.25
-------------------------------------- ------------ -------------------------------
-------------------------------------- ------------ -------------------------------
Sales of network marketing web pages 3,000 .3
-------------------------------------- ------------ -------------------------------
-------------------------------------- ------------ -------------------------------
Sales of domain names 47,000 4.25
-------------------------------------- ------------ -------------------------------
</TABLE>
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Market Opportunity
We believe we are targeting a significant marketing opportunity because:
o The e-commerce market is already very large and growing rapidly.
o Millions of consumers have already purchased the products we sell for
many years through traditional print catalogs, stores and television.
o There are logistical, financial and economic benefits to conducting
business over the Internet.
o We offer a broader selection, high-quality products than a traditional
retail outlet store.
o We offer a higher level of personalized customer service than a
traditional retail outlet store.
o We presently have and can maintain interesting, frequently updated
website content.
Marketing
Most of our business comes from free listings in Internet search engines.
Because we own thousands of domain names, we are listed many times in the search
engines. Each domain name operates as its own sub-business and can have a search
engine listing of its own.
Only about 20% of our websites are currently listed in the major search engines.
Once the other 80% are listed, we believe income will increase substantially. We
are currently developing automated software to handle these search engine
listings. The software will be finished by June 30st, and all of our web sites
will be submitted to the search engines by April 1st, 2000.
We use additional marketing methods to bring people to our sites, including:
o Targeted banner advertising.
o Press releases.
o Paid search engine listings, paying for higher placement in the search
result lists, on such sites as goto.com and realnames.com.
Our total advertising budget is less than $500 a month
Because we sell products and services from large, well-know companies, those
companies provide the brand name recognition. Since our customers buy directly
from the various companies' websites, the better they know the companies'
products and reputations, the better it is for us.
Many of our larger projects, such as findjobs.com, healthdeals.com,
toyhound.com, textbookhound.com, sexmaniac.com and nudephotos.com, have only
become operational in the latter part of 1999. Therefore, they have just begun
to bring in revenue and have not been widely marketed yet.
Our Potential Future Growth Areas
We plan to increase our customer traffic to our existing websites and expand
into other Internet industries by:
o Increasing our advertising to expand our customer base.
o Opening websites in markets where we already own related domain names,
but have not as yet set up a website.
o Upgrading the graphics and content on our existing websites to be more
appealing to visitors.
o Increasing the number of companies that pay us commissions, so we can
offer a broader range of products.
o Translating our websites into foreign languages and expanding
internationally.
o Buying additional domain names for the purpose of opening more
websites.
To implement the foregoing, we need no new equipment, employees, or bandwidth.
Most of the work will be done by Eric Borgos, the rest by independent
contractors.
Because there is virtually no cost for us to enter each industry, we have much
room to grow. We have several thousand unused domain names that we plan to
develop into revenue-generating websites. These domain names are already
purchased and operational, but currently carry a banner that indicates they are
under construction. A list is available at http:www.getnames.com
The only cost of setting up these new sites is the Web page design. This work
will be done by independent contractors and, based on our previous experience,
will cost from $50,000-100,000 for the year 2000.
We currently have the following Internet projects under development:
o Insurancequotes.com - We will sell leads generated from this site to a
leading insurance company such as 800insureme.com and other insurance
quote services. Online insurance quote forms will be available for
health insurance, auto insurance, business insurance, home insurance,
disability insurance and estate planning services. The sight should be
operational by December 2000.
o Findkids.com - Will allow parents to search for their missing children
over the Internet. Using face recognition technology, our software will
compare their child's photo with thousands of photos of children
displayed on web sites throughout the Internet.
o Adoptme.com - A web site allowing children to adopt virtual pets.
o GetVitamins.com - A discount online vitamin store offering over 14,000
health products.
o CheapVacations - An internet travel portal.
o Getnewsgroups.com - A web site that will allow users to read and send
Usenet newsgroup postings using a web based interface.
o Digitalcharity.com - A directory of charity web sites where you can
donate money just by clicking on their web page.
o Ailments.com - An online health portal listing information and links
regarding specific medical conditions, diseases, and ailments.
We have spent more than $50,000 setting up our own adult pay site at
nudephotos.com. The site is one of the largest adult entertainment sites on the
net, with over 700,000 sexually explicit photos, 50,000 online sexually explicit
movies, live sex shows, 10,000 erotic stories and free phone sex. We plan to
create additional sexually oriented adult entertainment sites using the existing
content, but marketed towards different niche markets, such as:
o Whipme.com for the bondage market.
o Lesbiancity.com for the lesbian market.
o Nudeteens.com for the teen market.
o Amateurphotos.com for the amateur market.
o Asianphotos.com for the Asian market.
These specialized markets have much less competition and a much higher signup
rate among viewers who visit the sites.
Trademarks
While we own many domain names, none of those domain names are trademarked.
Domain names are required to be renewed on a biannual basis at a cost of $10 per
name.
Competition
The market for e-commerce over the Internet is new, rapidly evolving and
intensely competitive, and we expect competition to intensify in the future.
Barriers to entry are relatively low, and current and new competitors can launch
new websites at a relatively low cost using commercially available software. We
currently or potentially compete with a number of other companies, including
many of our third party providers.
The recent establishment of large affiliate network, such as linkshare.com,
clicktrade.com, reporting.net and cj.com, has made it easier for new companies
to enter the affiliate sales market, but it has also made it easier for us to
sell a wider variety of products. These networks are basically listings of
affiliate commission programs grouped by industry. If, for example, we decide to
open another online book site, we can easily find many online bookstores willing
to pay a commission through these networks. These networks also make commission
tracking, link management and sales accounting easier for us.
We believe we may be able to favorably compete because the cost of buying good
domains names has become increasingly expensive, giving our large number of
domain names and advantage. Although each of the industries for which we offer
products and services is extremely competitive, we believe all of our industries
are growing at high enough rates to accommodate many competing companies.
Indeed, we believe that competition within an industry actually helps us,
because we have the ability to become a sales agent for each new company that
enters the market and receive a commission from them.
Product Liability
Because we offer thousands of products and services over the Internet from many
different manufacturers and vendors, we could be held liable from any problems
that arise from those sales. We do not carry liability insurance, so any
litigation resulting from product liability or service liability could
materially harm our business.
Government Regulation
We are subject, both directly and indirectly, to various laws and governmental
regulations relating to our business. There are currently few laws or
regulations directly applicable to commercial online services or the Internet.
However, due to increasing popularity and use of commercial online services and
the Internet, it is possible that a number of laws and regulations may be
adopted with respect to commercial online services and the Internet. These laws
and regulations may cover issues including, for example, user privacy, pricing
and characteristics and quality of products and services. Moreover, the
applicability to commercial online services and the Internet of existing laws
governing issues including, for example, property ownership, libel and personal
privacy, is uncertain and could expose us to substantial liability. Any new
legislation or regulation or the application of existing laws and regulations to
the Internet could reduce or eliminate our income.
As our services are available over the Internet anywhere in the world, multiple
jurisdictions may claim that we are required to qualify to do business as a
foreign corporation in each of those jurisdictions. Our failure to qualify as a
foreign corporation in a jurisdiction where we are required to do so could
subject us to taxes and penalties for the failure to qualify. It is possible
that state and foreign governments might also attempt to regulate our
transmissions of content on our websites or on the websites of others or
prosecute us for violations of their laws. We cannot assure you that violations
of local laws will not be alleged or charged by state or foreign governments,
that we might not unintentionally violate these laws or that these laws will not
be modified, or new laws enacted, in the future.
The laws regarding the dissemination of sexually oriented adult entertainment
over the Internet are currently unsettled. Courts have held the right to
distribute adult entertainment over the Internet is protected by the First and
Fourteenth Amendments to the United States Constitution, which prohibit Congress
or the various states from passing any law abridging the freedom of speech.
