UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB
GENERAL FORM OF REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
ARTIBLES, INC.
Michigan 38-3321841
Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
4090 Lake Drive,SE, Grand Rapids, Michigan 49506
(Address of Principal Executive Offices) (Zip Code)
Registrants Telephone No: (616)-285-1690
The following Securities are to be registered pursuant to Section 12(B) of the
Act:
None
The following Securities are to be registered pursuant to Section 12(g) of the
Act:
Common Stock, .01 par value per share
(Title or Class)
PART 1.
INTRODUCTION
This registration statement is voluntarily being filed pursuant to Section
12(g) of the Securities Exchange Act of 1934, in order to comply with
requirements of the National Association of Securities Dealers(NASD)
requirements, for marker maker submission of quotations, of the registering
corporations securities, on the Over the Counter Bulletin Board, often call the
"OTCBB". No common stock of this company has every been listed or registered at
any time previous to this registration statement. The common stock of the
registering corporation has not been rated by any NRSRO, or Nationally
Recognized Statistical Rating Organization for credit quality or marketability.
The company may choose to rate its securities in the future. Upon effective
registration of securities, if granted, the registering corporation will file
reports as required under the Exchange Act to maintain itself as a reporting
company thereby qualifying for minimum listing standards as promulgated by NASD
Regulation Inc. on the "OTBCC". The company does not anticipate any contingency
upon which it may cease filing reports with the SEC unless it is not required to
do so. This registration statement is provided to enhance public accessibility
to the corporations business information to interested parties; to allow the
corporation to obtain business goals yet provide for public disclosure.
ITEM 1. Description of Business
(a) BUSINESS DEVELOPMENT.
1. FORM AND YEAR OF ORGANIZATION: Artibles, Inc. the "Company" was incorporated
on November 22, 1996 as effected in the State of Michigan. The restated
Articles of Incorporation as filed with the administrator, as amended, on June
17, 1999. The identification number as assigned by administrative
bureau of the State of Michigan was 432-926. There was no predecessor company
and the Company has never filed for bankruptcy. The Company has not received any
notice of any legal proceedings against it.
2. ISSUANCE OF COMPANY STOCK. The company has 7,761,086 shares of common stock
outstanding (of par value $0.01) as of July 30, 2000 issued and outstanding.
There are 10,200,000 Authorized shares with 2,438,914 share un-issued.
The historical issuance of stock and ownership: On December 31st, 1996 the
company had 56,400 shares outstanding, issued to principal founders and one
affiliate pursuant to Section 4(2) of the 1933 Act. There was no solicitation or
advertising at any time by the company. On November 30 1997, 3,600 shares were
issued to a sophisticated accredited affiliated investor for services rendered,
bringing the total up to 60,000 shares outstanding. On December 2, 1997 the
company approved a 74.627 for 1 stock split bringing the number of total
outstanding shares to 4,477,612, due to the positive stock split. On December
31, 1997 15,400 shares were issued to an accredited affiliated sophisticated
international investor for services rendered brings the total shares outstanding
to 4,493,012. On July 1st, 1999 a cumulative total of 3,268,074 shares were
issued as follows: to two corporate service providers, for unpaid invoices for
697,761 shares, to one affiliated-investor for 74,624 shares, to satisfy one
unsecured convertible note holder of principal amount $51,000, whom converted to
common stock of 1,082,161 shares, to one affiliated corporate principal owner
for services rendered for 1,346,213 shares, and to one individual affiliated
founding owner for services rendered for 67,311 shares bringing the cumulative
total common shares to 7,761,085, common shares outstanding as of July 31, 2000.
There has been no preferred stock issued at any time at the time of application
of the registrant.
The capitalization of the company has been obtained from a combination of
private equity investment from the founders and affiliates, short-term debt
financing and corporate equity finance for services the company relies upon as
described in this registration statement. There is only one class of voting
common stock issued. In the first half of 1999 the company obtained debt capital
in the form of 13 convertible promissory notes fully executed, convertible into
common equity, from sophisticated investors for a total principal amount of
$733,000 as received by the company. On December 15, 1999, 7 of the 13
note-holders were converted into common equity, representing a principal dollar
amount of $175,000, for a total shares tendered by the company for this debt
reduction, of 76,460 shares. Therefore as of December 31, 1999 there was a total
of 7,837,546 common shares outstanding. There was a total principal amount of
convertible promissory notes $558,000.00 as of December 31, 1999. It is
anticipated by the company that all note-holders shall be converted into common
equity at some time in the near future.
The principal products and services the company engages in is a service
business as an informational services provider-vendor.
Business and individuals can access the Artibles service on the
Internet for information on luxury retail and wholesale products in the arts,
antiques and collectable markets worldwide. Business activities include,
information gathering on selected artistic and luxury goods products, tracking,
tagging, product analysis, item identification.
The company plans to create value in the marketplace that will be passed along
to consumers in the form of: 1. favorable pricing (direct from source market) on
products in the arts market, and useful information on these products. 2.
Reintegrating and assembly of information on products being offered worldwide in
this industry sector. The Artibles service is a utility for retailers and
wholesalers who currently buy and sell these products to the public. For
individual public customers the Artibles service is a resource to locate the
product they may desire. In addition registered uses of the Artibles website
will have access to branded services such as (appraisal, locator, escrow,
transfer or insurance) to consummate a business transaction anywhere in domestic
USA and Western Europe and then expanding worldwide, for distribution.
The company has not formally made any Public announcement regarding products or
services to date. The company has entered into confidential proprietary
discussions with major US corporations to explore synergistic relationships and
interest in the companies capitalization and product technology. Internet
technology utilization in the Luxury Arts Products Market is not well
defined. The competitive industry is extremely fragmented encompassing hundreds
of thousands or dealers, artisans, collectors, vendors disbursed geographically
all over the world. Major competition can be expected from proprietary art
auction houses selling their own products on the Internet and from numerous
Internet vendors or dealers, selling a mix of products not limited to the luxury
art product market. Artibles believes it is well positioned in this new industry
since the company is using a specialized search and recovery system as opposed
to a standard website displaying particular products. With rapid technology
changes and Internet commercialization and with no significant barriers to
entry, the company expects competition to persist, increase and intensify in the
future. The company also faces competition from traditional media such as radio,
television and print. The company competes with Internet art galleries, internet
based auctions, Internet fairs antique shows, stores and malls. The company
believes it primary competitive position will be determined in providing its
products and services via the internet, by international name recognition, by
offering variety of value added services, ease of use, price, quality of
service, reliability, technical expertise and experience of its personnel.
The company since 1996 has been in a research and development modality with
management participation on a full/part time basis. The initial cost of expensed
development and operations has been capitalized, and paid, for by the founders.
The total number of employees working full time is 3. The total number of
part time consultants is extensive and may include up to ten, with 4 being
utilized at the time or registration application. The company has no part time
employees.
REPORTING UNDER THE 1934 ACT. Upon effective registration of common stock
under the Exchange Act, if granted, the company will be required to file certain
periodic reports with the Securities and Exchange Commission. The Public may
read and copy all reports filed with the SEC by the company, at the SEC's
Public Reference Room at 450 Fifth Street N.W. Washington D. C. 20549. You may
obtain information on the operation of the Public Reference Room by calling the
SEC toll free at 1-800-SEC-0330. The SEC maintains an Internet site where all
reports, proxy and information statements filed by the company, may be obtained
at http://www.sec.gov. You may also contact the company at its web site
at http://www.artibles.com. You may also contact the company directly toll free
at 1-800-889-1619.
The company as registrant, upon registration being granted, is required to file
an annual audited financial report on a Form 10K within 90 days following the
end of its fiscal year. The company as registrant, will be required to file
reports on common stock shareholder ownership of affiliates and 5% owner(s)
initially, currently and annually thereafter. The company as registrant is
required to file, quarterly, un-audited or audited financial reports on Form 10-
Q on an ongoing basis. Material changes in the board of directors, mergers or
acquisitions, corporate status changes, accountant changes or other specified
events require the company to file Form 8K with the SEC commission.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS
(A) PLAN OF OPERATION. The company has broken its plan of operation into three
distinct phases or stages. In stage one, after primary capitalization, the
company will engage in the complete development and deployment of the companies
licensed Artedex system, an internet software application system of gathering,
processing, analyzing and publishing of pricing information, inventory, sale
price highs/lows/averages on items in 4,000 categories for sale on the top 10
Net Auction websites, and top 50 E-Tail sites currently on the Internet. The
Artedex informational access system will be offered and sold to other websites.
Concurrently, the company will develop a network of local and regional marketing
and sales representatives. The company calls these representatives Category
Market Developers(CMDs)who are typically large wholesalers and aggregators,
which will link with the company via the Internet. The second category of sales
agents are Field Market Developers(FMDs)which are typically small wholesalers,
retailers and aggregators, or smaller concerns, with more limited markets. These
smaller marketers, also be linked via the Internet to the company. The Artedex
system will make market information about products in numerous categories of
goods in this sector, available to Internet-enabled consumers and participants
Worldwide.
In stage two the company intends to establish Artibles, Inc. in the consumer
markets Worldwide utilizing the Internet as the predominant interface with
consumers and market participants. Jurisdictional issues shall be addressed by
the company to assure compliance with local rules and regulations. The company
in this stage shall seek to instill consumer confidence and presence by name
brand recognition, marketing efforts through the relationships established in
phase one with CMDs and FMDs. Much of the companies virtual inventory and
merchandising particulars will be implemented by the company's management during
this stage. Specific consumer needs because of diversity in culture, language
and communications ability along with strategic banking and affiliation vendor
relationships shall be integrated into the companies Webase and Website for
utility, and enhanced functionality in phase two. In stage two the company will
seek a investment banker for additional capitalization and restructuring while
seeking NASDAQ listing status.
Stage three is really the completed integration of company's business model as
developed in stages one and two. Stage three is the primarily a re-development
of the companies business plan as experiences obtained in stages one and two are
realized. The third stage is a concurrently operation, in that this stage
recognizes the fast moving intrinsic changes in the marketplace, which requires
the company to adapt to informational competitive market conditions. Therefore
the company may selectively expand into the most dynamic and profitable
opportunities discovered. Stage three requires the complete upgrade of all of
the companies systems and technology, and possible deployment on a more local
geographic location, thereby recasting the companies operation internationally,
taking advantage of capital or labor conditions globally to enhance profit. This
enhances or enables consumer competitive advantage in price and or delivery by
the enriched distribution abilities of the company
(B) CASH REQUIREMENTS AND OF NEED FOR ADDITIONAL FUNDS, TWELVE MONTHS. Our
funding requirements fall into two categories: basic working capital and
financing requirements to complete software programming activities and services
and marketing costs. Currently, we accordingly have only nominal working
capital available. We have no immediate or foreseeable need for capital other
than $1,000,000 in private raise of capital as described in this part.
Plans to offer stock via a Private Placements of the company's common stock is
currently underway. One of
the company's principal shareholders has arranged for several sophisticated non
US investors internationally located whom participate in the Arts and Luxury
goods market, to participate in company operations as affiliated investors. Any
global investor, subject to OFAC and various other legal, inter-dictive and
investigative due diligence methods, may satisfy the company's capital
requirements. This core financing provided by a the proposed capitalization,
would be the seed money to engage the company's business plan. The company is
seeking a financing commitment by assembling, at the time of this filing an
acceptable offering memorandum statement. The company plans to remain a United
Sates corporation and will currently not expatriate ownership or control to any
foreign entity.
Contingencies for additional Capital may arise should the companies product
development cost increase or private financing not materialize as anticipated.
(1) SUMMARY OF PRODUCT RESEARCH AND DEVELOPMENT
Research and Development
Artibles has deployed its site within the UK, the URL being WWW.ARTIBLES.CO.UK.
housed at TeleHouse, Carnary Warf, UK. The site is also available through
WWW.ARTIBLES.COM in the US, however, when addressing the site
within the US Artibles servers point to the UK site. Both are maintained by IT
professionals who are on call to assure uptime reliability.
Artibles has two current research and development projects that will
enhance the site and its partners. They are as follows:
Encryption:
Artibles is presently working with the development team in the UK to
deploy a 128 bit, advanced encryption scheme. The security permitted by this
system will allow for secure transactions to occur between buyers and sellers
within the Artibles system as well as provide anonymity to those buyers and
sellers who demand such to complete the sale. The 128 bit encryption system has
been co-developed and recently deployed for TD Waterhouse, a large multinational
brokerage house in the UK. When the development is completed, the "ARTIBLES
ASSURANCE POLICY" will be implemented. This system could become the most secure
system available on the net.
By providing security as described Artibles believes that it will attract
business that requires or demands a stronger security than is presently
available on the net. The E-BAY model, although highly successful with the
lower priced items for sale, does not allow individual buyers and sellers the
level of security necessary to buy and sell more costly works of Art, Antiques
and Collectibles with confidence. Our research indicates that the market is
looking for a new entrant that will answer the needs of the middle to higher
priced goods.
(2) EXPECTED PURCHASE OR SALE OF PLANT AND SIGNIFICANT EQUIPMENT. None.
(3) EXPECTED SIGNIFICANT CHANGE IN THE NUMBER OF EMPLOYEES None.
(C) DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
(1) OPERATIONS AND RESULTS FOR THE PAST TWO FISCAL YEARS. As of December
31st, 1999 we had accumulated a deficit of since our inception on November 22
1996. The company has no operating income to date
RISK FACTORS
NO OPERATING HISTORY OR REVENUES; LIMITED ASSETS
The Company was incorporated on November 22, 1996, under the name "Artibles,
Inc." Since its inception, the Company has incurred costs to develop and
enhance its technology, to create, introduce and enhance it web sites, to
establish marketing and distribution relationships and to build administrative
organization. The Company has no operating history or revenues and has limited
assets other than what it hopes to acquire in this Offering. Because the
Company has no operating history, the prediction of future results is difficult
or impossible, and the Company and its prospects must be considered in light of
the risks, costs and difficulties frequently encountered by companies in their
early stages of development, particularly companies in the rapidly evolving
Internet market. Following this Offering, the Company anticipates incurring
significant ongoing expenses including sales and marketing, public relations,
leasing costs, personnel hiring, training costs, funding of higher levels of
research and development, development of new distribution channels, broadening
of customer support capabilities, implementing strategic relationships important
to the Company and increasing its administrative resources in anticipation of
future growth. Principals of the Company have limited experience in the
operation of a large and global electronic business and in providing Internet
services. There can be no assurance that the Company will achieve its
objectives or that the operations of the Company will be profitable, nor if
profitability is attained, that such profitability will be sustained. The
Company's profitability will be subject to market and financial considerations
that may be beyond the control of the Company. To the extent that increases in
expenses precede or are not subsequently followed by increased revenues, the
Company's business, results of operations and financial condition will be
materially adversely affected. There can be no assurance that the Company will
generate sufficient revenues from the sale of its products and services to
achieve or maintain profitability on a quarterly or annual basis in the future.
The Company expects negative cash flow from operations for the foreseeable
future as it continues to develop and market its business. Since the Company is
in its infancy, there is a risk of loss of the entire investment.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company is likely to experience significant fluctuations in quarterly
operating results caused by many factors, including the rate of growth, usage
and acceptance of the Internet, changes in the demand for the Company's products
and services, introductions or enhancements of products and services by the
Company and its competitors, delays in the introduction or enhancement of
products and services by the Company or its competitors, customer order
deferrals in anticipation of upgrades and new products, changes in the Company's
pricing policies or those of its competitors, changes in the distribution
channels through which products or services are sold, the Company's ability to
anticipate and effectively adapt to developing markets and rapidly changing
technologies, the Company's ability to attract, retain and motivate qualified
personnel, changes in the mix of products and services sold, changes in the mix
of domestic and international revenues and changes in general economic
conditions. The Company will attempt to expand its channels of distribution, and
any increase in the Company's revenues will be dependent on its ability to
implement its distribution strategy. There also may be other factors that
significantly affect the Company's quarterly results which are difficult to
predict given that the Company has no operating history, which could result in
earnings falling short, for a particular period, of either a prior fiscal period
or investors' expectations.
