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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(Amendment No. _________________)
ALPHACOM, INC.
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(Exact name of small business issuer in its charter)
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Nevada 7372 34-1868605
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(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
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1035 Rosemary Boulevard, Akron, Ohio 44306 (330) 785-5555
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(Address and telephone number of principal executive offices)
1035 ROSEMARY BOULEVARD, AKRON, OHIO 44306
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(Address of principal place of business or intended principal place of
business)
ROBERT SNYDER, 1035 ROSEMARY BOULEVARD, AKRON, OHIO 44306 (330) 785-5555
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(Name, Address and telephone nunber of agent for service)
COPIES TO:
Miles Garnett, Esq., 66 Wayne Avenue, Atlantic Beach, NY 11509 (516) 371-4598
Approximate date of proposed sale to the public: AS SOON AS PRACTICABLE AFTER
THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, Check the following box. [x]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]_______________________________
If this form is a post effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]______________________________________________________
If this form is a post effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]______________________________
If delivery of the prospectus is expected to be made
pursuant to Rule 434, check the following box. [_]
CALCULATION OF REGISTRATION FEE
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Common Stock $26,600,000.00 $5.00 $26,600,000.00 $7,394.80
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Title of each Dollar Proposed maximum Proposed maximum Amount of
class of securities amount to be offering price aggregate offering registration fee
to be registered registered per unit price
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Note: Specific details relating to the fee calculation shall be furnished in
notes to the table, including references to provisions of Rule 457 (Section
230.457 of this chapter) relied upon, if the basis of the calculation is not
otherwise evident from the information presented in the table. If the filing fee
is calculated pursuant to Rule 457(o) under the Securities Act, only the title
of the class of securities to be registered, the proposed maximum aggregate
offering price for that class of securities and the amount of registration fee
need to appear in the Calculation of Registration Fee table. Any difference
between the dollar amount of securities registered for such offerings and the
dollar amount of securities sold may be carried forward on a future registration
statement pursuant to Rule 429 under the Securities Act.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
[LOGO]ALPHACOM
Tomorrow's Communications . . . Today!
ALPHACOM, INC.
5,320,000 SHARES OF COMMON STOCK
THE PURCHASE PRICE FOR OUR SHARES IS $5.00.
We are selling 5,000,000 shares of Common Stock ("Shares"), which have a par
value of $.001 per share (the "Common Stock"). We are a Nevada corporation.
Several of our founding shareholders are selling an additional 320,000 shares
concurrently, which represents 6% of the shares being offered. We and the
selling shareholders have fixed the price of all the shares made in this
offering at $5.00 each. All of the shares of common stock which we are offering
will be sold by us on a "best efforts" basis. We also plan to have
Broker/Dealers participate and sell on a "best efforts" basis. The
Broker/Dealers will receive a commission on their sales. See "Description of
Securities."
Prior to this offering (the "Offering"), there has been no public market for the
Shares and there can be no assurance that such a market will develop. The
offering price for the common stock has been arbitrarily determined by us. We
anticipate that the Shares will be quoted on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ) Small Capitalization
Market ("Nasdaq") under the symbols "ACOM". The minimum subscription is 100
Shares and the maximum subscription is 10,000 Shares. The Offering will begin on
the date of this Prospectus and continue until all of the Shares offered hereby
or such earlier date as we may close or terminate the Offering. There is no
required minimum number of Shares to be sold in the Offering. This Prospectus
may be used by us or by any broker-dealer who may participate in sales of the
shares.
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 7.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PER SHARE
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Public offering price ........................ $ 5.00
Underwriting discounts and commissions(1) .... $ .40
Proceeds, before expenses, to AlphaCom, Inc(2) $ 4.60
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1. The Offering is being made directly by us on a "Best Efforts" basis through
our directors, officers and employees who shall serve without compensation.
However, we intend to engage registered broker/dealers in the sale of its
securities to assist us in this Offering for which we will pay brokerage
commissions not to exceed eight (8) percent on such sales. The net total
proceeds due to us from this Offering will be retained by us before any of
the remaining proceeds are distributed to selling stockholders.
2. After deducting commissions but before deducting expenses payable by us,
estimated at $350,000, but no expenses are payable by the selling
stockholders.
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THE DATE OF THIS PROSPECTUS IS , 1999
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THIS OFFERING INVOLVES SUBSTANTIAL RISKS (SEE "RISK FACTORS") AND SHOULD BE
CONSIDERED ONLY BY PERSONS ABLE TO BEAR THE ECONOMIC RISK OF THE INVESTMENT FOR
AN INDEFINITE PERIOD OF TIME. NO ESCROW ACCOUNT, TRUST OR OTHER SIMILAR
ARRANGEMENT HAS BEEN ESTABLISHED AND INVESTORS' FUNDS ARE TO BE PAID DIRECTLY
TO US. AT THE TIME OF SUBSCRIBING, AN INVESTOR WILL NOT BE ABLE TO ASCERTAIN
HOW MANY SHARES WILL BE PURCHASED BY OTHER INVESTORS.
[LOGO]ALPHACOM
Tomorrow's Communications . . . Today!
TABLE OF CONTENTS
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Our Company ............................................................ 5
Summary ................................................................ 5
Risk Factors ........................................................... 7
Management Discussion of Analysis of Condition and Results of Operations 15
Year 2000 Readiness Disclosure ......................................... 15
Use of Proceeds ........................................................ 17
Capitalization ......................................................... 18
Dilution................................................................ 18
Business................................................................ 20
Selling Securityholders ................................................ 28
Principal Shareholders ................................................. 28
Management ............................................................. 29
Certain Transactions ................................................... 32
Description of Securities .............................................. 33
Shares Eligible for Future Sale ........................................ 33
Available Information .................................................. 34
Dividend Policy ........................................................ 35
Stock Transfer Agent ................................................... 35
Experts ................................................................ 35
Legal Matters .......................................................... 36
Index to Financial Statements .......................................... F1
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This information sets forth certain provisions of this Prospectus, is
intended only for quick reference, and is not intended to be complete. This
Prospectus describes in detail the numerous aspects of the transaction which are
material to investors, including those summarized below, and the accompanying
financial statements and assumptions referred to herein should be read in their
entirety by prospective investors. The following summary is, therefore,
qualified in its entirety by reference to the full text of this Prospectus.
OUR COMPANY
Our company, AlphaCom, Inc., is an innovator in communication
technology. It was incorporated on December 1, 1997 under the laws of the State
of Nevada. We specialize in inventive and superior approaches to wireline and
wireless internet connections. Our commitment has been to find and develop
effective solutions regarding the so-called "bandwidth problems". Our solutions
to solving these problems are two pronged; (1) development of original
proprietary and patented technology that "piggybacks" added channels in the
unused bandwidth portion that accompanies existing telephone and radio channels
and (2) a unique method of providing compression software to increase throughput
to the end user.
SUMMARY
We are selling 5,000,000 shares of Common Stock ("Shares"), which have
a par value of $.001 per share (the "Common Stock"). We are a Nevada
corporation. Several of our founding shareholders are selling an additional
320,000 shares concurrently, which represents 6% of the shares being offered. We
and the selling shareholders have fixed the price of all the shares made in this
offering at $5.00 each.
The Company markets a variety of wireless Internet products and
services including its wireless modem and wireless Internet access service
initially utilizing Cellular Digital Packet Data (CDPD) within specific regions
throughout The United States and Canada that presently offer CDPD technology.
The CDPD System overlays the cellular voice network to provide a wireless
extension of existing packet data networks. It provides secure wireless packet
data connectivity (19.2 kilobits/sec) and is based on Industry Standard Internet
Protocol (IP).
We are currently leasing an office facility of 8,000 square feet on a
year to year basis for $3,100.00 per month for administration, technical
support, and customer service. Our offices are located at 1035 Rosemary
Boulevard, Akron, Ohio 44306, and the telephone number is (330) 785-5555. The
facilities are adequate for our current needs and suitable additional space,
should it be needed, is expected to be available to accommodate expansion of our
operations on commercially reasonable terms. Information contained on our World
Wide Web site at http://www.networkalpha.com does not constitute a part of this
prospectus.
Unless otherwise indicated, the information in this prospectus,
irrespective of the date referenced, assumes that there is no exercise of
outstanding options or warrants to purchase additional shares.
THE OFFERING
COMMON STOCK OFFERED
FOR SALE HEREBY Up to a maximum of 5,000,000 shares of Common
Stock by us and 320,000 shares of common stock by
several of our founding stockholders.
OFFERING PRICE $5.00 per share of Common Stock. The Shares are
being sold on a "best efforts" basis and the
Company has the right to immediately utilize the
funds received from investors.
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TERMS OF THE OFFERING There is no minimum offering. Accordingly, as
shares are sold we will use the money raised for
our activities. The offering will remain open
until July 31, 2000, unless we decide to terminate
the selling efforts prior to this date. The
minimum subscription is 100 Shares and the maximum
subscription is 10,000 Shares.
COMMON PREFERRED
AUTHORIZED AND STOCK STOCK
OUTSTANDING ----- ---- -----
SHARES OF Authorized: 60,000,000 none
STOCK Outstanding:
Prior to Offering: 12,139,354 none
After Offering*: 17,139,354 none
*Assuming the maximum amount of the Offering has been subscribed.
PLAN OF DISTRIBUTION There is no minimum amount which must be raised in
the offering. All of the shares of common stock
which we are offering will be sold by us on a
"best efforts" basis. We also plan to have
Broker/Dealers participate and sell on a "best
efforts" basis. The Broker/Dealers will receive a
commission on their sales. None have been retained
as of this date.
USE OF PROCEEDS Assuming that the entire offering will be sold
then up to the first $350,000 that we raise will
be used to pay the expenses of the offering. If a
lesser amount is sold this sum will be in
proportion to the amount sold. The funds raised in
excess of that amount will be used for repayment
of debt; to complete R & D projects; and to
augment working capital. See "Use of Proceeds."
There is no minimum offering or escrow of
shareowners' funds. See "Plan of Distribution."
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RISK FACTORS
The securities offered hereby are highly speculative and involve
substantial risks. Prospective investors should carefully consider the following
risk factors before making an investment decision.
WE HAVE A LIMITED OPERATING HISTORY AND A HISTORY OF LOSSES AND EXPECTATIONS OF
FUTURE LOSSES, SO THAT THERE IS AN UNCERTAINTY OF PROFITABILITY.
The Company was formed in December 1997, and therefore has only a
limited operating history upon which an evaluation of its prospects can be
made. Such prospects must be considered in light of the substantial risk,
expenses and difficulties encountered by new entrants into the Internet services
industry. We have incurred net losses from inception through April 30, 1999, and
therefore has accumulated an earnings deficit, as well as negative working
capital. We expect to continue to incur net losses as we continue to expend
substantial resources on sales, marketing and administration, and the
development of our products. We do not anticipate operating net income until the
end of fiscal year 1999. In addition, we currently intend to increase our
capital expenditures and operating expenses in order to expand our network to
support additional expected subscribers in existing and future markets and to
market and provide services to a growing number of potential subscribers. There
can be no assurance that we will achieve or sustain profitability or positive
cash flow from our operations.
WE ARE FOLLOWING AN UNPROVEN BUSINESS MODEL.
In addition, it is difficult for us to predict whether our pricing
model will prove to be viable, whether demand for our services will materialize
at the prices we expect to charge or whether current or future pricing levels
will be sustainable. If such pricing levels are not achieved or sustained or if
our services do not achieve or sustain broad market acceptance, our business,
operating results and financial condition will be materially adversely
affected. Our ability to generate future revenues will be dependent on a number
of factors, many of which are beyond our control, including, among others
things, the risk factors described herein. Because of the foregoing factors,
among others, we are unable to forecast our revenues with any degree of
accuracy.
WE EXPECT TO HAVE COMPETITION SOME OF WHICH MIGHT BE SUBSTANTIAL.
We operate and compete in several markets including the Internet
Services, Wireless, Telecommunications and Network Marketing markets. These
markets are extremely competitive and highly fragmented. There are no
substantial barriers to entry, and we expect competition in this market to
intensify in the future. Our current and prospective competitors include many
larger companies that have substantially greater financial, technical, marketing
and other resources than us. We compete (or in the future expect to compete)
directly or indirectly with the following categories of companies: (1) national
and regional Internet service providers ("ISP's"); (2) established online
service providers ("OSP's"); (3) computer software and technology companies; (4)
national telecommunications companies; (5) regional Bell operating companies
("RBOC's"); (6) cable operators; (7) wireless internet service providers; (8)
cellular operators; and (9) other network marketing companies. Many of these
competitors are offering (or may soon offer) technologies that will attempt to
compete with some or all of our products and services.
Many of our competitors and potential competitors have substantially
larger subscriber bases, longer operating histories, greater name recognition
and more established relationships with application providers than us. Such
competitors may be able to undertake more extensive marketing campaigns, adopt
more aggressive pricing policies and devote substantially more resources to
developing internet services than us. There can be no assurance that we will be
able to compete successfully against current or future competitors or that
competitive pressures faced by us will not materially adversely affect our
business, operating results or financial condition. Further, as a stra-
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tegic response to changes in the competitive environment, we may make certain
pricing, service or marketing decisions or enter into acquisitions or new
ventures that could have a material adverse effect on our business, operating
results or financial condition. See "Business-Competition."
WE EXPECT TO HAVE FUTURE ADDITIONAL CAPITAL REQUIREMENTS.
Our capital requirements depend on numerous factors, including the rate
of market acceptance of our products and services, our ability to maintain and
expand our customer base, the rate of expansion of our network infrastructure,
the level of resources required to expand our market and Distributor
organization, information systems and research and development activities, the
pricing and timing of acquisitions, the availability of hardware and software
provided by third party venders and other factors. The timing and amount of such
capital requirements cannot be accurately predicted. If capital requirements
vary materially from those currently planned, or if we are unable to sell the
entire amount of the Offering, we may require additional financing sooner than
anticipated. We have no commitments for any additional financing, and there can
be no assurance that any such commitments can be obtained on favorable terms, if
at all.
Any additional equity financing may be dilutive to our shareholders,
and debt financing, if available, may involve restrictive covenants with
respect to dividends, raising future capital and other financial and
operational matters. If we are unable to obtain additional financing as needed,
we may be required to reduce the scope of our operations or our anticipated
expansion, which could have a material adverse effect on our business,
operating results and financial condition.
WE ARE USING THE "BEST EFFORTS" METHOD OF SELLING THE OFFERING WITHOUT MAKING
ANY ARRANGEMENTS FOR ESCROW OF THE PROCEEDS.
The Shares will be offered and sold on a best efforts basis. There is
no minimum-offering amount that is required to be sold before we may use the
proceeds of the Offering. Funds tendered by prospective purchasers will not be
placed in escrow, but will be available for use by us immediately upon
acceptance, for the purposes and in the amounts as estimated in the table under
"Use of Proceeds." Lack of an escrow arrangement could cause some risk to the
initial investors in the event that insufficient capital is raised in the
Offering.
WE ARE DEPENDENT ON TELECOMMUNICATIONS CARRIERS AND OTHER SUPPLIERS.
We rely on local telcos and other commpanies to provide data
communications capacity via local telecommunications lines and leased long
distance lines, along with flat rate and unlimited Internet access. We are
subject to potential disruptions in these telecommunications services and may
have no means of replacing these services, on a timely basis or at all, in the
event of such disruption. Any such disruptions could have a material adverse
effect on our business, operating results and financial condition.
In addition, we are dependent on certain third-party suppliers
including Uniden for wireless modems and Pegasus Data Systems, Inc. ("Pegasus")
for VMSK and VMSK/2 hardware and software components. Certain components used by
us in providing our network services are currently acquired from limited sources
for national Internet access such as IDT. We also depend on third-party software
vendors including Microsoft Corporation ("Microsoft") to provide us with much of
our Internet software. Failure of our suppliers to provide components and
products in the quantities, at the quality levels or at the time required by us,
or an inability by us to develop alternative sources of supply if required,
could materially adversely affect our ability to effectively support our
customer base in a timely manner and increase our costs of expansion.
Our suppliers and telecommunications carriers also sell or lease
services and products to our competitors, and some of these carriers are, and in
the future others may become, competitors of ours. There can be no assurance
that our suppliers and telecommunications carriers will not
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enter into exclusive arrangements with our competitors or otherwise stop selling
or leasing their services or products to us, which events could have a material
adverse effect on our business, operating results and financial condition.
WE ARE DEPENDENT ON CONTINUED GROWTH IN USE OF THE INTERNET.
Market acceptance of our services is substantially dependent upon the
adoption of the Internet for commerce, entertainment and communications. As is
typical in the case of an emerging industry characterized by rapidly changing
technology, evolving industry standards and frequent new product and service
introductions, demand for and market acceptance of recently introduced Internet
products and services are subject to a high level of uncertainty. In addition,
critical issues concerning the commercial use of the Internet remain unresolved
and may affect the growth of Internet use, especially in the business and
consumer markets targeted by us. Despite growing interest in the commercial
possibilities for the Internet, many businesses and consumers have been deterred
from purchasing Internet access services for a number of reasons, including
inconsistent quality of service, lack of availability of a cost-effective,
high-speed wireless service, a limited number of local access points for
corporate users, inability to integrate business applications on the Internet,
the need to deal with multiple and frequently incompatible vendors, inadequate
protections of the confidentiality of stored data and information moving across
the Internet and a lack of tools to simplify Internet access and use. The
adoption of the Internet for commerce and communications, particularly by those
individuals and enterprises that have historically relied upon alternative means
of commerce and communication, generally requires understanding and acceptance
of a new way of conducting business and exchanging information. In particular,
enterprises that have already invested substantial resources in other means of
conducting commerce and exchanging information, or in relationships with other
ISPs, may be reluctant and slow to adopt a new strategy that may make their
existing personnel, infrastructure and ISP relationship obsolete. If the market
fails to develop, develops more slowly than expected or market competition
increases, our business, operating results and financial condition may be
materially adversely affected.
THERE ARE RISKS OF TECHNOLOGICAL CHANGES OCCURING WHICH WOULD AFFECT OUR
BUSINESS.
The markets for consumer and business Internet access services and
online contents are characterized by rapid technological developments, frequent
new product introductions and evolving industry standards. The emerging nature
of these products and services and their rapid evolution will require that we
continually improve the performance, features and reliability of our network,
Internet contents and consumer and business services, particularly in response
to competitive offerings. There can be no assurance that we will be
successful in responding quickly, cost effectively and sufficiently to these
developments. There may be a time-limited market opportunity for our wireless
VMSK and VMSK/2, technology-based consumer and business Internet services, and
there can be no assurance that we will be successful in achieving widespread
acceptance of our services before competitors offer products and services with
speed and performance similar to or greater than our current offerings. In
addition, the widespread adoption of new Internet or telecommuting technologies
or standards, wireless and VMSK/VPSK based or otherwise, could require
substantial expenditures by us to modify or adapt our network products and
services, which could have a material adverse effect on our business, operating
results and financial condition. In addition, new Internet or telecommuting
services or enhancements offered by us or our suppliers may contain design flaws
or other defects that could have a material adverse effect on our business,
operating results and financial condition.
THERE ARE CONSIDERABLE RISKS IN RELYING ON AND RELATING TO OUR ACQUISITION
STRATEGY.
We expect to continue our strategy of acquiring new technologies in our
target markets, including acquisitions which could be material in size and
scope. We believe that our future growth depends, in part, upon the success of
this strategy. Although we are actively pursuing acquisition targets, there can
be no assurance that we will successfully identify and acquire on favorable
terms. We may in the future face increased competition for acquisition
opportunities, which may
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inhibit our ability to consummate suitable acquisitions and increase the costs
of completing acquisitions. No assurance can be given that any acquisition by
us will occur, and that if an acquisition does occur, that it will be
successful in enhancing our business.
Acquisitions involve a number of special risks and factors, including
the diversion of management's attention, the assimilation of the operations and
personnel of the acquired companies, the potential disruption of our ongoing
business, the inability of management to maximize the financial and our
strategic position by the successful incorporation of acquired technologies and
rights into our service offerings, the maintenance of uniform standards,
controls, procedures and policies and the impairment of relationships with
employees and customers as a result of changes in management. There is no
assurance that we will be successful in overcoming these risks or any other
problems encountered in connection with such acquisitions.
In addition, if we were to proceed with one or more significant
acquisitions in which the consideration consists of cash, a substantial portion
of our available cash (including proceeds of this Offering) could be used to
consummate the acquisitions. If we were to consummate one or more significant
acquisitions in which the consideration consists of stock, our shareholders
could experience significant dilution of their interests in us. Many business
acquisitions must be accounted for as a purchase. Most of the businesses that
may become attractive acquisition candidates for us are likely to have
significant goodwill and intangible assets, and acquisition of these businesses,
if accounted for as a purchase, would typically result in substantial
amortization charges to us. If we consummate additional acquisitions in the
future that must be accounted for as purchases, such acquisitions would likely
increase our amortization expenses and the length of time over which they are
reported.
WE DEPEND ON KEY PERSONNEL TO RUN OUR BUSINESS.
We are highly dependent on the technical and managerial skills of our
key employees, including technical, sales, marketing information systems,
financial and executive personnel, and on our ability to identify, hire and
retain additional personnel. Competition for key personnel, particularly persons
having technical expertise, is intense, and there can be no assurance that we
will be able to retain existing personnel or to identify or hire additional
personnel. In particular, we are highly dependent on the continued services of
our senior management team, which currently is composed of Bob Snyder, Joseph
Lechiara, Dennis Snyder and Barry Gilliand. We do not maintain key man life
insurance on any of our employees. Members of senior management do not have
employment agreements with us and, therefore may voluntarily terminate their
employment at any time. However, we do have non-competition agreements with all
members of senior management and key employees. Our inability to attract, hire
or retain the necessary technical, sales, marketing, information systems,
financial and executive personnel, or the loss of the services of any member of
our senior management team, could have a material adverse effect on our
business, operating results and financial condition.
WE ARE SEVERELY IMPACTED BY ANY CHANGES OR UNUSUAL ENFORCEMENT GOVERNMENT
REGULATIONS.