The First and Fourteenth Amendments, however, do not protect the dissemination
of obscene material, and several states and communities in which our websites
are available, have enacted laws regulating the distribution of obscene material
with some offenses designed as misdemeanors and others as felonies, depending on
numerous factors. The consequences for violating the State statutes are as
varied as the number of states enacting them. Similarly, 18 U.S.C. Sections
1460-1469 contain the federal prohibitions with respect to the dissemination of
obscene material, and the potential penalties for individuals, including
directors, officers and employees, violating the federal obscenity laws include
fines, community service, probation, forfeiture of assets and incarceration. The
range of possible sentences require calculations under the Federal Sentencing
Guidelines, and the amount of the fine and the length of the period of the
incarceration under those guidelines are calculated based upon the retail value
of the unprotected materials.
Also taken into account in determining the amount of the fine, length of
incarceration or other possible penalty are whether the person accepts
responsibility for his or her actions, whether the person was a minimal or minor
participant in the criminal activity, whether the person was an organizer,
leader, manager or supervisor, whether multiple counts were involved, whether
the person provided substantial assistance to the government, and whether the
person has a prior criminal history.
In addition federal law provides for the forfeiture of:
o Any obscene material produced, transported, mailed, shipped or received
in violation of the obscenity laws.
o Any property, real or personal, constituting or traceable to gross
profits or other proceeds obtained from the offense.
o Any property, real or personal, used or intended to be used to commit
or to promote the commission of the offense, if the court in its
discretion so determines, taking into consideration the nature, scope
and proportionality of the use of the property in the offense.
With respect to the realm of potential penalties facing us should we be found
guilty of disseminating obscene material, the forfeiture provisions detailed
above may apply to our corporate assets falling under the statute. In addition,
a fine may be imposed, the amount of which is tied to the pecuniary gain to the
organization from the offense or determined by a fine table tied to the severity
of the offense. Also factored into determining the amount of the fine are the
number of individuals in the organization and whether an individual with
substantial authority participated in, condoned, or was willfully ignorant of
the offense; whether the organization had an effective program to prevent and
detect violations of the law; and whether the organization cooperated in the
investigation and accepted responsibility for its criminal conduct. In addition,
the organization may be subject to a term of probation of up to five years.
Federal and state obscenity laws define the legality or illegality of materials
by reference to the United States Supreme Court's three-prong test set forth in
Miller v. California, 413 U.S 1593 in 1973. This test is used to evaluate
whether materials are obscene and therefore subject to regulation. Miller
provides that the following must be considered:
o Whether the average person, applying contemporary community standards,
would find that the work, taken as a whole, appeals to the prurient
interest.
o Whether the work depicts or describes, in a patently offensive way,
sexual conduct specifically defined by the applicable state law.
o Whether the work, taken as a whole, lacks serious literary, artistic,
political or scientific value.
The Supreme Court has clarified the Miller test in recent years advising that
the prurient interest prong and patent offensiveness prong must be measured
against, as the wording goes, the standards of an average person, applying
contemporary community standards, while the value prong of the test is to be
judged according to a reasonable person standard.
We believe that we are in compliance with all federal, state and local
regulations regulating the content of any motion picture, photographic and print
products offered on any of our affiliate websites.
As discussed above, U.S. federal and state government officials have targeted
what some people term as sin industries, such as tobacco, alcohol and adult
entertainment for special tax treatment and legislation. In 1996, the U.S
Congress passed the Communications Decency Act of 1996. Recently, the Supreme
Court, in American Civil Liberties Union versus Reno, held some substantive
provisions of the Communications Decency Act unconstitutional. Businesses in the
adult entertainment and programming industries expended millions of dollars in
legal and other fees in overturning the Communications Decency Act. Investors
should understand that the adult entertainment industry may continue to be a
target for legislation. In the event we must defend ourselves, or join with
other companies in the adult entertainment business to protect our rights, we
may incur significant expenses that could reduce or eliminate our income.
Network Infrastructure
All of the websites we own are hosted on Internet servers located at major Web
hosting providers such as Concentric Networks, Pair Networks and Interland. All
of these hosting companies offer high-speed fiber optic T-3 data connections,
redundant Internet backbone providers and 24-hour-a-day website monitoring and
tech support.
We have a four-year contract with Concentric Networks to host many of our sites
with four servers specifically dedicated to our accounts. The contract
stipulates that we pay Concentric Networks $3,000 a month for the four dedicated
servers, and they may cancel the contract for any reason on 30-days notice
without penalty.
Should Concentric Networks go out of business, or for some reason be unable to
provide a reliable Internet connection for the servers, we would experience both
several days' downtime and additional expenses. If we receive notice ahead of
time that our account needs to be moved to another provider, downtime would be
only be about 1 day with minimal additional expenses.
There are, however, many other Web hosting services that offer similar services
at competitive prices, and we maintain backup servers with several of those
vendors. In addition to 4 dedicated servers with Concentric.com, alternate
dedicated servers are maintained at 9netave.com, rackspace.com, and
infotechsys.com. Non-dedicated hosting accounts are maintained at pair.com,
interland.net, and he.net.
Web sites and domain names could be easily moved from one server or web host to
another in the event of an emergency or contract cancellation by Concentric
Networks.
Property and Leases
Our primary business address is:
Impulse Communications 468 Kingstown Road, #4 Wakefield, RI 02879 Phone:
401-789-0885
The rent for the Boston location is $800/month. We have a one-year lease with
Diurmed Coughlin, from July 1, 2000, to June 31, 2001.
Employees
We presently have no employees, although we use independent contractors on a
regular basis. We use the independent contractors for:
o Website design
o Programming
o Search engine promotion.
We have no contracts with our independent contractors.
IMPULSE COMMUNICATIONS, INC.'S MANAGEMENT
The names and ages of our executive officers and directors as of our formation
in January 2000, are as follows:
------------------ ---------- --------------------------------------------------
Name Age Position
------------------ ---------- --------------------------------------------------
------------------ ---------- --------------------------------------------------
Eric Borgos 31 CEO, president and director
-----------
------------------ ---------- --------------------------------------------------
Eric Borgos started Impulse Communications in September 1990 as a computer
consulting company. From September 1988 to December 1990, Mr. Borgos worked
part-time in the Babson College Computer Center. During the summers in 1986,
1987, and 1988 Mr. Borgos worked as in intern at O'Connor and Associates, a Wall
Street stock brokerage. Mr. Borgos received his B.A. from Babson College in 1991
Directors serve for the a one year term. Our Bylaws currently provide for a
Board of Directors comprised of 1 director.
Executive Compensation
We have no compensation committee or other board committee performing equivalent
functions. Mr. Borgos, our current president and chief executive officer,
participated in deliberations of our board of directors concerning executive
officer compensation.
We have no employment agreement with or key-man life insurance on Mr. Borgos.
Board Compensation
Our director does not receive cash compensation for his services as director.
Indemnification of Directors and Officers.
We have agreed to indemnify our director, meaning that we will pay for damages
they incur for properly acting as director. NRS 78.037 of the Nevada General
Corporation Law, currently provides that any provision may not eliminate or
limit the liability of a director or officer for acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law or the payment of
dividends in violation of the Nevada General Corporation Law.
Insofar as indemnification for liabilities arising under the securities act may
be permitted to directors, officers or persons controlling the registrant under
the foregoing provisions, the registrant has been informed that in the opinion
of the Securities and Exchange Commission this indemnification is against the
public policy and is therefore, unenforceable.
Provisions With Possible Anti-Takeover Effects
Nevada's Combinations with Interested Stockholders statute, which applies to
Nevada corporations having at least 200 stockholders, prevents an interested
stockholder and an applicable Nevada corporation from entering into a
combination unless some conditions are met. A combination means any merger or
consolidation with an interested stockholder, or any sale, lease exchange,
mortgage, pledge, transfer or other disposition, in one transaction or a series
of transactions, with an interested stockholder having:
o an aggregate market value equal to 5% or more of the aggregate market
value of the assets of the corporation,
o an aggregate market value equal to 5% or more of the aggregate market
value of all outstanding shares of the corporation, or
o 10% or more of the earning power or net income of the corporation.