As an Internet business, the Company expects to operate with little or no
backlog. As a result, quarterly sales and operating results depend generally on
the volume and timing of orders and the ability of the Company to fulfill orders
received within the quarter, all of which are difficult to forecast. The
Company's expense levels are based in part on its expectations as to future
orders and sales, which, given that the Company has no operating history, also
are extremely difficult to predict. The Company's expense levels are to a large
extent fixed, and it will be difficult for the Company to adjust spending in a
timely manner to compensate for any unexpected revenue shortfall. Accordingly,
any significant shortfall in demand for the Company's products and services in
relation to the Company's expectations would have an immediate material adverse
impact on the Company's business, results of operations and financial condition.
Due to all of the foregoing factors, the Company believes that its quarterly
operating results are likely to vary significantly. Therefore, in some future
quarter the Company's operating results may fall below the expectations of
securities analysts and investors.
UNPROVEN ACCEPTANCE OF THE COMPANY'S PRODUCTS AND SERVICES; DEVELOPING MARKET
Many of the Company's products and services have been introduced only recently,
have yet to be introduced or will be introduced in a substantially enhanced
form. The Company's success will depend largely upon the success of these and
future products and services and enhancements. Failure of these products and
services or enhancements to achieve significant market acceptance and usage
would materially adversely affect the Company's business, results of operations
and financial condition. If the Company were unable to successfully market its
current products and services, develop new products and services and
enhancements to current products and services or complete products and services
currently under development, or if such new products and services or
enhancements do not achieve market acceptance, the Company's business, results
of operations and financial condition would be materially adversely affected.
The primary markets for the Company's products and services have only recently
begun to develop and are rapidly evolving. As is typical in the case of a new
and rapidly evolving industry, demand for and market acceptance of products and
services that have been released recently or that are planned for future release
are subject to a high level of uncertainty. If the markets for the Company's
products and services fail to develop, develop more slowly than expected or
become saturated with competitors, or if the Company's products and services do
not achieve market acceptance, the Company's business, results of operations and
financial condition would be materially adversely affected.
INTERNET-RELATED RISKS
DEPENDENCE ON THE INTERNET; UNCERTAIN ACCEPTANCE OF THE INTERNET AS A MEDIUM FOR
COMMERCE
Use of the Internet by consumers is at a relatively early state of development,
and market acceptance of the Internet as a medium for commerce is subject to a
high level of uncertainty. The Company's future success will depend on its
ability to significantly increase revenues, which will require the development
and widespread acceptance of the Internet as a medium for commerce. There can
be no assurance that the Internet will be a successful retailing channel. The
Internet may not prove to be a viable commercial marketplace because of
inadequate development of the necessary infrastructure, such as reliable network
backbones, or complementary services, such as high speed modems and security
procedures for financial transactions. The viability of the Internet may prove
uncertain due to delays in the development and adoption of new standards and
protocols (for example, the next generation Internet Protocol) to handle
increased levels of Internet activity or due to increased government regulation.
If use of the Internet does not continue to grow, or if the necessary Internet
infrastructure or complementary services are not developed to effectively
support growth that may occur, the Company's business, results of operations and
financial condition could be materially adversely affected.
UNCERTAIN ACCEPTANCE OF THE COMPANY'S INTERNET CONTENT
The Company's future success will be significantly dependent upon its ability to
create, license and deliver entertaining and compelling
arts/antiques/collectibles-related content to attract users to its web sites to
purchase arts, antiques and collectibles, and to attract advertisers to its web
sites. The Company has limited experience in the online arts, antiques and
collectibles business. There can be no assurance that the Company's content
will be attractive to a sufficient number of users to generate significant
revenues. There also can be no assurance that the Company will be able to
anticipate, monitor and successfully respond to rapidly changing consumer tastes
and preferences so as to continually attract a sufficient number of users to its
web sites. If the Company is unable to develop Internet content that allows it
to attract, retain and expand a loyal user base, its business, results of
operations and financial condition will be materially adversely affected.
UNCERTAIN ACCEPTANCE OF THE INTERNET AS A MEDIUM FOR ADVERTISING
For the Company to generate advertising revenues, advertisers and advertising
agencies must direct a portion of their budgets to the Internet and,
specifically, to the Company's Internet web sites. To date, sales of Internet
advertising represent only a small percentage of total advertising sales. The
Company has begun to look for advertisers to purchase advertising on its web
sites but has not recognized material advertising revenues to date. There can
be no assurance that advertisers and advertising agencies will accept the
Internet as a medium. If Internet advertising is not widely accepted by, or if
the Company is not successful in generating significant advertising revenues
from, advertisers and advertising agencies, the Company's business, results of
operations and financial condition could be materially adversely affected. For
this reason, advertising revenues have not been included in the Company's
financial projections in Exhibit D.
SECURITY RISKS
Despite the implementation of network security measures by the Company, its
infrastructure is potentially vulnerable to computer break-ins and similar
disruptive problems caused by its customers or others. Consumer concern over
Internet security has been, and could continue to be, a barrier to commercial
activities which require consumers to send their credit card information over
the Internet. Computer viruses, break-ins or other security problems could lead
to misappropriation of proprietary information and interruptions, delays or
cessation in service to the Company's customers. Moreover, until more
comprehensive security technologies are developed, the security and privacy
concerns of existing and potential customers may inhibit the growth of the
Internet as a merchandising medium.
Users of the Internet face the following three security concerns: (i) security
of content; (ii) site security; and (iii) security of ownership. Security of
content ensures that what is put on the Internet is not altered or vandalized.
Some Web Servers are inadequately secured, allowing vandals to modify pages on a
web site, without an owner's knowledge or permission. Words, art and other work
can be changed and result in tarnishing the image of a business. Site security
will protect data from viruses, worms and sneak piracy. Some software pirates
on the Internet use unsuspecting sites to run schemes. Anonymous FTP servers
which have write permission are most vulnerable. Pirates can upload software
onto a machine using cryptic filenames that might not be seen in standard
directory listings, and then publish the software for others to download. Not
only can this compromise the reputation of a business on the Internet for
responsible system administration, it can make a business liable for damages.
A significant barrier to electronic commerce and communications is the secure
transmission of confidential information over public networks. The Company
relies on encryption and authentication technology licensed from third parties
to provide the security and authentication necessary to effect secure
transmission of confidential information. There can be no assurance that
advances in computer capabilities, new discoveries in the field of cryptography
or other events or developments will not result in a compromise or breach of the
algorithms used by the Company to protect customer transaction data. If any
compromise of the Company's security were to occur, it could have a material
adverse effect on the Company's business, results of operations and financial
condition. A party who is able to circumvent the Company's security measures
could misappropriate proprietary information or cause interruptions in the
Company's operations. The Company may be required to expend significant capital
and other resources to protect against the threat of such security breaches or
to alleviate problems caused by such breaches. Concerns over the security of
Internet transactions and the privacy of users also may inhibit the growth of
the Internet generally, and the World Wide Web in particular, especially as a
means of conducting commercial transactions. To the extent that activities of
the Company or third party contractors involve the storage and transmission of
proprietary information, such as credit card numbers, security breaches could
expose the Company to a risk of loss or litigation and possible liability.
There can be no assurance that the Company's security measures will prevent
security breaches or that failure to prevent such security breaches will not
have a material adverse effect on the Company's business, results of operations
and financial condition.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
The Company is subject, both directly and indirectly, to various laws and
governmental regulations relating to its business. The Company believes it is
currently in compliance with such laws and that they do not have a material
impact on its operations, although there can be no assurance that the Company
will be able to successfully address changes in the regulatory environment
should they occur. Moreover, other than laws and regulations applicable to
businesses generally there are currently few laws or regulations directly
applicable to access to or commerce on the Internet. However, due to the
increasing popularity and use of the Internet, it is possible that a number of
laws and regulations may be adopted with respect to the Internet. Such laws and
regulations may cover issues such as user privacy, pricing and characteristics
and quality of products and services. The enactment of any such laws or
regulations in the future may slow the growth of the Internet, which could in
turn decrease the demand for the Company's products and services and increase
the Company's cost of doing business or otherwise have an adverse effect on the
Company's business, results of operations and financial condition. Moreover,
the applicability to the Internet of existing laws governing issues such as
property ownership, libel and personal privacy is uncertain and could expose the
Company to substantial liability for which the Company might not be indemnified
by content providers. See "--Liability for Information Retrieved from the
Internet." In addition, claims have been brought, and sometimes successfully
pressed, against on-line services, for defamation, negligence, copyright or
trademark infringement or under other theories with respect to materials
disseminated through such services. The Company maintains a web site to which
users can upload materials, and there can be no assurance that the Company will
not be subject to similar claims. The Company believes that its use of material
on its web sites is protected under current provisions of copyright law.
However, legal rights to certain aspects of Internet content and commerce are
not clearly settled. There can be no assurance that the Company will be able to
continue to maintain rights to information. The failure to be able to offer
such information would have a material adverse effect on the Company's business,
results of operations and financial condition. See "BUSINESS--Government
Regulation."
LIABILITY FOR INFORMATION RETRIEVED FROM THE INTERNET
Due to the fact that material may be downloaded from web sites and may be
subsequently distributed to others, there is a potential that claims will be
made against the Company for defamation, negligence, copyright or trademark
infringement or other theories based on the nature and content of such material.
Such claims have been brought, and sometimes successfully pressed, against
online services in the past. In addition, the Company could be exposed to
liability with respect to the material that may be accessible through the
Company's branded products and web sites. For example, claims could be made
against the Company if material deemed inappropriate for viewing by children
could be accessed through the Company's web sites. Although the Company carries
general liability insurance, the Company's insurance may not cover potential
claims of this type or may not be adequate to cover all costs incurred in
defense of potential claims or to indemnify the Company for all liability that
may be imposed. Any costs or imposition of liability that is not covered by
insurance or in excess of insurance coverage could have a material adverse
effect on the Company's business, results of operations and financial condition.
The Company is currently not aware of any such claims.
COMPETITION; NEW ENTRANTS
The markets for the Company's products and services are new, competitive,
evolving quickly and subject to rapid technological change. Since the
Internet's commercialization in the early 1990's, the number of web sites on the
Internet competing for attention and spending has proliferated. With no
significant barriers to entry, the Company expects competition to persist,
increase and intensify in the future as the markets for the Company's products
and services continue to develop and as additional companies enter each of its
markets. It is possible that there are major companies as well as smaller
entrepreneurial companies that are focusing significant resources on developing
and marketing products and services that will compete with the Company's
products and services. Products and services that compete with those of the
Company can be expected in the future. Intense price competition may develop in
the Company's markets.
With respect to competition for consumers' attention, in addition to intense
competition from other Internet providers, the Company also faces competition
from traditional media such as radio, television and print. The Company also
competes with art galleries, auction houses, Internet-based auctions, fairs,
antique shows, stores and malls. The Company believes that the primary
competitive factors in providing its products and services via the Internet are
name recognition, variety of value-added services, ease of use, price, quality
of service, reliability, technical expertise and experience, and the
availability of customer support from Category Market Developers and Field
Market Developers. The Company's success will depend heavily upon its ability
to provide high quality, entertaining content, as well as cutting-edge
technology and value-added Internet services. The competition for advertising
revenues, both on Internet web sites and in more traditional media, is intense.
To the extent the Company is not able to attract significant sources of revenues
from space rental on it web sites, the Company's business, results of operations
and financial condition will be materially adversely affected. See "BUSINESS--
Competition." Many of the Company's current and potential competitors in each
of its markets have longer operating histories and significantly greater
financial, technical and marketing resources, name recognition and a larger
installed product base than the Company. These competitors may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements and to devote greater resources to the development, promotion and
sales of their products or services than the Company.
The Company's Internet competitors include The Internet Antique Shop, eBay,
NETIS Auctions on the Web, Cardvark (sports cards, entertainment cards,
memorabilia and comic books) and Collector Online, each of which provides a
range of Internet products and services targeted at the arts, antiques and
collectibles markets. For more information on the Company's competitors, see
"BUSINESS--Competition."
The Company does not believe that its markets will support the increasing number
of competitors and their products and services. As with many other markets, it
is possible that the Company's markets will become dominated by a small number
of suppliers. It is possible that the Company's competitors could bundle their
products and services with other computer software, including operating systems
and browser software, in a manner that may discourage users from purchasing the
products and services offered by the Company. This strategy may be particularly
effective for companies with leading market shares in their respective markets,
such as Microsoft. If the Company does not provide products and services that
achieve success in their respective segments in the short term, the Company
could suffer an insurmountable loss in market share and brand name acceptance,
which would result in a material adverse effect on the Company's business,
results of operations and financial condition. See "BUSINESS--Competition."
NEW PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE
The emerging market for Internet products and services is characterized by rapid
technological developments, evolving industry standards and customer demands and
frequent new product introductions and enhancements. In addition, many
companies are expected to introduce new Internet products and services in the
near future. The Company's success will depend on its ability to design,
develop, test, market, sell and support new products and services and
enhancements of current products and services on a timely basis in response to
both competitive products and services and evolving demands of the marketplace.
In addition, new products and services and enhancements must remain compatible
with standard platforms and file formats. The Company's ability to successfully
develop and release new products and services and enhancements in a timely
manner is subject to a variety of factors, including its ability to solve
technical problems and test products, competing priorities of the Company, the
availability of development and other resources and other factors outside the
control of the Company. There can be no assurance that the Company will not
experience difficulties that could delay or prevent the successful development,
introduction or marketing of new products and services and enhancements. If the
Company is unable to develop new products and services and enhancements to
existing products and services or to complete products and services currently
under development, or if such new products and services or enhancements do not
achieve market acceptance, the Company's business, results of operations and
financial condition would be materially adversely affected.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company currently anticipates that the net proceeds of the Offering will be
sufficient to meet its research and development and other working capital
requirements for at least the next 30 months at the maximum aggregate level, and
18 months at the minimum aggregate level. This estimate is based on certain
assumptions which could be negatively impacted by matters discussed under this
heading and elsewhere under the caption "RISK FACTORS." Thereafter, the Company
may need to raise additional funds to sustain and expand its sales and marketing
and research and development activities, particularly if a well-financed
competitor emerges or if there is a shift in the type of Internet services that
are developed and ultimately receive customer acceptance. The Company may need
to raise additional funds sooner to fund more rapid expansion, to develop new or
enhanced products or services, to respond to competitive pressures or to acquire
complementary products, businesses or technologies. If additional funds are
raised through the issuance of equity or securities convertible into equity, the
percentage ownership of the shareholders of the Company may be reduced,
shareholders may experience dilution and such securities may have rights,
preferences or privileges senior to those of the holders of common. There can
be no assurance that additional funds, whether
through equity financing, debt financing or other sources, will be available on
terms favorable to the Company, if at all. If adequate funds are not available
or are not available on acceptable terms, the Company may not be able to fund
its expansion, take advantage of acquisition opportunities, develop or enhance
products or services or respond to competitive pressures. Such inability could
have a material adverse effect on the Company's business, results of operations
and financial condition. See "USE OF PROCEEDS."
MANAGEMENT OF POTENTIAL GROWTH
The Company has recently experienced a period of rapid growth in its operations
and in the number and complexity of its products and product distribution
channels. The Company recently increased the size of its distribution force and
has recently established and is continuing to establish additional distribution
channels through third party relationships. The Company's growth, coupled with
the rapid evolution of the Company's markets, has placed, and is likely to
continue to place, significant strains on its administrative, operational and
financial resources and increased demands on its internal systems, procedures
and controls. To the extent that the Company continues to grow internally or
through acquisitions, the Company will be faced with risks, including risks
associated with the assimilation of new operations, web sites and personnel, the
diversion of resources from the Company's existing business and the inability of
management to integrate any acquired businesses. The Company's ability to
compete effectively will depend, in part, upon its ability to overcome these
risks and to revise, improve and effectively use its operational, management,
marketing and financial systems, both domestically and on an international
basis, as necessitated by changes in the Company's business. There can be no
assurance that the Company will be able to effectively manage such growth and
changes. Any failure of the Company to effectively manage its growth and to
respond to changes in its business would have a material adverse effect on the
Company's business, results of operations and financial condition.