We provide Internet services, in part, through data transmissions over
public telephone lines. These transmissions are governed by regulatory policies
establishing charges and terms for wire line communications. We are not
currently subject to direct regulation by the Federal Communications Commission
(the "FCC") or any other governmental agency, other than regulations applicable
to businesses generally. However, in the future we could become subject to
regulation by the FCC or another regulatory agency as a provider of basic
telecommunications services. For example, a number of long distance telephone
carriers recently filed a petition with the FCC seeking a declaration that
Internet telephone service is a "telecommunications service" subject to common
carrier regulation. Such a declaration, if enacted, would create substantial
barriers to our entry into the Internet telephone market. The FCC has requested
comments on this petition, but has not set a deadline for issuing a final
decision. Also, a number of local telephone companies have asked the
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FCC to levy access charges on "enhanced service providers," which may be deemed
to include ISPs. Although the outgoing Chairman of the FCC has indicated his
opposition to levying service charges against ISPs, local interconnection
charges could be levied in the future. Moreover, the public service commissions
of certain states are exploring the adoption of regulations that might subject
ISPs to state regulation.
The recently enacted Telecommunications Act of 1996 (the
"Telecommunications Act") contains certain provisions that lift, or establish
procedures for lifting, certain restrictions relating to the RBOCs' ability to
engage directly in the Internet access business. The Telecommunications Act also
makes it easier for national long distance carriers such as AT&T to offer local
telephone service and allows RBOCs to provide electronic publishing of
information and databases. Competition from these companies could have a
material adverse effect on us.
Radio communications are subject to extensive regulation by the United
States and foreign laws and international treaties. In order for us to operate
in a jurisdiction, it must obtain regulatory approval for our systems and comply
with different regulations in each jurisdiction. The delays inherent in this
governmental approval process may cause the cancellation, postponement or
rescheduling of the installation of communications systems by our customers,
which in turn may have a material adverse effect on the sale of systems by us to
such customers. The failure to comply with current or future regulations or
changes in the interpretation of existing regulations could result in the
suspension or cessation of operations. Such regulations or such interpretation
could require us to modify our radio systems and incur substantial costs to
comply with such timeconsuming regulations and changes. In addition, we are
also affected to the extent that domestic and international authorities regulate
the allocation and auction of the radio frequency spectrum. Equipment to support
new services can be marketed only if permitted by suitable frequency
allocations, auctions and regulations, and the process of establishing new
regulations is complex and lengthy. Failure by the regulatory authorities to
allocate suitable frequency spectrum could have a material adverse effect on our
business, financial condition and results of operations. The regulatory
environment in which we operate is subject to significant change. Regulatory
changes, which are affected by political, economic and technical factors, could
significantly impact our operations by restricting development efforts by us and
our customers, making current systems obsolete or increasing the opportunity for
additional competition. Any such regulatory changes could have a material
adverse effect on our business, financial condition and results of operations.
We might deem it necessary or advisable to modify our systems to operate in
compliance with such regulations. Such modifications could be extremely
expensive and time consuming.
WE MAY INCUR LIABILITY FOR INFORMATION RETRIEVED AND REPLICATED FROM OTHER
SOURCES THEN OUR OWN.
Because materials will be downloaded and redistributed by subscribers
and cached or replicated by us in connection with our offering of our services,
there is a potential that claims may be made against us under both United States
and foreign law for defamation, negligence, copyright or trademark infringement,
or other theories based on the nature and content of such materials. Such types
of claims have been brought, and sometimes successfully pressed, against OSPs in
the past. In particular, copyright and trademark laws are evolving both
domestically and internationally, and there is uncertainty concerning how
broadly the rights afforded under these laws will be applied to online
environments. It is impossible for us to determine who all the potential rights
holders may be with respect to all materials available through our services. In
addition, a number of third party owners of patents have claimed to hold patents
that cover various forms of online transactions or online technology. As with
other OSPs, patent claims could be asserted against us based upon our services
or technologies.
WE HAVE POTENTIAL LIABILITY FOR INDECENT CONTENT APPEARING ON ANY WEBSITE HOSTED
BY US.
The law relating to liability of ISPs and OSPs for information carried
on or disseminated through theft networks is currently unsettled. A number of
lawsuits have sought to impose
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such liability for defamatory speech and indecent materials. A recent federal
statute seeks to impose such liability, in some circumstances, for transmission
of obscene or indecent materials. In one case, a court has held that an OSP
could be found liable for defamatory matter provided through our service, on the
ground that the service provider exercised active editorial control over
postings to our service. Other courts have held that ISPs and OSPs may, under
certain circumstances, be subject to damages for copying or distributing
copyrighted materials. The Telecommunications Act prohibits and imposes criminal
penalties and civil liability for using an interactive computer service for
transmitting indecent or obscene communications. A number of states have adopted
or are currently considering similar legislation. The anti-indecency provisions
of the Telecommunications Act have been declared unconstitutional by the United
States District Courts for the Eastern District of Pennsylvania and the Southern
District of New York which have issued preliminary injunctions against their
enforcement. Although the United States Supreme Court has upheld these
decisions, its holding leaves open the possibility of the passage of federal or
state laws which are narrower in scope but may still impose upon ISPs or OSPs
potential liability for materials carried on or disseminated through their
systems could require us to implement measures to reduce our exposure to such
liability, which may require the expenditure of substantial resources or the
discontinuation of certain product or service offerings.
THERE IS A RISK THAT THE COMPUTER SYSTEMS THAT WE USE MAY FAIL AT SOME TIME OR
OTHER.
Our success largely depends on the efficient and uninterrupted
operation of our computer and communications hardware systems and the Internet.
As we expand our operations and data traffic grows, there will be increased
stress placed upon hardware and traffic management systems. There can be no
assurance that we will not experience system failures. Any system failure that
causes interruptions in our operations could have a material adverse effect on
our business, results of operations and financial condition. In addition, our
systems and operations are vulnerable to damage or interruption from fire,
flood, power loss, telecommunications failure, break-ins and similar events. We
do not presently have redundant systems or a formal disaster recovery plan and
do not carry business interruption or property and casualty insurance to
compensate it for losses that may occur.
THERE IS A RISK THAT WE MAY HAVE A LIABILITY THAT IS NOT COVERED BY INSURANCE.
Although we carry general liability insurance, our insurance may not
cover certain potential claims or may not be adequate to indemnify us for all
liability that may be imposed. Any imposition of liability that is not covered
by insurance or is in excess of insurance coverage could have a material adverse
effect on our business, operating results and financial condition.
ALTHOUGH WE ARE CAREFUL, THERE MAY BE SECURITY RISKS TO OUR PROPRIETARY
INFORMATION AND DATA.
Despite the implementation of security measures, our networks may be
vulnerable to unauthorized access, computer viruses and other disruptive
problems. ISPs and OSPs have in the past experienced, and may in the future
experience, interruptions in service as a result of the accidental or
intentional actions of Internet users, current and former employees or others.
Unauthorized access could also potentially jeopardize the security of
confidential information stored in our computer systems and those of our
subscribers, which may result in our liability to our subscribers and also may
deter potential subscribers. Although we intend to continue to implement
industry standard security measures, such measures have been circumvented in the
past, and there can be no assurance that measures implemented by us will not be
circumvented in the future. Moreover, we have no control over the security
measures of local wireless operators who offer the InSat Wireless (TM)
technology. Eliminating computer viruses and alleviating other security
problems may require interruptions, delays or cessation of service to our
subscribers, which could have a material adverse effect on our business,
operating results and financial conditions.
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OUR SUCCESS DEPENDS SUBSTANTIALLY UPON THE PROTECTION OF OUR PROPRIETARY
INFORMATION.
Our success will depend, in part, on our ability to preserve our trade
secrets and other proprietary property, including our rights in any technology
licenses upon which any of our products are based, and to operate without
infringing the patent or other proprietary rights of others. Our inability to
preserve such property or operate without infringing on such rights would have
a material adverse effect on our business, results of operations and financial
condition.
IT IS POSSIBLE THAT OUR FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE.
This Offering Prospectus contains certain forward-looking statements
and information relating to us that are based on the beliefs of our management
as well as assumptions made by and information currently available to our
management. We have relied, in part, on management's experience in forming its
judgments with respect to future developments in the Internet. When used in this
document, the words `anticipate', `believe', `estimate' and `expect' and similar
expressions, as they relate to us or our management, are intended to identify
forward-looking statements. Such statements reflect our current views with
respect to future events and are subject to certain risks, uncertainties and
assumptions, including the risk factors described in this Prospectus. Should one
or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated or expected. There can be
no assurance that the projected results will occur, that these judgments or
assumptions will prove correct, that unforeseen developments will not occur or
that our assumptions concerning future developments will not change prior to any
further financing transactions, including any public offering of our securities.
WE HAVE NOT PAID ANY DIVIDENDS AND IN THE FORESEEABLE FUTURE WE EXPECT THAT
THERE WILL BE A LACK OF DIVIDENDS.
To date, we have not paid any dividends. We are not currently
restricted from paying cash dividends. We presently plan to reinvest earnings
in order to finance the expansion and development of our business, and it is
therefore unlikely that any cash dividends will be declared in the foreseeable
future.
EVEN AFTER THE OFFERING IS SOLD, CONTROL WILL BE MAINTAINED BY THE CURRENT
STOCKHOLDERS.
Subject to the limitations of Nevada corporate law, current management
will have control of us through its aggregate stock ownership and will have the
right to perpetuate their status as officers and directors and therefore conduct
our business and affairs.
WE HAVE USED OUR OWN ATTORNEY TO DRAW ALL THE DOCUMENTS WITH RESPECT TO THIS
OFFERING AND NO SEPARATE INVESTORS' COUNSEL WAS RETAINED BY US.
We have not retained any independent professionals to review or comment
on this Offering or otherwise protect the interest of the investors hereunder.
Although we have retained our own counsel, neither such firm nor any other firm
has made, on behalf of the investors, any independent examination of any factual
matters represented by management herein, and purchasers of the shares should
not rely on the firm so retained with respect to any matters herein described.
THERE IS NO UNDERWRITER FOR THIS OFFERING AND WE ARE RELYING ON BEST EFFORTS OF
OURSELVES AND POSSIBLE BROKER/DEALERS.
There is no underwriter for this Offering, therefore, offerees will not have the
benefit of an underwriter's due diligence efforts which would typically include
the underwriter to be involved in the preparation of disclosure and the pricing
of the Common Stock offered hereby among other matters. As we have never engaged
in the public sale of our Common Stock, we have no experience in the
underwriting of any such offering. Accordingly, there is no prior experience
from which inves-
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<PAGE> 14
tors may judge our ability to consummate this Offering. In addition, the Common
Stock is being offered on a "best efforts" basis. Accordingly, there can be no
assurances as to the number of shares of Common Stock that may be sold or the
amount of capital that may be raised pursuant to this Offering.
WE HAVE A POTENTIAL FOR POSSIBLE DELISTING OF SECURITIES FROM THE NASDAQ SYSTEM
AND THERE ARE RISKS RELATING TO LOW-PRICED STOCKS WHICH MAY AFFECT US.
It is currently anticipated that our Common Stock will be eligible for
listing on Nasdaq upon the completion of this offering. In order to continue to
be listed on Nasdaq, however, we must maintain $2,000,000 in total assets, a
$200,000 market value of the public float and $1,000,000 in total capital and
surplus. In addition, continued inclusion requires two market makers and a
minimum bid price of $4.00 per share; provided, however, that if we fall below
such minimum bid price, it will remain eligible for continued inclusion on
Nasdaq if the market value of the public float is at least $1,000,000 and we
have $2,000,000 in capital and surplus. Nasdaq has recently proposed new
maintenance criteria which, if implemented, would eliminate the foregoing
exception to the minimum bid price requirement and require, among other
things, $2,000,000 in net tangible assets, $1,000,000 market value of the
public float and adherence to certain corporate governance provisions. The
failure to meet these maintenance criteria in the future may result in the
delisting of our securities from Nasdaq, and trading, if any, in our securities
would thereafter be conducted in the non-Nasdaq over-the-counter market. As a
result of such delisting, an investor could find it more difficult to dispose
of, or to obtain accurate quotations as to the market value of, our securities.
In addition, if the Common Stock were to become delisted from trading on Nasdaq
and the trading price of the Common Stock were to fall below $5.00 per share on
the date our securities were delisted, trading in such securities would also be
subject to the requirements of certain rules promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which require additional
disclosure by broker-dealers in connection with any trades involving a stock
defined as a penny stock (generally, any non-Nasdaq equity security that has a
market price of less than $5.00 per share, subject to certain exceptions). Such
rules require the delivery, prior to any penny stock transaction, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith, and impose various sales practice requirements on broker-dealers who
sell penny stocks to persons other than established customers and accredited
investors (generally institutions). For these types of transactions, the
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transaction prior to
sale. The additional burdens imposed upon broker-dealers by such requirements
may discourage broker-dealers from effecting transactions in our securities,
which could severely limit the market price and liquidity of such securities
and the ability of purchasers in this offering to sell their securities in the
secondary market. Disclosure is also required to be made about commissions
payable to both the Broker/Dealer and the registered representative and current
quotations for the securities. Finally, monthly statements are required to be
sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks.
The foregoing penny stock restrictions will not apply to our securities
if such securities are listed on the NASDAQ National Market System or are
otherwise listed on the regional NASDAQ System and have certain price and buying
information provided on a current and continuing basis or meet certain minimum
net tangible assets or average revenue criteria. If we are successful in raising
at least $4 million, now, or at some time in the future, our securities would
qualify for the exemptions from the penny stock restrictions. Otherwise we will
remain subject to Section 15(b)(6) of the Exchange Act governing these penny
stock restrictions. If our securities were subject to the existing rules on
penny stocks, the market liquidity for our securities could be adversely
affected.
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MANAGEMENT DISCUSSION OF ANALYSIS OF CONDITION AND
RESULTS OF OPERATIONS
We have experienced substantial changes to, and expansion of, our
business and operations since we began our operations in January, 1998. We
expect to continue to expand our business and user base, which will require us
to increase our personnel, develop software, purchase equipment and license
content, which will result in increasing expenses.
CASH REQUIREMENTS
- -----------------
In order to finance necessary working capital, fund research and
development projects and retire existing debt, it is the intent of our
Management to raise net proceeds of $23,000,000 from this SB-2 public offering.
In addition net income including sale of foreign licenses is projected to be
$2,057,000 during the next twelve months. The following source and application
of funds summarizes cash requirements and funding thereof:
INCREASE IN
SOURCE APPLICATION WORKING CAPITAL
Net proceeds from SB-2 offering $22,650,000 $ 22,650,000
Net Income from Operations 2,057,000 2,057,000
Retire existing debt $ 2,000,000 -2,000,000
Research and Development costs 3,000,000 -3,000,000
Reduction in Accounts Payable 500,000 - 500,000
Increase in Inventory 155,000 - 155,000
-----------------------------------------
INCREASE IN WORKING CAPITAL $24,707,000 $ 5,655,000 $ 19,052,000
RESEARCH AND DEVELOPMENT
- ------------------------
Completion of NU software is scheduled for mid-June. Enhancements to
the NU consisting of voice/video is scheduled to be marketable within six
months. Costs to complete these projects are estimated at $250,000.
In connection with the VMSK project (application of expansion
platforms), cost to complete is estimated at $2,750,000.
NEED FOR ADDITIONAL PERSONNEL
- -----------------------------
Since our Sales, Marketing and Distribution System in North America is
MLM, the projected growth of distribution (independent Contractors) requires no
additional costs to us. However, it is anticipated that the number of employees
will triple during the next twelve months, even with our outsourcing many tasks.
YEAR 2000 READINESS DISCLOSURE
YEAR 2000 COMPLIANCE. The Year 2000 issue involves the potential for system and
processing failures of date-related data resulting from computer-controlled
systems using two digits rather than four to define the applicable year. For
example, computer programs that contain time-sensitive software may recognize a
date using two digits of "00" as the year 1900 rather than the year 2000. This
could result in system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar ordinary business activities.
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<PAGE> 16
OUR STATE OF READINESS
We have defined Year 2000 compliance as follows:
Information technology time and date data processes, including, but not
limited to, calculating, comparing and sequencing data from, into and between
the 20th and 21st centuries contained in our software and services offered
through the U.S., will function accurately, continuously and without degradation
in performance and without requiring intervention or modification in any manner
that will or could adversely affect the performance of such products or the
delivery of such software and services as applicable at any time.
Our internal systems include both information technology systems and
non-information technology systems. We have initiated an assessment of our
proprietary information technology systems, and expect to complete any
remediation and testing of all information technology systems during 1999. With
respect to information technology systems provided by third-party vendors, we
have sought assurances from such vendors that their technology is Year 2000
compliant. All of our material information technology system vendors have
replied to inquiry letters sent by us stating that they either are Year 2000
compliant or expect to be so in a timely manner.
We believe that our internal software and hardware systems will
function properly with respect to dates in the Year 2000 and thereafter.
Nonetheless, there can be no assurance in this regard until such systems are
operational in the Year 2000. We are in the process of contacting all of our
significant suppliers to determine the extent to which our interface systems are
vulnerable to those third parties' failure to make their own systems Year 2000
compliant. Additionally, any Year 2000 problems experienced by our advertising
customers could affect the placement of advertisements on our online services.
Accordingly, to the extent the systems of our suppliers and advertising
customers are not fully Year 2000 compliant, there can be no assurance that
potential system interruptions or the cost necessary to update software will not
have a material adverse affect on our business, results of operation or
financial condition.
We are evaluating our non-information technology systems for Year 2000
compliance. We have not, to date, discovered any material Year 2000 issues with
respect to our non-information technology systems.
We are in the process of contacting our material suppliers whose
products or services are sold through us to determine if they are Year 2000
compliant. To date, all such suppliers have stated that they are, or expect to
be, Year 2000 compliant in a timely manner. Our customers are individual
Internet users, and, therefore, we do not have any individual customers who are
material to an evaluation of Year 2000 compliance issues.
THE COSTS TO ADDRESS YEAR 2000 ISSUES
We have expensed amounts incurred in connection with Year 2000
compliance since its formation through December 31, 1998. Such amounts have not
been material. The additional costs to make any other software or services Year
2000 compliant by mid-1999 will be expensed as incurred, but are not expected to
be material.
We are not currently aware of any material operational issues or costs
associated with preparing our systems for the Year 2000. Nonetheless, we may
experience material unexpected costs caused by undetected errors or defects in
the technology used in our systems or because of the failure of a material
supplier to be Year 2000 compliant.
RISKS ASSOCIATED WITH YEAR 2000 ISSUES
Notwithstanding our Year 2000 compliance efforts, the failure of a
material system or vendor used in our software and service, or the Internet
generally, to be Year 2000 compliant could
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harm the operation of our software and services or prevent us from generating
advertising or commerce sales through our software, or have other unforeseen,
adverse consequences to us.
Finally, we are also subject to external Year 2000-related failures or
disruptions that might generally affect industry and commerce, such as utility
or transportation company Year 2000 compliance failures and related service
interruptions. Moreover, participating vendors in our services might experience
substantial slow-downs in business if consumers avoid products and services such
as air travel both before and after January 1, 2000 arising from concerns about
reliability and safety because of the Year 2000 issue. All of these factors
could have a material adverse effect on our business, financial condition and
results of operations.
CONTINGENCY PLANS
We are engaged in an ongoing Year 2000 assessment and the development
of contingency plans. The results of our Year 2000 simulation testing and the
responses received from third-party vendors and service providers will be taken
into account in determining the nature and extent of any contingency plans. We
have identified our worst-case scenario as the interruption of our business
resulting from Year 2000 failure of the electric company or our Internet service
providers to provide services. We have not yet completed our worst-case scenario
contingency plan. Without a worst-case scenario contingency plan we may not have
enough time to complete remedial measures and implement contingency planning for
the worst-case scenario. We do plan to complete our contingency plan in
accordance with our compliance plan and under the guidance of our consultants in
the third quarter of 1999.
USE OF PROCEEDS
We are seeking a new investment through this offering to reduce debt
and expand our current operations. Our success is entirely dependent on our
ability to sell the shares in this offering. None of the items listed below can
be fully completed unless we raise a minimum of $5,750,000 from this offering.
We may not be able to raise all or part of the funds we need to operate our
business. If we are unable to raise these funds we will not remain as a viable
going concern and investors may lose their entire investment. If we receive net
proceeds in an amount less than $5,750,000, our business operations will be
curtailed to an extent not presently determinable by management.
The maximum net proceeds from this offering may be as high as
$22,650,000 if all of the shares offered are sold through broker-dealers. If we
are unable to sell all of the shares offered, the net proceeds would be lower.
In the table below, we have detailed the minimum amount of capital
required for us to operate our business as currently planned. In addition, we
have outlined the manner in which we intend to use the funds raised, assuming
that we sell all of the shares offered. The net proceeds we would receive from
the sale of all of the 5,320,000 shares of our Common Stock offered by this
prospectus are estimated to be approximately $22,650,000 if sold through
broker/dealers. For lesser percentages of shares sold see the table following.
The table also shows how we will use the proceeds of the Offering.
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<TABLE>
<CAPTION>
MINIMUM AMOUNT MAXIMUM AMOUNT
REQUIRED OF NET PROCEEDS
----------- ---------------
<S> <C> <C>
Company Proceeds from
the Offering $ 5,750,000 $23,000,000
Less: Offering Expenses 184,000 350,000
----------- -----------
Net Proceeds from
Offering $ 5,566,000 $22,650,000
----------- -----------
Use of Net Proceeds:
Retire existing debt $ 2,000,000 $ 2,000,000
R&D Projects 3,000,000 3,000,000
General working capital 566,000 17,650,000
----------- -----------
Total Use of Net
Proceeds $ 5,566,000 $22,650,000
=========== ===========
</TABLE>
The specific amounts to be allocated for these purposes will be in the
discretion of Management. We reserve the right to alter this stated use of
proceeds depending on business conditions.
To the extent the net proceeds of the Offering are not utilized
immediately, they will be invested in short-term certificates of deposit,
interest bearing deposits, short-term obligations of the United States of
America or prime commercial paper.
CAPITALIZATION
This table represents the capitalization of the Company as of
April 30, 1999 as adjusted to give effect to this offering.
<TABLE>
<CAPTION>
Shares Shares
100% sold 50% sold
ACTUAL ADJUSTED ADJUSTED
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Stockholders Equity
Common Stock, $.001 par value
Authorized- 60,000,000 Shares
Issued and Outstanding - 12,139,354 Shares
Actual Shares As Adjusted - 17,139,354 $ 12,139 $ 17,139 $ 14,639
Additional Paid in Capital $ 800,317 $20,995,317 $ 8,497,817
Deficit Accumulated during the development stage ($2,427,731) ($2,427,731) ($2,427,731)
----------- ----------- ----------
TOTAL STOCKHOLDERS EQUITY ($1,615,275) $18,584,725 $5,787,725
=========== =========== ==========
</TABLE>
DILUTION
We were initially capitalized by the sale of Common Stock to our
founders. The following table sets forth the difference between our founders and
purchasers of the shares in this Offering with respect to the number of Shares
purchased from us, the total consideration paid and the average price per share
paid.