An interested stockholder means a person who, together with affiliates and
associates, beneficially owns or within the prior three years, did beneficially
own 10% or more of the voting power of the corporation. A corporation to which
this statute applies may not engage in a combination within the three years
after the interested stockholder acquired its shares unless the combination or
purchase is approved by the board of directors before the interested stockholder
acquired the shares.
If this approval is not obtained, then after the expiration of the three-year
period, the business combination may be consummated with the approval of the
board of directors or a majority of the voting power held by disinterested
stockholders, or if the consideration to be paid by the interested stockholder
is at least equal to the highest of:
o the highest price per share paid by the interested stockholder within
the three years immediately preceding the date of the announcement of
the combination or in the transaction in which it became an interested
stockholder, whichever is higher
o the market value per share of common stock on the date of announcement
of the combination and the date the interested stockholder acquired the
shares, whichever is higher
o for holders of preferred stock, the highest liquidation value of the
preferred stock, if it is higher.
Nevada's Acquisition of Controlling Interest statute applies only to Nevada
corporations with at least 200 stockholders, including at least 100 stockholders
of record who are Nevada residents, and which conduct business directly or
indirectly in Nevada. As of the date of this Prospectus, the Issuer does not
have 100 stockholders of record who are residents of Nevada, although there can
be no assurance that in the future the Acquisition of Controlling Interest
statute will not apply to the us.
The Acquisition of Controlling Interest statute prohibits an acquirer, under
some circumstances, from voting its shares of a target corporation's stock after
crossing some ownership threshold percentages, unless the acquirer obtains
approval of the target corporation's disinterested stockholders. The statute
specifies three thresholds: one-fifth or more by less than one-third, one-third
but less than a majority, and a majority or more, of the outstanding voting
power. Once an acquirer crosses one of the above thresholds, those shares in an
offer or acquisition and acquired within 90 days thereof become control shares
and the control shares are deprived of the right to vote until disinterested
stockholders restore the right. The Acquisition of Controlling Interest statute
also provides that in the event control shares are accorded full voting rights
and the acquiring person has acquired a majority or more of all voting power,
all other stockholders who do not vote in favor of authorizing voting rights to
the control shares are entitled to demand payment for the fair value of their
shares in accordance with statutory procedures established for dissenters'
rights.
IMPULSE COMMUNICATIONS, INC.'S LEGAL PROCEEDINGS
Impulse Communications is not a party to or aware of any pending or threatened
lawsuits or other legal actions.
IMPULSE COMMUNICATIONS, INC.'S PRINCIPAL STOCKHOLDERS
The following table sets forth some information regarding the beneficial
ownership of our Common Stock as of June 30, 2000 by
o Each shareholder known by us to own beneficially more than 5% of the common
stock o Each executive officer o Each director and all directors and executive
officers as a group:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
------------------------------------------ ----------------------------- ---------------------- ---------------------
Name Number of Shares Percentage before Percentage after
---- ----------------- ------------------ -----------------
merger merger
------ ------
------------------------------------------ ----------------------------- ---------------------- ---------------------
------------------------------------------ ----------------------------- ---------------------- ---------------------
Eric Borgos (1) 9,750,000 97.5 94%
------------------------------------------ ----------------------------- ---------------------- ---------------------
------------------------------------------ ----------------------------- ---------------------- ---------------------
All directors and named executive 9,750,000 97.5 94%
officers as a group (one person)
------------------------------------------ ----------------------------- ---------------------- ---------------------
(1) The shares are owned by Impulse Communication LLC, of which Mr. Borgos is the sole beneficial owner.
</TABLE>
This table is based upon information derived from our stock records. Unless
otherwise indicated in the footnotes to this table and subject to community
property laws where applicable, we believe that each of the shareholders named
in this table has sole or shared voting and investment power with respect to the
shares indicated as beneficially owned. Applicable percentages are based upon
10,008,000 shares of Common Stock outstanding as of June 30, 2000.
<TABLE>
<CAPTION>
DESCRIPTION OF IMPULSE COMMUNICATIONS, INC'S CAPITAL STOCK
<S> <C>
------------------------------------------------ ----------------------------------------------------
Authorized Capital Stock Under Articles Shares Of Capital Stock Outstanding
Of Incorporation
------------------------------------------------ ----------------------------------------------------
------------------------------------------------ ----------------------------------------------------
75,000,000 shares of common stock 10,008,000 shares of common stock
------------------------------------------------ ----------------------------------------------------
------------------------------------------------ ----------------------------------------------------
No shares of preferred stock No shares of preferred stock
------------------------------------------------ ----------------------------------------------------
</TABLE>
Common Stock
As of June 30, 2000 there were 10,008,000 shares of common stock outstanding
held of record by 51 beneficial owners. There will be 10,408,000 post merger
shares of common stock outstanding after g iving effect to the issuance of the
shares of common stock to the public under this prospectus and the reverse split
and return of shares prior to the merger.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The common stock
has no preemptive or conversion rights or other subscription rights. There are
no sinking fund provisions applicable to the common stock. The outstanding
shares of common stock are, and the shares of common stock to be issued upon
completion of this offering will be, fully paid and non-assessable.
Options
We have no options outstanding.
Dividends
We have never paid any dividends and do not expect to do so after the closing of
the merger and thereafter for the foreseeable future.
Transfer Agent and Registrar
We are the transfer agent and registrar for our common stock.
ADAR ALTERNATIVE ONE'S BUSINESS
In February, 2000, as previously agreed with his client, Mr. Williams
resigned as officer and director and Mr. Sidney Golub was elected president and
director. In February, 2000, we changed our name from Second Enterprise Service
Group, Inc. to Adar Alternative One, Inc.
History and Organization
We were organized as a corporation under the laws of the state of Florida in
April, 1999. Since inception, our primary activity has been directed to
organizational efforts. We were formed as a vehicle to acquire a private company
desiring to become an SEC reporting company in order thereafter to secure a
listing on the over the counter bulletin board. The company we have identified
and agreed to acquire is Impulse Communications.
Operations
We do not currently engage in any business activities that provide any cash
flow. The costs of identifying, investigating, and analyzing the merger with
Impulse Communications have been and will continue to be paid with money in our
treasury or loaned by management. This is based on an oral agreement between
management and us.
Employees
We presently have no employees. Our officer and director is engaged in business
activities outside of us. It is anticipated that management will devote the time
necessary each month to our affairs of until a successful business opportunity
has been acquired.
Selected Financial Data
The following information concerning our financial position and operations is as
of and for the period ended December 31, 1999.
--------------------------------
Total assets $ 0
--------------------------------
--------------------------------
Total liabilities 0
--------------------------------
--------------------------------
Equity 0
--------------------------------
--------------------------------
Sales 0
--------------------------------
--------------------------------
Net loss 79
-------------------------------
--------------------------------
Net loss per share 0
-------------------------------
Management Discussion And Analysis Or Plan Of Operation
We are a development stage entity, and have neither engaged in any
operations nor generated any revenues to date. We have no assets. Our expenses
to date, all funded by a loan from management, are $79. We have agreed to pay
our management and director a salary of $50,000, to be paid from the merger fee.
Substantially all of our expenses that must be funded by management have
been and will be from our efforts to identify a suitable acquisition candidate
and close the acquisition. Management has orally agreed to fund our cash
requirements until an acquisition is closed. So long as management does so, we
will have sufficient funds to satisfy our cash requirements. This is primarily
because we anticipate incurring no significant expenditures. Before the
conclusion of the acquisition of Impulse Communications, we our expenses have
been and will continue to be limited to accounting fees, legal fees, telephone,
mailing, filing fees, occupational license fees, and transfer agent fees.