DEPENDENCE ON KEY PERSONNEL; RECENT HIRES
The Company's performance is substantially dependent on the performance of its
key technical and senior management personnel, most of whom have worked together
for a relatively short period of time and none of whom is bound by an employment
agreement. See "THE COMPANY--Management of the Company." The Company also
currently intends to utilize the services of certain third parties' personnel
for technical assistance services. In addition to the continued participation
by senior management, the profitability of the Company will depend significantly
upon the future participation of Dr. Joel Burke, Joseph J. Walsh, and Anthony
Gibson. Although these men currently intend to continue to participate in the
operation of the Company, there can be no assurance that they will continue such
participation. The loss of the services of these men and other personnel could
have a material adverse effect on the business, results of operations and
financial condition of the Company. The Company does maintain "key person"
life insurance policies on specifically, on one of its keys employees Joseph
Walsh. The Company's success is highly dependent on its continuing ability to
identify, hire, train, retain and motivate highly qualified management,
technical and sales and marketing personnel, including recently hired officers
and other employees. Other than
employees who may later be bound by employment agreements and non-competition
arrangements, the Company's employees voluntarily may terminate their employment
with the Company at any time. Competition for such personnel is intense, and
there can be no assurance that the Company will be able to attract, assimilate
or retain highly qualified technical and managerial personnel in the future. The
inability to attract and retain the necessary management, technical and sales
and marketing personnel could have a material adverse effect on the Company's
business, results of operations and financial condition. See "BUSINESS--
Employees" and "THE COMPANY--Management of the Company."
SIGNIFICANT CONTROL BY MANAGEMENT
Upon completion of this Offering, the Company's officers and directors and
their affiliates will beneficially own an aggregate of 100% of the Company's
outstanding shares of common stock. Such shareholders, if voting together, may,
as a practical matter, have sufficient voting power to exercise substantial
control over the Company's affairs. Such control includes the power to elect
all of the Company's directors, amend the Company's Articles of Incorporation
and Bylaws and, subject to certain limitations imposed by applicable law, to
effect or preclude fundamental corporate transactions involving the Company, all
of which could adversely affect the market price of the common stock. The
existence of these levels of ownership concentrated in a few persons makes it
unlikely that any other holder of Common Stock will be able to affect the
management or direction of the Company. See "CAPITAL STOCK."
IMPACT OF CONSUMER SPENDING
The success of the Company's operations depends to a significant extent upon a
number of factors affecting disposable consumer income, both domestic and
foreign, including economic conditions and factors such as employment, business
conditions, interest rates and taxation. There can be no assurance that the
Company's business, results of operations and financial condition will not be
materially adversely affected by changes in consumer spending.
RELIANCE ON EVOLVING DISTRIBUTION CHANNELS
The Company will develop multiple distribution channels, including sales over
the World Wide Web and sales through an independent and networked team of market
developers. Accordingly, the success of the Company will be dependent in large
part on its ability to recruit and train capable Category Market Developers
("CMDs"), and on the performance and success of Field Market Developers
("FMDs") whom they will recruit and train. There can be no assurance that the
CMDs or FMDs will be successful in marketing the Company's products and
services. The Company's inability to attract CMDs and FMDs, their inability to
penetrate their respective market segments, or the loss of any of Category
Market Developers and Field Market Developers as a result of competitive
products offered by other companies or products developed internally by these
CMDs and FMDs or otherwise, could materially adversely affect the Company's
business, results of operations and financial condition. See "BUSINESS--
Marketing."
The Company has expanded, and plans to continue expanding, its distribution
force. The Company's strategy is to use its CMDs and FMDs principally to
develop and support its relationships with Internet users. The Company also
intends to use its web sites to demonstrate, market and sell its products and
services. This Web-centric aspect of the Company's sales and marketing strategy
is largely untested. The inability of the Company to successfully expand its
CMD and FMD network, the inability of its CMD and FMD network to successfully
establish new relationships with artists and dealers or the failure to
successfully implement a Web-centric sales and marketing program could
materially adversely affect the Company's business, results of operations and
financial condition.
DEPENDENCE ON MIRROR SITES AND INTERNET CONTENT PROVIDERS
The Company currently intends to license telecommunications and media companies
to establish Artibles mirror sites outside the United States to improve service
response times for users outside the United States, to facilitate worldwide
distribution of the Company's products and services and increase global
awareness of the Company's brand. In addition, the Company is seeking to
establish value-added links with Internet content providers to allow a content
provider's users to use the Artibles Internet Web Service without leaving the
content provider's web site. The Company expects to derive revenue from mirror
sites and value-added links and to increase the Company's brand recognition
among users. The Company has not yet entered into letters of intent with respect
to mirror sites. The Company will establish value-added links with
organizations such as museums, art galleries, artisans, studios, collector
groups, and dealers. The success of the Company in establishing the Artibles
brand name and achieving market acceptance of certain of its products and
services is dependent, in part, on its and its partners' success in establishing
and maintaining additional mirror sites and value-added links and on the success
of the mirror sites and value-added links. The Company's or its partners'
inability to achieve such success would materially adversely affect the
Company's business, results of operations and financial condition.
RISKS INHERENT IN THE INDUSTRY
The arts, antiques and collectibles industry, like other creative industries,
involves a substantial degree of risk. Each "product" is an individual artistic
work, and its commercial success primarily is determined by consumer taste,
which is unpredictable and constantly changing. Accordingly, there can be no
assurance as to the financial success of any particular item, the timing of any
such success or the popularity of any particular artist, or the Company's
ability to attract artists to the Company's Internet service.
LONG-TERM LEASES AND OBSOLESCENCE
The Company and its CMDs have entered or will enter into equipment leases with
terms up to 36 months. (See "THE COMPANY--Equipment Leases"). Under these
equipment leases, each CMD will be obligated to make monthly lease payments that
may exceed $550. The Company may guarantee lease payments on some or all of
these leases. These leases will constitute a significant financial obligation
that will continue regardless of the profitability of the individual CMD.
In addition, the rapid technological change in the computer industry causes a
continuous development and advancement in the techniques and equipment used on
the Internet. As a result, there is a significant risk that the equipment and
devices purchased or leased by the Company and its CMD quickly may become
obsolete. If the equipment becomes obsolete, the Company may be required to
acquire new equipment while it is still obligated to make lease payments on the
outdated equipment or before it has an opportunity to recover its investment.
There can be no assurance that the operations of the Company will provide
sufficient revenue for the payment of the equipment leases entered into or for
the purchase of computer and other equipment in the event that the equipment
originally acquired becomes obsolete, which failure would have a material
adverse effect on the Company's business, results of operations and financial
condition.
RISK OF CAPACITY CONSTRAINTS AND SYSTEM FAILURE RELATING TO THE ARTIBLES WEB
SITES
A key element of the Company's marketing strategy and promotional efforts is the
Artibles Internet Web Service, which the Company will make available at no
charge to individuals using the Company's services. Accordingly, the
performance of the Artibles Internet Web Service is critical to the Company's
ability to establish the Artibles brand name and the value of its products and
services. A rapid increase in the volume of searches conducted using the
Artibles Internet Web Service could strain its capacity, which could lead to
slower response times or complete system failures. In addition, as the number
of Internet users and of Web pages and other Internet content increases, there
can be no assurance that the Artibles Internet Web Service will be able to be
scaled appropriately. The Company will be bound by certain performance and
support commitments under the agreements it enters into with companies that
provide mirror sites and value-added links, and, accordingly, any failure by the
Company to meet these commitments could result in the termination of, or
exposure to damages under, one or more of these agreements. The Company also is
dependent on hardware suppliers, particularly Intel and Microsoft, for prompt
delivery, installation and service of servers and other equipment used to
operate the Artibles Internet Web Service and for Internet access. The servers
for the Company's web sites, located in Grand Rapids, Michigan, and for the
mirror sites are vulnerable to damage from fire, natural disasters, power loss,
telecommunications failures and similar events. Despite the implementation of
network security measures by the Company and mirror site providers, their
servers also are vulnerable to computer viruses, break-ins and similar
disruptive problems. Computer viruses, break-ins or other problems caused by
third parties could lead to interruptions, delays or cessation in service in the
Artibles Internet Web Service. While the Company frequently reviews and seeks
to upgrade its technical infrastructure and provides for certain system
redundancies and backup power to limit the likelihood of systems overload or
failure, any damage, failure or delay that causes interruptions in the Company's
operations could have a material adverse affect on the availability, decrease in
response time or other deterioration in performance of the Company's business,
results of operations and financial condition. Although the Company maintains
insurance, such insurance may not be adequate to compensate the Company for all
property damage and business interruption losses that may occur.
RISK OF PRODUCT DEFECTS; PRODUCT LIABILITY
As a result of their complexity, software products may contain undetected errors
or failures when first introduced or as new versions are released. There can be
no assurance that, despite testing by the Company and testing and use by current
and potential customers, errors will not be found in new products after
commencement or, if discovered, that the Company will be able to successfully
correct such errors in a timely manner or at all. Computer break-ins and other
disruptions, if caused or permitted by errors or failures in the Company's
security products, would jeopardize the security of information stored in and
transmitted through or by the computer systems of the Company's customers and/or
CMDs, which may result in significant liability to the Company and deter
potential customers. The occurrence of errors and failures in the Company's
products could result in loss of or delay in market acceptance of the Company's
products, and alleviating such errors and failures could require significant
expenditure of capital and resources by the Company. The consequences of such
errors and failures could have a material adverse effect on the Company's
business, results of operations and financial condition. The Company's license
agreements with its CMDs are expected to contain provisions designed to limit
the Company's exposure to potential product liability claims. It is possible,
however, that the limitation of liability provisions contained in the Company's
license agreements may not be effective under the laws of certain jurisdictions.
A product liability claim brought against the Company could have a material
adverse effect on the Company's business, results of operations and financial
condition.
UNCERTAIN PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
The Company's success depends significantly upon proprietary technology. The
Company relies on a combination of patent, copyright, trademark and trade secret
laws, non-disclosure agreements and other contractual provisions to establish,
maintain and protect its proprietary rights, all of which afford only limited
protection. There can be no assurance that patents will issue from pending
applications or from any future applications or that, if issued, any claims will
be sufficiently broad to protect the Company's rights in such technology. In
addition, there can be no assurance that any patents that may be issued will not
be challenged, invalidated or circumvented, or that any rights granted
thereunder would provide protection of the Company's proprietary rights.
Failure of any patents to protect the Company's rights in technology and cross
licensing arrangements may make it easier for the Company's competitors to offer
equivalent or superior technology.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of the Company's products or services or to
obtain and use information that the Company regards as proprietary. Third
parties also may independently develop similar technology without breach of the
Company's proprietary rights. In addition, the laws of some foreign countries
do not protect proprietary rights to as great an extent as do the laws of the
United States. A number of the Company's products are licensed under "shrink
wrap" license agreements or license agreements distributed over the World Wide
Web that are not signed by licensees and therefore may not be binding under the
laws of certain jurisdictions. The Company's current plan to distribute certain
software and other data over the World Wide Web and allow potential customers to
electronically download its software for a free evaluation period would make the
Company's software more susceptible to unauthorized copying and use.
The Company has applied for United States and foreign registrations of
"Artibles" as a trademark and a service mark and will continue to evaluate
registration of additional trademarks and service marks as appropriate. The
Company is not aware of any third party that is using the name "Artibles" as a
trademark or as part of an Internet address. No assurance can be given,
however, that a party will not challenge the right of the Company to use
Artibles as a trademark, service mark or as part of its Internet address. See
"BUSINESS--Intellectual Property Rights."
Although the Company does not believe it is infringing on the intellectual
property rights of others, claims of infringement are becoming increasingly
common as the computer industry develops and legal protections, including
patents, are applied to software products and Internet-related services.
Litigation may be necessary to protect the Company's proprietary technology and
rights, and third parties may assert infringement claims against the Company
with respect to their proprietary rights. Any claims or litigation can be time-
consuming and expensive regardless of their merit. Infringement claims against
the Company can cause product release delays, require the Company to redesign
its products or require the Company to enter into royalty or license agreements,
which agreements may not be available on terms acceptable to the Company or at
all.
EFFECT OF GOVERNMENT REGULATION OF TECHNOLOGY EXPORTS
The Company's international sales and operations may be subject to risks such as
the imposition of governmental controls, export license requirements,
restrictions on the export of critical technology, trade restrictions and
changes in tariffs. In particular, because of current governmental controls on
the exportation of encryption technology, the Company is unable to export a
number of its security products. As a result, competitors outside the United
States that face less stringent controls on their products may be able to
compete more effectively than the Company in the global network security market.
There can be no assurance that these factors will not have a material adverse
effect on the Company's business, results of operations and financial condition.
RISKS ASSOCIATED WITH GLOBAL OPERATIONS
An important component of the Company's growth strategy is its planned expansion
into global markets, which will require significant management attention and
financial resources. The Company's ability to expand its products and services
internationally is limited by the general acceptance of the Internet in other
countries. The Company expects to commit additional time and development
resources to customizing its products and services for selected international
markets and to developing international sales and support channels. There can
be no assurance that the Company will be able to successfully market, sell and
distribute its products in global markets due to legal, contractual and
practical considerations. International operations are subject to a number of
risks, including costs of customizing products and services for international
markets, dependence on independent resellers, multiple and conflicting
regulations regarding communications, use of data and control of Internet
access, longer payment cycles, unexpected changes in regulatory requirements,
import and export restrictions and tariffs, difficulties in staffing and
managing international operations, greater difficulty or delay in accounts
receivable collection, potentially adverse tax consequences, the burden of
complying with a variety of laws outside the United States, the impact of
possible recessionary environments in economies outside the United States and
political and economic instability. In addition, the Company's ability to
expand its business in certain countries will require the modification of its
products to operate compatibly with different hardware and software standards.
Furthermore, the Company expects that its export sales will be denominated
predominantly in United States dollars. An increase in the value of the United
States dollar relative to other currencies could make the Company's products and
services more expensive and, therefore, potentially less competitive in
international markets. There can be no assurance that one or more of such
factors will not have a material adverse effect on the Company's future global
operations and, consequently, on the Company's business, results of operations
and financial condition.
LIMITATIONS ON PERSONAL LIABILITY, INCLUDING FOR GROSS NEGLIGENCE
Under the Company's Articles of Incorporation, the personal monetary liability
of the directors of the Company for breach of their fiduciary duty of care,
including actions involving gross negligence, are eliminated to the fullest
extent permitted under Michigan law. See "THE COMPANY--Indemnification and Limit
of Liability."
ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Shares,
and there can be no assurance that an active public market for the
Shares will develop or be sustained after the Offering. The offering price will
be determined by the Company's Board of Directors based upon several factors,
and may not be indicative of the market price for the Shares after
completion of this Offering. Among the factors to be considered in determining
the offering price will be the Company's results of operations, its current
financial condition, its future prospects, the market for its products and
services, the experience of its management, the economic conditions of the
Company's industry in general, the demand for similar securities of companies
considered comparable to the Company and other relevant factors. The price of
the Shares may be highly volatile and could be subject to wide
fluctuations in response to variations in operating results, announcements of
technological innovations or new products or services by the Company or its
competitors, changes in financial estimates by securities analysts or other
events or factors. There is no assurance that investors in the Offering will be
able to sell their Shares at a price greater than or equal to the
established Offering price, or at any other price. In addition, the financial
markets have experienced significant price and volume fluctuations that have
particularly affected the market prices of equity securities of many high
technology companies and that often have been unrelated to the operating
performance of such companies or have resulted from the failure of the operating
results of such companies to meet market expectations in a particular quarter.
Broad market fluctuations or any failure of the Company's operating results in a
particular quarter to meet market expectations may adversely affect the market
price of the Shares. In the past, following periods of volatility in
the market price of a company's securities, securities class action litigation
often has been instituted against such a company. Such litigation could result
in substantial costs and a diversion of management's attention and resources,
which would have a material adverse effect on the Company's business, results of
operations and financial condition.
LACK OF CASH DIVIDENDS
Each Share shall be entitled to receive a distribution which shall be
payable in either cash, as selected by the Company's Board of Directors.
Accordingly, the Company shall have no obligation to pay cash dividends.
CONFLICTS OF INTEREST
See "ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" and "NOTE 7" of the
Notes to the Audited Financials.
DEBT FINANCING; LEVERAGE RISKS
The use of debt financing may increase the Company's profitability. However,
this increased debt load causes significant debt service obligations and makes
it more difficult for the Company to reach profitability. Such leveraging also
would amplify the effect on the value of the Preferred Shares of any decrease in
the profitability of the Company. In addition, debt financing and liens granted
in connection with any indebtedness substantially increase the risk that the
Company may incur substantial or total loss of its assets. See "THE COMPANY--
Outstanding Debt Obligations."