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The table below assumes 50% of the Shares offered hereby are sold.
<TABLE>
<CAPTION>
Shares Issued Total Consideration Average Price
------------- ------------------- -------------
Number Percent Amount Percent Per Share
-------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Founder 12,139,354 83% $812,455 6% $0.07
New Investors 2,500,000 17% $12,500,000 94% $5.00
Total 14,639,354 100% $13,312,455 100% $0.91
</TABLE>
The table below assumes all of the Shares offered hereby are sold.
<TABLE>
<CAPTION>
Shares Issued Total Consideration Average Price
------------- ------------------- -------------
Number Percent Amount Percent Per Share
-------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Founder 12,139,354 71% $ 812,455 3% $0.07
New Investors 5,000,000 29% $25,000,000 97% $5.00
Total(1) 17,139,354 100% $25,812,455 100% $1.51
</TABLE>
In March of 1999, we made a commitment to a group of individuals to
issue up to 700,000 shares offered herein at a discount of 80%. The effect of
this commitment is reflected in the above tables.
As of April 30, 1999, the net tangible book value of our Common Stock
was ($2,168,623) or ($.18) per share based on the 12,139,354 shares of Common
Stock outstanding. "Net tangible book value" per share represents the amount of
total tangible assets less total liabilities, divided by the number of shares.
After giving effect to the sale by us of 5,000,000 shares of Common Stock at an
Offering price of $5.00 per share and after deducting estimated expenses and
underwriting discounts, our proforma net tangible book value as of that date
would be $20,881,377 or $1.22 per share, based on the 17,139,354 shares of
Common Stock to be outstanding at that time. This represents an immediate
dilution (i.e. the difference between the offering price per share of Common
Stock and the net tangible book value per share of Common Stock after the
offering) of $3.78 per share to the new investors who purchase shares in the
offering ("New Investors"), as illustrated in the following table (amounts are
expressed on a per share basis):
(1) Calculations concerning Dilution are based on an assumption of the Offering
being fully subscribed.
The following table represents the dilution per share based on the percentage
sold of the total amount of shares being offered.
<TABLE>
<CAPTION>
50% 75% 100%
--- --- ----
<S> <C> <C> <C>
Offering price ........................ $ 5.00 $ 5.00 $ 5.00
Net tangible book value before offering ($ 0.18) ($ 0.18) ($ 0.18)
Increase attributable to the Offering . $ 0.70 $ 1.05 $ 1.40
-------- -------- --------
Net tangible book value
after giving effect to the Offering ... $ 0.52 $ 0.87 $ 1.22
-------- -------- --------
Per share Dilution to new investors ... $ 4.48 $ 4.13 $ 3.78
</TABLE>
We do not intend to pay any cash dividends with respect to our Common
Stock in the foreseeable future. We intend to retain any earnings for use in the
operation of our business. Our Board of Directors will determine dividend policy
in the future based upon, among other things, our results of operations,
financial condition, contractual restrictions and other factors deemed relevant
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<PAGE> 20
at the time. We intend to retain appropriate levels of our earnings, if any, to
support our business activities.
BUSINESS
THE COMPANY
We were incorporated on December 1, 1997 in the State of Nevada. Prior
to that time, Mr. Robert Snyder worked out of his basement developing the
concept and potential solutions encountered by those surfing the World Wide Web.
On July 1, 1998 we purchased certain limited assets of Alpha Beta
Communications, including its distributor base.
We are providing and will continue to introduce and market new and
innovative hi-tech products and services in the rapidly expanding multi-billion
dollar Internet, Telecommunications and related industries to individual
consumers, small and large businesses, governments and institutions, both
nationally and internationally.
PRODUCTS AND SERVICES
InSat Wireless(TM): We utilize Cellular Digital Packet Data (CDPD)
within specific regions throughout The United States and Canada that presently
offer CDPD technology. The CDPD System overlays the cellular voice network to
provide a wireless extension of existing packet data networks. It provides
secure wireless packet data connectivity (19.2 kilobits/sec) and is based on
Industry Standard Internet Protocol (IP). Although CDPD pricing varies from
carrier to carrier, we will offer a monthly flat rate service. We will take
advantage of our lead in the marketplace with this pricing plan and offer "one
stop shopping" for all peripherals and enhancements using CDPD and applicable
hardware and software.
GSI-V: Keeping with the wireless market, we became a Value Added
Reseller (VAR) for Technology Guardian, Inc. (NASDAQ OTCBB: TEGI). TEGI provides
an asymmetrical (dial-up outbound), high speed satellite Internet solution for
up to 250 simultaneous users or sessions at up to 500 KBPS downloads called
GSI-V. To date, we have limited sales of the GSI-V, but have interest from
financial brokerage firms, schools, and international sales in Canada and the
Bahamas.
Wireline Internet Access and Network Utility(NU): We market a
traditional dial-up Internet service or wireline service. Moreover, we expect to
increase the average throughput rate by up to 50 times using our NU software,
currently in Beta testing.
Se-mailT(TM): The most recent product we currently market and sell
through our Distributors is the privately labeled Se-mail(TM). Se-mail(TM) was
designed by C.View Technologies, Inc., a privately held corporation in
California. With Se-mail(TM) one can now see and hear the sending mail party in
full motion. With the proliferation of improper use of the Internet,
Se-mail(TM) may become an attractive email alternative, especially when
conveying sensitive material. The "Software Only" version of the Se-mail(TM)
software is perhaps the only system available permitting a "TV quality" up to 30
frames per second. The laptop version of the Se-mail(TM) system permits similar
portable video capacity.
International (Exclusive) Licensing: We plan to sell international
(exclusive) licensing privileges to other companies to expand its network
worldwide. Currently, we are in negotiation with various parties in connection
with licensing in other countries including nine countries in Central America,
Israel and Turkey. We are negotiating with various parties for distribution of
our products and services in other countries. License fees are determined on a
country by country basis. In addition, licensee will pay us an ongoing monthly
royalty fee on a per subscriber basis. Other products and services will be
offered on a case by case basis including the anticipated Expressway 2000(TM) FM
wireless modem.
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PRODUCT DEVELOPMENT PLAN
We will continue to market our wireless modems with its low flat rates
in certain areas and incorporate the NU compression with Very
Minimum-Shift-Keying or Variable-Phase-Shift-Key (VMSK/VPSK) technology to
increase their throughput through our Joint Venture with American Millennium
Corporation, Inc. (NASDAQ OTCBB: AMCI). AMCI's proprietary VMSK/VPSK technology
is projected to increase both the up-link and throughput speed well above 30
bps/Hz. After successful beta testing, we will institute a build-out plan for
VMSK/VPSK with the end result being an infrastructure that will offer seamless
service throughout North America and to key locations around the world. To
facilitate the implementation of the VMSK/VPSK technology, we are in the process
of developing a turnkey value added service and revenue center described as
"Wireless ISP In A Box" for existing FM radio operators or private parties doing
business with FM radio operators. In either case, they become Internet Service
Providers in their respective service area featuring VMSK/VPSK high speed
internet access and receive a monthly fee for each customer utilizing the new
service. This product will be called the Expressway 2000 FM Wireless Modem and
Expressway 2000 Services.
Radio stations are looking for new sources of revenue. VMSK provides FM
radio stations with an opportunity to offer high throughput Internet access
within their MSA, at a competitive price. As this would add a substantial
ongoing revenue stream without meaningfully adding to the station's cost
structure.
FM radio stations which participate in our VMSK program thus may
experience significant enhancement of the station's bottom line results.
Depending on the station's MSA the additional ongoing revenue stream of $2 per
month per Internet access account may indeed be very substantial.
Participating FM stations will be charged a one-time up-front deposit
fee to cover the cost of VMSK hardware, software and installation. As our cost
of equipment and installation are passed on to the participation stations, our
cash flow and working capital positions will be encumbered by or adversely
effected by our anticipated rapid expansion of VMSK.
ISP Partners Program. We have successfully launched its ISP (Internet
Service Provider) Partners Program and have already signed a large number of
ISP's. This program gives new strength to existing ISP's in their fight to
maintain their share of the internet customer base. ISP's are faced with new
technology such as DSL (Digital Subscriber Line) Cable Line Modems and new
wireless technology such as our's that in time will significantly erode their
customer base. Under our Partners Program we make the ISP a distributor of our
hardware and software giving them the high throughputs required to maintain
their customers as well as a favorable competitive price. The ISP Partner
Program also benefits by earning revenue for the sales of our modems, software
and services. We benefit from this program by adding a net $5 per month for
every customer that the ISP converts to our hardware and software products. It
also provides us an almost instant revenue stream and POP's (Point of Presents)
for our distributors to sell hardware and software into areas where we have no
POP or local access to internet dial-up.
"Wireless ISP In A Box", is a combination of new and innovative
technology packaged for easy delivery and installation in FM radio stations. The
fee for purchasing the rights to deliver this service will be subject to a
number of demographic characteristics specific to each location, such as
population, business and economic conditions; local Internet and computer
support and projected number of prospective customers. We plan to launch our new
technology and service in ten (10) key locations (to be announced) throughout
1999. Each FM radio station is expected to have the capacity to handle a large
number of subscribers. We project capturing a large market share in each area
within a short period of time. To set this plan into action, we will initiate an
aggressive marketing campaign in advance of said wireless service by conducting
seminars in cooperation with the new service provider in that area. The
objective is to create a pent-up demand for the service and to establish a
strong network marketing presence for future growth.
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In addition to the introduction of VMSK/VPSK high speed Internet
access, we plan to introduce our full motion Video Conferencing software, which
is projected to provide 30 frames per second for our wireless service as well as
existing twisted copper wires or Plain Old Telephone Service (POTS) line. What
is unique to this application and how it influences not only the marketing
opportunity but also eventual sales of the video conferencing software is that
it automatically encourages a perpetual flow of new sales due to its requirement
for video conferencing software at both ends of the transmission. One could
liken this concept to that of MCI's very successful "Friends and Family"
promotion, whereby customers were enticed to share the service with family,
friends and others in order for each to create his own personal communication
network.
TECHNICAL EXPLANATION OF VMSK/VPSK
Very-Minimum-Shift-Keying or Variable-Phase-Shift-Key ("VMSK/VPSK") is
patented under U.S. Patents 4,742,532 and 5,185,765 High Speed Data
Transmission. These patents cover an encoding and decoding method that
compresses ordinary BPSK modulation to transmit digital data at 10 to 25
bits/sec/Hz. Tests have been performed as high as 50 bits/sec/Hz. This method
requires 1/10 as much spectral space or less when compared to ordinary AM or FM.
No other method has ever achieved such high levels of compression. Called VMSK/2
modulation, this method does not lose signal power with increasing compression
since the transmission method is always BPSK. Less than 1% as much power is
required for VMSK/2 as would be required for QAMI024, the only known competitor.
Eb/n values of 12-14dB are being realized for EER = 1 in 1 million. The
equipment exists and can be demonstrated. All measurements are confirmed by
recognized independent labs.
New patents are pending on the VMSK/2 modulation method, which is
particularly adaptable to satellite communication and for wireless LANs using
the power line to avoid wiring for the small business or home. The performance
is about double that of the previously patented VPSK method. The new patents are
applicable to VPSK as well and will extend the life of relevant patents to 2016.
A newly developed modulation method for using the supplementary carrier
authorization over ordinary FM stations makes it possible to transmit two high
speed digital information channels, one at 198 Kb/s and the other at 144 Kb/s.
This technology allows the FM broadcasting station to carry the two additional
or hidden programs in addition to its normal program. The 198 Kb/s data rate of
the primary channel is more than 10 times that being achieved at present by
other services. Time division multiplex and discrete addressing are used to
"peel off" portions to be used by separate customers.
The second hidden channel is a lower data rate channel operating at 144
Kb/s. Video for video conferencing using the MPEG2 compression method requires
only a 144 Kb/s data rate. This standard is excellent for teaching, sales
messages, store casting and other uses requiring video. Control information is
added to insure that only the authorized addressee receives the signal. When not
used for video, sound can be compressed into less than 32 Kb/s with excellent
quality, or the entire channel can be used for data transmission. Sound with the
quality of an AM radio can be carried in the bandwidth along with data. The
space can be dynamically allocated. If there are no video users or sound users
at the moment, the entire 198+144 Kb/s space can be dedicated to data, for
example to Internet downloading to addressees, or it can be split to 12-20
audio voice channels. Compact Disk quality stereo audio can also be transmitted.
Real time video requires a land line capable of carrying data at 160
Kb/s. These so called ISDN lines are now readily available at higher cost than
normal telephone line service, but are not exorbitantly priced and are coming
into general use for Internet connections. For the occasional high data rate
down load for most Internet users, however this FM-SCA service is an excellent
choice at lower cost than ISDN lines. It compares favorably with, and may even
be superior to Satellite services.
The service is available throughout the coverage area of the FM
station. The extremely good signal to noise ratio for the new APSK sub-carrier
modulation method ensures a very low bit error rate for all users. Error
correction can be built into the receiver for critical applications.
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Nationwide coverage is available through the use of satellites or the
Internet, with broadcasting at the local site. For users such as churches and
video training providers, the cost compared to cable or satellite use may be
greatly reduced.
HOW VMSK/VPSK WORKS
- -------------------
Two separate high-speed digital channels are available. For video
programs on the separate video channel, one installs a video conferencing camera
on location and an ISDN telephone line of the type now being used for Internet
connections. The latest MPEG2 video compression insures the highest video
quality.
There are two types of video service:
(1) Time Cueing. A location is polled for a desired message. If it
has a sales announcement, product release or other short message,
the station will accept it in sequence. If desired, the messages
(Color Video and sound) can be recorded at the station for later
broadcast or sequenced and repeated as often as desired. These
are excellent sales media for department stores and supermarkets.
One pays the normal video rate for the time used. This can be
used for telemarketing to Internet download subscribers.
(2) Dedicated. For schools, special training courses, church services
to the home bound etc. A schedule is arranged that will provide
exclusive use to the video channel for the scheduled time. One
pays for the scheduled time and a slight premium.
APPLICATIONS AND HIGHLIGHTS OF VMSK/VPSK AND VMSK/2 TECHNOLOGY
VMSK/VPSK and VMSK/2 technology have the ability to perform the
following applications:
Local area networking over the power line. Low cost LAN carries
data at 3400 b/s/Hz over the power lines. 80 times the present rates.
Wireless Platforms. Increased revenue can be obtained by
increasing the number of customers on all wireless platforms by including: PCS,
Analogue, Cell, COMA, TOMA, GSM, Microwave LAN, WAN, TELEMETRY, and FM-SCA Data.
Data users. For bulk data transmission for many users, such as stock
quotes, business record transfer, Internet down loads, etc.
Wireline. For applications for Wireline transmissions of data, VMSK can
enhance all existing wireline services, I.E.: Utilizing VMSK as alternative to
ADSL and DSL, VMSK can provide three times the distance with less noise and
interference that can be attained by the new digital line services offered by
the telephone companies.
The wireline applications that can be expanded with VMSK could be:
- Local Phone Line Service
- ISDN services
- Dual ISDN
- Fractional T-1
- T-1
- Cable Line Fiber Optic Networks
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MARKET TRENDS
The Internet. The Internet is a collection of computer networks
connecting millions of public and private computers around the world. In its
formative stages, the Internet was used by government agencies and academic
institutions to exchange information, publish research and transfer e-mail. A
number of factors, including the proliferation of communication enabled personal
computers, the availability of intuitive graphical user interface software and
the wide accessibility of an increasingly robust network infrastructure, have
combined to allow users to easily access the Internet and, in turn, have
produced rapid growth in the number of Internet users.
The emergence of the Web, the graphical multimedia environment of the
Internet, has resulted in the development of the Internet as a new mass
communications medium. The case and speed of publishing, distributing and
communicating text, graphics, audio and video over the Internet has led to a
proliferation of Internet-based services, including chat rooms, online
magazines, news feeds, interactive games and a wealth of educational and
entertainment information, as well as the development of online communities. In
addition, by eliminating many of the costs involved in executing routine
commercial transactions, such as simple banking services and retail purchases,
the Internet is rapidly providing individuals and organizations with a new
medium for conducting business.
Growth of the Internet Market. The consumer online and Internet
services industry is now in an early stage of an evolution that is embracing
both consumers and businesses. It is estimated that the today's number of
Internet users exceeds 240 million and could double in the year 2000. This
growth is created by the Internet's ability to provide, in a more appealing,
cost and time effective manner, many of the functions now provided by mail,
telephone and television. It is widely recognized that the evolution of the
Internet industry will have enormous implications for the way individuals
communicate, work learn, and entertain themselves.
Morgan Stanley Research estimates the demand for online and Internet
services to closely follow personal computer ("PC") penetration within the home
and office. PC penetration recently reached a rate of nearly one-third of all
United States households. This penetration rate is similar to the household TV
penetration level in the early 1960s and is expected to increase to a level
close to the current TV household penetration level of 98% within the next 10 to
20 years.
Today, the world is populated by some 200 million computers. It is
estimated that by the year 2002 this figure will increase to 500 million.
Combining these figures with the dramatically expanding use of the Internet, it
becomes clear that we are experiencing a never-before-seen phenomenon: the
development of a pervasive worldwide communication network which transcends
borders and which fundamentally changes the way the world communicates.
In this environment, with our advanced communication technology and our
broad and expanding network of independent distributor associates and
international licensees, we are well positioned to provide what the world needs:
integrated facilities to provide the hardware, software and services for
reliable, high throughput wireline and wireless Internet access elusive goal of
realizing cost effective, broadly affordable computer voice communication and
teleconferencing. We also project that apart from a burgeoning market and demand
for our products and services in what we tend to refer to as the developed
countries, there will also be a huge demand by lesser developed countries. As
these may lack the wiring infrastructure for modern communications, our wireless
high throughput bandwidth facilities will enable them to leapfrog into modern
21st century communication facilities without having to commit to high
infrastructure cost investments.
DISTRIBUTION METHODS
Marketing in the United States and Canada: Following a careful analysis
of the marketing strengths of our products and services and its initially
limited available resources for traditional marketing we elected to avail
ourselves of the power and dynamics of the well established $80
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billion per year network marketing industry as the method of distribution in the
United States and Canada. With a steadily expanding network of over 4,000
independent distributor associates currently in place, our goal is to become a
dominant force in the market place with a ready made marketing and distribution
channel for our products and services. Based on our experience in these markets
and our knowledge of the industry, we believe that the combination of a network
of independent distributors motivated by a generous, well though out
compensation package and a range of competitively priced cutting edge electronic
communication products and services will enable us to outperform other companies
in these markets.
Marketing outside of North America: Marketing in countries outside of
North America will be accomplished through licensing agreements with strongly
capitalized parties capable of up-front payments of licensing fees and financing
of initial orders. Licensing agreements for several countries are already in
place.
COMPETITION
The market for consumer and business Internet services and online
content are extremely competitive and highly fragmented. There are no
significant barriers to entry and we expect that competition will intensify in
the future. Our most direct competition in these markets are ISPs, national long
distance and local exchange carriers, wireless service providers, OSPs,
cable-based data services and Internet content aggregators. Many of these
competitors are offering (or may soon offer) technologies that will attempt to
compete with some or all of our products and services. Such technologies include
ISDN and XDSL. The basis of competition in these markets include transmission
speed, reliability of service, ease of access, price/performance, ease-of-use,
content quality, quality of presentation, timeliness of content, customer
support, operating experience and revenue sharing.
GOVERNMENT REGULATION
FEDERAL
We provide Internet services, in part, through data transmissions over
public telephone lines. These transmissions are governed by regulatory policies
establishing charges and terms for wire line communications. We currently are
not subject to direct regulation by the FCC or any other governmental agency,
other than regulations applicable to businesses generally. However, in the
future we could become subject to regulation by the FCC or another regulatory
agency as a provider of basic telecommunication services. For example, a number
of long distance telephone carriers recently filed a petition with the FCC
seeking a declaration that Internet telephone service is a "telecommunication
service" subject to common carrier regulation. Such a declaration, if enacted,
would create substantial barriers to our entry into the Internet telephone
market. The FCC has requested comments on this position, but has not set a
deadline for issuing a final decision. Also, a number of local telephone
carriers have asked the FCC to levy access charges on "enhanced service
providers," which may be deemed to include ISPs. Although the Chairman of the
FCC has indicated his opposition to levying service charges against ISPs, local
interconnection charges could be levied in the future. Moreover, the public
service commissions of certain states are exploring the adoption of regulations
that might subject ISPs to state regulation.
The FCC regulates the licensing construction, operation and
acquisition of wireless telecommunications systems in the U.S. pursuant to the
1934 Act, as amended and the roles, regulations and policies promulgated by the
FCC thereunder. Included in the regulations is the use of the electromagnetic
spectrum in the United States, including the frequency band currently used by
our radio products. Part 15 of the FCC regulations defines frequency bands in
which unlicensed operation of radio equipment that meets certain technical and
operational requirements is permitted. We utilize CDPD for the majority of our
wireless transmissions which is currently under FCC regulations.
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In the international markets, there are various categories of
government regulations. In those countries that have accepted certain worldwide
standards, such as the FCC rulings or those from the European Telecommunications
Standards Institute, we are not expected to experience significant regulatory
issues in bringing our products to market. Approval in these markets involves
retaining local testing agencies to verify specific product compliance. However,
many developing countries, including the large markets in India and China, have
not fully developed or have no frequency allocation, equipment certification or
telecommunications regulatory standards. In these types of markets, we will
actively work both directly and with industry standard bodies, to conform
regulations to worldwide standards.
STATE AND LOCAL REGULATION
The scope of the regulatory authority covers such matters as the terms
and conditions of interconnection between Local Exchange Carriers ("LECs") and
wireless carriers with respect to intrastate services, customer billing
information and practices, billing disputes, other consumer protection matters,
facilities construction issues, transfers of control, the bundling of services
and equipment and requirements relating to the availability of capacity on a
wholesale basis. In these areas, particularly, the terms and conditions of
interconnection between LECs and wireless providers, the FCC and state
regulatory authorities share regulatory responsibilities with respect to
interstate and intrastate issues, respectively.