We do not intend to seek additional financing. At this time we believe that the
funds to be provided by management will be sufficient for funding our operations
until we close the acquisition of Impulse Communications and therefore do not
expect to issue any additional securities before the closing of the acquisition
of Impulse Communications.
Properties.
We are presently using the office of Mr. Sidney Golub in Massachusetts at no
cost as our office. This arrangement is expected to continue only until a
business combination is closed, although there is currently no agreement between
us and Mr. Golub. We at present own no equipment, and do not intend to own any.
Security Ownership of Some Beneficial Owners and Management.
-----------------------------------------------------------
The following table sets forth some information regarding the beneficial
ownership of our Common Stock as of June 30 , 2000 by
o Each shareholder known by us to own beneficially more than 5% of the common
stock
o Each executive officer
o Each director and all directors and executive officers as a group:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
------------------------------------ ----------------------- ---------------- ------------------ ----------------
Name Number of Shares Percentage Number of Shares Percentage
---- ----------------- ----------- ----------------- ----------
Pre-Merger(1) before merger Post-Merger after merger
------------- ------------- ------------ ------------
(1)
------------------------------------ ----------------------- ---------------- ------------------ ----------------
------------------------------------ ----------------------- ---------------- ------------------ ----------------
Michael T. Williams 1,000,000 50% 200,000 2%
2503 W. Gardner Ct.
Tampa FL 33611
------------------------------------ ----------------------- ---------------- ------------------ ----------------
------------------------------------ ----------------------- ---------------- ------------------ ----------------
Sidney J. Golub 1,000,000 50% 200,000 2%
10 Troon Place
P.O. Box 289
Mashpee, MA 02649
------------------------------------ ----------------------- ---------------- ------------------ ----------------
------------------------------------ ----------------------- ---------------- ------------------ ----------------
All directors and named 1,000,000 50% 200,000 2%
executive officers as a group (one
person)
------------------------------------ ----------------------- ---------------- ------------------ ----------------
</TABLE>
This table is based upon information derived from our stock records. Unless
otherwise indicated in the footnotes to this table and subject to community
property laws where applicable, we believe that each of the shareholders named
in this table has sole or shared voting and investment power with respect to the
shares indicated as beneficially owned. Applicable percentages are based upon
2,000,000 shares of Common Stock outstanding as of June 30, 2000.
(1) In connection with the merger, Adar Alternative One agreed to effect a
reverse split such that the Williams' Account and Mr. Golub will each own
200,000 shares prior to the closing of the merger.
Mr. Williams and Mr. Golub may be deemed our founders, as that term is
defined under the securities act of 1933.
Director and Executive Officer.
------------------------------
The following table and subsequent discussion sets forth information about our
director and executive officer, who will resign upon the closing of the
acquisition transaction. Our director and executive officer was elected to his
position in February 2000
Name Age Title
Sidney J. Golub 58 President, Treasurer and Director
Since prior to 1995, Mr. Golub has been president of Adar Group, Inc., a
management consulting firm.
Executive Compensation.
The following table sets forth all compensation awarded to, earned by, or paid
for services rendered to us in all capacities during the period ended December
31, 1999, by our prior chief executive officer.
<TABLE>
<CAPTION>
Summary Compensation Table
Name and Principal Position Annual Compensation - 1999
--------------------------- --------------------------
<S> <C> <C> <C>
Salary, $, Bonus, $, Number of Shares Underlying Options, #,
---------- --------- ------------
Michael T. Williams, President None None None
</TABLE>
Future Compensation and Relationships and Related Transactions.
Of the $125,000 merger fee to be paid to us by Impulse Communications under the
terms of the merger agreement, Mr. Golub will receive $50,000 for his role as
current president and director. The remaining $75,000 will be paid to Williams
Law Group for legal services in preparing this registration statement.
In connection with the merger, Adar Alternative One agreed to effect a reverse
split with the result that Mr. Williams' Account and Mr. Golub will each own
200,000 shares prior to the closing of the merger.
Legal Proceedings.
We not a party to or aware of any pending or threatened lawsuits or other
legal actions.
Indemnification of Directors and Officers.
Our director is bound by the general standards for directors provisions in
Florida law. These provisions allow him in making decisions to consider any
factors as he deems relevant, including our long-term prospects and interests
and the social, economic, legal or other effects of any proposed action on the
employees, suppliers or our customers, the community in which the we operate and
the economy. Florida law limits our director's liability.
We have agreed to indemnify our director, meaning that we will pay for
damages they incur for properly acting as director. The SEC believes that this
indemnification may not be given for violations of the securities act of 1933.
Insofar as indemnification for liabilities arising under the securities act may
be permitted to directors, officers or persons controlling the registrant under
the foregoing provisions, the registrant has been informed that in the opinion
of the Securities and Exchange Commission this indemnification is against the
public policy and is therefore, unenforceable.
Provisions With Possible Anti-Takeover Effects
Section 607.0902 of Florida law restricts the voting rights of some shares of a
corporation's stock when those shares are acquired by a party who, by this
acquisition, would control at least one-fifth of all voting rights of the
corporation's issued and outstanding stock. The statute provides that the
acquired shares, the control shares, will, upon this acquisition, cease to have
any voting rights. The acquiring party may, however, petition the corporation to
have voting rights re-assigned to the control shares by way of an acquiring
person's statement submitted to the corporation in compliance with the
requirements of the statute. Upon receipt of this request, the corporation must
submit, for shareholder approval, the acquiring person's request to have voting
rights re-assigned to the control shares. Voting rights may be reassigned to the
control shares by a resolution of a majority of the corporation's shareholders
for each class and series of stock. If this resolution is approved, and the
voting rights re-assigned to the control shares represent a majority of all
voting rights of the corporation's outstanding voting stock, then, unless the
corporation's articles of incorporation or Bylaws provide otherwise, all
shareholders of the corporation will be able to exercise dissenter's rights in
accordance with Florida law.
A corporation may, by amendment to its articles of incorporation or bylaws,
provide that, if the party acquiring the control shares does not submit an
acquiring person's statement in accordance with the statute, the corporation may
redeem the control shares at any time during the period ending 60 days after the
acquisition of control shares. If the acquiring party files an acquiring
person's statement, the control shares are not subject to redemption by the
corporation unless the shareholders, acting on the acquiring party's request,
deny full voting rights to the control shares.
The statute does not alter the voting rights of any stock of the corporation
acquired in any of the following manners:
o Under the laws of intestate succession or under a gift or testamentary
transfer
o Under the satisfaction of a pledge or other security interest created
in good faith and not for the purpose of circumventing the statute
o Under either a share exchange or share exchange if the corporation is a
party to the agreement or plan of merger or share exchange
o Under any savings, employee stock ownership or other benefit plan
of the corporation
o Under an acquisition of shares specifically approved by the board
of directors of the corporation
DESCRIPTION OF ADAR ALTERNATIVE ONE'S CAPITAL STOCK
----------------------------------- ---------------------------------------
Authorized Capital Stock Shares Of Capital Stock Outstanding
----------------------------------- ---------------------------------------
----------------------------------- ---------------------------------------
50,000,000 2,000,000
----------------------------------- ---------------------------------------
----------------------------------- ---------------------------------------
20,000,000 none
----------------------------------- ---------------------------------------
Common Stock
As of June 30, 2000, there were 2,000,000 shares of common stock outstanding
held of record by 2 stockholders. There will be 10,408,000 post merger shares of
common stock outstanding after giving effect to the issuance of the shares of
common stock to the public under this prospectus and the reverse split and
return of shares prior to the merger.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The common stock
has no preemptive or conversion rights or other subscription rights. There are
no sinking fund provisions applicable to the common stock. The outstanding
shares of common stock are, and the shares of common stock to be issued upon
completion of this offering will be, fully paid and non-assessable.