TRANSFER RESTRICTIONS
The Shares are subject to restrictions on transferability and resale
and may not be transferred or resold except in compliance with the registration
requirements of the Securities Act, or the applicable state securities laws, or
pursuant to exemption therefrom. Investors should be aware that they may be
required to bear the financial risks of this investment for an indefinite period
of time. Investors will be required to represent that the units are being
acquired only for investment and without an intention to resell.
ITEM 3. DESCRIPTION OF PROPERTY
The Issuer has no property and enjoys the non-exclusive use of offices and
telephone of its principal shareholder. These service costs are
billed to the company on a time free basis and are included in our reported
expense.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) SECURITY OWNERSHIP OF MANAGEMENT. To the best of Registrant's knowledge
and belief the following disclosure presents the total beneficial security
ownership of all Directors and nominees, naming them, of Registrant, know to
or discoverable by registrant.
(B) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. To the best of Registrant's
knowledge and belief the following disclosure presents the total security
ownership of all persons, entities and groups, known to or discoverable by
registrant, to be the beneficial owner or owners of more than five percent of
any voting class of registrant's stock.
ITEM 5. DIRECTORS, CATEGORY OFFICERS, PROMOTERS AND CONTROL PERSONS.
The following persons are the Directors of Registrant, having taken office from
inception of the issuers, to serve until their successors may be elected or
appointed.
Executive Officers
DIRECTOR'S NAME AGE OFFICE POSITION
Joseph Walsh 47 Chairman of the Board
Dr. Joel Burke 63 President
Mr. Joseph Walsh, age 47, is a full time employee and currently serves as
Chairman of the Board. Mr. Walsh has extensive experience in the electronic
communications field. From 1991 to 1993 he served as Chief Executive Officer for
the Falcon Group, Inc. where he served the company as contractual liaison
integrated and assembled large scale contracts in multimedia product technology,
such as between EDS and the United States Postal Service. In 1993, Mr. Walsh
founded Resources Financial Group, Inc. which manufactured private label
computers using innovative technology for the medical community.
Dr. Joel Burke, age 63, a full time employee of the Company, currently
serves as President. Dr. Burke was formerly the Chairman and CEO of Channel I,
Inc. a United Kingdom company which provided contractual service in conjunction
with AT & T to provide the London Underground( Public Transportation )in London,
England with informational multimedia kiosks and in locations throughout the
city. In 1992 Dr. Burke served as Vice President of Multimedia Service for
Resource Finance Group, Inc.
KEY MANAGEMENT AND PERSONNEL.
Joseph Walsh - Chairman and CEO
Joseph Walsh, Chairman and CEO of the Company, has a rich and diverse background
in electronics, graphics, and video, as well as in advertising, sales,
manufacturing, and marketing. His vision and skills transcend the conventional
categories, and his combination of technical, creative, and business acumen is
unique in the industry. He is responsible for development and promotion of the
corporate vision and for the creation of the strategic business relationships
underlying the Artibles business plan.
Though immersed in the technology, Mr. Walsh's focus is clearly on business
opportunities, which he perceives as problems in need of a solution. Mr. Walsh
is extremely creative and imaginative in providing solutions, utilizing the core
technologies that he has mastered. Not only can he conceptualize and articulate
solutions, he can find ways to bring together diverse interests in order to
implement them. This includes formulating a sound business plan, forming a
joint venture with other companies, structuring contractual ties that benefit
all parties, and raising the capital necessary for a project. Because of his
good track record in putting together corporate ideas, he has developed strong
ties with the financial community. He has experience in how to found and
operate a public company.
His flair for promotion has been obvious from his early days in business. As an
advertising account executive, he developed a marketing survey for the
automobile industry that enabled the agency he worked for to grow from $2
million in billings to over $55 million in two years and become the largest
Chevrolet advertising group in the country.
At his own advertising agency, Mr. Walsh directed the sales, marketing, and
creative services for the development of television programs, which led to the
creation of his own video facility with complete computer graphics, animation,
and digital video. He developed his first full-motion multimedia kiosk with Dr.
Joel Burke in 1984, which was followed by other multimedia applications, such as
the Postal Buddy project for EDS and the U. S. Postal Service, for which he
designed the man-to-machine interface and the specialized digital video enhanced
CPU that made it operate.
As CEO of the company, he is responsible for its overall direction. He brings
to the position a wide range of successful sales and marketing experience, along
with great expertise in the key technical disciplines that drive the
corporation: graphics, video, and multimedia. Much of the innovative spirit of
the company stems from his energy and creativity. The idea of an efficient,
universal distribution system, based on the Internet, grew out of his desire to
find a way to consolidate the highly fragmented arts, antiques, and collectibles
industry.
Dr. Joel Burke - President
Dr. Joel Burke is a pioneer in multimedia. In 1980 he wrote an interactive
video operating system in assembler language before the requisite programming
skill sets were commonly available. Using this software platform, he co-
developed his first interactive multimedia kiosk with Joseph Walsh in 1984 and
spent the remainder of decade on similar applications. His technical expertise
at the time was in the of the man-to-machine interface which is at the heart of
touch screen interactive multimedia applications.
During his twelve year stint as a developer of training programs for Amway
Corporation, Dr. Burke honed his multimedia skills, concentrating his attention
on making multimedia systems extremely easy and fun to use even by people
unfamiliar with the technology. At the same time, the Amway business experience
taught him a great deal about the power of an effective distribution system.
Dr. Burke served as a multimedia consultant to Steelcase Corporation, the
world's largest office furniture manufacturer, and the State of Michigan, and
was called upon to help develop the man-to-machine interface for the Postal
Buddy system for the US Postal Service, the largest kiosk project in the world
up to that time (1991-92). Subsequently he became the co-founder, chairman, and
CEO of Channel i Limited, a multimedia company with a contract to install
multimedia kiosks in the London Underground in association with AT&T. This
system was an early prototype of Artibles without two of its key features: the
Internet backbone and the organization of market developers, inspired by the
Amway model of independent distributors.
In addition to the executive experience, these projects afforded Dr. Burke an
opportunity to experiment with a variety of decision systems, useful to guide
people in product selection, medical diagnosis, coping with hazardous materials,
choosing transportation routes, locating a vacation sites, picking a hotel,
deciding on which flowers to send a loved one, or identifying which government
agency might be of service in a given situation.
Gert Wallis - Software Engineer
Mr. Wallis is an experienced software engineer from South Africa. He has
developed a number of software packages, including TurboCAD and TurboCASH. He
has worked extensively with banks and financial institutions on accounting and
transactional in developing application software that can handle a high volume
of transactions in a high security environment.
Mr. Wallis is a leading edge programmer for Internet applications. He is fluent
in Java, the popular new language that gives cross-platform versatility to
software.
Mr. Wallis has a rare combination of gifts when it comes to software design. He
is keenly tuned in to institutional requirements, customer needs, and technical
specifications. He is able to discuss business issues with business people,
technical details with technicians. He is unique in his ability to analyze
business problems, translate them into software specifications, outline the
entire software architecture, do the hands-on writing of the code, and oversee
software production by a staff of programmers.
Gerald Harstine - Executive
Mr. Harstine is an experienced marketing manager who is currently general
manager of a large Steelcase dealership in Tennessee. He is expert at improving
the efficiency of companies and making them grow and become more profitable.
Prior to his job in Tennessee he demonstrated his turnaround capability at
International Product Display, a 50 year old Michigan company that produces
point of purchase displays for retail organizations, including numerous national
accounts. By imaginative restructuring, Mr. Harstine was able to turn the
company around in two years and restore it to profitability after 10 years of
loses. While implementing an integrated sales and marketing program, Mr.
Harstine developed a new work team and change the work culture of the company
from a centralized model to a decentralized one, through an employee empowerment
program.
Prior to these positions, Mr. Harstine was Director of Laboratory Systems for
American Seating Company, where he was responsible for all project bid and
design activity, analysis of market needs and customer applications,
development and implementation of strategic marketing and business plans, and
the administration of new product development procedures.
Earlier positions included a stint as President of Michigan Instruments, Inc., a
producer of precision instrumentation, where he was responsible for the
development and implementation of strategic market plans, coordination of
engineering design and development projects, and the development of an
international sales and marketing network. His accomplishments include a 60%
increase in sales volume in two years and a 200% increase in gross profit
margins.
Mr. Harstine has a BS degree in economics from Morehead State University, and MS
degree in economics from the University of Connecticut, and an MBA in marketing
management from Baldwin-Wallace College.
His first senior position was as Department Manager for Advanced Technology
Marketing for Lear-Sigler, Inc., where he was responsible for the development
and management of strategic marketing initiatives for advanced technology in
military aerospace and avionics markets. His duties included the coordination
of project teams, development and implementation of strategic plans, development
and nurturing of customer relationships, and supervision of field
representatives.
Dennis Johnson - Executive
Mr. Johnson is president of Corporate Connections, a consulting firm
specializing in strategic communications planning for mid-size corporations with
multiple locations, with emphasis on integration of voice, data, and video
network systems. He is an experienced project manager who has been in charge of
projects of considerable magnitude.
As Vice President of Real Estate at the Zondervan Corporation, a $200 million
publishing house, Mr. Johnson was responsible for planning and building an $13
million corporate headquarters, a three-year project whose goal was to reduce
operating expenses, improve communications, create a new corporate image, and
improve customer service.
He was also put in charge of the accelerated growth of Family Bookstores, the
fifth largest bookstore chain in the nation, which in a 30 month period grew
from 87 to 127 stores. His responsibilities included the creation of key market
research benchmarks, development of a prototype store, lease negotiations, store
construction, and installation of a financial accountability system.
Mr. Johnson brings a variety of skills and experiences to the management of
telecommunications projects, having dealt with such assignments as part of
larger projects. He has a bachelor's degree in Social Work from Baylor
University and a master's degree in Communications from Western Michigan
University.
Throughout the years Mr. Johnson has demonstrated a strong capacity for taking
ownership of projects and bringing them to completion. He has strong project
management skills which are not limited to telecommunications technology, even
though that is his special area of interest. He is strongly committed to making
the total physical environment suit its users and yet remain within a strict
budget. He has a great vision for fitting the parts and pieces together into an
integrated whole.
David Guzeman - Consultant
Dave Guzeman, President of Mindpik, Inc., is a widely experienced computer and
marketing expert. With a degree in physics, Mr. Guzeman began his career as a
engineer at Sunbeam Corporation and then joined Tyledyne Semiconductor, where he
served as the Digital Integrated Circuit Product Marketing Manager. His hardware
expertise, cultivated at Intel, extends down to the chip level, and his
understanding of software grows out of that underlying skill set.
At Intel, Mr. Guzeman convinced CEO Andy Grove that microprocessor chips could
be marketed like any other product and so became Intel's first marketing and
public relations director. His success at Intel led to a position of Vice
President of Marketing at Zilog, the semiconductor division of Exxon, which he
turned into a profitable $100 million operation.
The many important contacts he made in the computer industry and in the business
world in general served as a perfect launching pad for setting up his own
business, Mindpik, Inc., and now he is a much sought after consultant. Mr.
Guzeman was also the founder of Iasis, Inc., a California firm that developed
micro-processor based training systems and publications. He is the author of
the 6 volume Programmed Learning Course in Microprocessor Design and the
Microcomputer Design Handbook.
Epoch Resources first worked with Mr. Guzeman when he was Mindpik was engaged as
a consultant to a large EDS multimedia project deployed in US Post Office sites,
and Mr. Walsh and Mr. Burke were contracted to create the man-to-machine
interface. Dave's unique balance of technical expertise and market savvy made
this a challenging, and productive collaboration and led to other joint
projects.
On another project Mr. Guzeman developed under our auspices a highly profitable
electronic merchandising strategy that adopted by our client company in the
United Kingdom. This marketing plan led to the establishment of a long-term
relationship with AT&T and a contract for Channel i Limited with the London
Underground to install multimedia kiosks throughout their heavily traveled
subway system.
Dave's easy-going personality, his innovative approach to problems, and his
exceptional grasp of technical and marketing issues, make him a great resource
to our organization. His clear and concise solutions to oft-times nagging
technical, marketing, and merchandising problems faced by the industry allow us
to better identify genuine business opportunities and carry out the resulting
projects efficiently and profitably.
Tony Gibson
Regional Market Developer - England
Tony Gibson is a premiere professional in developing interactive multimedia
software applications. His TravelPoint program for the travel industry,
developed in consultation with Mr. Walsh, was judged the top interactive
multimedia application in Europe in 1992.
Mr. Gibson has a keen eye for business opportunities that can be created or
enhanced by the incorporation of multimedia technology. His business experience
include extensive work in the insurance industry, and that has led to a wide
range of business contacts in Great Britain and North America.
Mr. Gibson is has great aptitude for providing business needs with a software
solution. He is also a gifted administrator who can take on total
responsibility for a massive multimedia project and oversee a large staff of
programmers, seeing to it that all the parts work together seamlessly.
Mr. Gibson also has a rare combination of artistic and technical skill, so that
the production values of the graphics and video he produces is truly
outstanding. It is this artist quality, more so than the technically flawless
operation of his system, that earned TravelPoint the numerous awards it won for
multimedia excellence.
Mr. Gibson worked on the Postal Buddy project with Mr. Walsh and Mr. Burke,
directing a large programming staff to develop the operating. Despite the
magnitude of the project, Mr. Gibson produced a product that operated flawlessly
and delivered it within the time frame specified by the contract.
ITEM 6. EXECUTIVE COMPENSATION
There is no present program of executive compensation, and no plan or
compensation is expected to be adopted or authorized at any time before the
commencement of significant operations.
Our costs of doing business include payments to principal shareholders, to
principal consultants and corporate service providers. Please see Item 7 ,
Relationships and Transactions for more extensive disclosure regarding
conveyance of equity capital to owners, officer or affiliated interested parties
associated with the company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The company has beneficial relationships, agreements and transactions with
entities that are material to the registrants business, and any registration of
common equity securities thereof. Specifically, the company has an executed
service agreement with Epoch Resources, Incorporated a company who provides
software development expertise, marketing preparation and various service
related activities such as print, copy, communication and international/domestic
target documentation.
ITEM 8. DESCRIPTION OF SECURITIES
THE REGISTRANT'S CAPITAL AUTHORIZED AND ISSUED. The Registrant is authorized to
issue 10,200,000 shares divided into two classes as follows:
COMMON STOCK: The amount of authorized common shares of a single class is
10,000,000 of the par value of One Cent ($.01), of which 7,776,081 shares are
issued and outstanding. Each holder of Common Stock is entitled to one vote per
share on all matters submitted for action by the stockholders. All shares of
Common Stock are equal to each other with respect to the election of directors
and cumulative voting is not permitted; therefore the holders of more than 50%
outstanding Common Stock can, if they choose to do so, elect all of the
directors. All shares of Common Stock equal dividend rights There are no
provisions in the Articles of Incorporation or By-Laws which would delay,
defer or prevent a change of control.
PREFERRED STOCK: The amount of authorized preferred shares of a single class is
200,000 of no par value of which there are no shares outstanding and all are
un-issued. The company may, after ratification of resolution, of its Board of
Directors issue Preferred Stock which shall be designated a particular series,
at the time of issuance subject to the provisions as offered such as, and
determined by the Board of Directors of the company. Provisions that the
companies Board of Directors may stipulate but are not limited to cumulative,
non-cumulative payment of dividends, participation in common earnings, prior
preference issuance covenants, voting or nonvoting rights, rates of dividend
payments or conversion provisions if any, and shareholder rights in event of the
companies liquidation.
OPTIONS AND DERIVATIVE SECURITIES. There are no outstanding options or
derivative securities of this Registrant. There are no shares issued or
reserved which are subject to options or warrants to purchase, or securities
convertible into common stock of this Registrant.
RISKS OF "PENNY STOCK." The Company's common stock may be deemed to be "penny
stock" as that term is defined in Reg. Section 240.3A51-1 of the Securities and
Exchange Commission. Penny stock are stocks (i) with a price of less than five
dollars per share; (ii) that are not traded on a "recognized" national exchange;
(iii) whose prices are not quoted on the NASDAQ automated quotation system
(NASDAQ) listed stocks must still meet requirement (i) above; or (iv) in issuers
with net tangible assets less than $2,000,000 (if the issuer has been in
continuous operation for at least three years) or $5,000,000 (if in continuous
operation for less than three years), or with average revenues of less than
$6,000,000 for the last three years.