The FCC and a number of state regulatory authorities have initiated
proceedings or indicated their intention to examine access charge obligations,
mutual compensation arrangements for interconnections between local exchange
carriers and wireless providers, the pricing of transport and switching
facilities provided by LECs to wireless providers, the implementation of number
portability to permit customers to retain their telephone numbers when they
change service providers, and alterations in the structure of universal service
funding among other matters.
We may become an active participant in proceedings before the FCC and
before state regulatory authorities. Proceedings with respect to the foregoing
policy issues before the FCC and state regulatory authorities could have
significant impacts on the competitive market structure among wireless providers
and the relationships between wireless providers and other carriers. We are
unable at this point to predict the scope, pace, or financial impact of policy
changes which could be adopted in these proceedings. To keep it apprised of
developments in this area, we will retain special FCC counsel in the event we
deem it necessary.
RECENT EVENTS
The 1996 Act mandates significant changes in existing regulation of the
telecommunications industry to promote competitive development of new service
offerings, to expand public availability of telecommunications services and to
streamline regulation of the industry. The 1996 Act provides that implementing
its legislative objectives will be the task of the FCC, the state public
utilities commissions and a federal-state joint board. The FCC released a
tentative implementation schedule on February 12, 1996. Much of this
implementation must be completed in numerous virtually simultaneous proceedings
with short, 6 to 18 month, deadlines. These proceedings are expected to address
issues and proposals already before the FCC in pending rule making proceedings
affecting the wireless industry as well as additional areas of
telecommunications regulation not previously addressed by the FCC and the
states.
The primary purpose and effect of the new law is to open all
telecommunications markets to competition including the local wireline loop. The
1996 Act makes all state and local barriers to competition unlawful, whether
they are direct or indirect. It directs the FCC to hold notice and comment
proceedings and to preempt all inconsistent state and local laws and
regulations. Only narrow powers are left to state and local authorities. Each
state retains the power to impose competitively neutral requirements that are
both consistent with the 1996 Act's universal service provision and necessary
for universal service, public safety and welfare, continued service quality and
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consumer rights. While a state may not impose requirements that effectively
function as barriers to entry or create a competitive disadvantage, the scope of
state authority to maintain existing or adopt new requirements under this
section is not clearly spelled out. Before it preempts a state or local
requirements as violating the entry barrier prohibition, the FCC must hold a
notice and comment proceeding.
The recently enacted Telecommunications Act contains certain provisions
that lift, or establish procedures for lifting certain restrictions relating to
the RBOCs' ability to engage directly in the Internet access business. The
Telecommunications Act also makes it easier for national long distance carriers
such as AT&T to offer local telephone service. In addition, the Telecommunica-
tions Act allows the RBOCs to provide electronic publishing of information and
databases. Competition from these companies could have an adverse effect on the
Company's business.
Due to the increasing use of the Internet, it is possible that
additional laws and regulations may be adopted with respect to the Internet,
covering issues such as content, user privacy, pricing, libel, intellectual
property protection and infringement and technology export and other controls.
Changes in the regulatory environment relating to the Internet access industry,
including regulatory changes that directly or indirectly affect
telecommunications costs or increase the likelihood or scope of competition from
regional telephone companies or others, could have a material adverse effect on
us. See "Risk Factors -- Competition."
PROPRIETARY INFORMATION
We have developed custom designed software for use with Internet
access, and relies on a combination of copyright, trademark, patent and trade
secrets and contractual restrictions to establish and protect our licensed and
patented VMSK/VPSK technology. Under the terms of the joint venture for
VMSK/VPSK with AMC, we may market products and services that utilize VMSK/VPSK
in exchange for 20% of royalties to be paid into the Joint Venture.
It is our policy to execute agreements with employees and consultants
upon the commencement of their relationships with us. These agreements provide
that confidential information developed or made known during the course of a
relationship with us is to be owned by the Company or its respective
subsidiaries and kept confidential and not disclosed to third parties except in
specific circumstances. There can be no assurance that the steps taken by us
will be adequate to prevent misappropriation of our technology or that our
competitors will not independently develop technologies that are substantially
equivalent or superior to our technology.
EMPLOYEES
As of April 30, 1999, we employed a total of seventeen employees, four
of whom are in management, one in administration, three in marketing, three in
customer service, three on the technical staff, one in information and two in
consulting.
None of our employees are represented by a labor union. We have not
experienced any work stoppage and consider relations with our employees to be
good.
YEAR 2000
The Year 2000 issue involves the potential for system and processing
failures of date-related data resulting from computer-controlled systems using
two digits rather than four to define the applicable year. For example, computer
programs that contain time sensitive software may recognize a date using two
digits of "00" as the Year 1900 rather than the Year 2000. This could result in
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send invoices
or engage in similar ordinary business activities.
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We believe that our internal software and hardware systems will
function properly with respect to dates in the Year 2000 and thereafter.
Nonetheless, there can be no assurance in this regard until such systems are
operational in the Year 2000. We are in the process of contacting all of our
significant suppliers to determine the extent to which our interface systems are
vulnerable to those third parties' failure to make their own systems Year 2000
compliant. In the event any of our suppliers or vendors prove not to be Year
2000 compliant, we believe that we could find Year 2000 compliant replacement
vendors or suppliers without significant delay or expense. Additionally, any
Year 2000 problems experienced by our advertising customers could affect the
placement of advertisements on our online services. Accordingly, to the extent
the systems of our suppliers and advertising customers are not fully Year 2000
compliant, there can be no assurance that potential system interruptions or the
cost necessary to update software will not have a material adverse affect on our
business, results of operation or financial condition.
FACILITIES
We currently leases our office facility of approximately 8,000 square
feet on a year to year basis for $3,100.00 per month to provide space for
administration, technical support, and customer service.
Our facilities are adequate for our current needs and suitable
additional space, when needed, will be available to accommodate expansion of our
operations on commercially reasonable terms.
SELLING SECURITYHOLDERS
We have agreed to register shares of some of our current stockholders
for resale at the same time we are selling our own shares in this offering and
to pay all offering expenses. These shareholders are selling 320,000 shares.
We will not receive any of the proceeds of their sales.
Although we have fixed the price of our stock, selling stockholders are
free to sell at any price they desire. Sales by selling stockholders at a price
lower than ours could adversely impact our ability to sell our stock and result
in our receiving less proceeds than if there were not such a concurrent
offering.
The following table sets forth the name of each selling shareholder and
the number of their shares being sold in connection with this offering.
NAME Number of Shares
Robert Snyder 150,000
Dennis Snyder 150,000
Jack DeVrieze 20,000
TOTAL 320,000
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our Common Stock as of April 30, 1999, by (i) each person
(including any "group" as that term is used in Section 13(d)(3) of the
Securities Act of 1934 (the "Exchange Act") who is known by us to own
beneficially 5% or more of the Common Stock, (ii) each director of the Company,
and (iii) all directors and executive officers as a group. Unless otherwise
indicated, all persons listed below have
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sole voting power and investment power with respect to such shares. The total
number of shares authorized is 60,000,000 shares of Common Stock, each of which
is $.001 per share par value. 12,139,354 shares of Common Stock have been issued
and are outstanding as follows:
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to Offering Shares Owned after Offering
----------------------- Being --------------------
Number Percent Offered Number Percent
------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Robert Snyder(1)(2) 4,025,000 33.2% 150,000 3,875,000 22.6%
Dennis Snyder(1)(2) 4,000,000 33.0% 150,000 3,850,000 22.5%
Barry Gilliland(2) 93,319 .8% -0.0- 93,319 .5%
---------- ------ ------- ---------- -----
Total Shares 12,139,354 100.00% 300,000 17,139,354 100.0%
</TABLE>
Directors and officers as a group 8,219,819 shares
(1)Related by blood or marriage
(2)Directors and Officers
MANAGEMENT
There are currently three (3) occupied seats on the Board of Directors.
The following table sets forth information with respect to the directors and
executive officers.
<TABLE>
<CAPTION>
DATE SERVICE
NAME AGE OFFICE COMMENCED
---- --- ------ ---------
<S> <C> <C> <C>
Robert Snyder* 54 Chairman, President December, 1997
& Chief Executive Officer
Joseph Lechiara 63 Chief Financial Officer August, 1998
& Treasurer
Dennis Snyder* 43 Vice President December, 1997
of Customer Service
Barry Gilliland* 46 Vice President, December, 1997
Operations
</TABLE>
* Indicates Board Member
All directors will hold office until the next annual stockholder's
meeting and until their successors have been elected or qualified or until their
death, resignation, retirement, removal, or disqualification. Vacancies on the
board will be filled by a majority vote of the remaining directors. Officers of
the Company serve at the discretion of the Board of Directors.
The Officers and Directors of the Company are set forth below.
ROBERT SNYDER, President, CEO, and Chairman. Mr. Snyder, as company
co-founder, integrated the resources and technology into the platform that
supports AlphaCom's product rollout to its distributor base. Additionally, he
developed the business model that defines the Com-
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pany's line of products and services. Mr. Snyder's business background includes
over 34 years of related experience in establishing and maintaining start-up
businesses involved in manufacturing, sales and marketing network marketing, and
finance. In 1964, he established a company to sell and distribute office
supplies and copy machines that has enjoyed over 34 years of continuous
operation. During his career, he has demonstrated the ability to develop
marketing plans and sales strategies having established five additional
companies. With considerable experience in small business investment ventures,
Mr. Snyder brings to AlphaCom the leadership and financial skills he employed
successfully in other businesses. Mr. Snyder intends to devote full time to the
Company acting in an executive capacity.
JOSEPH LECHIARA, Chief Financial Officer. Mr. Lechiara was an Audit
Partner in a big six accounting firm with 25 years experience. His
responsibilities included working with start-up companies to very large Fortune
500 companies in audit, tax and consulting activities. His experience includes
numerous U.S. Securities and Exchange Commission (SEC) filings and compliance
with other Federal and State Regulatory agencies over a broad spectrum of
industries including manufacturing, life insurance, food processing,
distribution, theme parks and transportation. Before Mr. Lechiara joined the
Company, he had designed and implemented accounting systems for various
companies, as well as owning and operating five companies with 35 employees. Mr.
Lechiara intends to devote full time to the Company acting in an executive
capacity.
DENNIS SNYDER, Vice President Customer Service. Mr. Snyder, company
co-founder, has 18 years of experience in oversight of service and repair of
high tech electronic equipment. He became the lead troubleshooter for an
electronics firm where he performed as assistant service manager. Dennis Snyder
has owned his own software development and computer consulting businesses within
his career in the computer industry. Most recently, he has been directly
involved in sales and marketing of high tech products and services. Mr. Snyder
intends to devote full time to the Company acting in an executive capacity.
BARRY GILLILAND, Vice President of Administration. Mr. Gilliland has an
extensive background in office and manufacturing management. His
responsibilities included supervising over 50 employees as production foreman,
the implementation of several company-wide programs, production scheduling,
inventory control and statistical quality control. He developed and imple-
mented a purchasing program of new products while maintaining communications
with vendors. He established a corporate fleet and facility management program
which produced substantial savings for the corporation. Mr. Gilliland's
implementation skills are a key asset to the Company and its distributor base.
Mr. Gilliland intends to devote full time to the Company acting in an executive
capacity.
EXECUTIVE ADVISORY BOARD
The Company will establish an informal Executive Advisory Board,
appointed by Mr. Robert Snyder. The role of the Executive Advisory Board is to
be available to assist our management with general business and strategic
planning advice upon request from time to time. Accordingly, the Executive
Advisory Board Members intend to devote themselves part-time to the affairs of
the Company, as needed.
OTHER KEY ADVISORS
Scott Frye, Chief Technical Advisor. Mr. Frye has seven years of
experience in private investment and offshore banking. Additionally, he
facilitated the set-up of one of the first Internet service providers in
Pennsylvania. Mr. Frye has considerable hands on experience in Internet
telephony, phone2phone, fax2fax and virtual office applications with a special
emphasis on internet and intranet "real life" solutions. Mr. Frye advises
AlphaCom on new product and services developments as well as related industry
opportunities in telecommunications and cyberspace.
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EXECUTIVE COMPENSATION
The following table sets forth the annual remuneration for the highest
paid officers and directors of the Company for the annual period ending December
31, 1998.
Name Capacities in Which Aggregate
Remuneration was Received Remuneration
- --------------------------------------------------------------------------------
Robert Snyder Chairman, President and Chief $52,000.00
Executive Officer
Joseph Lechiara Chief Financial Officer (started 8/98) $22,000.00
Dennis Snyder Vice President Customer Service $52,000.00
Barry Gilliland Vice President of Administration $38,220.00
EMPLOYMENT AGREEMENTS
We plan to enter into employment agreements with each of Messrs. Robert
Snyder, Dennis Snyder, Joseph Lechiara and Barry Gilliland which provide for an
annual base compensation of $52,000, $52,000, $52,000, and $38,220,
respectively, and such bonuses as the Board of Directors may from time to time
determine.
STOCK OPTIONS
We have not adopted any formal stock options plans to reward and
provide incentives to its officers, directors, employees, consultants and other
eligible participants, but is anticipated to do so as follows: (a) the Executive
Stock Incentive Plan, (b) the 1999 Incentive Stock Option Plan, and (c) the 1999
Stock incentive Plan. The Company has reserved 250,000 shares for issuance under
the plans. Awards under each plan may be in the form of incentive stock options
or non-qualified stock options. The plans will be administered by the Company's
Board of Directors, which is authorized to select the plan recipients, the time
or times at which awards may be granted and the number of shares to be subject
to each option awarded.
DIRECTORS' COMPENSATION
Our directors receive no compensation for their services as directors.
Members of the Executive Advisory Board will receive payment for their services,
travel and other expenses incurred in connection with attendance at each
meeting.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
At present we have not entered into individual indemnity agreements
with our Officers or Directors. However, our By-Laws and Certificate of
Incorporation provide a blanket indemnification that we shall indemnify, to the
fullest extent under Nevada law, our directors and officers against certain
liabilities incurred with respect to their service in such capabilities. In
addition, the Certificate of Incorporation provides that the personal liability
of our directors and officers and our stockholders for monetary damages will be
limited.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons pursuant
to the foregoing provisions, or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933, as amended,
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or
paid by a director, officer or controlling person in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy
Page 31
<PAGE> 32
as expressed in the Securities Act of 1933, as amended, and we will be governed
by the final adjudication of such case.
DIRECTORS AND OFFICERS INSURANCE
We are exploring the possibility of obtaining directors and officers("D
& O") liability insurance. We have obtained several premium quotations but have
not entered into any contract with any insurance company to provide said
coverages as of the date of this Prospectus. There is no assurance that we will
be able to obtain such insurance.
KEYMAN LIFE INSURANCE
Keyman Life Insurance is expected to be purchased after the effective
date of this offering in amounts up to $1 million, 50% payable to the Company
and 50% payable to family beneficiaries. We are planning to purchase such
insurance towards the cross purchase of shares from the estate of an officer or
director and to provide us with the capital to replace the executive loss
(executive search for successor, etc.).
CERTAIN TRANSACTIONS
On December 5, 1997, the Board of Directors authorized the issuance of
an aggregate of 8,025,000 shares of Common Stock as founder's stock at a price
of $.001 per share, to Messrs. Robert Snyder and Dennis Snyder.
On January 30, 1998, the Board of Directors authorized the issuance of
an aggregate of 1,272,000 shares of Common Stock as founder's stock to its
employees, and advisors to the Company at a price of $.001 per share, to
approximately 26 individuals. Subsequently, (September 30, 1998) 33,000 shares
were issued to employees at a price of $.18 per share.
As of July 2, 1998, we issued 1,653,354 restricted shares (under Rule
144 to be held for a minimum of one year after issuance before free trading
provided our stock is listed for trading) of its Common Stock to 47 minority
shareholders of Alpha Beta Communications, Inc. (ABC) and we further agreed to
make a $200,000 cash payment to ABC's majority shareholder, Robert Snyder, the
Chairman, President and CEO of AlphaCom, Inc. The $200,000 payment is only to
paid upon AlphaCom completing a successful public Offering of our Common Stock.
We are not liable for any other creditor, consumer, entity or payables not
listed prior to June 1, 1998.
In July 1998, we offered 750,000 units (consisting of one share of our
Common Stock and a promissory note equal to $1.00) at $1.00 under Regulation D
Rule 504. We successfully closed this Offering September 29, 1998.
In November 1998, the Board of Directors authorized the issuance of
124,000 shares of Common Stock in connection with a consulting contract for
services rendered. The Board also reserved 500,000 shares of Common Stock to
fund Warrants to be issued in connection with a proposed Interim Loan of
$2,500,000. Warrant holders will be entitled to purchase Common Stock at $1.00 a
share after holding the Warrants for one year.
We subsequently sold a private placement offering at $1.00 per share,
dated October 8, 1998, to twenty investors in the amount of $250,000.
On April 19, 1999, the Board of Directors reserved 300,000 additional
shares of Common Stock at $1.00 a share to be issued to employees in lieu of
cash bonus, of which 76,000 shares has been issued as of April 30, 1999. In
addition, the Board of Directors authorized the issuance of 80,000 shares to the
CFO at $1.00 a share.
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<PAGE> 33
We have adopted a policy that all future transactions between the
Company and officers, directors and 5% shareholders will be on terms no less
favorable that could be obtained from unaffiliated third parties and will be
approved by a majority or independent, disinterested directors of the Company.
DESCRIPTION OF SECURITIES
All material provisions of our capital stock are summarized in this
prospectus. However the following description is not complete and is subject to
applicable Nevada law and to the provisions of our articles of incorporation and
bylaws. We have filed copies of these documents as exhibits to the registration
statement related to this prospectus.
COMMON STOCK
We are authorized to issue 60,000,000 shares of Common Stock, at a par
value $.001 per share. As of the date of this Prospectus, there are 12,139,354
shares of Common Stock outstanding. After giving effect to the Offering, the
issued and outstanding capital stock of the Company will consist of 17,139,354
shares of Common Stock.
YOU HAVE THE VOTING RIGHTS FOR YOUR SHARES. You and all other holders
of Common Stock are entitled to one vote for each share held of record on all
matters to be voted on by stockholders. You have no cumulative voting rights
with respect to the election of directors, with the result that the holders of
more than 50% of the shares voting for the election of directors can elect all
of the directors then up for election.
YOU HAVE DIVIDEND RIGHTS FOR YOUR SHARES. You and all other holders of
Common Stock are entitled to receive dividends and other distributions when, as
and if declared by the Board of Directors out of funds legally available, based
upon the percentage of our common stock you own. We will not pay dividends. You
should not expect to receive any dividends on shares in the near future. This
investment may be inappropriate for you if you need dividend income from an
investment in shares.
YOU HAVE RIGHTS IF WE ARE LIQUIDATED. Upon our liquidation, dissolution
or winding up of affairs, you and all other holders of our Common Stock will be
entitled to share in the distribution of all assets remaining after payment of
all debts, liabilities and expenses, and after provision has been made for each
class of stock, if any, having preference over our Common Stock. Holders of
shares of Common Stock, as such, have no conversion, preemptive or other
subscription rights, and there are no redemption provisions applicable to the
Common Stock. All of the outstanding shares of Common Stock are, and the shares
of Common Stock offered hereby, when issued in exchange for the consideration
paid as set forth in this Prospectus, will be, fully paid and nonassessable. Our
directors, at their discretion, may borrow funds without your prior approval,
which potentially further reduces the liquidation value of your shares.
YOU HAVE NO RIGHT TO ACQUIRE SHARES OF STOCK BASED UPON THE PERCENTAGE
OF OUR COMMON STOCK YOU OWN WHEN WE SELL MORE SHARES OF OUR STOCK TO OTHER
PEOPLE. This is because we do not provide our stockholders with preemptive
rights to subscribe for or to purchase any additional shares offered by us in
the future. The absence of these rights could, upon our sale of additional
shares of common stock, result in a dilution of our percentage ownership that
you hold.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, we will have 17,139,354 shares of
Common Stock issued and outstanding assuming all the shares offered herein are
sold. The shares of Common Stock sold in this Offering will be freely
transferable without restrictions or further registration
Page 33
<PAGE> 34
under the Securities Act, except for any of our shares purchased by an
"affiliate" (as that term is defined under the Act) who will be subject to the
resale limitations of Rule 144 promulgated under the Act.
There will be approximately 10,819,354 shares of Common Stock
outstanding that are "restricted securities" as that term is defined in Rule 144
promulgated under the Securities Act.
The shares of Common Stock owned by insiders, officers and directors
are deemed "restricted securities" as that term is defined under the Securities
Act and in the future may be sold under Rule 144, which provides, in essence,
that a person holding restricted securities for a period of one (1) year may
sell every three (3) months, in brokerage transactions and/or market maker
transactions, an amount equal to the greater of (a) one percent (1%) of our
issued and outstanding Common Stock or (b) the average weekly trading volume of
the Common Stock during the four (4) calendar weeks prior to such sale. Rule 144
also permits, under certain circumstances, the sale of shares without any
quantity limitation by a person who is not an affiliate of the Company and who
has satisfied a two (2) year holding period. Additionally, shares underlying
employee stock options granted, to the extent vested and exercised, may be
resold beginning on the ninety-first day after the Effective Date of a
Prospectus, or Offering Memorandum pursuant to Rule 701 promulgated under the
Securities Act.
As of the date hereof and upon completion of the offering, none of our
shares of Common Stock (other than those which are qualified by the SEC in
connection with this offering) are available for sale under Rule 144. Future
sales under Rule 144 may have an adverse effect on the market price of the
shares of Common stock. Our officers, directors and certain of our security
holders have agreed not to sell, transfer or otherwise dispose of their shares
of our Common Stock or any securities convertible into Common Stock for a period
of 12 months from the date hereof.
Under Rule 701 of the Securities Act, persons who purchase shares upon
exercise of options granted prior to the date of this Prospectus are entitled to
sell such shares after the 90th day following the date of this Prospectus in
reliance on Rule 144, without having to comply with the holding period
requirements of Rule 144 and, in the case of non-affiliates, without having to
comply with the public information, volume limitation or notice provisions of
Rule 144. Affiliates are subject to all Rule 144 restrictions after this 90-day
period, but without a holding period.