Preferred Stock
We are authorized to issue 20,000,000 shares of Class A preferred stock. There
are no shares of preferred stock outstanding. Issuance of preferred stock with
voting and conversion rights may adversely affect the voting power of the
holders of common stock, including voting rights of the holders of common stock.
In some circumstances, an issuance of preferred stock could have the effect of
decreasing the market price of the common stock. We currently have no plans to
issue any shares of preferred stock.
Options
We have no options outstanding.
Dividends
We have never paid any dividends and do not expect to do so after the closing of
the merger and thereafter for the foreseeable future.
Transfer Agent and Registrar
We are the transfer agent and registrar for our common stock.
We believe our facilities will be adequate for our anticipated growth and that
we will be able to obtain additional space as needed on commercially reasonable
terms.
Legal Proceedings
We are not currently a party to any material legal proceedings.
COMPARISON OF RIGHTS OF ADAR ALTERNATIVE ONE STOCKHOLDERS AND IMPULSE
COMMUNICATIONS SHAREHOLDERS
Because Adar Alternative One will change its state of incorporation, articles or
articles and bylaws to be the same as those of Impulse Communications, the
rights of shareholders of Impulse Communications will not change as a result of
the merger.
AVAILABLE INFORMATION
Neither Impulse Communications nor Adar Alternative One are subject to the
reporting requirements of the Exchange Act and the rules and regulations
promulgated thereunder, and, therefore, do not file reports, information
statements or other information with the Commission. Adar Alternative One has
filed with the Commission a registration statement on Form S-4 under the
Securities Act. This prospectus constitutes the prospectus of Adar Alternative
One that is filed as part of the Registration Statement in accordance with the
rules and regulations of the Commission. Copies of the registration statement,
including the exhibits to the Registration Statement and other material that is
not included herein, may be inspected, without charge, at the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549, and may be available at the following Regional Offices of
the Commission: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, New York, New York 10048.
Copies of such materials may be obtained at prescribed rates from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549. Information on the operation of the Public Reference Room
may be obtained by calling the Commission at 1-800-SEC-0330. In addition, the
Commission maintains a site on the World Wide Web at http:www.sec.gov that
contains reports, information and information statements and other information
regarding registrants that file electronically with the Commission.
EXPERTS
The Financial Statements of Impulse Communications, Inc. for the years ended
December, 1998, and 1999 also included in this prospectus and elsewhere in the
Registration Statement have been included herein in reliance on the report of
Gray, Gray, & Gray, LLP, given on the authority of that firm as experts in
accounting and auditing
LEGAL MATTERS
The validity of the shares of Adar Alternative One common stock being offered by
this prospectus and certain federal income tax matters related to the merger are
being passed upon for Adar Alternative One by Williams Law Group, P.A., Tampa,
FL. Mr. Williams is the sole officer and director of and owns 1,000,000 shares
pre merger and 172,000 shares post merger of the stock of Adar Alternative One.
IMPULSE COMMUNICATIONS, INC.
REVIEW OF FINANCIAL STATEMENTS
AND OTHER FINANCIAL INFORMATION
JUNE 30, 2000
<PAGE>
IMPULSE COMMUNICATIONS, INC.
REVIEW OF FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
JUNE 30, 2000
REVIEW OF FINANCIAL STATEMENTS
ACCOUNTANTS' REPORT.........................................................1
BALANCE SHEETS..............................................................2
STATEMENTS OF OPERATIONS AND PROPRIETOR'S EQUITY/RETAINED EARNINGS..........3
STATEMENTS OF CASH FLOWS - DIRECT METHOD....................................4
OTHER FINANCIAL INFORMATION
PRO FORMA PER SHARE DATA...................................................12
<PAGE>
Board of Directors
Impulse Communications, Inc.
We have reviewed the accompanying balance sheets of Impulse Communications, Inc.
as of June 30, 2000 and 1999, and the related statements of operations and
proprietor's equity/retained earnings and cash flows - direct method for the six
months then ended, in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of the management of Impulse Communications, Inc.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The other financial information accompanying the financial statements is
presented only for supplementary analysis purposes and has been subjected to the
inquiry and analytical procedures applied in the review of the basic financial
statements. We did not become aware of any material modifications that should be
made to such data.
GRAY, GRAY & GRAY, LLP
Westwood, Massachusetts
September 22, 2000
<TABLE>
<CAPTION>
IMPULSE COMMUNICATIONS, INC.
BALANCE SHEETS
(See Accountants' Review Report)
ASSETS
June 30,
2000 1999
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 3,446 $ 0
Accounts receivable 88,996 81,479
Prepaid expenses 6,000 0
Advances to stockholder 135,818 0
------- -------
TOTAL CURRENT ASSETS 234,260 81,479
------- ------
EQUIPMENT, net of accumulated depreciation of $7,543
in 2000 and $2,513 in 1999 16,592 8,741
------- --------
OTHER ASSETS
Deferred tax asset
374 0
--- -
TOTAL ASSETS $ 251,226 $ 90,220
=============== ===============
---------------- -----------------
LIABILITIES AND STOCKHOLDER'S/PROPRIETOR'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 59,811 $ 3,249
Accrued payroll and payroll taxes 32,295 0
Accrued income taxes 50,720 0
-----------
TOTAL CURRENT LIABILITIES 142,826 3,249
------- ---------
STOCKHOLDER'S/PROPRIETOR'S EQUITY
Common stock 10,008 0
Additional paid-in capital 30,165 0
Retained earnings 68,227 0
Proprietor's equity 0 86,971
------ ------
TOTAL STOCKHOLDER'S/PROPRIETOR'S EQUITY 108,400 86,971
------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S/PROPRIETOR'S EQUITY
$ 251,226 $ 90,220
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
IMPULSE COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS AND PROPRIETOR'S EQUITY/RETAINED EARNINGS
(See Accountants' Review Report)
<TABLE>
<CAPTION>
Six Months Ended June 30,
<S> <C> <C>
2000 1999
---- ----
INTERNET REVENUES $789,280 $510,181
COST OF REVENUES 517,877 261,537
------- -------
GROSS PROFIT 271,403 248,644
------- -------
OPERATING EXPENSES
Sales and marketing 17,507 5,517
General and administrative 103,344 7,003
------- -----
TOTAL OPERATING EXPENSES 120,851 12,520
------- ------
INCOME BEFORE PROVISION FOR INCOME TAXES 150,552 236,124
PROVISION FOR INCOME TAXES 50,346 0
------ -------
NET INCOME $100,206 236,124
========
PROPRIETOR'S EQUITY AT BEGINNING OF PERIOD $44,231 33,066
NET INCOME THROUGH MARCH 6, 2000 AND JUNE 30, 1999 31,979 0
LESS PROPRIETOR'S DISTRIBUTIONS, NET OF CONTRIBUTIONS AND DONATED SERVICES
76,210 182,219
------ -------
PROPRIETOR'S EQUITY AT MARCH 6, 2000 AND JUNE 30, 2000 $0 $86,971
== =======
RETAINED EARNINGS AT BEGINNING OF PERIOD $0
NET INCOME FROM MARCH 6, 2000 THROUGH JUNE 30, 2000 68,227
------
RETAINED EARNINGS AT END OF PERIOD $68,227
=======
The accompanying notes are an integral part of these financial statements.
-3-
</TABLE>
<PAGE>
IMPULSE COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS - DIRECT METHOD
(See Accountants' Review Report)
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Ended June 30,
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $787,530 $466,728
Cash paid to suppliers (540,929) (219,716)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 246,601 247,012
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (11,127) (4,793)
Advances to stockholder (135,818) 0
-------- --------
NET CASH (USED) BY INVESTING ACTIVITIES (146,945) (4,793)
--------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proprietor's withdrawals, net (96,210) (242,219)
-------- ---------
NET CASH (USED) BY FINANCING ACTIVITIES (96,210) (242,219)
-------- ---------
NET INCREASE IN CASH 3,446 0
CASH AT BEGINNING OF YEAR 0 0
--------------- ----------------
CASH AT END OF YEAR $3,446 $0
====== ==
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH OPERATING AND FINANCING ACTIVITY:
The stockholder contributed $40,173 of net assets in exchange for 100% of
the common stock (see Note 5). $20,000 and $60,000 are the estimated fair
value of donated services performed by the chief executive officer for the
six months ended June 30, 2000 and 1999, respectively (see Note 5).