Section 15(g) of the Securities Exchange Act of 1934, as amended, and Reg.
Section 240.15g 2 of the Securities and Exchange Commission require broker
dealers dealing in penny stocks to provide potential investors with a document
disclosing the risks of penny stocks and to obtain a manually signed and dated
written receipt of the document before effecting any transaction in a penny
stock for the investor's account. Potential investors in the Company's common
stock are urged to obtain and read such disclosure carefully before purchasing
any shares that are deemed to be "penny stock."
Moreover, Reg. Section 240.15g-9 of the Securities and Exchange Commission
requires broker-dealers in penny stocks to approve the account of any investor
for transactions in such stocks before selling any penny stock to that investor.
This procedure requires the broker dealer to (i) obtain from the investor
information concerning his or her financial situation, investment experience and
investment objectives; (ii) reasonably determine, based on that information,
that transactions in penny stocks are suitable for the investor and that the
investor has sufficient knowledge and experience as to be reasonably capable of
evaluating the risks of penny stock transactions; (iii) provide the investor
with a written statement setting forth the basis on which the broker-dealer made
the determination in (ii) above; and (iv) receive a signed and dated copy of
such statement from the investor, confirming that it accurately reflects the
investor's financial situation, investment experience and investment objectives.
Compliance with these requirements may make it more difficult for investors in
the Company's common stock to resell their shares to third parties or to
otherwise dispose of them.
RISKS OF STATE BLUE SKY LAWS. In addition to other risks, restrictions and
limitations which may affect the resale of the existing shares of the common
stock of this Registrant, consideration must be given to the Blue Sky laws and
regulations of each State or jurisdiction in which a shareholder wishing to re-
sell may reside. Some States may distinguish between companies with active
businesses and companies whose only business is to seek to secure business
opportunities, and may restrict or limit resales of otherwise fee-trading and
unrestricted securities. This Registrant has taken no action to register or
qualify its common stock for resale pursuant to the Blue Sky laws or regulations
of any State or jurisdiction. Accordingly offers to buy or sell the existing
securities of this Registrant may be unlawful in certain States.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
ITEM 2. LEGAL PROCEEDINGS
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
ITEM 5. INDEMNIFICATION OF OFFICERS
INDEMNIFICATION AND LIMITS OF LIABILITY
As provided in its Articles of Incorporation and Bylaws, the Company will
indemnify any officer or director of the Company who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by reason of the fact that he or she is or was an officer or
director of the Company or is or was serving as an officer or director of
another corporation at the request of the Company, to the fullest extent
permitted by the MBCA. The Company may indemnify further officers or directors,
and may indemnify persons who are not officers or directors, to the extent
authorized by the Bylaws, resolution of the Board of Directors or contractual
agreement authorized by the Board of Directors.
The MBCA permits Michigan corporations to limit the personal liability of
directors for a breach of their fiduciary duty. The Company's Articles of
Incorporation limit liability to the maximum extent permitted by law. The
Company's Articles of Incorporation provide that a director of the Company shall
not be personally liable to the Company or its shareholders for monetary damages
for a breach of fiduciary duty as a director, except that a director's liability
is not limited for:
(i) A breach of the director's duty of loyalty to the Company or its
shareholders;
(ii) An act or omission not in good faith or that involves intentional
misconduct or knowing violation of law;
(iii) A violation of Section 551(1) of the MBCA, which section relates to the
making of unlawful dividends, distributions or loans; or
(iv) A transaction from which the director derived an improper personal
benefit.
As a result of the inclusion of such a provision, shareholders of the Company
may be unable to recover monetary damages against directors for actions taken by
them which constitute negligence or gross negligence or which are in violation
of their fiduciary duties, although it may be possible to obtain injunctive or
other equitable relief with respect to such actions. If equitable remedies are
not available to shareholders in any particular case, shareholders may not have
any effective remedy against the challenged conduct.
If the MBCA is amended to further eliminate or limit the liability of a
director, then a director of the Company (in addition to the circumstances in
which a director is not personally liable as set forth in the preceding
paragraph), will, to the fullest extent permitted by the MBCA, as so amended,
not be liable to the Company or its shareholders.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to the directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been advised that in the
opinion of the SEC such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable. Similar considerations
may apply under state securities laws.
Simultaneously with the completion of this Offering, the Company and each of its
officers and directors will enter into indemnification agreements. The
indemnification agreements will provide that the Company will indemnify officers
and directors against certain liabilities (including settlements) and expenses
actually and reasonably incurred by them in connection with any threatened,
pending or completed legal action, proceeding or investigation (other than
actions brought by or in the right of the Company) to which any of them is, was
or is threatened to be made a party by reason of his or her status as an
officer, director or agent of the Company or his or her serving at the request
of the Company in any other capacity for or on behalf of the Company, provided
that (i) such officer or director acted in good faith and in a manner at least
not opposed to the best interests of the Company, (ii) with respect to any
criminal proceedings, such officer or director had no reasonable cause to
believe his or her conduct was unlawful, (iii) such officer or director is not
fully adjudged to be liable for negligence or misconduct in the performance of
his or her duty to the Company, unless the court views in light of the
circumstances that the officer or director is nevertheless entitled to
indemnification and (iv) the indemnification does not relate to any liability
arising under Section 16(b) of the Exchange Act, or the rules or regulations
promulgated thereunder. With respect to any action brought by or in the right
of the Company, officers or directors also may be indemnified, to the extent not
prohibited by applicable laws or as determined by a court of competent
jurisdiction, against reasonable costs and expenses incurred by them in
connection with such action if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
Company.
The Company may purchase and maintain insurance on behalf of any person who is
or was an officer, director, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust or other enterprise, whether for profit or not, against any
liability asserted against such person and incurred by such person in any such
capacity, whether or not the Company would have the power to indemnify such
person against such liability under the Company's Articles of Incorporation or
Bylaws.
PART F/S
Financial Statements. The following financial statements are included in
this statement:
Accountant's Report
Balance Sheets - June 30, 2000 and 1999
Statements of Operations and Accumulated Deficit
For the Years Ended June 30, 2000 and 1999
Statement of Changes in Stockholders' Equity (Deficit)
For the Years Ended June 30, 2000 and 1999
Statement of Cash Flows
For the Years Ended June 30, 2000 and 1999
Notes to Financial Statements
<PAGE>
THOMAS BAUMAN
CERTIFIED PUBLIC ACCOUNTANT
4 SCHAEFFER STREET
HUNTINGTON STATION, NY 17746
To the Board of Directors and Shareholders
Artibles, Inc.
Grand Rapids, NY
INDEPENDENT AUDITOR'S REPORT
I have audited the accompanying balance sheet of Road Apples, Inc. (a
development stage company) as of June 30, 2000 and 1999 and the related
statements of operations, accumulated deficit, changes in stockholders' equity
(deficit) and cash flows for the fiscal year then ended. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted the audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for our opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Artibles, Inc. as of June 30, 2000,
and 1999 and the results of its operations, changes in stockholders' equity
(deficit), and cash flows and for the period then ended in conformity with
generally accepted accounting principles.
/s/ Thomas Bauman
Thomas Bauman, C.P.A.
September 25, 2000
ARTIBLES, INC.
(a development stage company)
BALANCE SHEET
JUNE 30,
ASSETS
2000 1999
---- -----
CURRENT ASSETS
Cash (Note 1) $ -0- $ 238,750
PROPERTY AND EQUIPMENT
At cost, less accumulated
Depreciation of $12,064 in
2000 and $7,564 in 1999
(Note 2) 10,436 14,936
ORGANIZATION COSTS, less accumulated
amortization of $3,156 in 2000
and $2,104 in 1999 (Note 2) 2,104 3,156
---------- ----------
TOTAL ASSETS $ 12,540 $ 256,842
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank Overdraft 474 -0-
Accounts Payable 35,230 35,230
Due to Related Party (Note 7) 132,000 132,000
Convertible debt (Note 3) -0- -0-
Interest Payable 48,750 -0-
-------- ---------
Total Current Liabilities 216,454 192,230
-------- ---------
STOCKHOLDER'S EQUITY (DEFICIT)
Common Stock ($.01 - 10,000,000
Shares authorized; 7,761,085 and
5,265,400 shares issued and
outstanding in 2000 and 1999,
respectively) 1,808,325 1,761,725
Deficit accumulated during
development stage (2,012,239) (1,697,113)
Total Stockholder's Equity (203,914) 64,612
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY $ 12,540 $ 256,842
=========== ===========
See accompanying notes are an integral part of this statement
See Accountant's Audit Report
ARTIBLES, INC.
(a development stage company)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
For the Years Ended June 30,
2000 1999
---- ----
Revenue $ -0- $ -0-
General and Administrative Expenses
Development Costs (Note 5) 14,973 632,195
Marketing (Note 6) 170,000 170,448
Professional Fees 20,484 126,763
Equipment rental 9,917 75,672
Travel and entertainment 13,248 23,638
Depreciation and amortization 5,552 9,668
Commissions and consulting 2,416 11,078
Office 16,911 12,673
------- -------
Total General and Administrative
Expenses 253,501 1,072,135
Other Expenses
Interest 61,625 12,188
Net Loss (315,126) (1,074,323)
Accumulated Deficit - Beginning of Year (1,697,113) (622,790)
----------- -----------
Accumulated Deficit - End of Year (2,012,239) (1,697,113)
=========== ============
See accompanying notes are an integral part of this statement
See Accountant's Audit Report
<PAGE>
ARTIBLES, INC.
(a development stage company)
Statement of Changes in Stockholders' Equity (Deficit)
For the Years Ended June 30, 2000 and 1999
Number of Common Accumulated
Shares Stock Deficit
Balance as of July 1, 1998 4,477,612 207,725 (622,790)
Net Loss for the year ended (1,074,323)
Issuance of Common Stock 787,788 1,554,000
-------- --------- ----------
Balance as of June 30,1999 5,265,400 1,761,725 (1,697,113)
Net Loss for the year ended
June 30, 2000 2,495,685 46,600
---------- --------- ----------
Balance as of June 30, 2000 7,761,085 1,808,325 (2,012,239)
========== ========= ===========
See accompanying notes are an integral part of this statement
See Accountant's Audit Report
<PAGE>
ARTIBLES, INC.
(a development stage company)
STATEMENT OF CASH FLOWS
For the Years Ended June 30
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (315,126) (1,074,323)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation 5,552 9,668
Accounts Payable -0- (244,663)
Interest Payable 48,750 -0-
--------- ----------
NET CASH (USED) BY OPERATING ACTIVITIES (260,824) (1,309,318)
--------- -----------
Cash Flows from Investing Activities:
Payments for purchases of equipment -0- (7,182)
NET CASH (USED) BY INVESTING ACTIVITIES -0- (7,182)
Cash Flows From Financing Activities
(Payments) on Loans (25,000) (46,000)
Issuance of Common Stock 46,600 1,554,000
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 21,600 1,508,000
NET (DECREASE) INCREASE IN CASH (239,224) 191,500
CASH AT BEGINNING OF PERIOD 238,750 47,250
BANK OVERDRAFT AT JUNE 30, 2000 (474)
=========
CASH AT JUNE 30, 1999 238,750
=========
Supplemental Cash Flow Information:
Cash paid for interest was $37,250 and $12,188 in the fiscal year ended
June 30, 2000 and 1999.
Significant Noncash Investing and Financing Activities:
Debt converted to Common Stock was $46,000 and $1,554,000 in the fiscal
years ended June 30, 2000 and 1999.
See accompanying notes are an integral part of this statement
See Accountant's Audit Report
ARTIBLES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
Note 1 - Nature of Business and Liquidity:
Artibles, Inc., (the "Company") was incorporated in the state of Michigan in
1996. The Company is a development stage company that is developing an
electronic worldwide distribution channel for art and collectibles utilizing
Internet-ready TV set-top boxes and a proprietary intranet for use by individual
and business subscribers. The proprietary intranet is being developed with the
objective of providing users secure electronic commerce using smart card
technology.
The Company anticipates earning revenues in the form of advertising fees,
computer equipment and software rental, and commission on consignment sales and
auctions.
The Company is in the development stage and has not yet acquired the necessary
operating assets, nor has it begun any part of its proposed business. While the
Company is negotiating with prospective personnel and potential customer
distribution channels, there is no assurance that any benefit will result from
such activities. The Company will not receive any operating revenues until the
commencement of operations, but will continue to incur expenses until then. From
its inception through June 30, 2000, there has been no revenue earned and the
Company has incurred substantial losses from operations, which have amounted to
approximately $2 million on a cumulative basis. These losses, which include the
costs for development of products for commercial use, have been funded by the
conversion of debt to common stock. At June 30, 2000, the Company had a bank
overdraft of $474 and negative working capital of approximately $1 million.
However, in August 2000, the Company received additional equity financing of
$133,000. Management believes that currently available funds will not be
sufficient to sustain the Company at present levels for the next 12 months. The
Company's ability to continue as a going concern is dependent on funding from
outside parties, and cash inflows to be generated from the Company's revenue
sources. The level of realization of funding from the Company's revenue sources
is presently uncertain. If the revenue sources do not generate sufficient cash,
management believes additional working capital financing must be obtained.
There is no assurance any such financing is or would become available. In the
event that funding is insufficient, the Company would have to substantially cut
back its level of spending which could substantially curtail the Company's
operations.
Management plans to raise sufficient capital through an initial private
placement to fund current obligations and to provide for the remaining
development of software and distribution systems necessary to begin operations.
Operations are expected to commence in October of 2000.
See Accountant's Audit Report
-6-
ARTIBLES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates continuity
of operations, realization of assets and satisfaction of liabilities in the
ordinary course of business. The propriety of using the going concern basis is
dependent upon, among other things, the achievement of future profitable
operations and the ability to generate sufficient cash from operations, public
and private financings and other funding sources to meet its obligations. The
uncertainties described in the preceding paragraphs raise substantial doubt at
June 30, 2000 about the Company's ability to continue as a going concern. The
accompanying consolidated financial statements do not include any adjustments
relating to the recoverability and classification of the carrying amount of
recorded assets or the amount and classification of liabilities that might
result should the Company be unable to continue as a going concern.
Note 2 - Summary of Significant Accounting Policies:
Cash and Cash Equivalents
The Company considers all short-term, highly liquid investments that are readily
convertible into known amounts of cash and have original maturities of three
months or less to be cash equivalents.
Organization Costs
Costs relating to the general organization of the Company were deferred at
inception. Such costs are being amortized over five years.
Income Taxes
The Company accounts for income taxes under the asset and liability method as
required by Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. Under the asset and liability method, deferred
income taxes are recognized for the tax consequences of "temporary differences"
by applying enacted tax rates applicable to future years to differences between
the financial statements carrying amounts and the tax bases of existing assets
and liabilities. Under SFAS No. 109, the effect on deferred income taxes of a
change in tax laws or rates is recognized in income in the period that includes
the enactment date.
A valuation allowance reduces deferred tax assets when it is "more likely than
not" that some portion or all of the deferred tax assets will not be realized.
See Accountant's Audit Report
-7-
ARTIBLES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
Property, Equipment and Depreciation
Property and equipment are stated at cost. Significant additions or
improvements extending asset lives are capitalized; normal maintenance and
repair costs are expensed as incurred. Depreciation is computed on the straight
line method over five years for financial reporting purposes.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Note 3 - Convertible Debt
The Company had several unsecured convertible note obligations (the "Note"),
which amounted to $25,000 at June 30, 1999. The Notes bore interest at a rate
of 10% per annum and were due one year after issuance. The holders had an
option to convert the Notes into equity shares within four to ten months from
the date of the Note. All of the Notes were converted into common shares at the
value of $2.50 per share.
Note 4 - Interest Payable
The Company had interest payable in the amount of $48,750 at June 30, 2000. The
amount represents accrued interest on $500,000 in convertible notes at a rate of
9.75% per annum. The notes were converted to shares on June 14, 2000.
Note 5 - Development Costs
Costs incurred to develop software technologies internally are expensed, as
incurred, as development costs until technological feasibility is established.
Based on the Company's development process, technological feasibility occurs
upon the completion of a working model. The Company has not capitalized any
software development costs to date.