There has been no public market for our Common Stock. With a relatively
minimal public float and without a professional underwriter, there is little or
no liklihood that an active and liquid public trading market, as that term is
commonly understood, will develop, or if developed that it will be sustained,
and accordingly, an investment in our common stock should be considered highly
illiquid. Although we believe a public market will be established in the future,
there can be no assurance that a public market for the Common Stock will
develop. If a public market for the Common Stock does develop at a future time,
sales of shares by shareholders of substantial amounts of our Common Stock in
the public market could adversely affect the prevailing market price and could
impair our future ability to raise capital through the sale of our equity
securities.
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 relating to the Common Stock
offered hereby. This Prospectus, which is part of the Registration Statement,
does not contain all of the information included in the Registration Statement
and the exhibits and schedules thereto. For further information with respect to
us, the Common Stock offered hereby, reference is made to the Registration
Statement, including the exhibits and schedules thereto. Statements contained in
this Prospectus concerning the provisions or contents of any contract, agreement
or any other document referred to herein are not necessarily complete. With
respect to each such contract, agreement or document filed as an exhibit to the
Registration Statement, reference is made to such exhibit for a more complete
description of the matters involved.
Page 34
<PAGE> 35
The Registration Statement, including the exhibits and schedules
thereto, may be inspected and copied at prescribed rates at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
DC 20549 and at the Commission's regional offices at 7 World Trade Center, 13th
Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. The Commission also maintains a web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission, including the Company.
The address of such site is [http://www.sec.gov].
We intend to furnish to our shareowners annual reports containing
audited consolidated financial statements certified by independent public
accountants for each fiscal year and quarterly reports containing unaudited
consolidated financial statements for the first three quarters of each fiscal
year.
We will provide without charge to each person who receives a
Prospectus, upon written or oral request of such person, a copy of any of the
information that was incorporated by reference in the Prospectus (not including
Exhibits to the information that is incorporated by reference unless the
Exhibits are themselves specifically incorporated by reference). Any such
request shall be directed to the Chief Financial Officer of AlphaCom, Inc.,
Joseph M. Lechiara, at 1035 Rosemary Boulevard, Akron, Ohio 44306, Tel.# (330)
785-5555.
Within five days of our receipt of a subscription agreement accompanied
by a check for the purchase price, we will send by first class mail a written
confirmation to notify the subscriber of the extent, if any, to which such
subscription has been accepted by the Company. We reserve the right to reject
orders for the purchase of Shares in whole or in part. Not more than thirty days
following the closing of the Offering, a subscriber's Common Stock certificate
will be mailed by first class mail.
DIVIDEND POLICY
We have never declared or paid cash dividends on our Common Stock and
anticipate that all future earnings will be retained for development of our
business. The payment of any future dividends will be at the discretion of our
Board of Directors and will depend upon, among other things, future earnings,
capital requirements, the financial condition of the Company and general
business conditions.
STOCK TRANSFER AGENT
Our transfer agent and registrar of the Common Stock is American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10004.
EXPERTS
Our consolidated financial statements which include the subsidiaries
(development stage companies) as of and for the year ending December 31, 1998
have been audited by Spector & Saulino, L.L.C., CPAs, 4040 Embassy Parkway,
Akron, Ohio 44333, independent auditors, as set forth in their report included
herein and incorporated herein by reference. Such consolidated financial
statements have been included in reliance upon such report given upon their
authority as experts in accounting and auditing.
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<PAGE> 36
LEGAL MATTERS
There is no past, pending or, to our knowledge, threatened litigation
or administrative action which has or is expected by our management to have a
material effect upon our business, financial condition or operations, including
any litigation or action involving our officers, directors, or other key
personnel. However, Robert Snyder, our president has a Federal Tax Lien filed
against him which could cause his assets to be siezed by the IRS, including
AlphaCom's stock, if a payment arrangement is not agreed upon and complied with.
The Law Offices of Miles Garnett, Esq., 66 Wayne Avenue, Atlantic
Beach, N.Y.11509, Tel. #(516) 371-4598, [http://www.garnett.com], will pass upon
certain legal matters relating to the Offering.
Page 36
<PAGE> 37
ALPHACOM, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountant
As of and for the four months ended April 30, 1999 and 1998...........................................F-2
Consolidated Balance Sheets - Unaudited
April 30, 1999 and 1998...............................................................................F-3
Consolidated Statements of Operations - Unaudited
For the four months ended April 30, 1999 and 1998.....................................................F-5
Consolidated Statements of Stockholders' Deficit - Unaudited
For the four months ended April 30, 1999 and 1998.....................................................F-6
Consolidated Statements of Cash Flows - Unaudited
For the four months ended April 30, 1999 and 1998.....................................................F-7
Notes to Consolidated Financial Statements - Unaudited
As of and for the four months ended April 30, 1999 and 1998...........................................F-9
Report of Independent Certified Public Accountant
As of and for the year ended December 31, 1998........................................................F-15
Consolidated Balance Sheet
As of December 31, 1998...............................................................................F-16
Consolidated Statement of Operations
For the year ended December 31, 1998..................................................................F-18
Consolidated Statement of Stockholders' Deficit
For the year ended December 31, 1998..................................................................F-19
Consolidated Statement of Cash Flows
For the year ended December 31, 1998..................................................................F-20
Notes to Consolidated Financial Statements
As of and for the year ended December 31, 1998........................................................F-22
</TABLE>
F-1
<PAGE> 38
INDEPENDENT ACCOUNTANTS' REPORT
-------------------------------
To the Stockholders and
Board of Directors of AlphaCom, Inc. and Subsidiary:
The accompanying consolidated balance sheets of AlphaCom, Inc. and Subsidiary
(development stage companies) as of April 30, 1999 and 1998, and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the four months then ended were not audited by us, and accordingly, we do not
express an opinion on them.
SPECTOR & SAULINO, CPAs, L.L.C.
Akron, Ohio
June 8, 1999
F-2
<PAGE> 39
ALPHACOM, INC. AND SUBSIDIARY
(development stage companies)
CONSOLIDATED BALANCE SHEETS - UNAUDITED
April 30, 1999 and 1998
----------
<TABLE>
<CAPTION>
ASSETS
1999 1998
---- ----
<S> <C> <C>
Current assets:
Cash $ 21,873 $ --
Accounts receivable trade 19 --
Accounts receivable, related parties 6,864 585,491
Prepaid expenses and other current assets 328,974 --
Inventories 43,252 --
---------- ----------
Total current assets 400,982 585,491
---------- ----------
Property, plant and equipment:
Machinery and equipment 59,437 --
Furniture and fixtures 38,132 --
Vehicles 54,539 --
Leasehold improvements 34,580 --
---------- ----------
186,688 --
Less accumulated depreciation
and amortization 31,617 --
---------- ----------
Total property, plant and equipment 155,071 --
---------- ----------
Advance on investment 205,000 --
Intangible assets, net of accumulated
amortization of $25,081 at April 30, 1999 576,877 --
Deposits 13,339 115,000
---------- ----------
Total other assets 795,216 115,000
---------- ----------
Total assets $1,351,269 $ 700,491
========== ==========
</TABLE>
See Independent Accountants' Report and Notes to Financial Statements.
F-3
<PAGE> 40
ALPHACOM, INC. AND SUBSIDIARY
(development stage companies)
CONSOLIDATED BALANCE SHEETS, Continued - UNAUDITED
April 30, 1999 and 1998
-------
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Current liabilities:
Notes payable, officer-stockholder $ 721,306 $ --
Notes payable, stockholders, less unamortized
discount of $12,073 and $0 at April 30, 1999
and 1998, respectively 721,398 746,028
Current portion of long-term debt 58,879 --
Accounts payable, trade 1,108,940 --
Accounts payable, related party 5,508 --
Accrued interest, officer-stockholder 29,353 --
Accrued interest, stockholders 49,988 --
Accrued expenses 119,114 --
Other 129,306 --
----------- -----------
Total current liabilities 2,943,792 746,028
Long-term liabilities:
Long-term debt, net of current portion 22,752 --
----------- -----------
Total liabilities 2,966,544 746,028
----------- -----------
Stockholders' deficit:
Common stock, $.001 par value, 20,000,000
shares authorized, 12,139,354 and 9,297,000
shares issued and outstanding at April 30, 1999
and 1998, respectively 12,139 9,297
Additional paid-in capital 800,317 --
Deficit accumulated during the development
stage (2,427,731) (54,834)
----------- -----------
Total stockholders' deficit (1,615,275) (45,537)
----------- -----------
Total liabilities and stockholders' deficit $ 1,351,269 $ 700,491
=========== ===========
</TABLE>
See Independent Accountants' Report and Notes to Financial Statements.
F-4
<PAGE> 41
ALPHACOM, INC. AND SUBSIDIARY
(development stage companies)
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
for the four months ended April 30, 1999 and 1998
----------
<TABLE>
<CAPTION>
1999 1998
---- -----
<S> <C> <C>
Net sales, communication equipment $ 37,013 $ --
Cost of sales, communication equipment 33,255 --
--------- ---------
Gross profit, equipment 3,758 --
--------- ---------
Net sales, communication services 13,869 --
Cost of sales, communication services 3,647 --
--------- ---------
Gross profit, services 10,222 --
--------- ---------
Total gross profit 13,980 --
Selling, general and administrative expenses 592,475 44,804
--------- ---------
Operating loss (578,495) (44,804)
Interest expense (56,918) (10,030)
--------- ---------
Net loss $(635,413) $ (54,834)
========= =========
Net loss per common share $ (.05) $ (.01)
========= =========
</TABLE>
See Independent Accountants' Report and Notes to Financial Statements.
F-5
<PAGE> 42
ALPHACOM, INC. AND SUBSIDIARY
(development stage companies)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - UNAUDITED
for the four months ended April 30, 1999 and 1998
-----------------
<TABLE>
<CAPTION>
Deficit
Number Par Value Accumulated
of of Additional During the
Date of Common Common Paid-in Development
Transaction Shares Stock Capital Stage Total
----------- ------ ----- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Balances at
December 31,1997 - 8,025,000 $ 8,025 - - $ 8,025
Stock issued to key
employees ($.001
per share) 1/30/98 1,272,000 1,272 - - 1,272
Net loss for the four
months ended
April 30, 1998 - - - - (54,834) (54,834)
------------ ---------- ---------- ------------ ------------
Balances at April 30, 1998 - 9,297,000 $ 9,297 $ - $ (54,834) $ (45,537)
============ ========== ========== ============ ============
Balances at
December 31, 1998 - 11,983,354 $ 11,983 $ 685,888 $ (1,792,318) $ (1,094,447)
Stock issuance costs 3/31/99 - - (41,415) - (41,415)
Stock issued to key
employees ($1.00
per share) 4/19/99 156,000 156 155,844 - 156,000
Net loss for the four months
ended April 30, 1999 - - - - (635,413) (635,413)
------------ ---------- ---------- ------------ ------------
Balances at April 30, 1999 - 12,139,354 $ 12,139 $ 800,317 $ (2,427,731) $ (1,615,275)
=========== ========== ========== ============ =============
</TABLE>
See Independent Accountants' Report and Notes to Financial Statements.
F-6
<PAGE> 43
ALPHACOM, INC. AND SUBSIDIARY
(development stage companies)
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
for the four months ended April 30, 1999 and 1998
Increase (Decrease) in Cash
--------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(635,413) $ (54,834)
--------- ---------
Adjustments to reconcile net loss
to net cash provided by (used in) operating activities:
Depreciation 12,545 --
Amortization 34,180 --
Non-cash equity transactions 156,000 1,272
(Increase) decrease in assets:
Accounts receivable, trade 8,439 --
Accounts receivable, related parties 10,598 (585,491)
Accounts receivable, other 7,540 --
Prepaid expenses and other current assets (60,469) --
Inventories (22,617) --
Deposits -- (115,000)
Increase in liabilities:
Accounts payable, trade 447,400 --
Accounts payable, related party 5,508 --
Accrued interest 26,702 --
Accrued expenses and other accrued liabilities 90,471 --
--------- ---------
Total adjustments 716,297 (699,219)
--------- ---------
Net cash provided by (used in) operating activities 80,884 (754,053)
--------- ---------
Cash flows from investing activities:
Purchases of property, plant and equipment (20,647) --
--------- ---------
Net cash used in investing activities (20,647) --
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt 50,000 --
Principal payments on long-term debt (31,807) --
Proceeds from notes payable, officer-stockholder
and related parties 2,500 746,028
Principal payments on notes payable, related parties (19,029) --
Stock issuance costs (41,415) --
--------- ---------
Net cash provided by (used in) financing activities (39,751) 746,028
--------- ---------
Net increase (decrease) in cash 20,486 (8,025)
Cash, beginning of period 1,387 8,025
--------- ---------
Cash, end of period $ 21,873 $ --
========= =========
</TABLE>
See Independent Accountants' Report and Notes to Financial Statements.
F-7
<PAGE> 44
ALPHACOM, INC. AND SUBSIDIARY
(development stage companies)
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued - UNAUDITED
for the four months ended April 30, 1999 and 1998
Increase (Decrease) in Cash
----------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 30,216 $ 10,030
============== ==============
Supplemental schedule of noncash investing and financing activities:
</TABLE>
During the four months ended April 30, 1999, interest expense of $24,147 had
been recorded as a result of amortizing a discount on notes payable,
stockholders.
See Independent Accountants' Report and Notes to Financial Statements.
F-8
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
---------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
--------------------------------------------------------------------
NATURE OF OPERATIONS
AlphaCom, Inc. (the "Company") was incorporated on December 1, 1997 under
the laws of the State of Nevada and commenced operations on January 1,
1998. The Company will distribute high-technology communication products
and services to consumers who utilize the internet. Sales and distribution
will be accomplished through a network marketing system in North America
and through authorized distributors and licensees in countries outside of
North America.
The following is a summary of significant accounting policies of the
Company:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
AlphaCom, Inc. and its wholly-owned subsidiary (AlphaCom Canada, Ltd.). All
significant intercompany profits, balances, and transactions have been
eliminated in consolidation.
These financial statements include all adjustments which in the opinion of
management are necessary to prevent the financial statements from being
misleading.
FOREIGN CURRENCY TRANSLATION
The Company's account balances that are in Canadian currency (which result
from the Canadian subsidiary) have been translated in accordance with SFAS
No. 52, "Foreign Currency Translation." Assets and liabilities have been
translated at exchange rates as of the end of the period. Income and
expense accounts have been translated at the average exchange rates during
the period. Due to limited activity at the Canadian subsidiary, there were
no transaction gains and losses from remeasurement of monetary assets,
liabilities, income and expense.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has a number of financial instruments, none of which are held
for trading purposes. The Company estimates that the fair value of all
financial instruments at April 30, 1999 and 1998, does not differ
materially from the aggregate carrying values of its financial instruments
recorded in the accompanying balance sheets. The estimated fair value
amounts have been determined by the Company using available market
information and appropriate valuation methodologies. Considerable judgment
is necessarily required in interpreting market data to develop the
estimates of fair value, and, accordingly, the estimates are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange.
INVENTORIES
Inventories consist primarily of computer communication hardware and
software and are stated at lower of cost or market. Cost is determined by
the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost. Major additions and
betterments are charged to the property accounts while replacements,
maintenance and repairs which do not improve or extend the life of the
respective assets are expensed currently. When property is retired or
otherwise disposed of, the cost of the property is removed from the asset
account, accumulated depreciation is charged with an amount equivalent to
the depreciation provided, and the difference is charged or credited to
income.
F-9
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued - UNAUDITED
-----------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
--------------------------------------------------------------------
(Continued)
DEPRECIATION
Depreciation is provided using primarily the straight-line method over the
estimated useful lives of the assets for financial statement purposes;
accelerated methods are primarily used for tax purposes.
INCOME TAXES
Income taxes are provided for the tax effect of transactions reported in
the consolidated financial statements and consist of taxes currently due
plus deferred taxes related primarily to differences between the basis of
property and equipment, and various reserves and accruals for financial and
income tax reporting. The deferred tax assets and liabilities represent the
future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or
settled.
INTANGIBLE ASSETS
Intangible assets have been recorded as a result of the limited asset
purchase from Alpha Beta Communications, Inc. (note 2) and are being
amortized on a straight-line basis over 20 years.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of trade accounts
receivable.
The Company grants credit to its customers. The Company performs ongoing
credit evaluations of its customers and does not require collateral.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding
for the year. Diluted earnings per share reflect the potential dilution
that could occur if the dilutive agreements resulted in the issuance of
common stock that then shared in the earnings of the Company.
At April 30, 1999, 10,000 shares of potential common stock related to
detachable warrants on a secured loan agreement (Note 5) and 124,000 shares
of potential common stock related to a consulting agreement (Note 10) were
excluded from the computation of diluted loss per share because their
inclusion would have an antidilutive effect on loss per share.
F-10
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued - UNAUDITED
--------
2. LIMITED ASSET PURCHASE:
----------------------
In July of 1998, the Company entered into a Limited Asset Purchase
Agreement (Agreement) with Alpha Beta Communications, Inc. ("ABC"). The
Agreement provided for the purchase of substantially all of the assets and
assumption of certain liabilities of ABC in exchange for $475,767 due the
Company from ABC and the issuance of 1,653,354 shares of $.001 par value
common stock, valued by management at $.18 per share or $297,603, issued to
the minority stockholders of ABC. The tangible assets acquired included
accounts receivable, inventories, property and equipment, prepaid and other
assets. Management estimated the fair market value of these assets to be
$208,950. In addition, AlphaCom acquired intangible assets including trade
names, client list, distributor base and/or subscribers. As part of the
transaction, AlphaCom also assumed liabilities of $37,507. In addition, the
Company has a commitment to pay $200,000 to ABC's majority stockholder, who
is also a stockholder in the Company, contingent upon the successful public
offering of the Company.
The transaction has been accounted for as a purchase and has resulted in
intangible assets of $601,958 which will be amortized over 20 years using
the straight-line method.
3. NOTES PAYABLE, OFFICER-STOCKHOLDER:
----------------------------------
The Company has notes payable to an officer-stockholder amounting to
$721,306 at April 30, 1999. The notes bear interest at rates ranging from
5.1% to 5.6%, are unsecured and are payable in full on June 30, 1999. The
weighted average of the interest rates is 5.54% and the estimated fair
value of these notes equals their book value at April 30, 1999.
Accrued interest on notes payable, officer-stockholder amounts to $29,353
at April 30, 1999. No interest has been paid on notes payable,
officer-stockholder.
There were no notes payable to the officer-stockholder at April 30, 1998.
4. NOTES PAYABLE, STOCKHOLDERS:
---------------------------
In 1998 the Company entered into a number of transactions with individual
creditors and issued unsecured notes payable. The terms of the notes
included interest at a stated rate of 12% per annum together with one share
of the Company's $.001 par value common stock for each one dollar borrowed.
For purposes of this transaction, management valued the common stock at
$.18 per share at the time of the stock issuance. The notes mature at
various dates in 1999.
The aggregate discount on the notes payable was determined in December 1998
to be $135,000 and is being amortized over the life of the notes. The
estimated fair value of these notes equals their book value.
The Company also has an unsecured note payable to a stockholder amounting
to $1,737 at April 30, 1999. The note bears interest at 18.0% and is
payable in the near term.
F-11
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued - UNAUDITED
------------
5. LONG-TERM DEBT:
--------------
<TABLE>
<S> <C>
Long-term debt consists of the following at April 30, 1999:
Senior secured loan agreement bearing interest at 12%.
The note is secured and matures March 30, 2000 at which
time a balloon payment for the entire principal is due. $ 50,000
Note payable, bank, due in monthly installments
of $453, including interest at 8.39%. The note
payable is collateralized by a vehicle and matures
July 2002. 15,429
Note payable, bank, due in monthly installments of $468,
including interest at 10.17%. The note payable is
collateralized by a vehicle and matures July 2002. 16,202
--------------
81,631
Less current maturities 58,879
--------------
$ 22,752
==============
</TABLE>
On March 26, 1999 the Company entered into a senior secured loan agreement
with a lender. Under the terms of the agreement, the lender will use its
best efforts to loan $2,500,000 to the Company from the sale of
participation interests to investors. The lender required the pledge of all
of the assets of the Company as security for the loan. The loan agreement
also provides for detached warrants to the lender for the purchase of up to
500,000 shares of the Company's common stock, at $1.00 per share, limited
to 20% of the dollar amount loaned to the Company. The warrants cannot be
exercised until one year from the date of the loan and expire after five
years from the date of the loan. The agreement expires July 1, 1999 unless
extended by the Company and the lender.
At April 30, 1999, under the terms of the agreement, the lender has a
warrant for 10,000 shares of the common stock of the Company.
There was no long-term debt at April 30, 1998.
6. OPERATING LEASE COMMITMENTS:
---------------------------
The Company is obligated under non-cancelable leases for the use of the
operating facility, an automobile and a copier. The leases expire at
various dates through 2001 and the facility lease allows for two one-year
renewals beginning in April 1999. Certain of the leases require the lessee
to bear the cost of insurance and maintenance.
Approximate future minimum obligations under non-cancelable lease
commitments for years ending December 31 are as follows:
<TABLE>
<S> <C>
1999 $ 14,100
2000 7,500
2001 900
---------
$ 22,500
=========
</TABLE>
F-12
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued - UNAUDITED
--------
7. INCOME TAXES:
------------
The following reconciles income taxes reported in the consolidated
financial statements to taxes that would be obtained by applying the U.S.
federal statutory rate to income before income taxes at April 30:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C> <C>
Expected taxes (benefit) using statutory rate of 34% $ (216,040) $ (18,643)
Valuation allowance 216,040 18,643
------------- ------------
Benefit of income taxes $ - $ -
============= =============
</TABLE>
8. RELATED PARTY TRANSACTIONS:
--------------------------
Certain key officers of the Company have agreed to defer a percentage of
their compensation until such time as the Company completes its anticipated
public offering. Amounts deferred through April 30, 1999 and 1998 totaling
$129,306 and $0, respectively have been included as other current
liabilities in the accompanying consolidated financial statements.
Additionally, as of April 30, 1999, the Company has advanced $6,864 to
employees and has an advance from an entity under common ownership
amounting to $5,508.
As of April 30, 1998, the Company had accounts receivable from an affiliate
amounting to $584,016 and an advance to a stockholder of $1,475.
See Notes 3 and 4 for discussion of other related party transactions.