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
---- ----
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $100,206 $236,124
-------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,065 1,795
Deferred taxes (374) 0
Contributed assets 40,173 0
Donated services - executive compensation 20,000 60,000
(Increase) decrease in assets:
Accounts receivable (35,123) (43,453)
Prepaid expenses (6,000) 5,000
Increase (decrease) in liabilities:
Accounts payable 41,639 (12,454)
Accrued payroll and payroll taxes 32,295 0
Accrued income taxes 50,720 0
------ ---------
TOTAL ADJUSTMENTS 146,395 10,888
------- ------
NET CASH PROVIDED BY OPERATING ACTIVITIES $246,601 $247,012
======== ========
The accompanying notes are an integral part of these financial statements.
-5-
</TABLE>
<PAGE>
IMPULSE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(See Accountants' Review Report)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Principal Business Activity - Impulse Communications, Inc. has assembled a
portfolio of approximately 7,000 domain names and web sites on the internet. The
sites are used to provide access to electronic commerce merchants and their
customers. The Company conducts its business within one industry segment.
Inherent in Impulse Communications business are various risks and uncertainties,
including the limited history of commerce on the internet. Future revenues are
dependent on the continued growth and acceptance of the internet, use of the
internet for information, publication, distribution and commerce, and acceptance
of the Internet as an effective advertising medium.
Basis of Presentation - The proprietor opened its virtual doors on the web in
January, 1995. On March 6, 2000 the proprietor incorporated. These financial
statements report the combined activity from January 1, 2000 through June 30,
2000.
Recognition of Revenue - Internet revenues consist primarily of the following:
o Referral Commissions - Most of the Company's 7000 domain names and web
sites are used as portals to create traffic to e-merchant sites (primarily
adult content) who will pay a commission based on the ability of the
traffic to generate sales. Referral commission revenues are recognized at
the time the referral sale takes place.
o Subscription Revenues - Subscription revenues relates to customer
subscription at an adult content and a traditional service related web
site. Subscription periods are not greater than one month. Revenues are
recognized in the month that the customer subscribes for the service,
provided that no significant Company obligations remain and collection of
the receivable is probable. Risk of loss is limited due to the use of
pre-approved charges to customer credit cards.
o Domain Name Revenues - Revenues from the sale of domain names, if any, are
recognized at the time when ownership of the domain name is transferred.
<PAGE>
-6-
IMPULSE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(See Accountants' Review Report)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentrations of Credit Risk - Financial instruments that subject the Company
to concentrations of credit risk consist primarily of trade receivables. The
carrying amount of the trade receivables approximates fair value due to their
relatively short maturity. The Company generally does not require collateral on
accounts receivable.
Concentrations of credit risk with respect to trade receivables are limited due
to the large number of customers comprising the Company's customer base, and
their dispersion across the United States.
Allowance for Doubtful Accounts - Accounts receivable are considered by the
Company to be fully collectable at June 30, 2000 and 1999, accordingly no
allowance has been set up.
Use of Estimates - The presentation of financial statements in conformity with
generally accepted accounting principals requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclose contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash - During the course of the normal business cycle, the Company may at times,
maintain on deposit cash balances in excess of insured limits.
Income Taxes - Deferred taxes are provided on temporary differences arising from
assets and liabilities whose basis are different for financial reporting and
income tax purposes, primarily depreciable assets. Profits or losses of Impulse
Communications at June 30, 1999 are attributable directly to the sole proprietor
for income tax purposes. Consequently, an income tax provision has not been
reflected in these financial statements.
Equipment - Equipment is stated at cost, less accumulated depreciation.
Expenditures for routine repairs and maintenance are charged to operations as
they are incurred while those which significantly improve or extend the lives of
existing assets are capitalized. Depreciation is computed by the straight-line
method over the estimated useful lives of the following assets:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Estimated
2000 1999 Useful Lives
---- ---- ------------
Computer hardware $ 24,135 $ 11,254 3 Years
Less accumulated depreciation 7,543 2,513
------ ----- ------ -----
$ 16,592 $ 8,741
============ ============
</TABLE>
<PAGE>
-7-
IMPULSE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(See Accountants' Review Report)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Long-Lived Assets - In accordance with SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, the
carrying value of long-lived assets is reviewed on a regular basis for existence
of facts, or circumstances that may suggest impairment. To date, no such
impairment has been indicated. Should there be an impairment in the future, the
Company will measure the amount of the Impairment based on un-discounted
expected cash flow from the impairment asset.
Domain Names - The Company owns numerous domain names in the United Stated and
some Internationally. Domain name registration fees are paid annually. The
Company's policy is to evaluate its domain names prior to paying its annual
registration renewal fees.
NOTE 2 - RELATED PARTY TRANSACTIONS
Accounts Payable - Included in accounts payable at June 30, 2000 and 1999 is
$3,950 and $3,249 due to a related party for internet web page consulting
services. Included in cost of revenues is $17,554 and $17,437 paid to the
related party for the six months ended June 30, 2000 and 1999, respectively.
Advances to Stockholder - Advances to stockholder consist of non-interest
bearing advances to the Company stockholder that are expected to be repaid
during the next operating cycle.
NOTE 3 - COMMITMENTS
Commissions - The Company has verbal and signed commission agreements with
individuals to pay certain percentages based on profit or revenue generation at
certain sites. Included in cost of revenues is commission expense in the amount
of $24,570 and $12,180 for the six months ended June 30, 2000 and 1999,
respectively.
Facility - The Company has a lease for office space through June 30, 2001.
<PAGE>
-8-
IMPULSE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(See Accountants' Review Report)
NOTE 3 - COMMITMENTS (CONTINUED)
Servers - The Company leases off-site dedicated server space under lease
obligations that are accounted for as operating leases.
Future minimum rental payments under facility and operating leases greater than
one year are as follows:
Facility Servers Total
2001 $ 9,600 $ 7,200 $ 16,800
2002 $ 7,200 $ 7,200
2003 $ 6,600 $ 6,600
Included in operating expenses is rent expense for equipment and facilities of
approximately $21,032 and $8,401 for the six months ended June 30, 2000 and
1999, respectively.
NOTE 4 - ADVERTISING
The Company expenses advertising and promotional materials as incurred.
Advertising expense included in operating expenses was $16,507 and $5,517 for
the six months ended June 30, 2000 and 1999, respectively.
NOTE 5 - COMMON STOCK
Common stock, $0.01 par value:
Authorized 75,000,000 shares, issued and outstanding 10,008,000 shares.
Common shares are voting and dividends are paid at the discretion of the Board
of Directors.
On March 6, 2000, the Company was incorporated. The sole proprietor contributed
the assets to the corporation in exchange for 100% of the common stock. Based on
SEC Staff Accounting Bulletin No. 48 the historical cost basis was used to
record the contributed assets.
<PAGE>
-9-
IMPULSE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(See Accountants' Review Report)
NOTE 6 - EARNINGS PER SHARE
The following information presents the computation of basic earnings per share
("EPS") for the June 30, 2000 period presented in the statement of operations
using the common shares outstanding of the Company. EPS amounts presented have
been calculated in accordance with Statement of Financial Accounting Standards
No. 128. "Earnings Per Share" ("SFAS 128") establishes standards for computing
and presenting EPS.
Basic EPS excludes dilution and is computed by dividing common shares available
to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. The Company does not have any dilutive
items and therefore diluted earnings per share are not presented.