Note 6- Advertising Costs
Advertising is expensed as incurred. For the fiscal years ended June 30, 2000
and 1999 advertising expense was $500 and $764, respectively, and are included
in marketing expenses in the statement of operations.
See Accountant's Audit Report
-8-
ARTIBLES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
Note 7 - Related Party Transactions
Epoch Resources ("Epoch") provides marketing, electronic commerce and web
development services to the Company. The services totaled $145,000 and
$824,421 for the fiscal years ended June 30, 2000 and 1999, and are included in
development costs, marketing, and equipment rental expenses in the statement of
operations. On May 17, 1999, the Board of Directors of the Company resolved to
convert $800,000 of accounts payable to Epoch into common stock. As of June 30,
2000, and 1999, the Company owed Epoch $132,000. The Chief Executive Officer
and majority stockholder of Epoch is also the Chief Executive Officer, Chairman
of the Board and 51% equity owner of the Company. The President of the Company
is also a minority stockholder of Epoch.
Note 8 - Income Taxes
_____________________
As a result of net operating losses, the Company has not recorded a provision
for income taxes. The components of the deferred tax assets and related
valuation allowance at June 30, 2000 and 1999 are as follows.
June 30,
____________
2000 1999
____ ____
Deferred tax assets:
Net operating loss carryforwards $ 315,126 $ 1,074,323
Less: valuation allowance 315,126 1,074,323
_________ __________
Net deferred taxes $ -0- $ -0-
_________ __________
Based on management's assessment, the Company has placed a valuation allowance
against its otherwise recognizable deferred tax assets due to the likelihood
that the Company may not generate sufficient taxable income during the
carryforward period to utilize the net operating loss carryforwards.
At June 30, 2000, the Company has net operating losses for federal and state
income tax purposes of approximately $1,389,449, which begin to expire in 2020.
The net operating losses can be carried forward to offset future taxable income.
Utilization of the above carryforwards maybe subject to utilization limitations,
which may inhibit the Company's ability to use carryforwards in the future. As
a result of net operating losses, the Company has not recorded a provision for
income taxes.
Note 9 - Subsequent Events
__________________________
In August 2000, the Company received additional equity financing of $133,000.
See Accountant's Audit Report
-9-
<PAGE>
PART III
Items 1 and 2. Index to Exhibits and Description of Exhibits. The
following exhibits are included as part of this statement:
Exhibit No. Description
2.1 Articles of Incorporation filed March 1, 2000
2.3 Current Bylaws
Exhibit 2.1
RESTATED ARTICLES OF INCORPORATION
OF
ARTIBLES, INC.
1. These Restated Articles of Incorporation have been duly adopted by
the shareholders of Artibles, Inc. and are executed pursuant to the
provisions of Sections 641-643, Act 284, Public Acts of 1972, as amended.
2. The corporation identification number (CID) assigned by the Bureau
is 432-962.
3. The present name of the corporation is:
ARTIBLES,INC.
4. The corporation has had no former names.
5. The date of filing the original Articles of Incorporation was
November 22, 1996.
6. The following Restated Articles of Incorporation supersede the
original Articles of Incorporation and shall be the Articles of
Incorporation of the corporation:
ARTICLE I
The name of the corporation is:
ARTIBLES, INC.
ARTICLE II
The purpose or purposes for which the corporation is organized is to
engage in any activity within the purposes for which corporations may be
organized under the Michigan Business Corporation Act.
ARTICLE III
The total number of shares of which the corporation shall have the
authority to issue is ten million, two hundred thousand (10,200,000) divided
into two classes, as follows:
(1) Ten million (10,000,000) shares of common stock of the par value of
One Cent ($.01), which shall be called "Common Stock".
(2) Two hundred thousand (200,000) shares of preferred stock, having no
par value, which shall be called "Preferred Stock".
The following provisions shall apply to the authorized stock of the
corporation:
A. Provisions Applicable to Common Stock.
1. No Preference. None of the shares of the Common Stock shall be
entitled to any preferences, and each share of Common Stock shall be equal
to every other share of said Common Stock in every respect.
2. Dividends. After payment or declaration of full dividends on all
shares having a priority over the Common Stock as to dividends, and after
making all required sinking or retirement fund payments, if any, on all
classes of preferred shares and on any other stock of the corporation
ranking as to dividends or assets prior to the Common Stock, dividends on
the shares of Common Stock may be declared and paid, but only when and as
determined by the Board of Directors.
3. Rights on Liquidation. On any liquidation, dissolution, or winding
up of the affairs of the corporation, after there shall have been paid to
or set aside for the holders of all shares having priority over the Common
Stock the full preferential amounts to which they are respectively
entitled, the holders of the Common Stock shall be entitled to receive pro
rata all the remaining assets of the corporation available for
distribution to its shareholders.
3. Voting. At all meetings of shareholders of the corporation, the
holders of the Common Stock shall be entitled to one vote for each share
of Common Stock held by them respectively.
B. Provisions Applicable to Preferred Stock.
1. Issuance in Series. The authorized shares of Preferred Stock
may be issued from time to time in one or more series, each of such series
to have such designations, powers, preferences, and relative,
participating, optional, or other rights, and such qualifications,
limitations, or restrictions, as may be stated in a resolution or
resolutions providing for the issue of such series adopted by the Board of
Directors. Authority is hereby expressly granted to the Board of
Directors, subject to the provision of this Article, to authorize the
issuance of any authorized and un-issued shares of Preferred Stock (whether
or not previously designated as shares of a particular series, and
including shares of any series issued and thereafter acquired by the
corporation) as shares of one or more series of Preferred Stock, and with
respect to each series to determine and designate by resolution providing
for the issuance of such series:
(a) The number of shares to constitute the series and the title
thereof;
(b) Whether the holders shall be entitled to cumulative or
non-cumulative dividends, and, with respect to shares entitled to cumulative
dividends, the date or dates from (which such dividends shall be cumulative, the
rate of the annual dividends thereon which may be fixed or variable and may be
made dependent upon facts ascertainable outside of the Restated Articles of
Incorporation), the dates of payment thereof, and any other terms and conditions
relating to such dividends;
(c) Whether the shares of such series shall be redeemable, and, if
redeemable, whether redeemable at the cash, property, or rights, including
securities of any other corporation, and whether redeemable at the option of the
holder or the corporation or upon the happening of a specified event, the
limitations and restrictions with respect to such redemption, the time or
times, when, the price or prices or rate or rates at which, the adjustments with
which, and the manner in which such shares shall be redeemable, including the
manner of selecting shares of such series for redemption if less than all shares
are to be redeemed, and the terms and amount of a sinking fund, if any, provided
for the purchase or redemption of such shares;
(d) Whether the shares of such series shall be participating or
nonparticipating, and, with respect to participating shares, the date or dates
from which the dividends shall be participating, the rate of the dividends
thereon (which may be fixed or variable and may be made dependent upon facts
ascertainable outside of the Restated Articles of Incorporation), the dates of
payment thereof, and any other terms and conditions relating to such additional
dividends;
(e) The amount per share payable to holders upon any voluntary or
involuntary liquidation, dissolution, or winding up of the affairs of the
corporation;
(f) The conversion or exchange rights, if any, of such series,
including, without limitation, the price or prices, rate or rates, and
provisions for the adjustment thereof (including provisions for protection
against the dilution or impairment of such rights, and all other terms and
conditions upon which shares constituting such series may be converted into, or
exchanged for, shares of any other class or classes or series;
(g) The voting rights per share, if any, of each such series, provided
that in no event shall any shares of any series be entitled to more than one
vote per share; and
(h) All other rights, privileges, terms, and conditions that are
permitted by law and are not inconsistent with this Article.
All shares of Preferred Stock shall rank equally and be identical in all
respects except as to the matters specified in this Article or any amendment
thereto, or the matters permitted to be fixed by the Board of Directors, and all
shares of any one series thereof shall be identical in every particular except
as to the date, if any, from which dividends on such shares shall accumulate.
2. Dividends. The holders of shares of each series of Preferred Stock
shall be entitled to receive, when, as, and if declared by the Board of
Directors, dividends at, but not exceeding, the dividend rate fixed for such
series by the Board of Directors pursuant to the provisions of this Article.
3. Liquidation Preference. Upon the liquidation, dissolution, or
winding up of the affairs of the corporation, whether voluntary or involuntary,
the holders of each series of Preferred Stock shall be entitled to receive in
full out of the assets of the corporation available for distribution to
shareholders(including its capital) before any amount shall be paid to, or
distributed among,the holders of Common Stock, an amount or amounts fixed by the
Board of Directors pursuant to the provisions of this Article. If the assets of
the corporation legally available for payment or distribution to holders of the
Preferred Stock upon the voluntary or involuntary liquidation, dissolution, or
winding up of the affairs of the corporation are insufficient to permit the
payment of the full preferential amount to which all outstanding shares of the
Preferred Stock are entitled, then such assets shall be distributed ratably upon
outstanding shares of the Preferred Stock are entitled, then such assets shall
be distributed ratably upon outstanding shares of the Preferred Stock in
proportion to the full preferential amount to which each such share shall be
entitled. After payment to holders of the Preferred Stock of the full
preferential amount, holders of the Preferred Stock as such shall have no right
or claim to any of the remaining assets of the corporation. The merger or
consolidation of the corporation into or with any other corporation, or the
merger of any other corporation into the corporation, or the sale, lease, or
conveyance of all or substantially of the property or business of the
corporation, shall not be deemed to be a dissolution, liquidation, or winding up
for purposes of this Section 3.
ARTICLE IV
The address of the current registered office of the corporation is 240
Greenwich, Grand Rapids, Michigan 49506
The name of the current resident agent is Mr. Joseph J. Walsh.
ARTICLE V
When a compromise or arrangement or a plan of reorganization of this
corporation is proposed between this corporation and its creditors or any class
of them or between this corporation and its shareholders or any class of them, a
court of equity jurisdiction within the state, on application of this
corporation or of a creditor or shareholder thereof, or on application of a
receiver appointed for the corporation, may order a meeting of the creditors or
class of creditors or of the shareholders or class of shareholders to be
affected by the proposed compromise or arrangement or a reorganization, agree to
a compromise or arrangement or a reorganization of this corporation as a
consequence of the compromise or arrangement, the compromise or arrangement and
the reorganization, if sanctioned by the court to which the application has been
made, shall be binding on all of the creditors or class of creditors, or on all
of the shareholders or class of shareholders and also on this corporation.
ARTICLE VI
Members of the Board of Directors of the corporation shall be selected,
replaced, and removed as follows:
(1) Number of Directors. The number of the directors of the corporation
shall be fixed from time to time by resolution adopted by a majority vote of the
Board of Directors but shall not be less than three.
(2) Classification. The Board of Directors shall be divided into three
classes as nearly equal in number as possible, with the term of office of one
class expiring each year. At each annual meeting of the shareholders, the
successors of the class of directors whose term expires at that meeting shall be
elected to hold office for a term expiring at the annual meeting of shareholders
held in the third year following the year of their election.
(3) Vacancies and Newly Created Directorships. Any vacancy occurring in
the Board of Directors caused by resignation, removal, death, disqualification,
or other incapacity, and any newly created directorships resulting from an
increase in the number of directors, shall be filled by a majority vote of
directors then in office, whether or not a quorum. Each director chosen to fill
a vacancy or a newly created directorship shall hold office until the next
election of the class for which such director shall have been chosen. When the
number of directors is changed, any newly created or eliminated directorships
shall be so apportioned by the Board of Directors among the classes as to make
all classes as nearly equal in number as possible. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director.
(4) Removal. Any director may be removed from office at any time, but
only for cause, and only if removal is approved as set forth below.
Except as may be provided otherwise by law, cause for removal shall
be construed to exist only if: (i) the director whose removal is proposed has
been convicted of a felony by a court of competent jurisdiction and such
conviction is no longer subject to direct appeal; (ii) such director has been
adjudicated by a court of competent jurisdiction to be liable for negligence or
misconduct in the performance of his duty to the corporation in a matter of
substantial importance to the corporation and such adjudication is no longer
subject to direct appeal; (iii) such director has become mentally incompetent,
whether or not so adjudicated, which mental incompetency directly affects his
ability as a director of the corporation; or (iv) such director's actions or
failure to act are deemed by the Board of Directors to be in derogation of the
director's duties.
Whether cause for removal exists shall be determined by the
affirmative vote of two-thirds (2/3) of the total number of directors. Any
action to remove a director pursuant to (i) or (ii) above shall be taken within
one year of such conviction or adjudication. For purposes of this paragraph,
the total number of directors will not include the director who is the subject
of the removal determination, nor will such director be entitled to vote
thereon.
ARTICLE VII
The corporation shall indemnify directors and executive officers of the
corporation as of right to the fullest extent now or hereafter permitted by law
in connection with any actual or threatened civil, criminal, administrative, or
investigative action, suit, or proceeding (whether brought by or in the name of
the corporation, a subsidiary, or otherwise) arising out of their service to the
corporation, a subsidiary, or to another organization at the request of the
corporation or a subsidiary. The corporation may indemnify persons who are not
directors or executive officers of the corporation to the extent authorized by
law, resolution of the Board of Directors, or contractual agreement authorized
by the Board of Directors. The corporation may purchase and maintain insurance
to protect itself and any such director, officer, or other person against any
liability asserted against him or her and incurred by him or her in respect of
such service whether or not the corporation would have the power to indemnify
him or her against such liability by law or under the provisions of this
paragraph. The provisions of this paragraph shall apply to actions, suits, or
proceedings, whether arising from acts or omissions occurring before or after
the adoption of this Article VII, and to directors, officers, and other persons
who have ceased to render such service, and shall inure to the benefit of the
heirs, executors, and administrators of the directors, officers, and other
persons referred to in this paragraph.
ARTICLE VIII
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of the
director's fiduciary duty. However, this Article VIII shall not eliminate or
limit the liability of a director for any of the following:
(1) A breach of the director's duty of loyalty to the corporation or its
shareholders.
(2) Acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law.
(3) A violation of Section 551(1) of the Michigan Business Corporation
Act.
(4) A transaction from which the director derived an improper personal
benefit.
(5) An act or omission occurring before the effective date of this
Article VIII.
Any repeal or modification of this Article VIII by the shareholders of the
corporation shall not adversely affect any right or protection of any director
of the corporation existing at the time of, or with respect to, any acts or
omissions occurring before such repeal or modification.
I, the President of Artibles, Inc., sign my name this day of 2000.
ARTIBLES, INC.
DR. JOEL BURKE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Exhibit 2.3
BYLAWS
OF
ARTIBLES, INC.
ARTICLE I
OFFICES
1.01. Principal Office. The principal office of the corporation shall be
at such place within the state of Michigan as the board of directors shall
determine from time to time.
1.02. Other Offices. The corporation also may have offices at such other
places as the board of directors from time to time determines or the business of
the corporation requires.
ARTICLE II
SEAL
2.01. Seal. The corporation may have a seal in the form that the board of
directors may from time to time determine. The seal may be used by causing it
or a facsimile to be impressed, affixed, or reproduced.
ARTICLE III
CAPITAL STOCK
3.01 Issuance of Shares. The shares of capital stock of the corporation
shall be issued in the amounts, at the times, for the consideration, and on the
terms and conditions that the board shall deem advisable, subject to the
articles of incorporation and any requirements of the laws of the state of
Michigan.
3.02 Certification for Shares. The shares of the corporation shall be
represented by certificates signed by the chairperson of the board, the
president, or a vice president, and also may be signed by the treasurer,
assistant treasurer, secretary, or assistant secretary of the corporation, and
may be sealed with the seal of the corporation or a facsimile of it. A
certificate representing shares shall state on its face that the corporation is
formed under the laws of the state of Michigan and shall also state the name of
the person to whom it is issued, the number and class of shares and the
designation of the series, if any, that the certificate represents, and any
other provisions that may be required by the laws of the state of Michigan.
3.03 Transfer of Shares. The shares of the capital stock of the
corporation are transferable only on the books of the corporation upon surrender
of the certificate for the shares, properly endorsed for transfer, and the
presentation of the evidence of ownership and validity of the assignment that
the corporation may require.