9. JOINT VENTURE AND INVESTMENT AGREEMENTS:
---------------------------------------
In May 1998, the Company entered into an agreement with a corporation to
establish a joint venture to use, develop, market and/or resell certain
proprietary data transmission technology developed by the corporation. The
Company will own 51% of the joint venture, with the corporation owning the
remaining 49%. Use of the joint venture's technology by end users will
require certain royalties to be paid to the joint venture. As of April 30,
1999, the joint venture has not commenced operations. The Company's and the
joint venture's future operations are dependent on the effectiveness of
this technology and the continuation of this agreement.
The Company also has an agreement whereby it will invest $705,000 directly
into the corporation. In accordance with the agreement, as of April 30,
1999, the Company has advanced $205,000 on this investment and no shares of
the corporation have been issued to the Company. The Company is to remit
the remaining $500,000 commitment upon the completion of its public
offering, at which time the corporation will issue shares to the Company.
10. COMMITMENTS AND CONTINGENCIES:
-----------------------------
As of April 30, 1999, the Company has entered into two commitments with a
software provider. The first commitment requires the Company to acquire
40,000 units of software at a total cost of $1,080,000. As of April 30,
1999, $10,000 has been deposited on this commitment and no units have been
acquired. The second commitment requires the Company to acquire 15,000
units of other software at a total cost of $945,000. As of April 30, 1999,
no money has been paid on this commitment and no units have been acquired.
F-13
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued - UNAUDITED
---------
10. COMMITMENTS AND CONTINGENCIES: (Continued)
-----------------------------
Effective December 4, 1998, the Company entered into an agreement with an
entity whereby the entity will provide consulting services to AlphaCom,
Inc. and Subsidiary. As a result of this agreement, AlphaCom, Inc. is
required to pay $124,000 and to issue 124,000 shares of its stock to the
consulting entity for services rendered over the two year term of the
contract. As of April 30, 1999, the Company has expensed $16,000 of cash
payments required under the contract. The Company has agreed to issue
62,000 shares of common stock to the entity on the first and the second
anniversaries of the contract.
The Company has a commitment with another entity whereby the other entity
will develop a CD to be used in a certain CD-ROM application. The
outstanding commitment amounts to $18,000 at April 30, 1999.
The Company has an agreement with an internet service provider whereby it
will provide internet access to the Company's customers at a fixed monthly
fee. Under the terms of the agreement, the Company is required to sell
25,000 IDT internet access accounts. As of April 30, 1999 no such accounts
have been sold.
There were no commitments or contingencies at April 30, 1998. See Notes 2
and 9 for discussion of other commitments.
11. RESEARCH AND DEVELOPMENT COSTS:
------------------------------
Research and development costs related to both future and present products
are charged to operations as incurred. The Company recognized approximately
$156 and $0 of research and development costs during the four months ended
April 30, 1999 and 1998, respectively.
12. DEVELOPMENT STAGE ENTITY:
------------------------
The Company was formed in December 1997 to distribute high-technology
communication products and services to consumers who utilize the Internet.
Activities since that time have primarily been devoted to raising capital,
obtaining financing, product development and administrative functions. The
future viability of the Company is dependent upon its ability to
successfully obtain sufficient capital and market acceptance of its
products. There can be no assurance that the Company will achieve or
sustain profitability or positive cash flow from its operations, which, if
not achieved, will materially adversely affect the Company's business,
operating results and financial condition.
13. IMPACT OF YEAR 2000:
-------------------
Some of the Company's computer programs may have been written using two
digits rather than four to define the applicable year. As a result, those
computer programs may have time-sensitive software that recognize a date
using "00" as the year 1900 rather than the year 2000. This could cause a
system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business
activities.
The Company is utilizing both internal and external resources to identify,
correct or reprogram, and test the systems for year 2000 compliance.
14. SUBSEQUENT EVENT:
----------------
On May 6, 1999, the Company's stockholders held a special meeting where
they approved an increase in the number of authorized common shares from
20,000,000 to 60,000,000. This transaction had no effect on the number of
common shares outstanding or the par value of the common shares.
F-14
<PAGE> 51
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Stockholders and
Board of Directors of AlphaCom, Inc. and Subsidiary:
We have audited the accompanying consolidated balance sheet of AlphaCom, Inc.
and Subsidiary (development stage companies) as of December 31, 1998, and the
related consolidated statements of operations, stockholders' deficit and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AlphaCom, Inc. and
Subsidiary as of December 31, 1998, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
SPECTOR & SAULINO, CPAs, L.L.C.
Akron, Ohio
February 17, 1999, except for note 14, which is dated May 6, 1999.
F-15
<PAGE> 52
ALPHACOM, INC. AND SUBSIDIARY
(development stage companies)
CONSOLIDATED BALANCE SHEET
December 31, 1998
--------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash $ 1,387
Accounts receivable trade, less allowance for
doubtful accounts of $7,000 8,458
Accounts receivable, related parties 17,462
Accounts receivable, other 7,540
Prepaid expenses and other current assets 268,505
Inventories 20,635
----------
Total current assets 323,987
----------
Property, plant and equipment:
Machinery and equipment 38,790
Furniture and fixtures 38,132
Vehicles 54,539
Leasehold improvements 34,580
----------
166,041
Less accumulated depreciation
and amortization 19,072
----------
Total property, plant and equipment 146,969
----------
Advance on investment 205,000
Intangible assets, net of accumulated
amortization of $15,048 586,910
Deposits 13,339
----------
Total other assets 805,249
----------
Total assets $1,276,205
==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
F-16
<PAGE> 53
ALPHACOM, INC. AND SUBSIDIARY
(development stage companies)
CONSOLIDATED BALANCE SHEET, Continued
December 31, 1998
-------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C>
Current liabilities:
Note payable, officer-stockholder $ 721,306
Notes payable, stockholders, less unamortized
discount of $36,220 713,780
Current portion of long-term debt 8,648
Accounts payable, trade 690,540
Accrued interest, officer-stockholder 16,182
Accrued interest, stockholders 36,457
Accrued expenses 56,649
Other 101,300
-----------
Total current liabilities 2,344,862
Long-term liabilities:
Long-term debt, net of current portion 25,790
-----------
Total liabilities 2,370,652
-----------
Stockholders' deficit:
Common stock, $.001 par value, 20,000,000
shares authorized, 11,983,354 shares issued
and outstanding. See note 14 11,983
Additional paid-in capital 685,888
Deficit accumulated during the development
stage (1,792,318)
-----------
Total stockholders' deficit (1,094,447)
-----------
Total liabilities and stockholders' deficit $ 1,276,205
===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
F-17
<PAGE> 54
ALPHACOM, INC. AND SUBSIDIARY
(development stage companies)
CONSOLIDATED STATEMENT OF OPERATIONS
for the year ended December 31, 1998
------
<TABLE>
<S> <C>
Net sales, communication equipment $ 91,255
Cost of sales, communication equipment 6,557
-----------
Gross profit, equipment 84,698
-----------
Net sales, communication services 30,813
Cost of sales, communication services 14,897
-----------
Gross profit, services 15,916
-----------
Total gross profit 100,614
Selling, general and administrative expenses 1,697,126
-----------
Operating loss (1,596,512)
Interest expense (195,806)
-----------
Net loss $(1,792,318)
===========
Net loss per common share $ (.17)
===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
F-18
<PAGE> 55
ALPHACOM, INC. AND SUBSIDIARY
(development stage companies)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Deficit
Number Par Value Accumulated
of of Additional During the
Date of Common Common Paid-in Development
Transaction Shares Stock Capital Stage Total
----------- ------ ----- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Balances at December
31,1997 8,025,000 $ 8,025 - - $ 8,025
Stock issued to key
employees ($.001
per share) 1/30/98 1,272,000 1,272 - - 1,272
Stock issued for limited
asset purchase from
Alpha Beta Communi-
cations, Inc.
($.18 per share) See
Note 2. 7/02/98 1,653,354 1,653 295,950 - 297,603
Stock issued in associ-
ation with debt ($.18
per share). See Note 4. Various 750,000 750 134,281 - 135,031
Stock issued to key
employees ($.18
per share) 9/30/98 33,000 33 5,907 - 5,940
Stock issued via private
placement ($1.00 per
share) 10/08/98 250,000 250 249,750 - 250,000
Net loss for 1998 - - - (1,792,318) (1,792,318)
----------- --------- --------- ----------- -----------
Balances at December
31, 1998 11,983,354 $ 11,983 $ 685,888 $(1,792,318) $(1,094,447)
=========== ========= ========= =========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
F-19
<PAGE> 56
ALPHACOM, INC. AND SUBSIDIARY
(development stage companies)
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended December 31, 1998
Increase (Decrease) in Cash
--------
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $(1,792,318)
-----------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 19,072
Amortization 15,017
Non-cash equity transactions 142,243
(Increase) decrease in assets:
Accounts receivable, trade 20,042
Accounts receivable, related parties (493,229)
Accounts receivable, other (7,540)
Prepaid expenses and other current assets (251,781)
Inventories (1,277)
Deposits (13,339)
Increase in liabilities:
Accounts payable, trade 690,540
Accrued interest 52,639
Accrued expenses and other accrued liabilities 157,949
-----------
Total adjustments 330,336
-----------
Net cash used in operating activities (1,461,982)
-----------
Cash flows from investing activities:
Purchases of property, plant and equipment (21,673)
Advance on investment (205,000)
-----------
Net cash used in investing activities (226,673)
-----------
Cash flows from financing activities:
Principal payments on long-term debt (3,069)
Proceeds from notes payable, officer-stockholder
and related parties 1,435,086
Capital contributions 250,000
-----------
Net cash provided by financing activities 1,682,017
-----------
Net decrease in cash (6,638)
Cash, beginning of year 8,025
-----------
Cash, end of year $ 1,387
===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
F-20
<PAGE> 57
ALPHACOM, INC. AND SUBSIDIARY
(development stage companies)
CONSOLIDATED STATEMENT OF CASH FLOWS, Continued
for the year ended December 31, 1998
Increase (Decrease) in Cash
---------
<TABLE>
<S> <C>
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 44,387
===============
</TABLE>
Supplemental schedule of noncash investing and financing activities:
Limited asset purchase from Alpha Beta Communications, Inc. (ABC) including
the receipt of $28,500 of accounts receivable, $19,358 of inventory, $16,724
of prepaid expenses, $144,368 of property, plant and equipment and $601,958
of intangible assets. Additionally, as a result of this agreement, the
Company assumed $37,507 of long-term debt, offset $475,767 of receivables
from ABC and issued stock with a value of $297,603. See note 2.
Interest expense of $98,780 has been recorded as a result of amortizing a
discount on notes payable, stockholders. See note 4.
The accompanying notes are an integral part
of these financial statements.
F-21
<PAGE> 58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------------------------------
NATURE OF OPERATIONS
AlphaCom, Inc. (the "Company") was incorporated on December 1, 1997 under
the laws of the State of Nevada and commenced operations on January 1,
1998. The Company will distribute high-technology communication products
and services to consumers who utilize the internet. Sales and distribution
will be accomplished through a network marketing system in North America
and through authorized distributors and licensees in countries outside of
North America.
The following is a summary of significant accounting policies of the
Company:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
AlphaCom, Inc. and its wholly owned subsidiary (AlphaCom Canada, Ltd.). All
significant intercompany profits, balances, and transactions have been
eliminated in consolidation.
FOREIGN CURRENCY TRANSLATION
The Company's account balances that are in Canadian currency (which result
from the Canadian subsidiary) have been translated in accordance with SFAS
No. 52, "Foreign Currency Translation." Assets and liabilities have been
translated at exchange rates as of the end of the year. Income and expense
accounts have been translated at the average exchange rates during the
year. Due to limited activity at the Canadian subsidiary, there were no
transaction gains and losses from remeasurement of monetary assets,
liabilities, income and expense.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has a number of financial instruments, none of which are held
for trading purposes. The Company estimates that the fair value of all
financial instruments at December 31, 1998, does not differ materially from
the aggregate carrying values of its financial instruments recorded in the
accompanying balance sheet. The estimated fair value amounts have been
determined by the Company using available market information and
appropriate valuation methodologies. Considerable judgment is necessarily
required in interpreting market data to develop the estimates of fair
value, and, accordingly, the estimates are not necessarily indicative of
the amounts that the Company could realize in a current market exchange.
INVENTORIES
Inventories consist primarily of computer communication hardware and
software and are stated at lower of cost or market. Cost is determined by
the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost. Major additions and
betterments are charged to the property accounts while replacements,
maintenance and repairs which do not improve or extend the life of the
respective assets are expensed currently. When property is retired or
otherwise disposed of, the cost of the property is removed from the asset
account, accumulated depreciation is charged with an amount equivalent to
the depreciation provided, and the difference is charged or credited to
income.
F-22
<PAGE> 59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
--------------------------------------------------------------------
(CONTINUED)
DEPRECIATION
Depreciation is provided using primarily the straight-line method over the
estimated useful lives of the assets for financial statement purposes;
accelerated methods are primarily used for tax purposes.
INCOME TAXES
Income taxes are provided for the tax effect of transactions reported in
the consolidated financial statements and consist of taxes currently due
plus deferred taxes related primarily to differences between the basis of
property and equipment, and various reserves and accruals for financial and
income tax reporting. The deferred tax assets and liabilities represent the
future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or
settled.
INTANGIBLE ASSETS
Intangible assets have been recorded as a result of the limited asset
purchase from Alpha Beta Communications, Inc. (note 2) and are being
amortized on a straight-line basis over 20 years.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of trade accounts
receivable.
The Company grants credit to its customers. The Company performs ongoing
credit evaluations of its customers and does not require collateral.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding
for the year. Diluted earnings per share reflect the potential dilution
that could occur if the dilutive agreement resulted in the issuance of
common stock that then shared in the earnings of the Company.
At December 31 1998, 124,000 shares of potential common stock related to a
consulting agreement (Note 10) were excluded from the computation of
diluted loss per share because their inclusion would have an antidilutive
effect on loss per share.
F-23
<PAGE> 60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------
2. LIMITED ASSET PURCHASE:
-----------------------
In July of 1998, the Company entered into a Limited Asset Purchase
Agreement (Agreement) with Alpha Beta Communications, Inc. ("ABC"). The
Agreement provided for the purchase of substantially all of the assets and
assumption of certain liabilities of ABC in exchange for $475,767 due the
Company from ABC and the issuance of 1,653,354 shares of $.001 par value
common stock, valued by management at $.18 per share or $297,603, issued to
the minority stockholders of ABC. The tangible assets acquired included
accounts receivable, inventories, property and equipment, prepaid and other
assets. Management estimated the fair market value of these assets to be
$208,950. In addition, AlphaCom acquired intangible assets including trade
names, client list, distributor base and/or subscribers. As part of the
transaction, AlphaCom also assumed liabilities of $37,507. In addition, the
Company has a commitment to pay $200,000 to ABC's majority stockholder, who
is also a stockholder in the Company, contingent upon the successful public
offering of the Company.
The transaction has been accounted for as a purchase and has resulted in
intangible assets of $601,958 which will be amortized over 20 years using
the straight-line method.
3. NOTES PAYABLE, OFFICER-STOCKHOLDER:
-----------------------------------
The Company has notes payable to an officer-stockholder amounting to
$721,306 at December 31, 1998. The notes bear interest at rates ranging
from 5.1% to 5.6%, are unsecured and are payable in full on June 30, 1999.
The weighted average of the interest rates is 5.54% and the estimated fair
value of these notes equals their book value at December 31, 1998.
Accrued interest on notes payable, officer-stockholder amounts to $16,182
at December 31, 1998. No interest has been paid on notes payable,
officer-stockholder.
4. NOTES PAYABLE, STOCKHOLDERS:
----------------------------
In 1998 the Company entered into a number of transactions with individual
creditors and issued unsecured notes payable. The terms of the notes
included interest at a stated rate of 12% per annum together with one share
of the Company's $.001 par value common stock for each one dollar borrowed.
For purposes of this transaction, management valued the common stock at
$.18 per share at the time of the transaction. The notes mature at various
dates through September 1999.
Discount on the notes payable has been recorded for financial statement
purposes. The aggregate discount of $135,000 is being amortized over the
life of the notes. The estimated fair value of these notes equals their
book value at December 31, 1998.
F-24
<PAGE> 61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
---------
5. LONG-TERM DEBT:
---------------
<TABLE>
<S> <C>
Long-term debt consists of the following at December 31, 1998:
Note payable, bank, due in monthly installments
of $453, including interest at 8.39%. The note
payable is collateralized by a vehicle and matures
July 2002. $ 16,787
Note payable, bank, due in monthly installments of $468,
including interest at 10.17%. The note payable is
collateralized by a vehicle and matures July 2002. 17,651
---------
34,438
Less current maturities 8,648
---------
$ 25,790
==========
</TABLE>
The book value of these notes equals their estimated fair market value at
December 31, 1998. The following is a schedule of maturities for the next
four years ending December 31 and in the aggregate for long-term debt owed
by the Company at December 31, 1998:
<TABLE>
<S> <C>
1999 $ 8,648
2000 9,362
2001 10,135
2002 6,293
----------
$ 34,438
==========
</TABLE>
6. OPERATING LEASE COMMITMENTS:
----------------------------
The Company is obligated under non-cancelable leases for the use of the
operating facility, an automobile and a copier. The leases expire at
various dates through 2001 and the facility lease allows for two one-year
renewals beginning in April 1999. Certain of the leases require the lessee
to bear the cost of insurance and maintenance.
Approximate future minimum obligations under non-cancelable lease
commitments for years ending December 31 are as follows:
<TABLE>
<S> <C>
1999 $ 14,100
2000 7,500
2001 900
-----------
$ 22,500
===========
</TABLE>
Rent expense was approximately $29,800 in 1998.
F-25
<PAGE> 62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------
7. INCOME TAXES:
-------------
The following reconciles income taxes reported in the consolidated
financial statements to taxes that would be obtained by applying the U.S.
federal statutory rate to income before income taxes at December 31, 1998:
<TABLE>
<S> <C>
Expected taxes (benefit) using statutory rate of 34% $ (609,388)
Non-deductible expenses 2,236
State income tax benefit, net of federal benefit (102,500)
Other 152
Valuation allowance 709,500
--------------
Benefit of income taxes $ -
==============
The deferred tax asset and liability consists of the following components:
Deferred federal short-term tax asset $ 610,000
Deferred state short-term tax asset 103,000
Deferred tax asset valuation allowance (713,000)
------------
Total deferred short-term tax asset $ -
==============
Deferred federal long-term tax liability $ 3,000
Deferred state long-term tax liability 500
Deferred tax liability valuation allowance (3,500)
--------------
Total deferred long-term tax liability $ -
==============
</TABLE>
Federal and state deferred tax assets related to net operating loss
carryforwards are approximately $658,000 and $112,000, respectively. The
federal net operating loss may be carried forward for twenty years while
the state net operating loss may be carried forward for fifteen years. As
discussed in note 12, the Company is a development stage entity. As such,
the Company lacks an operating history and therefore, a valuation allowance
has been recorded to offset the deferred tax assets and the benefit of
income taxes. Actual results could differ from this estimate.
8. RELATED PARTY TRANSACTIONS
--------------------------
Certain key officers of the Company have agreed to defer a percentage of
their compensation until such time as the Company completes its anticipated
public offering. Amounts deferred through December 31, 1998 totaling
$101,300 have been included as other current liabilities in the
accompanying consolidated financial statements.
Additionally, as of December 31, 1998, the Company has advanced $5,710 to
employees and has advanced $11,752 to an entity under common ownership.
See Notes 2, 3, and 4 for discussion of other related party transactions.
F-26
<PAGE> 63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------
9. JOINT VENTURE AND INVESTMENT AGREEMENTS:
----------------------------------------
In May 1998, the Company entered into an agreement with a corporation to
establish a joint venture to use, develop, market and/or resell certain
proprietary data transmission technology developed by the corporation. The
Company will own 51% of the joint venture, with the corporation owning the
remaining 49%. Use of the joint venture's technology by end users will
require certain royalties to be paid to the joint venture. As of December
31, 1998, the joint venture has not commenced operations. The Company's and
the joint venture's future operations are dependent on the effectiveness of
this technology and the continuation of this agreement.
The Company also has an agreement whereby it will invest $705,000 directly
into the corporation. In accordance with the agreement, as of December 31,
1998, the Company has advanced $205,000 on this investment and no shares of
the corporation have been issued to the Company. The Company is to remit
the remaining $500,000 commitment upon the completion of its public
offering, at which time the corporation will issue shares to the Company.
10. COMMITMENTS AND CONTINGENCIES:
------------------------------
The Company has entered into two commitments with a software provider. The
first commitment requires the Company to acquire 40,000 units of software
at a total cost of $1,080,000. As of December 31, 1998, $10,000 has been
deposited on this commitment and no units have been acquired. The second
commitment requires the Company to acquire 15,000 units of other software
at a total cost of $945,000. As of December 31, 1998, no money has been
paid on this commitment and no units have been acquired.
Effective December 4, 1998, the Company entered into an agreement with an
entity whereby other entity will provide consulting services to AlphaCom,
Inc. and Subsidiary. As a result of this agreement, AlphaCom, Inc. is
required to pay $124,000 and to issue 124,000 shares of its stock to the
consulting entity for services rendered over the two year term of the
contract. As of December 31, 1998, the Company has expensed $4,000 of cash
payments required under the contract. The Company has agreed to issue
62,000 shares of common stock to the entity on the first and second
anniversaries of the contract.
The Company has a commitment with another entity whereby the other entity
will develop a CD to be used in a certain CD-ROM application. The
outstanding commitment amounts to $18,000 at December 31, 1998.
The Company has an agreement with an internet service provider whereby it
will provide internet access to the Company's customers at a fixed monthly
fee. Under the terms of the agreement, the Company is required to sell
25,000 IDT internet access accounts. As of December 31, 1998 no such
accounts have been sold.
See Notes 2 and 9 for discussion of other commitments.
11. RESEARCH AND DEVELOPMENT COSTS:
-------------------------------
Research and development costs related to both future and present products
are charged to operations as incurred. The Company recognized approximately
$844,000 of research and development costs during the year ended December
31, 1998.
F-27
<PAGE> 64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
--------
12. DEVELOPMENT STAGE ENTITY:
-------------------------
The Company was formed in December 1997 to distribute high-technology
communication products and services to consumers who utilize the internet.
Activities since that time have primarily been devoted to raising capital,
obtaining financing, product development and administrative functions. The
future viability of the Company is dependent upon its ability to
successfully obtain sufficient capital and market acceptance of its
products. There can be no assurance that the Company will achieve or
sustain profitability or positive cash flow from its operations, which, if
not achieved, will materially adversely affect the Company's business,
operating results and financial condition.