Net income $ 100,206
==============
Weighted average common shares outstanding * 10,008,000
==========
Basic earnings per share $ 0.01
==============
*The weighted average number of common shares outstanding are treated as being
the same at the beginning and end of period presented.
NOTE 7 - INCOME TAXES
The provision (benefit) for taxes on income consists of the following at June
30, 2000:
Current
Federal $37,071
State 13,649
------
50,720
Deferred
Federal (374)
State 0
---------------
(374)
$50,346
<PAGE>
IMPULSE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(See Accountants' Review Report)
NOTE 7 - INCOME TAXES (CONTINUED)
The net deferred tax amount included in the accompanying balance sheet includes
the following amount of deferred assets and liabilities as of June 30, 2000:
Current Noncurrent
Deferred tax asset $ 0 $ 374
Deferred tax liability 0 0
- -
$ 0 $ 374
=============== ==============
The deferred tax asset results from differing depreciation methods.
NOTE 8 - DONATED SERVICES
The estimated fair value of donated services performed by the chief executive
officer included in cost of revenues is as follows for the six months ended June
30:
2000 1999
---- ----
Executive compensation $ 20,000 $ 60,000
============= ===============
<PAGE>
OTHER FINANCIAL INFORMATION
<PAGE>
-11-
IMPULSE COMMUNICATIONS, INC.
PRO FORMA PER SHARE DATA
Earnings Per share - The following information presents the computation of basic
earnings per share ("EPS") for the June 30, 1999 period presented in the
statements of operations using the common shares outstanding of the incorporated
proprietorship. Effective March 6, 2000 the sole proprietorship was
incorporated. EPS amounts presented have been calculated in accordance with
Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS
128"). SFAS 128 establishes standards for computing and presenting EPS.
Basic EPS excludes dilution and is computed by dividing common shares available
to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. The Company does not have any dilutive
items and therefore diluted earnings per share are not presented.
Net income available to the sole proprietor $ 236,124
Income tax effect (88,302)
--------
$ 147,822
===================
Weighted average number of common shares outstanding* 10,008,000
==========
Basic earnings per share $ 0.01
==================
* The weighted average number of common shares outstanding are treated as being
the same at the beginning and end of the period presented.
<PAGE>
Adar Alternative One, Inc.
INDEX TO JUNE 2000 QUARTERLY FINANCIAL STATEMENTS
Financial Statements (unaudited)
Balance Sheets as of June 30, 2000 and December 31, 1999....... F-43
Statements of Operations for the three and six month periods
ended June 30, 2000 and the period April 6, 1999
(date of incorporation) to June 30, 1999 and 2000............. F-44
Statement of Stockholder's Equity for the six months
ended Juen 30, 2000............................................ F-45
Statement of Cash Flows for the three and six months ended
June 30, 2000 and the period April 6, 1999 (date of
incorporation) to June 30, 1999 and 2000..................... F-46
Notes to Financial Statements.................................. F-47
F-42
<PAGE>
Adar Alternative One, Inc.
(A Development Stage Enterprise)
BALANCE SHEET
---------------------------------------------------------------------------
June 30, December
2000 31, 1999
ASSETS (Unaudited) (Unaudited)
------ ----------- -----------
TOTAL ASSETS $ - $ -
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
TOTAL LIABILITIES $ - $ -
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock - no par value: 50,000,000 shares
authorized; 2,000,000 shares issued and
outstanding 79 79
Preferred stock - no par value: 20,000,000
shares authorized; no shares issued and
outstanding - -
Additional paid in capital 6,000 4,000
Deficit accumulated during the development stage (6,079) (4,079)
----------- -----------
Total stockholders' equity - -
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ - $ -
=========== ===========
---------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
F-43
<PAGE>
Adar Alternative One, Inc.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
(Unaudited)
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Period
April 6, April 6,
Six Three 1999 (date 1999 (date
Months Months of of
Ended Ended incorporation)incorporation)
June 30, June 30, to June to June
2000 2000 30, 1999 30, 2000
--------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
EXPENSES:
Professional fees and expenses $ 2,000 $ 1,000 $ 2,000 $ 6,000
Organizational costs - - 79 79
--------- ----------- ------------- -------------
NET LOSS $ 2,000 $ 1,000 $ 2,079 $ 6,079
========= =========== ============= =============
NET LOSS PER SHARE $ 0.00 $ 0.00 $ 0.00 $ 0.00
========= =========== ============= =============
</TABLE>
---------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
F-44
<PAGE>
Adar Alternative One, Inc.
(A Development Stage Enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
For the six months ended June 30, 2000
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Deficit
Accumulaated
Additional During the
Common Stock Paid in Development
Shares Value Capital Stage Total
--------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances,December 31, 1999 2,000,000 $ 79 $ 4,000 $ (4,079) $ -
Capital Contribution of Services - - 2,000 - 2,000
Net loss for the six
months ended June 30, 2000 - - - (2,000) (2,000)
--------- -------- ---------- ------------ -----------
Balances June 30, 2000 2,000,000 $ 79 $ 6,000 $ (6,079) $ -
========= ========= ========== ============ ===========
</TABLE>
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
F-45
<PAGE>
Adar Alternative One, Inc.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Period
April 6, April 6,
Six Three 1999 (date 1999 (date
Months Months of of
Ended Ended incorporation) incorporation)
June 30, June 30, to June to June
2000 2000 30, 1999 30, 2000
--------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,000) $ (1,000) $ (2,079) $ (6,079)
Adjustments to reconcile net loss to
cash used in operating activities -
Contributed services and expenses 2,000 1,000 2,000 6,000
---------- ---------- ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES - - (79) (79)
---------- ---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock - - 79 79
---------- ---------- ----------- -----------
CASH PROVIDED BY FINANCING ACTIVITIES - - 79 79
---------- ---------- ----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS - - - -
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD - - - -
---------- ---------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ - $ - $ - $ -
========== ========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ - $ - $ - $ -
========== ========== =========== ===========
Taxes paid $ - $ - $ - $ -
========== ========== =========== ===========
</TABLE>
-------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
F-46
<PAGE>
Adar Alternative One, Inc.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
------------------------------------------------------------------------------
NOTE A - FORMATION AND OPERATIONS OF THE COMPANY
Adar Alternative One, Inc., (we", "us", "our") was incorporated under
the laws of the state of Florida on April 6, 1999. We are considered to be in
the development stage, as defined in Financial Accounting Standards Board
Statement No. 7. We intend to investigate and, if such investigation warrants,
engage in business combinations. Our planned principal operations have not
commenced, therefore accounting policies and procedures have not yet been
established.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Our accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principals for interim financial information
and the instructions to Form 10-QSB and Rule 10-1 of Regulation S-X of the
Securities and Exchange Commission (the "SEC"). Accordingly, these financial
statements do not include all of the footnotes required by generally accepted
accounting principals. In the opinion of management, all adjustments (consisting
of normal and recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three and six months
ended June 30, 2000 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2000.
NOTE B - GOING CONCERN
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. We have an accumulated deficit of
$6,079 as of June 30, 2000. We do not currently engage in business activities
that provide any cash flow, accordingly our ability to continue as a going
concern is dependent on our management's ability to fund our cash requirements
until a business combination is closed. These factors among others may indicate
that we will be unable to continue as a going concern for a reasonable period of
time.
The financial statements do not include any adjustments that might be necessary
if we are unable to continue as a going concern.
NOTE C - INCOME TAXES
During the period April 6, 1999 (date of incorporation) to June 30, 2000, we
recognized losses for both financial and tax reporting purposes. Accordingly, no
deferred taxes have been provided for in the accompanying statement of
operations.
NOTE D - RELATED PARTY TRANSACTION
Our President, who is also a shareholder, has agreed, in writing, to fund all of
our expenses until such time as an acquisition transaction is closed. None of
these funds expended on our behalf will be reimbursable to our President,
accordingly these amounts will be reflected in our financial statements as
contributed capital.