3.04 Registered Shareholders. The corporation shall be entitled to treat
the person in whose name any share of stock is registered as the owner of it for
the purpose of dividends and other distributions or for any recapitalization,
merger, plan of share exchange, reorganization, sale of assets, or liquidation,
for the purpose of votes, approvals, and consents by shareholders, for the
purpose of notices to shareholders, and for all other purposes whatever, and
shall not be bound to recognize any equitable or other claim to or interest in
the shares by any other person, whether or not the corporation shall have notice
of it, save as expressly required by the laws of the state of Michigan.
3.05 Lost or Destroyed Certificates. On the presentation to the
corporation of a proper affidavit attesting to the loss, destruction, or
mutilation of any certificate or certificates for shares of stock of the
corporation, the board of directors shall direct the issuance of a new
certificate or certificates to replace the certificates so alleged to be lost,
destroyed, or mutilated. The board of directors may require as a condition
precedent to the issuance of new certificates a bond or agreement of indemnity,
in the form and amount and with or without the sureties, as the board of
directors may direct or approve.
ARTICLE IV
SHAREHOLDERS AND MEETINGS OF SHAREHOLDERS
4.01. Place of Meetings. All meetings of shareholders shall be held at
the principal office of the corporation or at any other place that shall be
determined by the board of directors and stated in the meeting notice.
4.02 Annual Meeting. The annual meeting of the shareholders of the
corporation shall be held on the first of November at 4:00 p.m. Directors shall
be elected at each annual meeting and such other business transacted as may come
before the meeting.
4.03 Special Meetings. Special meetings of shareholders may be called by
the board of directors, the chairperson of the board(if the office is filled),
or the president and shall be called by the president or secretary at the
written request of shareholders holding a majority of the outstanding shares of
stock of the corporation entitled to vote. The request shall state the purpose
or purposes for which the meeting is to be called.
4.04 Notice of Meetings. Except as otherwise provided by statute,
written notice of the time, place, and purposes of a shareholders meeting shall
be given not less than 10 nor more than 60 days before the date of the meeting
to each shareholder of record entitled to vote at the meeting, either personally
or by mailing the notice to his or her last address as it appears on the books
of the corporation. No notice need be given of an adjourned meeting of the
shareholders provided that the time and place to which the meeting is adjourned
are announced at the meeting at which the adjournment is taken, and at the
adjourned meeting the only business to be transacted is business that might have
been transacted at the original meeting. However, if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record entitled to notice on the
new record date as provided in this bylaw.
4.05 Record Dates. The board of directors may fix in advance a record
date for the purpose of determining shareholders entitled to notice of and to
vote at a meeting of shareholders or an adjournment of the meeting or to express
consent to or to dissent from a proposal without a meeting; for the purpose of
determining shareholders entitled to receive payment of a dividend or an
allotment of a right; or for the purpose of any other action. The date fixed
shall not be more than 60 nor less than 10 days before the date of the meeting,
nor more than 60 days before any other action. In such case only the
shareholders that shall be shareholders of record on the date so fixed shall be
entitled to notice of and to vote at the meeting or an adjournment of the
meeting or to express consent to or to dissent from the proposal; to receive
payment of the dividend or the allotment of rights; or to participate in any
other action, notwithstanding any transfer of any stock on the books of the
corporation, after any such record date. Nothing in this bylaw shall affect the
rights of a shareholder and his or her transferee or transferor as between
themselves.
4.06 List of Shareholders. The secretary of the corporation or the agent
of the corporation having charge of the stock transfer records for shares of the
corporation shall make and certify a complete list of the shareholders entitled
to vote at shareholders meeting or any adjournment of it. The list shall be
arranged alphabetically within each class and series and include the address of,
and the number of shares held by, each shareholder; be produced at the time and
place of the meeting; be subject to inspection by any shareholder during the
whole time of the meeting and be prima facie evidence of which shareholders are
entitled to examine the list or vote at the meeting.
4.07 Quorum. Unless a greater or lesser quorum is required in the
articles of incorporation or by the laws of the state of Michigan, the
shareholders present at a meeting in person or by proxy who, as of the record
date for the meeting, were holders of a majority of the outstanding shares of
the corporation entitled to vote at the meeting, shall constitute a quorum at
the meeting. Whether or not a quorum is present, a meeting of shareholders may
be adjourned by a vote of the shares present in person or by proxy. When the
holders of a class or series of shares are entitled to vote separately on an
item of business, this bylaw applies in determining the presence of a quorum of
the class or series for transacting the item of business.
4.08 Proxies. A shareholder entitled to vote at a shareholders meeting
or to express consent or to dissent without a meeting may authorize other
persons to act for the shareholder by proxy. A proxy shall be signed by the
shareholder or the shareholder's authorized agent or representative and shall
not be valid after the expiration of three years from its date unless otherwise
provided in the proxy. A proxy is revocable at the pleasure of the shareholder
executing it except as otherwise provided by the laws of the state of Michigan.
4.09 Voting. Each outstanding share is entitled to one vote on each
matter submitted to a vote, unless the articles of incorporation provide
otherwise. Votes may be cast orally or in writing, but if more than 25
shareholders of record are entitled to vote, then votes shall be cast in writing
signed by the shareholders or the shareholder's proxy. When an action, other
than the election of directors, is to be taken by a vote of the shareholders,
it shall be authorized by a majority of the votes cast by the holders of shares
entitled to vote on it, unless a greater vote is required by the articles of
incorporation or by the laws of the state of Michigan. Except as otherwise
provided by the articles of incorporation, directors shall be elected by a
plurality of the votes cast at any election.
ARTICLE V
DIRECTORS
5.01 Number. The business and affairs of the corporation shall be
managed by a board of not less than one nor more than seven directors as shall
be fixed from time to time by the board of directors. The directors need not be
residents of Michigan or shareholders of the corporation.
5.02 Election, Resignation, and Removal. Directors shall be elected at
each annual shareholders meeting, each director to hold office until the next
annual shareholders meeting and until the director's successor is elected and
qualified, or until the director's resignation or removal. A director may
resign by written notice to the corporation. The resignation is effective on
its receipt by the corporation or at a subsequent time as set forth in the
notice of resignation. A director or the entire board of directors may be
removed, with or without cause, by vote of the holders of a majority of the
shares entitled to vote at an election of directors.
5.03 Vacancies. Vacancies in the board of directors occurring by reason
of death, resignation, removal, increase in the number of directors, or
otherwise shall be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the board of directors, unless filled by
proper action of the shareholders of the corporation Each person so elected
shall be a director for a term of office continuing only until the next election
of directors by the shareholders. A vacancy that will occur at a specific date,
by reason of a resignation effective at a later date or otherwise, may be filled
before the vacancy occurs, but the newly elected director may not take office
until the vacancy occurs.
5.04 Annual Meeting. The board of directors shall meet each year
immediately after the annual meeting of the shareholders, or within three days
of such time, excluding Sundays and legal holidays, of the later time is deemed
advisable, at the place where the shareholders meeting has been held or any
other place that the board may determine, for the purpose of electing officers
and considering such business that may properly be brought before the meeting;
provided that, if less than a majority of the directors appear for an annual
meeting of the board of directors, the holding of the annual meeting shall not
be required and the matters that might have been taken up in it may be taken up
at any later special or annual meeting, or by consent resolution.
5.05 Regular and Special Meetings. Regular meetings of the board of
directors may be held at the time and places that the majority of the directors
may from time to time determine at a prior meeting or as shall be directed or
approved by the vote or written consent or as shall be directed or approved by
the vote or written consent of all the directors. Special meetings of the board
may be called by the chairperson of the board (if the office if filled)or the
president, and shall be called by the president or secretary on the written
request of any two directors, provided two or more directors hold office.
5.06 Notices. No notice shall be required for annual or regular meetings
of the board or for adjourned meetings, whether regular or special. Three days
written notice shall be given for special meetings of the board, and the notice
shall state the time, place, and purpose or purposes of the meeting.
5.07 Quorum. A majority of the board of directors then in office, or of
the members of a board committee, constitutes a quorum for the transaction of
business. The vote of a majority of the directors present at any meeting at
which there is a quorum constitutes the action of the board or of the committee,
except when a larger vote may be required by the laws of the state of Michigan.
A member of the board or of a committee designated by the board may participate
in a meeting by conference telephone or similar communications equipment through
which all persons participating in the meeting can communicate with each other.
Participation in a meeting in this manner constitutes presence in person at the
meeting.
5.08 Dissents. A director who is present at a meeting of the board of
directors, or a board committee of which the director is a member, at which
action on a corporate matter is taken, is presumed to have concurred in that
action unless the director's dissent is entered in the minutes of the meeting or
unless the director files a written dissent to the action with the person acting
as secretary of the meeting before the adjournment of it or forwards the dissent
by registered mail to the secretary of the corporation promptly after the
adjournment of the meeting. The right to dissent does not apply to a director
who voted in favor of the action. A director who is absent from a meeting of
the board or a board committee of which the director is a member, at which any
such action is taken, is presumed to have concurred in the action unless he or
she files a written dissent with the secretary of the corporation within a
reasonable time after the director has knowledge of the action.
5.09 Compensation. The board of directors, by affirmative vote of a
majority of directors in office and irrespective of any personal interest of any
of them, may establish reasonable compensation of directors for services to the
corporation as directors or officers.
5.10 Executive and Other Committees. The board of directors may, by
resolution passed by a majority of the whole board, appoint three or more
members of the board as an executive committee to exercise all powers and
authorities of the board in managing the business and affairs of the
corporation, except that the committee shall not have power or authority to (a)
amend the articles of incorporation; (b) adopt an agreement of merger or plan
of share exchange; (c) recommend to shareholders the sale, lease, or exchange of
all or substantially all of the corporation's property and assets; (d) recommend
to shareholders a dissolution of the corporation or revocation of a dissolution;
(e) amend these bylaws; (f) fill vacancies in the board; or (g) declare a
dividend or authorize the issuance of stock, unless expressly authorized by the
board.
The board of directors from time to time may, by like resolution, appoint
any other committees of one or more directors to have the authority that shall
be specified by the board in the resolution making the appointments. The board
of directors may designate one or more directors as alternate members of any
committee to replace an agent or disqualified member at any committee meeting.
ARTICLE VI
NOTICES, WAIVERS OF NOTICE, AND MANNER OF ACTING
6.01 Notices. All notices of meetings required to be given to
shareholders, directors, or any committee of directors may be given by mail,
telecopy, telegram, radiogram, cablegram, or fax to any shareholder, director,
or committee member at his or her last address as it appears on the books of the
corporation. The notice shall be deemed to be given at the time it is mailed or
otherwise dispatched.
6.02 Waiver of Notice. Notice of the time, place, and purpose of any
meeting of shareholders, directors, or committee of directors may be waived by
telecopy, telegram, radiogram, cablegram, fax, or other writing, either before
or after the meeting, or in any other manner that may be permitted by the laws
of the state of Michigan. Attendance of a person at any shareholders meeting,
in person or by proxy, or at any meeting of directors or of a committee of
directors, constitutes a waiver of notice of the meeting except as follows:
(a) In the case of a shareholder, unless the shareholder at the beginning of the
meeting objects to holding the meeting or transacting business at the meeting,
or unless with respect to consideration of a particular matter at the meeting
that is not within the purpose or purposes described in the meeting notice, the
shareholder objects to considering the matter when it is presented.
(b) In the case of a director, unless he or she at the beginning of the meeting,
or upon his or her arrival, objects to the meeting or the transacting of
business at the meeting and does not thereafter vote for or assent to any action
taken at the meeting.
6.03 Action Without a Meeting. Except as the articles of incorporation may
otherwise provide for action to be taken by shareholders, any action required or
permitted at any meeting of shareholders, directors, or a committee of directors
may be taken without a meeting, without prior notice, and without a vote, if all
of the shareholders, directors, or committee members entitled to vote on it
consent to it in writing, before or after the action is taken.
ARTICLE VII
OFFICERS
7.01 Number. The board of directors shall elect or appoint a president,
a secretary, and a treasurer, and may select a chairperson of the board and one
or more vice presidents, assistant secretaries, or assistant treasurers. The
president and chairperson of the board, if any, shall be members of the board of
directors.
7.02 Term of Office, Resignation, and Removal. An officer shall hold
office for the term for which he or she is elected or appointed and until his or
her successor is elected or appointed and qualified, or until his or her
resignation or removal. An officer may resign by written notice to the
corporation. The resignation is effective on its receipt by the corporation or
at a subsequent time specified in the notice of resignation. An officer may be
removed by the board with or without cause. The removal of an officer shall be
without prejudice to his or her contract rights, if any. The election or
appointment of an officer does not of itself create contact rights.
7.03 Vacancies. The board of directors may fill any vacancies in any
office occurring for whatever reason.
7.04 Authority. All officers, employees, and agents of the corporation
shall have the authority and perform the duties to conduct and manage the
business and affairs of the corporation that may be designated by the board of
directors and these bylaws.
ARTICLE VIII
DUTIES OF OFFICERS
8.01 Chairperson of the Board. The chairperson of the board, if the
office is filled, shall preside at all meetings of the shareholders and of the
board of directors at which the chairperson is present.
8.02 President. The president shall see that all orders and resolutions of the
board are carried into effect, and the president shall have the general powers
of supervision and management usually vested in the chief executive officer of a
corporation, including the authority to vote all securities of other
corporations and business organizations held by the corporation. In the
absence or disability of the chairperson of the board, or if that office has not
been filled, the president also shall perform the duties of the chairperson of
the board as set forth in these bylaws.
8.03 Vice Presidents. The vice presidents, in order of their seniority,
shall, in the absence or disability of the president, perform the duties and
exercise the powers of the president and shall perform any other duties that the
board of directors or the president may from time to time prescribe.
8.04 Secretary. The secretary shall attend all meetings of the board of
directors and shareholders and shall record all votes and minutes of all
proceedings in a book to be kept for that purpose; shall give or cause to be
given notice of all meetings of the shareholders and the board of directors; and
shall keep in safe custody the seal of the corporation and, when authorized by
the board, affix it to any instrument requiring it, and when so affixed it shall
be attested to by the signature of the secretary or by the signature of the
treasurer or an assistant secretary. The secretary may delegate any of the
duties, powers, and authorities of the secretary to one or more assistant
secretaries, unless the delegation is disapproved by the board.
8.05 Treasurer. The treasurer shall have the custody of the corporate
funds and securities; shall keep full and accurate accounts of receipts and
disbursements in the books of the corporation; and shall deposit all moneys and
other valuable effects in the name and to the credit of the corporation in the
depositories that may be designated by the board of directors. The treasurer
shall render to the president and directors, whenever they may require it, an
account of his or her transactions as treasurer and of the financial condition
of the corporation. The treasurer may delegate any of his or her duties,
powers, and authorities to one or more assistant treasurers unless the
delegation is disapproved by the board of directors.
8.06 Assistant Secretaries and Treasurers. The assistant secretaries, in
order of their seniority, shall perform the duties and exercise the powers and
authorities of the secretary in case of the secretary's absence or disability.
The assistant treasurers, in the order of their seniority, shall perform the
duties and exercise the powers and authorities of the treasurer in case of the
treasurer's absence or disability. The assistant secretaries and assistant
treasurers shall also perform the duties that may be delegated to them by the
secretary and treasurer, respectively, and also the duties that the board of
directors may prescribe.
ARTICLE IX
SPECIAL CORPORATE ACTS
9.01 Orders for Payment of Money. All checks, drafts, notes, bonds,
bills of exchange, and orders for payment of money of the corporation shall be
signed by the officer or officers or any other person or persons that the board
of directors may from time to time designate.
9.02 Contracts and Conveyances. The board of directors of the
corporation may in any instance designate the officer and/or agent who shall
have authority to execute any contract, conveyance, mortgage, or other
instrument on behalf of the corporation, or may ratify or confirm any execution.
When the execution of any instrument has been authorized, without specification
of the executing officers or agents, the chairperson of the board, the president
or any vice president, and the secretary, assistant secretary, treasurer, or
assistant treasurer may execute the instrument in the name and on behalf of this
corporation and may affix the corporate seal to it.
ARTICLE X
BOOKS AND RECORDS
10.01 Maintenance of Books and Records. The proper officers and agents of
the corporation shall keep and maintain the books, records, and accounts of the
corporation's business and affairs, minutes of the proceedings of its
shareholders, board, and committees, if any, and the stock ledgers and lists of
shareholders, as the board of directors shall deem advisable and as shall be
required by the laws of the state of Michigan and other states or jurisdictions
empowered to impose such requirements. Books, records, and minutes may be kept
within or without the state of Michigan in a place that the board shall
determine.