13. IMPACT OF YEAR 2000:
--------------------
Some of the Company's computer programs may have been written using two
digits rather than four to define the applicable year. As a result, those
computer programs may have time-sensitive software that recognize a date
using "00" as the year 1900 rather than the year 2000. This could cause a
system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business
activities.
The Company is utilizing both internal and external resources to identify,
correct or reprogram, and test the systems for year 2000 compliance.
14. SUBSEQUENT EVENT:
-----------------
On May 6, 1999, the Company's stockholders held a special meeting where
they approved an increase in the number of authorized common shares from
20,000,000 to 60,000,000. This transaction had no effect on the number of
common shares outstanding or the par value of the common shares.
F-28
<PAGE> 65
NO DEALER, SALESPERSON OR ANY OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY US. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED
BY THIS PROSPECTUS, OR AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IS UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS SHALL NOT, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS.
TABLE OF CONTENTS
Our Company .................................. 5
Summary ...................................... 5
Risk Factors ................................. 7
Management Discussion of Analysis of Condition
and Results of Operations .................... 15
Year 2000 Readiness Disclosure ............... 15
Use of Proceeds .............................. 17
Capitalization ............................... 18
Dilution ..................................... 18
Business ..................................... 20
Selling Securityholders ...................... 28
Principal Shareholders ....................... 28
Management ................................... 29
Certain Transactions ......................... 32
Description of Securities .................... 33
Shares Eligible for Future Sale .............. 33
Available Information ........................ 34
Dividend Policy .............................. 35
Stock Transfer Agent ......................... 35
Experts ...................................... 35
Legal Matters ................................ 36
Index to Financial Statements ................ Fl
ALPHACOM, INC.
5,320,000
SHARES COMMON STOCK
(par value $.001 per share)
[LOGO]ALPHACOM
Tomorrow's Communications... Today!
AlphaCom, Inc.
1035 Rosemary Boulevard
Akron, Ohio 44306
_______, 1999
<PAGE> 66
Part II-INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The information required by this item is incorporated by reference to
"indemnification" in the prospectus herein.
At present we have not entered into individual indemnity agreements
with our Officers or Directors. However, our By-Laws and Certificate of
Incorporation provide a blanket indemnification that we shall indemnify, to the
fullest extent under Nevada law, our directors and officers against certain
liabilities incurred with respect to their service in such capabilities. In
addition, the Certificate of Incorporation provides that the personal liability
of our directors and officers and our stockholders for monetary damages will be
limited.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons pursuant
to the foregoing provisions, or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933, as amended,
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or
paid by a director, officer or controlling person in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933, as amended, and we will be governed by the final
adjudication of such case.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration Fee $ 7,394.80
Blue Sky Fees and Expenses $ 10,000.00
Legal Fees and Expenses $ 16,000.00
Printing and Engraving Expenses $ 5,000.00
Accountant's Fees and Expenses $ 30,000.00
-----------
Total $ 68,394.80
The foregoing expenses, except for the SEC fees, are estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
(a) Unregistered Securities Sold
The following sets forth information relating to all previous
sales of common stock by the Registrant which sales were not
registered under the Securities Act of 1933.
On September 9, 1998, we issued 750,000 shares of common
stock, for an aggregate consideration of $750,000. No sales
<PAGE> 67
commissions were paid in connection with the offering. The foregoing
purchases and sales were exempt from registration under the
Securities Act pursuant to Rule 504 of Regulation D on the basis
that the transactions involved a public offering.
Pursuant to a private placement of securities effected between October
8, 1998 and June 8, 1999, we sold 250,000 shares of common stock to
20 investors, each of whom subscribed to purchase the shares, at a
price of $1.00 per share, for aggregate consideration of $250,000.
No sales commissions were paid in connection with the offering. The
foregoing purchases and sales were exempt from registration under
the Securities Act pursuant to Rule 506 of Regulation D on the basis
that the transactions did not involve a public offering.
All investors had the opportunity to ask questions and receive answers
from all of our officers, directors and employees. In addition, they
had access to review all of our corporate records and material
contracts and agreements.
<PAGE> 68
(i) LIST OF PERSONS TO WHOM THE PUBLIC OFFERING SECURITIES WERE SOLD. Between
July 27, 1998 and September 9, 1998
<TABLE>
<S> <C> <C>
Acuman Investment Group Mary Ann Jacob Joseph T. Shuster
Troy D. Allen Brett Job Glenn Silverhart
M. Michael Allison Shyam Joshi Jagdish Singh
Alfred Isaac Bageya Cynthia A. Kalman Dorothy M. Sprosty
Shane C. Bailey Andrew Kazmer Ronald R. Sprosty
BC Stone (BC Stone Partners) Trishia M. Sprosty
Rene Becker Peter D. King James Stamp
David P. Bell Brian Kirin Joel W. Stamp
Dan Berkley Steven J. Kosko Willard J. Stamp
Marlene Blaszczyk Chris Kulpinski Thomas J. Terry III
Henry M. Bockman Joseph Lechiara Thomas E. Tomasik
Thomas P. Bonacuse Barbara E. Lee Bac H. Tran
Stacy M. Brandt David Leslie Alan R. Trevarthen
Brimfield (Brimfield Fabrication) Kinson & Victoria Tso
Kevin S. Broderick Jerry Leslie Frank S. Turkovich
Brad Byler Paul D. Loftus Gary A. Viar
Santkumar Chopra Derrick S. Long Rich Vincenti
Mary Ann and George Cloos Rocco Lucadamo Garfield E. Vogen
Brian Cole Sharif Marzouk Frank A. Wahl
Joan Colling Dianne L. McCarthy Marjorie B. Webb
Travis L.Collins Kerri Meeks Michael T. Welsh
Russell A. Cramer Jr. Karen Mendenhall Bradley A. Wertz
Steven R. Cross Juanita Miller Brian E. Wertz
Lee Ann Daher Julie Murray Jonathan R. Wertz
Philip C. Davis Joann Nonno Wertz Enterprises, Inc.
Jon Jacobson & Sharon Denzel Ormsbee (Ormsbee Enterprises)
Donald W. Ellis Jimmy Pappas James T. White
Bill Fernald David C. Parks II Terry A. White
Max & Lisa Fink Barrett F. Parris Robert H. Wilkins III
Richard T. Fontanesi John L. Pearl Charles R. Williams
James Fryar Robbie Pendleton, Jr. Anthony K. Wilson
Masc A. Fugarino Sean A.Wilson Sheila P. Kelley
Luis J. Garcia Robert J. Phillips Sean Wilson
David R. Gorby. Nathaniel M. Pine Jeffrey D. Zadra
Ted Gottschallk Edwin J. Pivcevich Jeffrey Dean Zadra II
Richard Grobman Stephen Porter Norbert Seidel
Donald Gross Ken Pridore Mark A. Shapiro
James Gryck Ardith L. Ries Dennis Sega
Gloria Muriel Hall Charles G. Salter Thomas M. Herman
Daniel J. Hardee Nick Santillo Joseph D. Horning
Willie G. Harrison A. Frank Sapper Andrew Inboden
Christine Henry Dr. Baldwin Sawyer Andrew J. Herman
June M.Schaut Shema (Shema Development)
Bruce G. & Lynn Davis Herphy
Daniel L. & Carol D. Petke
</TABLE>
(ii) LIST OF PERSONS TO WHOM THE PRIVATE PLACEMENT OFFERING SECURITIES WERE
SOLD. Between October 8, 1998 and June 8, 1999
Richard Brandt accredited
Bruce Clement accredited
<PAGE> 69
I. James Cummings sophisticated
Mary Dreiman accredited
Boris Goldstein accredited
Gilbert Hamrick, Jr. accredited
James Heiser accredited
Jimmy Pappas accredited
David Peters sophisticated
Steve Peters sophisticated
Daniel Peters, Sr. sophisticated
John Piscitelli, III accredited
John Piscitelli, Jr. accredited
William R. Shellhase, II accredited
Shema Development accredited
Joel W. Stamp accredited
Willard Stamp accredited
David Styer sophisticated
Bac Tran accredited
Edward J. Unaitis accredited
November, 1998
The Board of Directors authorized the issuance of 124,000 shares of Common Stock
in connection with a consulting contract for services rendered by ITM.
<PAGE> 70
ITEM 27. - EXHIBITS
Index to Exhibits
Exhibit No.
- -----------
(1) Form of Subscription Agreement
(2) Charter and Bylaws
(a) Certified copy of (Charter) Certificate of
Incorporation of AlphaCom, Inc.
(b) Bylaws of AlphaCom, Inc.
(3) Form of Sales Agreement to secure Internet Service Subscribers
(4) Material Contracts
(a) Limited Asset Purchase Agreement(s) dated July 1,
1998 by and between AlphaCom, Inc. and stockholders
of Alpha Beta Communications, Inc.
(b) Lease Agreement on the premises 1035 Rosemary B'lvd.,
Akron, Ohio, by and between AlphaCom, Inc. and John
Piscitelli, Jr.
(c) Preliminary Agreement, by and between AlphaCom, Inc.
and ITM to esablish a joint venture.
(d) Joint Venture agreement with American Millennium
Corporation, Inc. dated 5/14/98.
(7) Opinion Re: Nevada Corporate Law
(8) Consent of Miles Garnett, Esq.
27 - Financial Data Schedule
23.5 Consent of Spector & Saulino, L.L.C., CPAs
<PAGE> 71
ITEM 28. UNDERTAKINGS
The undersigned registrant undertakes:
(1) To file, during any period in which offer or sales are being made, a
post-effective amendment to this registration statement
To include any prospectus required by section I O(a)(3) of the
Securities Act of 1933;
To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment) which, individually or in the aggregate,
represent a fundamental change in the information in the
registration statement;
To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to the information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of securities at that time shall be deemed to be the
initial bona fide offering.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission any supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred to that section.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to our certificate of incorporation or provisions of
Nevada law, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission the indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. If a claim for
indemnification against liabilities (other than the payment by the Registrant)
of expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit, or proceeding is
asserted by a director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of our
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether the indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of the issue.
<PAGE> 72
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, this
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on our behalf by the undersigned, in the City of AKRON,
State of OHIO, on July 13, 1999.
(Registrant) ALPHACOM, INC.
By /s/ Robert Snyder
------------------------------------
Robert Snyder, President and
Chairman of the Board of Directors
In accordance with the Securities Act of 1933 this registration was
signed by the following persons in the capacities and on the dates indicated.
(Signature) /s/Dennis Snyder
-------------------------------------
Dennis Snyder
Vice President of Customer Service
(Date) 7/13/99
-------------------------------------
(Signature) /s/Barry Gilliland
-------------------------------------
Barry Gilliland
Vice President Administration
(Date) 7-13-99
-------------------------------------
(Signature) /s/Joseph Lechiara
-------------------------------------
Joseph Lechiara
Chief Financial Officer
(Date) 7-13-99
-------------------------------------
(Signature) -------------------------------------
(Type or Print Name)
(Title) -------------------------------------
(Date) -------------------------------------
Who must sign: the small business issuer, its principal executive officer or
officers, its principal financial officer, its controller or principal
accounting officer and at least the majority of directors or persons performing
similar functions.
<PAGE> 1
Exhibit 1
For Office Use Only:
Broker/Dealer Name & Address Investor:
-----------------------------
Investor #:__________________
[LOGO]ALPHACOM
Tomorrow's Communications... Today!
SUBSCRIPTION AGREEMENT
FOR
ALPHACOM, INC.
FORM SB-2 OFFERING
COMMON STOCK ($5.00 PER SHARE)
Persons interested in purchasing shares of the Common Stock of AlphaCom, Inc.
(the "Shares") must complete and return this Subscription Agreement along with
their check or money order to:
ALPHACOM, INC.
1035 ROSEMARY BOULEVARD; SUITE I
Akron, Ohio 44306, ("the Issuer") ("the Company")
Subject only to acceptance hereof by the issuer, in its discretion, the
undersigned hereby subscribes for the number of Common Shares and at the
aggregate subscription price set forth below.
An accepted copy of this Agreement will be returned to the Subscriber as a
receipt, and the physical stock certificates shall be delivered to each Investor
within thirty (30) days of the Close of this Offering.
SECURITIES OFFERED - The Company and selling shareholders are offering
5,320,000 shares (par value $.001 per share) of Common Stock at $5.00 per share.
MINIMUM SUBSCRIPTION - In connection with this subscription the
undersigned hereby subscribes to the number of Common shares shown in the
following table.
ALL SUBSCRIBERS - The Minimum Subscription is 100 shares and
the maximum subscription is 10,000 shares.
NUMBER OF COMMON SHARES = ______________________
MULTIPLY BY PRICE OF SHARES x $5.00 Per Share
------------------------
AGGREGATE SUBSCRIPTION PRICE ________________________
Check or money order shall be made payable to ALPHACOM, INC.
<PAGE> 2
In connection with this investment in the Company, I represent and warrant as
follows:
a) Prior to tendering payment for the Shares, I received a copy of and read your
Prospectus dated __________________, 1999.
b) I am a bona fide resident of the state of ___________________________.
c) The Issuer and the other purchasers are relying on the truth and accuracy of
the declarations, representations and warranties herein made by the
undersigned. Accordingly, the foregoing representations and warranties and
undertakings are made by the undersigned with the intent that they may be
relied upon in determining his/her suitability as a purchaser. Investor agrees
that such representations and warranties shall survive the acceptance of
Investor as a purchaser, and Investor indemnifies and agrees to hold harmless,
the Issuer and each other purchaser from and against all damages, claims,
expenses, losses or actions resulting from the untruth of any of the warranties
and representations contained in this Subscription Agreement.
Please register the Shares which I am purchasing as follows:
Name: _______________________________________ Date:_____________________________
As (check one)
[_] Individual [_] Tenants in Common [_] Existing Partnership
[_] Joint Tenants [_] Corporation [_] Trust
[_] Minor with adult custodian under the Uniform Gift to Minors Act
For the person(s) who will be registered shareholder(s):
- ------------------------------------------- -----------------------------------
Signature of Subscriber Residence Address
- ------------------------------------------- -----------------------------------
Name of Subscriber (Printed) City or Town
- ------------------------------------------- -----------------------------------
Signature of Co-Subscriber State Zip Code
- ------------------------------------------- -----------------------------------
Name of Co-Subscriber (Printed) Telephone
- ------------------------------------------- -----------------------------------
Subscriber Tax I.D. or Co-Subscriber Tax I.D. or
Social Security Number Social Security Number
- -------------------------------------------
E-mail Address (if available)
- --------------------------------------------------------------------------------
ACCEPTED BY: ALPHACOM, INC.
By: Date
------------------------------ -----------------------------------
Officer
<PAGE> 1
Exhibit 2(a)
SECRETARY OF STATE
[SEAL]
STATE OF NEVADA
CORPORATE CHARTER
I, DEAN HELLER, the duly elected and qualified Nevada Secretary of State, do
hereby certify that ALPHACOM, INC. did on DECEMBER 1, 1997 file in this office
the original Articles of Incorporation; that said Articles are now on file and
of record in the office of the Secretary of State of the State of Nevada, and
further, that said Articles contain all the provisions required by the law of
said State of Nevada.
IN WITNESS WHEREOF, I have hereunto set
my hand and affixed the Great Seal of
State, at my office, in Carson City,
Nevada, on December 2, 1997.
[SEAL] /s/ Dean Heller
Secretary of State
By /s/ illegible
Certification Clerk
<PAGE> 2
STATE OF NEVADA - SECRETARY OF STATE
CERTIFICATE FILE NUMBER
26772-1997
ALPHACOM, INC.
LAUGHLIN ASSOCIATES, INC. FOR THE FILING PERIOD 12/97 TO 12/98
2533 N. CARSON STREET
CARSON CITY, NV 89706
[SEAL] KA FILED
MAY 28 1998
DEAN HELLER
SECRETARY OF STATE
I, Dean Heller, the duly qualified Secretary of State of Nevada do hereby
certify that the above corporation after having paid the annual fee of $85.00
for filing in this office a list of its officers and directors and designation
of resident agent for the above filing period, together with penalty in the sum
of and having also filed the aforesaid list as required by Nevada
Revised Statutes Section 78.150-78.165 and 80.110-80.140, as amended, is hereby
authorized to transact and conduct business within the state for the aforesaid
period.
/s/ Dean Heller
THE CERTIFICATE BECOMES A RECEIPT UPON BEING DEAN HELLER
VALIDATED BY THE OFFICE OF SECRETARY OF STATE SECRETARY OF STATE
<PAGE> 3
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JUNE 04 1998
NO. C26772-97
----------------
/S/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
CERTIFICATE AMENDING ARTICLES OF INCORPORATION
OF
ALPHACOM, INC.
The undersigned, being the President and Secretary of AlphaCom, Inc., a
Nevada Corporation, hereby certify that by majority vote of the Board of
Directors and majority vote of the Stockholders at a meeting held on May 27,
1998, it was agreed by unanimous vote that this CERTIFICATE AMENDING ARTICLES
OF INCORPORATION be filed.
The undersigned further certify that the original Articles of
Incorporation of AlphaCom, Inc., were filed with the Secretary of State of 1st
day of December, 1997. The undersigned further certify that ARTICLE FIRST of
the original Articles of Incorporation filed on the 1st day of December, 1997,
herein is amended to read as follows:
ARTICLE FOURTH
FOURTH. That the total number of shares of common stock authorized that
may be issued by the Corporation is TWENTY MILLION (20,000,000) shares of
common stock @ $.001 par value and no other class of stock shall be
authorized. Said shares may be issued by the corporation from time to time for
such considerations as may be fixed by the Board of Directors.
The undersigned hereby certify that they have on this 27th of May, 1998,
executed this Certificate Amending the original Articles of Incorporation
heretofore filed with the Secretary of State of Nevada.
/s/ Robert Snyder
-----------------------
President
/s/ Dennis Snyder
-----------------------
Secretary
ALL PURPOSE ACKNOWLEDGMENT
State of Ohio )
) ss:
County of Summit )
On the 27 day of May, 1998, before me, the undersigned Notary Public,
personally appeared, Robert Snyder Pres - Dennis Snyder Secy known or proved by
satisfactory evidence, to be the person whose name appears above, and
acknowledged to me that he executed the above in his authorized capacity, and
that by his signature on the instrument the person or the entity upon behalf
of which the person acted, executed the instrument.
WITNESS my hand and official seal.
(Official Stamp or Seal)
/s/ illegible
- --------------------
Notary Public
My Commission expires
7-11-2002
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FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
DEC 01 1997
NO. C26772-1997 ARTICLES OF INCORPORATION
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Dean Heller
DEAN HELLER, SECRETARY OF STATE OF
--
AlphaCom, Inc.
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FIRST. The name of the corporation is:
AlphaCom, Inc.
SECOND. Its registered office in the State of Nevada is located at 2533
North Carson Street, Carson City, Nevada 89706 that this Corporation may
maintain an office, or offices, in such other place within or without the State
of Nevada as may be from time to time designated by the Board of Directors, or
by the By-Laws of said Corporation, and that this Corporation may conduct all
Corporation business of every kind and nature, including the holding of all
meetings of Directors and Stockholders, outside the State of Nevada as well as
within the State of Nevada
THIRD. The objects for which this Corporation is formed are: To engage
in any lawful activity, including, but not limited to the following:
(A) Shall have such rights, privileges and powers as may be conferred
upon corporations by any existing law.
(B) May at any time exercise such rights, privileges and powers, when
not inconsistent with the purposes and objects for which this corporation is
organized.
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C) Shall have power to have succession by its corporate name for the
period limited in its certificate or articles of incorporation, and when no
period is limited, perpetually, or until dissolved and its affairs wound up
according to law.
(D) Shall have power to sue and be sued in any court of law or equity.
(E) Shall have power to make contracts.
(F) Shall have power to hold, purchase and convey real and personal
estate and to mortgage or lease any such real and personal estate with its
franchises. The power to hold real and personal estate shall include the power
to take the same by devise or bequest in the State of Nevada, or in any other
state, territory or country.
(G) Shall have power to appoint such officers and agents as the affairs
of the corporation shall require, and to allow them suitable compensation.
(H) Shall have power to make By-Laws not inconsistent with the
constitution or laws of the United States, or of the State of Nevada, for the
management, regulation and government of its affairs and property, the transfer
of its stock, the transaction of its business, and the calling and holding of
meetings of its stockholders.
(I) Shall have power to wind up and dissolve itself, or be wound up or
dissolved.
(J) Shall have power to adopt and use a common seal or stamp, and alter
the same at pleasure. The use of a seal or stamp by the corporation on any
corporate documents is not necessary. The corporation may use a seal or stamp,
if it desires, but such use or nonuse shall not in any way affect the legality
of the document.
(K) Shall have power to borrow money and contract debts when necessary
for the transaction of its business, or for the exercise of its corporate
rights, privileges or franchises,
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or for any other lawful purpose of its incorporation; to issue bonds, promissory
notes, bills of exchange, debentures, and other obligations and evidences of
indebtedness, payable at a specified time or times, or payable upon the
happening of a specified event or events, whether secured by mortgage, pledge or
otherwise, or unsecured, for money borrowed, or in payment for property
purchased, or acquired, or for any other lawful object.
(L) Shall have power to guarantee, purchase, hold, sell, assign,
transfer, mortgage, pledge or otherwise dispose of the shares of the capital
stock of, or any bonds, securities or evidences of the indebtedness created by,
any other corporation or corporations of the State of Nevada, or any other state
or government, and, while owners of such stock, bonds, securities or evidences
of indebtedness, to exercise all the rights, powers and privileges of ownership,
including the right to vote, if any.
(M) Shall have power to purchase, hold, sell and transfer shares of its
own capital stock, and use therefor its capital, capital surplus, surplus, or
other property or fund.
(N) Shall have power to conduct business, have one or more offices, and
hold, purchase, mortgage and convey real and personal property in the State of
Nevada, and in any of the several states, territories, possessions and
dependencies of the United States, the District of Columbia, and any foreign
countries.
(O) Shall have power to do all and everything necessary and proper for
the accomplishment of the objects enumerated in its certificate or articles of
incorporation, or any amendment thereof, or necessary or incidental to the
protection and benefit of the corporation, and, in general, to carry on any
lawful business necessary or incidental to the attainment of the
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objects of the corporation, whether or not such business is similar in nature to
the objects set forth in the certificate or articles of incorporation of the
corporation, or any amendment thereof.