F-47
<PAGE>
NOTE E - PROPOSED MERGER
We have entered into a merger agreement with Impulse Communications, Inc.
("Impulse") which we anticipate will close in the year 2000. In conjunction
with the merger we have agreed to effect a reverse stock split whereby
our stockholders will retain 400,000 shares outstanding after
such. In addition, Impulse has agreed to pay the expenses of the merger, which
include approximately $125,000 to the stockholders of the Company.
------------------------------------------------------------------------------
F-48
<TABLE>
<CAPTION>
ADAR ALTERNATIVE ONE, INC.
PROSPECTUS
TABLE OF CONTENTS
<S> <C>
SUMMARY.....................................................................................................................4
-------
RISK FACTORS................................................................................................................6
------------
MERGER APPROVALS...........................................................................................................13
----------------
MERGER TRANSACTIONS........................................................................................................13
-------------------
IMPULSE COMMUNICATIONS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............21
------------------------------------------------------------------------------------------------------------
IMPULSE COMMUNICATIONS BUSINESS............................................................................................21
-------------------------------
IMPULSE COMMUNICATIONS, INC.'S MANAGEMENT..................................................................................35
-----------------------------------------
IMPULSE COMMUNICATIONS, INC.'S LEGAL PROCEEDINGS...........................................................................36
------------------------------------------------
IMPULSE COMMUNICATIONS, INC.'S PRINCIPAL STOCKHOLDERS......................................................................37
-----------------------------------------------------
DESCRIPTION OF IMPULSE COMMUNICATIONS, INC'S CAPITAL STOCK.................................................................37
----------------------------------------------------------
ADAR ALTERNATIVE ONE'S BUSINESS............................................................................................38
-------------------------------
DESCRIPTION OF ADAR ALTERNATIVE ONE'S CAPITAL STOCK........................................................................42
---------------------------------------------------
COMPARISON OF RIGHTS OF ADAR ALTERNATIVE ONE STOCKHOLDERS AND IMPULSE COMMUNICATIONS SHAREHOLDERS..........................43
-------------------------------------------------------------------------------------------------
AVAILABLE INFORMATION......................................................................................................43
---------------------
EXPERTS....................................................................................................................43
-------
LEGAL MATTERS..............................................................................................................44
-------------
</TABLE>
Dealer prospectus delivery obligation
Until , all dealers that effect transactions in these securities, whether or not
participating in this offering, are required to deliver a prospectus.
September **, 2000
<PAGE>
PART II
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Florida Business Corporation Act. Section 607.0850(1) of the Florida
Business Corporation Act (the "FBCA") provides that a Florida corporation, such
as the Company, shall have the power to indemnify any person who was or is a
party to any proceeding (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 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 liability incurred in connection with such proceeding,
including any appeal thereof, 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.
Section 607.0850(2) of the FBCA provides that a Florida corporation
shall have the power to indemnify any person, who was or is a party to any
proceeding 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 and amounts paid in
settlement not exceeding, in the judgment of the board of directors, the
estimated expense of litigating the proceeding to conclusion, actually and
reasonably incurred in connection with the defense or settlement of such
proceeding, including any appeal thereof. Such indemnification shall be
authorized if such person acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation,
except that no indemnification shall be made under this subsection in respect of
any claim, issue, or matter as to which such person shall have been adjudged to
be liable unless, and only to the extent that, the court in which such
proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
Section 607.850 of the FBCA further provides that: (i) to the extent
that a director, officer, employee or agent of a corporation has been successful
on the merits or otherwise in defense of any proceeding referred to in
subsection (1) or subsection (2), or in defense of any proceeding referred to in
subsection (1) or subsection (2), or in defense of any claim, issue, or matter
therein, he shall be indemnified against expense actually and reasonably
incurred by him in connection therewith; (ii) indemnification provided pursuant
to Section 607.0850 is not exclusive; and (iii) the corporation may purchase and
maintain insurance on behalf of a director or officer of the corporation against
any liability asserted against him or 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 liabilities under Section 607.0850.
Notwithstanding the foregoing, Section 607.0850 of the FBCA provides
that indemnification or advancement of expenses shall not be made to or on
behalf of any director, officer, employee or agent if a judgment or other final
adjudication establishes that his actions, or omissions to act, were material to
the cause of action so adjudicated and constitute: (i) a violation of the
criminal law, unless the director, officer, employee or agent had reasonable
cause to believe his conduct was lawful or had no reasonable cause to believe
his conduct was unlawful; (ii) a transaction from which the director, officer,
employee or agent derived an improper personal benefit; (iii) in the case of a
director, a circumstance under which the liability provisions regarding unlawful
distributions are applicable; or (iv) willful misconduct or a conscious
disregard for the best interests of the corporation in a proceeding by or in the
right of the corporation to procure a judgment in its favor or in a proceeding
by or in the right of a shareholder.
Section 607.0831 of the FBCA provides that a director of a Florida
corporation is not personally liable for monetary damages to the corporation or
any other person for any statement, vote, decision, or failure to act, regarding
corporate management or policy, by a director, unless: (i) the director breached
or failed to perform his duties as a director; and (ii) the director's breach
of, or failure to perform, those duties constitutes: (A) a violation of criminal
law, unless the director had reasonable cause to believe his conduct was lawful
or had no reasonable cause to believe his conduct was unlawful; (B) a
transaction from which the director derived an improper personal benefit, either
directly or indirectly; (C) a circumstance under which the liability provisions
regarding unlawful distributions are applicable; (D) in a proceeding by or in
the right of the corporation to procure a judgment in its favor or by or in the
right of a shareholder, conscious disregard for the best interest of the
corporation, or willful misconduct; or (E) in a proceeding by or in the right of
someone other than the corporation or a shareholder, recklessness or an act or
omission which was committed in bad faith or with malicious purpose or in a
manner exhibiting wanton and willful disregard of human rights, safety, or
property.
Articles and Bylaws. The Company's Articles of Incorporation and the
Company's Bylaws provide that the Company shall, to the fullest extent permitted
by law, indemnify all directors of the Company, as well as any officers or
employees of the Company to whom the Company has agreed to grant
indemnification.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Item 2
1 Agreement and Plan of Merger and Reorganization *
Item 3
1 Articles of Incorporation of the Registrant.(1)
2 Bylaws of the Registrant (1)
79
<PAGE>
3 Amended and Restated Articles of Incorporation of Registrant, to
be effective after consummation of the proposed Merger.
4. Amended and Restated Bylaws of the Registrant, to be effective
after consummation of the proposed Merger.
Item 4
1 Form of Common Stock Certificate of the Registrant.(1)
Item 5
1 Legal Opinion of Williams Law Group, P.A.
Item 8
1 Tax Opinion of Michael Williams, P.A.
Item 10
1. Sample Internet Billing terms #1 **
2. Sample Internet Billing terms #2 **
Item 23
1 Consent of GRAY, GRAY & GRAY, LLP
2 Consent of WILLIAMS LAW GROUP, P.A. (to be included in Exhibits
5.1).
All other Exhibits called for by Rule 601 of Regulation S-1 are not
applicable to this filing.
Information pertaining to our Common Stock is contained in our Articles
of Incorporation and By-Laws.
* Filed herewith
** Previously Files
All other Exhibits called for by Rule 601 of Regulation S-1 are not applicable
to this filing.
(1) Information pertaining to Common Stock is contained in our Articles of
Incorporation and By-Laws.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes to:
1.File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
i.Include any prospectus required by section 10(a)(3) of the Securities
Act;
ii.Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement; and Notwithstanding the forgoing, any increase
or decrease in volume of securities offered (if the total dollar value
of securities offered would not exceed that which was registered) and
any deviation From the low or high end of the estimated maximum
offering range may be reflected in the form of prospects filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
the volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement. iii.Include any
additional or changed material information on the plan of distribution.
2.For determining liability under the Securities Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering.
3.File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