10.02 Reliance on Books and Records. In discharging his or her duties, a
director or an officer of the corporation, when acting in good faith, may rely
on information, opinions, reports, or statements, including financial statements
and other financial data, if prepared or presented by any of the following:
(a) One or more directors, officers, or employees of the corporation, or of a
business organization under joint control or common control, whom the director
or officer reasonably believes to be reliable and competent in the matters
presented.
(b) Legal counsel, public accountants, engineers, or other persons as to matters
the director or officer reasonably believes are within the person's professional
or expert competence.
(c) A committee of the board of which he or she is not a member if the director
or officer reasonably believes the committee merits confidence.
A director or officer is not entitled to rely on the information set forth
above if he or she has knowledge concerning the matter in question that makes
reliance otherwise permitted unwarranted.
ARTICLE XI
FISCAL YEAR
11.01 Fiscal Year. The fiscal year of the corporation shall be as fixed
by the board of directors.
ARTICLE XII
INDEMNIFICATION
12.01 Indemnification. Each director and officer of the corporation now
or hereafter serving as such shall be indemnified by the corporation against any
and all claims and liabilities to which he or she has or may become subject by
reason of serving or having served as such director or officer, or by reason of
any action alleged to have been taken, omitted, or neglected as such director or
officer and the corporation shall reimburse each such person for all legal
expenses reasonably incurred in connection with any such claim or liability or
wrong payments made by him or her in satisfaction of a judgment. No such person
shall be indemnified against, or be reimbursed for any expense or payments
incurred with, any claim or liability established to have arisen out of his own
willful misconduct or gross negligence.
The right of indemnification hereinabove provided for shall not be
exclusive of any right to which any director or officer of the corporation may
otherwise be entitled by law.
ARTICLE XIII
AMENDMENTS
13.01 Amendments. The bylaws of the corporation may be amended, altered,
or repealed, in whole or in part, by the shareholders or by the board of
directors at any meeting duly held in accordance with these bylaws, provided
that notice of the meeting includes notice of the proposed amendment,
alteration, or repeal.
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Exhibit
SERVICES AGREEMENT
This Agreement is effective as of the 15 day of December, 1996, by and
between Artibles, Inc., a corporation (the "Company"), and Epoch Resources,
Inc., of Grand Rapids, Michigan ("EPOCH").
WHEREAS, the Company is a Michigan corporation; and
WHEREAS, EPOCH, is in the business of providing Computer Consulting,
Production and Programming services; and
WHEREAS, the Company desires to retain EPOCH to provide its services;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the receipt and sufficiency of which is hereby acknowledged,
the parties hereby agree as follows:
1. Duties and Involvement
a. The Company hereby engages EPOCH to provide its services when requested.
b. EPOCH acknowledges that in rendering services to the Company, it is not and
will not be responsible for any management decisions on behalf of the Company
and that it is not authorized or empowered to commit the Company to any
recommendation or course of action. The Company represents that EPOCH does not
have, through stock ownership or otherwise, the power to control the Company nor
to exercise any dominating influence over its management.
2. Terms
This Agreement shall continue for one (1) year and shall be automatically
renewed in favor of Epoch for one year years unless one of the following events
occur:
a. EPOCH submits a letter of termination to the Company;
b. The Company terminates EPOCH for cause which shall mean misconduct
resulting in damage to the Company;
3. Compensation
EPOCH shall be paid pursuant to its schedule of rates and charges as
amended by EPOCH on an annual basis.
4. Confidentiality
During and after the services period, EPOCH will not divulge or
appropriate to its own use or the use of others, in competition with the
Company, any secret or confidential information or knowledge pertaining to the
business of the Company, or of any of its subsidiaries, obtained by it in any
way while contracted by the Company or by any of its subsidiaries.
5. Remedies
If at any time EPOCH violates to a material extent any of the covenants or
agreements set forth in Paragraph 4, the Company shall have the right to
terminate all of its obligations to make further payments under this Agreement.
EPOCH acknowledges that the Company would be irreparably injured by a violation
of paragraph 4 and agrees that the Company shall be entitled to an injunction
restraining EPOCH from any actual or threatened breach of paragraph 4 or to any
other appropriate equitable remedy without any bond or other security being
required.
6. Amendment
This Agreement may be amended or canceled by mutual agreement of the
parties without the consent of any other person. No person, other than the
parties hereto, shall have any rights under or interest in this Agreement, or
the subject matter hereof.
7. Notices
Any notice required or permitted to be given under this Agreement shall be
sufficient if in writing and if sent by registered mail to the Company at its
principal executive offices or to EPOCH at the last address filed by him in
writing with the Company, as the case may be.
8. Non-Assignment
The interests of EPOCH under this Agreement are not subject to the claims
of its creditors and may not be voluntarily or involuntarily assigned, alienated
or encumbered.
9. Successors
This Agreement shall be binding upon, and inure to the benefit of, the
Company and its successors and assigns and upon any person acquiring, whether by
merger, consolidation, purchase of assets or otherwise, all or substantially all
of the Company's assets and business.
10. Applicable Law
The provisions of this Agreement shall be construed in accordance with the
laws of the State of Michigan.
11. Counterparts
This Agreement may be executed in two or more counterparts, any one of
which shall be deemed the original without reference to the others.
12. Arbitration
Any dispute, controversy or claim between the Company and Consultant
arising out of or related to this Agreement shall be settled by arbitration,
which shall be conducted in accordance with the rules of the American
Arbitration Association then in effect and conducted in the State of Michigan.
Any award made by such arbitrators shall be binding and conclusive for all
purpose thereof, may include injunctive relief, as well as orders for specific
performance and may be entered as a final judgment in any court of competent
jurisdiction. No arbitration arising out of or relating to this Agreement shall
include, by consolidation or joinder or in any other manner, parties other than
the Company or consultant and other persons substantially involved in common
question of fact or law whose presence is required if complete relief is to be
afforded in arbitration. The cost and expenses of such arbitration shall be
borne in accordance with the determination of the arbitrators and may include
reasonable attorney's fees. Each party hereby further agrees that service of
process may be made upon it by registered or certified mail or personal service
at the address provided for herein.
IN WITNESS WHEREOF, EPOCH has hereunto set his hand, and the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.
ARTIBLES, INC. EPOCH RESOURCES, INC.
By: By:
Its Authorized Agent Its Authorized Agent
THIS SECURITY HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR THE SECURITIES LAW OF ANY STATE AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM.
PROMISSORY NOTE
Date: January, 12, 1999 Principal Sum: $25,000.00
OBLIGATION AND PAYMENT
FOR VALUE RECEIVED, receipt of which is acknowledged, Artibles, Inc., of
Grand Rapids, Michigan, promises to pay the order of Charles Ishay, the
principal sum of Twenty Five Thousand ($25,000.00) Dollars, together with
interest at the rate of Ten (10%) percent per annum on the unpaid balance.
Payment will be made upon demand one year after the issuance of this Note.
Artibles, Inc. shall have the right to pre-pay this Note, in whole or in part,
at any time without premium or penalty. Installments shall be paid at Charles
Shay's office in New York, or at any other place that the holder of this Note
designates in writing. Interest shall be computed monthly. Installments shall
be applied first toward the payment of interest and costs of collection provided
for in this Note; the balance, if any, will be applied to the payment of the
principal.
STOCK PAYMENT OPTION
After four (4) months from the date of this Note, and prior to ten (10)
months from the date of this Note, Artibles, Inc., agrees to accept from Charles
Ishay his proposal to satisfy this Note in full or any part thereof, by issuance
of shares (defined below) of unregistered common stock of Artibles, Inc., at the
value of $2.50 per share. Artibles, Inc., shall issue the shares in the amount
requested by Charles Ishay, in full or partial satisfaction of the Note.
Artibles, Inc., agrees to register the shares in any subsequent registration.
Subsequent to ten (10) months after the date of this Note, Artibles, Inc., may
accept or reject Charles Ishay's proposal to satisfy the Note by delivery of
shares.
For the purposes of this Note, the terms share of Artibles, Inc., stock
shall mean the post-split shares which Artibles, Inc. intends to authorize and
issue up to the amount of 55 million shares.
WAIVER
The undersigned waives demand, presentment, protest, notice of dishonor or
non-payment of this Note, and all other actions or notices in connection with
the delivery, acceptance, performance, default, or enforcement of the payment of
this Note. The undersigned agrees to pay all costs of collection when incurred,
including holder's attorneys' fees and costs, and to perform and comply with
each of the covenants and conditions contained in any agreement executed in
connection herewith, including but not limited to mortgages, liens, security
agreements, and financing statements.
DEFAULT
If the undersigned should default in the payment of principal, or
interest, when due in accordance with the terms listed herein, or if the
undersigned should fail to perform or comply with any term, covenant, or
condition of any agreement executed in connection with this Note, or any other
agreement executed in connection with this Note, or any other agreement with,
and such failure continues for seven (7) days after the holder gives written
notice to the undersigned at the address below, reasonably identifying the
failure, it is agreed that the holder or holders of this Note may, without
notice, declare the unpaid balance of the principal sum and any interest accrued
on it, at once due and payable at the place of payment listed above. Notice
shall be deemed to have been given when personally delivered or when deposited
in the Units States mail addressed to the undersigned with proper postage
affixed. Interest shall continue to accrue on the unpaid principal balance at
the rate established above regardless of any acceleration of the debt pursuant
to the terms of this paragraph.
BENEFIT
This Note shall inure to the benefit of Charles Ishay and his successors and
assigns, it shall be binding upon the undersigned, its respective legal
representatives, successors and assigns. The undersigned agrees that it will
not assert any claim it may have against as a defense against payment on this
Note, or as a setoff against amounts owed pursuant to the terms of this Note.
The undersigned agree that any litigation with respect to or arising our of this
Note shall, at Artibles' sole discretion and election, be conducted in the
Michigan Courts seated in Kent County, Michigan, or in the United States
District Court for the Western District of Michigan; the undersigned hereby
consents to the personal jurisdiction of such courts and waives any objection it
may have to the laying of venue of such litigation.
REPORTS
The undersigned shall receive, for so long as it holds this Note or shares
issued in payment therefore, and until Artibles, Inc., is a reporting company
under the Federal Securities laws, such annual and quarterly reports and
financial statements as are required to be prepared and delivered by Artibles,
Inc., to its other lenders and/or investors and, to the extent not included in
the foregoing, (i) an annual report including such financial statements as are
then regularly prepared by Artibles, Inc., and a summary of the business,
operations, financial condition and prospects of Artibles, Inc., and (ii) a
quarterly business summary of the business, operations, financial condition and
prospects of Artibles, Inc.
USE OF PROCEEDS
The proceeds of the indebtedness represented by this Note will be used for
capital expenditures, working capital and other general corporate purposes.
DISCLOSURE
Artibles, Inc., has not, in writing or orally, to the holder of this Note or of
any of the other similar notes being issued contemporaneously with this Note,
made any untrue statements of a material fact or omitted to state any material
fact necessary to make the statements made, in light of the circumstances in
which they were made, not misleading.
INVESTOR STATUS
The holder of this Note, by acceptance hereof, confirms that: (i) he is an
"Accredited Investor" as defined in Rule 501 of Regulation D under the United
States Securities Act of 1933, as amended; (ii) he possesses such knowledge and
experience in financial and business matters so that the holder is capable of
evaluating the risks and merits of an investment in this Note and in Artibles,
Inc.; (iii) he is able to bear the economic risks of an investment in Artibles,
Inc., and could afford a complete loss of such investment, and (iv) he has had
an opportunity to ask questions and received answers regarding Artibles. Inc.
and the offering and sale of the note and has been furnished with all
information requested relating to Artibles, Inc., and the offering and sale of
the Note.
OTHER PROVISIONS
No delay or omission on the part of the holder in the exercise of any right
hereunder, or under any agreement securing this Note, shall operate as a waiver
of such right or any other right, a waiver on any one occasion shall not be
construed as a bar to or waiver of any such right on any future occasion. The
undersigned agrees that this Note and the rights and obligations of all parties
hereunder shall be governed by and construed under the laws of the State of
Michigan. In the event any provision hereof is in conflict with any statute or
rule of law in the State of Michigan, or is otherwise unenforceable for any
reason whatsoever, then such provision shall be deemed severable from this Note,
or enforceable to the maximum extent permitted by law, as the case may be, and
the same shall not invalidate any other provisions hereof.
In Witness Whereof, this Note has been executed on the day and year above
written.
ARTIBLES, INC.
By:
Dr. Joel Burke, Its President
240 Greenwich Drive
Grand Rapids, MI 49506
PROMISSORY NOTE
Date: January 14, 1999 Principal Sum: $25,000.00
OBLIGATION AND PAYMENT
FOR VALUE RECEIVED, receipt of which is acknowledged, Artibles, Inc., of
Grand Rapids, Michigan, promises to pay the order of Elvira Antebi, the
principal sum of Twenty Five Thousand ($25,000.00) Dollars, together with
interest at the rate of Ten (10%) percent per annum on the unpaid balance.
Payment will be made upon demand one year after the issuance of this Note.
Artibles, Inc. shall have the right to pre-pay this Note, in whole or in part,
at any time without premium or penalty. Installments shall be paid at Elvira
Antebi's office in 1974 E. 21st Street, Brooklyn, NY, 11229. Interest shall be
computed monthly. Installments shall be applied first toward the payment of
interest and costs of collection provided for in this Note; the balance, if any,
will be applied to the payment of the principal.
WAIVER
The undersigned waives demand, presentment, protest, notice of dishonor or
non-payment of this Note, and all other actions or notices in connection with
the delivery, acceptance, performance, default, or enforcement of the payment of
this Note. The undersigned agrees to pay all costs of collection when incurred,
including holder's attorneys' fees and costs, and to perform and comply with
each of the covenants and conditions contained in any agreement executed in
connection herewith, including but not limited to mortgages, liens, security
agreements, and financing statements.
DEFAULT
If the undersigned should default in the payment of principal, or
interest, when due in accordance with the terms listed herein, or if the
undersigned should fail to perform or comply with any term, covenant, or
condition of any agreement executed in connection with this Note, or any other
agreement executed in connection with this Note, or any other agreement with
Elvira Antebi and such failure continues for seven (7) days after the holder
gives written notice to the undersigned at the address below, reasonably
identifying the failure, it is agreed that the holder or holders of this Note
may, without notice, declare the unpaid balance of the principal sum and any
interest accrued on it, at once due and payable at the place of payment listed
above. Notice shall be deemed to have been given when personally delivered or
when deposited in the Units States mail addressed to the undersigned with proper
postage affixed. Interest shall continue to accrue on the unpaid principal
balance at the rate established above regardless of any acceleration of the debt
pursuant to the terms of this paragraph.
BENEFIT
This Note shall inure to the benefit of Artibles and his successors and assigns,
it shall be binding upon the undersigned, its respective legal representatives,
successors and assigns. The undersigned agrees that it will not assert any
claim it may have against Elvira Antebi as a defense against payment on this
Note, or as a setoff against amounts owed pursuant to the terms of this Note.
The undersigned agree that any litigation with respect to or arising our of this
Note shall, at Artibles' sole discretion and election, be conducted in the
Michigan Courts seated in Kent County, Michigan, or in the United States
District Court for the Western District of Michigan; the undersigned hereby
consents to the personal jurisdiction of such courts and waives any objection it
may have to the laying of venue of such litigation.
OTHER PROVISIONS
No delay or omission on the part of the holder in the exercise of any right
hereunder, or under any agreement securing this Note, shall operate as a waiver
of such right or any other right, a waiver on any one occasion shall not be
construed as a bar to or waiver of any such right on any future occasion. The
undersigned agrees that this Note and the rights and obligations of all parties
hereunder shall be governed by and construed under the laws of the State of
Michigan. In the event any provision hereof is in conflict with any statute or
rule of law in the State of Michigan, or is otherwise unenforceable for any
reason whatsoever, then such provision shall be deemed severable from this Note,
or enforceable to the maximum extent permitted by law, as the case may be, and
the same shall not invalidate any other provisions hereof.
In Witness Whereof, this Note has been executed on the day and year above
written.
ARTIBLES, INC.
By:
Dr. Joel Burke, Its President
240 Greenwich Drive
Grand Rapids, MI 49506