(P) Shall have power to make donations for the public welfare or for
charitable, scientific or educational purposes.
(Q) Shall have power to enter into partnerships, general or limited, or
joint ventures, in connection with any lawful activities, as may be allowed by
law.
FOURTH. That the total number of common stock authorized that may be
issued by the Corporation is TWENTY MILLION (20,000,000) shares of stock @ $.01
par value and no other class of stock shall be authorized. Said shares may be
issued by the corporation from time to time for such considerations as may be
fixed by the Board of Directors.
FIFTH. The governing board of this corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the By-Laws of this
Corporation, providing that the number of directors shall not be reduced to
fewer than one (1).
The name and post office address of the first board of Directors shall
be one (1) in number and listed as follows:
NAME POST OFFICE ADDRESS
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Brent Buscay 2533 North Carson Street
Carson City, Nevada 89706
SIXTH. The capital stock, after the amount of the subscription price, or
par value, has been paid in, shall not be subject to assessment to pay the debts
of the corporation.
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SEVENTH. The name and post office address of the Incorporator signing
the Articles of Incorporation is as follows:
NAME POST OFFICE ADDRESS
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Brent Buscay 2533 North Carson Street
Carson City, Nevada 89706
EIGHTH. The resident agent for this corporation shall be:
LAUGHLIN ASSOCIATES, INC.
The address of said agent, and, the registered or statutory address of this
corporation in the state of Nevada, shall be:
2533 North Carson Street
Carson City, Nevada 89706
NINTH. The corporation is to have perpetual existence.
TENTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
Subject to the By-Laws, if any, adopted by the Stockholders, to make,
alter or amend the By-Laws of the Corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in; to authorize and cause to be executed, mortgages and
liens upon the real and personal property of this Corporation.
By resolution passed by a majority of the whole Board, to designate one
(1) or more committees, each committee to consist of one or more of the
Directors of the Corporation,
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which, to the extent provided in the resolution, or in the By-Laws of the
Corporation, shall have and may exercise the powers of the Board of Directors in
the management of the business and affairs of the Corporation. Such committee,
or committees, shall have such name, or names, as may be stated in the By-Laws
of the Corporation, or as may be determined from time to time by resolution
adopted by the Board of Directors.
When and as authorized by the affirmative vote of the Stockholders
holding stock entitling them to exercise at least a majority of the voting power
given at a Stockholders meeting called for that purpose, or when authorized by
the written consent of the holders of at least a majority of the voting stock
issued and outstanding, the Board of Directors shall have power and authority at
any meeting to sell, lease or exchange all of the property and assets of the
Corporation, including its good will and its corporate franchises, upon such
terms and conditions as its board of Directors deems expedient and for the best
interests of the Corporation.
ELEVENTH. No shareholder shall be entitled as a matter of right to
subscribe for or receive additional shares of any class of stock of the
Corporation, whether now or hereafter authorized, or any bonds, debentures or
securities convertible into stock, but such additional shares of stock or other
securities convertible into stock may be issued or disposed of by the Board of
Directors to such persons and on such terms as in its discretion it shall deem
advisable.
TWELFTH. No director or officer of the Corporation shall be personally
liable to the Corporation or any of its stockholders for damages for breach of
fiduciary duty as a director or officer involving any act or omission of any
such director or officer; provided, however, that the foregoing provision shall
not eliminate or limit the liability of a director or
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officer (i) for acts or omissions which involve intentional misconduct, fraud or
a knowing violation of law, or (ii) the payment of dividends in violation of
Section 78.300 of the Nevada Revised Statutes. Any repeal or modification of
this Article by the stockholders of the Corporation shall be prospective only,
and shall not adversely affect any limitation on the personal liability of a
director or officer of the Corporation for acts or omissions prior to such
repeal or modification.
THIRTEENTH. This Corporation reserves the right to amend, alter, change
or repeal any provision contained in the Articles of Incorporation, in the
manner now or hereafter prescribed by statute, or by the Articles of
Incorporation, and all rights conferred upon Stockholders herein are granted
subject to this reservation.
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I, THE UNDERSIGNED, being the Incorporator hereinbefore named for the
purpose of forming a Corporation pursuant to the General Corporation Law of the
State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts herein stated are true, and accordingly
have hereunto set my hand this 1st day of December, 1997.
/s/ Brent Buscay
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Brent Buscay
STATE OF NEVADA )
) SS:
CARSON CITY )
On this 1st day of December, 1997 in Carson City, Nevada, before me, the
undersigned, a Notary Public in and for Carson City, State of Nevada, personally
appeared:
Brent Buscay
Known to me to be the person whose name is subscribed to the foregoing document
and acknowledged to me that he executed the same.
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[SEAL] WENDEE L. CORREIA
NOTARY PUBLIC-NEVADA
Appt. Recorded in CARSON CITY
No. 97-2163-3 My Appt. Exp. April 9, 2001
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/s/ Wendee L. Correia
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Notary Public
I, Laughlin Associates, Inc. hereby accept as Resident Agent for the previously
named Corporation.
December 01, 1997 /s/ Brent Buscay
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Date Vice President
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CERTIFIED STATEMENT OF J.M LECHIARA
I, J.M. Lechiara, CFO and Treasurer of AlphaCom, Inc. am, and since my
employment on August 1, 1998 have been an officer of AlphaCom, Inc. I have
participated in all corporate activity since that time and am competent to
execute this certification of corporate matters.
I am aware that no Bylaws or other governing documents have been adopted by the
corporation, its directors or shareholders other than the Articles of
Incorporation filed December 1, 1997, and that there have been no amendments or
changes to those Articles except for the following:
1. On May 27, 1998 - Article Fourth - to change the par value of the common
stock to $.001 per share.
2. On April 15, 1999 - approved by the shareholders at a special meeting held
on May 6, 1999 - Article Fourth - to increase the authorized shares to
60,000,000 shares.
I am also aware that no event has occurred which would affect the authority or
powers granted therein.
I am also aware that he current Annual List of Officers as filed with the
Nevada Secretary of State is complete and accurate.
I HEREBY CERTIFY UNDER PENALTY OF PERJURY UNDER THE LAWS OF THIS STATE THAT THE
FOREGOING IS TRUE AND ACCURATE TO THE BEST OF MY KNOWLEDGE.
/s/ J.M. Lechiara 6-23-99
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J.M. Lechiara Date
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[SEAL]
DEAN HELLER
[GRAPHIC] NEVADA SECRETARY OF STATE
CORPORATE INFORMATION
Name: ALPHACOM, INC.
Type: File Number: State: Incorporated On: December 01,
Corporation 26772-1997 NEVADA 1997
Status: Current list of officers on file Corp Type: Regular
Resident Agent: LAUGHLIN ASSOCIATES, INC. (Accepted)
Address: 2533 N. CARSON STREET
CARSON CITY NV 89706
President: ROBERT SNYDER
Address: 2533 N. CARSON ST
CARSON CITY NV 89706
Secretary: DENNIS SNYDER
Address: 2533 N. CARSON ST
CARSON CITY NV 89706
Treasurer: JOE LECHIARA
Address: 2533 N. CARSON ST
CARSON CITY NV 89706
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ALPHACOM, INC.
?TYP/NR C 026772-1997 ST NEVADA INC ON DEC 1, 1997 FOR PERPETUAL
?STATUS CURRENT LIST AS OF: 01-04-99 NUMBER OF PAGES FILED: 8 DRH
TYPE: REGULAR
PURPOSE: ALL LEGAL ACTIVITIES
PU FILING FEE 225.00 EXP CAPITAL: $60,000
?SHRS 60,000,000 PAR VAL: $.001 NR NO PAR SHRS
?NBR 15065
LIST OF OFFICERS FOR 98 - 99 FILED ON 01-04-99 ANNUAL LO TCH
LAUGHLIN ASSOCIATES, INC. ACCEPTED 120197
2533 N. CARSON STREET CARSON CITY NV 89706
PRES ROBERT SNYDER 052898
2533 N. CARSON STREET CARSON CITY NV 89706
SECT DENNIS SNYDER 052898
2533 N. CARSON STREET CARSON CITY NV 89706
TRES JOE LECHIARA 010499
2533 N. CARSON STREET CARSON CITY NV 89706
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Exhibit 2(b)
AlphaCom, Inc.
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BY-LAWS
ARTICLE I MEETINGS OF SHAREHOLDERS
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1. Shareholders' Meetings shall be held in the office of the
corporation, at Carson City, NV, or at such other place or places as the
Directors shall, from time to time, determine.
2. The annual meeting of the shareholders of this corporation shall be
held at 11:00 a.m., on the 1st day of December of each year beginning in 1998,
at which time there shall be elected by the shareholders of the corporation a
Board of Directors for the ensuing year, and the shareholders shall transact
such other business as shall properly come before them. If the day fixed for the
annual meeting shall be a legal holiday such meeting shall be held on the next
succeeding business day.
3. A notice signed by any Officer of the corporation or by any person
designated by the Board of Directors, which sets forth the place of the annual
meeting, shall be personally delivered to each of the shareholders of record, or
mailed postage prepaid, at the address as appears on the stock book of the
corporation, or if no such address appears in the stock book of the corporation,
to his last known address, at least ten (10) days prior to the annual meeting.
Whenever any notice whatever is required to be given under any article
of these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to the notice, whether before or after the time of the meeting of the
shareholders, shall be deemed equivalent to proper notice.
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4. A majority of the shares issued and outstanding, either in person or
by proxy, shall constitute a quorum for the transaction of business at any
meeting of the shareholders.
5. If a quorum is not present at the annual meeting, the shareholders
present, in person or by proxy, may adjourn to such future time as shall be
agreed upon by them, and notice of such adjournment shall be mailed, postage
prepaid, to each shareholder of record at least ten (10) days before such date
to which the meeting was adjourned; but if a quorum is present, they may adjourn
from day to day as they see fit, and no notice of such adjournment need be
given.
6. Special meetings of the shareholders may be called at anytime by the
President; by all of the Directors provided there are no more than three, or if
more than three, by any three Directors; or by the holder of a majority share of
the capital stock of the corporation. The Secretary shall send a notice of such
called meeting to each shareholder of record at least ten (10) days before such
meeting, and such notice shall state the time and place of the meeting, and the
object thereof. No business shall be transacted at a special meeting except as
stated in the notice to the shareholders, unless by unanimous consent of all
shareholders present, either in person or by proxy.
7. Each shareholder shall be entitled to one vote for each share of
stock in his own name on the books of the corporation, whether represented in
person or by proxy.
8. At all meetings of shareholders, a shareholder may vote by proxy
executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting.
9. The following order of business shall be observed at all
meetings of the
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shareholders so far as is practicable:
a. Call the roll;
b. Reading, correcting, and approving of
the minutes of the previous meeting;
c. Reports of Officers;
d. Reports of Committees;
e. Election of Directors;
f. Unfinished business; and
g. New business.
10. Unless otherwise provided by law, any action required to be taken at
a meeting of the shareholders, or any other action which may be taken at a
meeting of the shareholders, may be taken without a meeting if a consent in
writing, setting forth the action to be taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE II STOCK
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1. Certificates of stock shall be in a form adopted by the Board of
Directors and shall be signed by the President and Secretary of the corporation.
2. All certificates shall be consecutively numbered; the name of the
person owning the shares represented thereby, with the number of such shares and
the date of issue shall be entered on the company's books.
3. All certificates of stock transferred by endorsement thereon shall be
surrendered by cancellation and new certificates issued to the purchaser or
assignee.
4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession,
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assignment or authority to transfer, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, and cancel the old
certificate; every such transfer shall be entered on the transfer book of the
corporation.
5. The corporation shall be entitled to treat the holder of record of
any share as the holder in fact thereof, and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of this state.
ARTICLE III DIRECTORS
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1. A Board of Directors, consisting of at least one (1) person shall be
chosen annually by the shareholders at their meeting to manage the affairs of
the corporation. The Directors' term of office shall be one (1) year, and
Directors may be re-elected for successive annual terms.
2. Vacancies on the Board of Directors by reason of death, resignation
or other causes shall be filled by the remaining Director or Directors choosing
a Director or Directors to fill the unexpired term.
3. Regular meetings of the Board of Directors shall be held at 1:00
p.m., on the 1st day of December of each year beginning in 1998 at the office of
the company at Carson City, NV, or at such other time or place as the Board of
Directors shall by resolution appoint; special meetings may be called by the
President or any Director giving ten (10) days notice to each Director. Special
meetings may also be called by execution of the appropriate waiver of notice and
called when executed by a majority of the Directors of the company. A majority
of the Directors shall constitute a quorum.
4. The Directors shall have the general management and control of the
business and
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affairs of the corporation and shall exercise all the powers that may be
exercised or performed by the corporation, under the statutes, the Articles of
Incorporation, and the By-Laws. Such management will be by equal vote of each
member of the Board of Directors with each Board member having an equal vote.
5. The act of the majority of the Directors present at a meeting at
which a quorum is present shall be the act of the Directors.
6. A resolution, in writing, signed by all or a majority of the members
of the Board of Directors, shall constitute action by the Board of Directors to
effect therein expressed, with the same force and effect as though such
resolution had been passed at a duly convened meeting; and it shall be the duty
of the Secretary to record every such resolution in the Minute Book of the
corporation under its proper date.
7. Any or all of the Directors may be removed for cause by vote of the
shareholders or by action of the Board. Directors may be removed without cause
only by vote of the shareholders.
8. A Director may resign at any time by giving written notice to the
Board, the President or the Secretary of the corporation. Unless otherwise
specified in the notice, the resignation shall take effect upon receipt thereof
by the Board or such Officer, and the acceptance of the resignation shall not be
necessary to make it effective.
9. A Director of the corporation who is present at a meeting of the
Directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless his dissent shall be entered in the
minutes of the meeting or unless he shall file his written dissent to such
action with the person acting as the Secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered mail to the
Secretary of the
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corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a Director who voted in favor of such action.
ARTICLE IV OFFICERS
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1. The Officers of this company shall consist of: a President, one or
more Vice Presidents, Secretary, Treasurer, and such other officers as shall,
from time to time, be elected or appointed by the Board of Directors.
2. The PRESIDENT shall preside at all meetings of the Directors and the
shareholders and shall have general charge and control over the affairs of the
corporation subject to the Board of Directors. He shall sign or countersign all
certificates, contracts and other instruments of the corporation as authorized
by the Board of Directors and shall perform all such other duties as are
incident to his office or are required by him by the Board of Directors.
3. The VICE PRESIDENT shall exercise the functions of the President
during the absence or disability of the President and shall have such powers and
such duties as may be assigned to him, from time to time, by the Board of
Directors.
4. The SECRETARY shall issue notices for all meetings as required by the
By-Laws, shall keep a record of the minutes of the proceedings of the meetings
of the shareholders and Directors, shall have charge of the corporate books, and
shall make such reports and perform such other duties as are incident to his
office, or properly required of him by the Board of Directors. He shall be
responsible that the corporation complies with Section 78.105 of the Nevada
Revised Statutes and supplies to the Nevada Resident Agent or Registered Office
in Nevada, any and all amendments to the corporation's Articles of Incorporation
and any and all amendments or changes to the By-Laws of the corporation. In
compliance with Section 78.105, he will also supply to the Nevada Resident
Agent or Registered Office in Nevada, and maintain,
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a current statement setting out the name of the custodian of the stock ledger or
duplicate stock ledger, and the present and complete Post Office address,
including street and number, if any, where such stock ledger or duplicate stock
ledger is kept.
5. The TREASURER shall have the custody of all monies and securities of
the corporation and shall keep regular books of account. He shall disburse the
funds of the corporation in payment of the just demands against the corporation,
or as may be ordered by the Board of Directors, making proper vouchers for such
disbursements and shall render to the Board of Directors, from time to time, as
may be required of him, an account of all his transactions as Treasurer and of
the financial condition of the corporation. He shall perform all duties incident
to his office or which are properly required of him by the Board of Directors.
6. The RESIDENT AGENT shall be in charge of the corporation's registered
office in the State of Nevada, upon whom process against the corporation may be
served and shall perform all duties required of him by statute.
7. The salaries of all Officers shall be fixed by the Board of Directors
and may be changed, from time to time, by a majority vote of the Board.
8. Each of such Officers shall serve for a term of one (1) year or until
their successors are chosen and qualified. Officers may be re-elected or
appointed for successive annual terms.
9. The Board of Directors may appoint such other Officers and Agents, as
it shall deem necessary or expedient, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined, from time to time, by the Board of Directors.
10. Any Officer or Agent elected or appointed by the Directors may be
removed by
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the Directors whenever in their judgment the best interests of the corporation
would be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed.
11. A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the Directors for the unexpired
portion of the term.
ARTICLE V INDEMNIFICATION OF OFFICERS AND DIRECTORS
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The corporation shall indemnify any and all of its Directors and
Officers, and its former Directors and Officers, or any person who may have
served at the corporation's request as a Director or Officer of another
corporation in which it owns shares of capital stock or of which it is a
creditor, against expenses actually and necessarily incurred by them in
connection with the defense of any action, suit or proceeding in which they, or
any of them, are made parties, or a party, by reason of being or having been
Director(s) or Officer(s) of the corporation, or of such other corporation,
except, in relation to matters as to which any such Director or Officer or
former Director or Officer or person shall be adjudged in such action, suit or
proceeding to be liable for negligence or misconduct in the performance of duty.
Such indemnification shall not be deemed exclusive of any other rights to which
those indemnified may be entitled, under By-Law, agreement, vote of shareholders
or otherwise.
ARTICLE VI DIVIDENDS
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The Directors may, from time to time, declare, and the corporation may
pay, dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE VII WAIVER OF NOTICE
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Unless otherwise provided by law, whenever any notice is required to be
given to any shareholder or Director of the corporation under the provisions of
these By-Laws or under the
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provisions of the Articles of Incorporation, a waiver thereof in writing, signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
ARTICLE VIII AMENDMENTS
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1. Any of these By-Laws may be amended by a majority vote of the
shareholders at any annual meeting or at any special meeting called for that
purpose.
2. The Board of Directors may amend the By-Laws or adopt additional
By-Laws, but shall not alter or repeal any By-Laws adopted by the shareholders
of the company.
CERTIFIED TO BE THE BY-LAWS OF:
AlphaCom, Inc.
BY:_______________________________
Secretary
<PAGE> 10
STOCK LEDGER STATEMENT
This statement made by AlphaCom, Inc., maintained and kept on file at its
registered office in Nevada in compliance with Section 78.105 (d) of the Nevada
Revised Statutes.
The name of the custodian of our stock ledger or duplicate stock ledger is:
__________________________________________________
(Name of person in possession of Stock Ledger)
Whose complete address where said ledger is kept is:
__________________________________________________
(Physical address -- Street, etc.)
__________________________________________________
(City) (State) (Zip Code)
__________________________________________________
(Telephone Number Including Area Code)
This statement is current until altered, changed, amended or revoked and our
Nevada Resident Agent so notified by next Original revised statement or
revocation.
DATED THIS__________________day of__________________________________, 19_______.
CERTIFIED TO BE THE STATEMENT OF:
AlphaCom, Inc.
By:__________________________________
Secretary
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RESOLUTION
WRITTEN CONSENT OF ORIGINAL DIRECTOR(S)/OFFICER(S) OF
AlphaCom, Inc.
The undersigned, being all or a quorum of the original temporary
Director(s)/Officer(s) of AlphaCom, Inc., a Nevada Corporation, named in the
original Articles of Incorporation, for purposes of incorporation only, which
were filed with the Secretary of State of Nevada on the 1st day of December,
1997, do hereby consent, in writing, pursuant to NRS 78.315 to the following
resolution:
RESOLVED, that this corporation shall be offered for sale and sold in
its present shell form prior to the issuance or sale of any of the corporation's
capital stock and/or election of permanent Directors and Officers and without
further organizational procedures or the further conduct of any business,
internal or otherwise; any and all such matters, privileges and responsibilities
being deferred in favor of the new owners, Directors and Officers; with the
exceptions that the original Articles of Incorporation of this corporation may
be amended by majority of the original incorporators to accommodate the request
and pleasure of the buyer of this said corporate shell and,
FURTHER, the Directors shall guarantee to, and indemnify the buyer of
this corporation that there are NO liabilities, taxes or encumbrances of any
kind or nature whatsoever outstanding against this corporation and resign as a
Director and Officer of this corporation transferring all right, title and
interest in and to this corporation to the new owners, etc.
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IN WITNESS WHEREOF, the undersigned have executed this Written Consent as of the
date hereof.
DATED AT Carson City, this 1st day of December, 1997.
/s/ Brent Buscay
----------------------
Brent Buscay, Director
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SAVE AND HOLD HARMLESS INDEMNITY AGREEMENT
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RECEIPT
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TRANSFER AND ASSIGNMENT
-----------------------
Laughlin Associates, Inc., Nevada Resident Agents, hereby guarantees,
represents and unequivocally states to purchaser(s) of AlphaCom, Inc., a Nevada
Corporation Shell, that there are absolutely NO taxes, liabilities, debts or
encumbrances of any kind, type or nature whatsoever as of this date, accrued by
said corporation, owing by said corporation or outstanding against said
corporation and,
FURTHER, said Laughlin Associates, Inc. agrees to Save and Hold Harmless
and to completely indemnify the purchaser of said corporation, his heirs,
transferee or assigns, any and all future Shareholders, Directors and Officers
of said corporation from any liability whatsoever related to any liabilities of
or on behalf of AlphaCom, Inc., a Nevada Corporation, legally obligated by or
against said corporation prior to date of resignation; sale and transfer to
purchaser.
FURTHER, Laughlin Associates, Inc. hereby acknowledges receipt of a good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged as full, complete and final payment of said corporate shell and,
THEREFORE, said Laughlin Associates, Inc. does also hereby acknowledge
sale, transfer and assign of all their total right, title and interest in and to
said corporation, effective as of the date hereof.
IN WITNESS WHEREOF, said officers have hereunto set their hands this 1st
day of December, 1997 at Carson City, Nevada.
LAUGHLIN ASSOCIATES, INC.
/s/ Brent Buscay
----------------------
Brent Buscay, Director
2-3
<PAGE> 14
CONSENT TO ACTION WITHOUT A MEETING OF THE DIRECTORS
----------------------------------------------------
OF
--
AlphaCom, Inc.
--------------
In accordance with Chapter 78 of the Nevada Revised Statutes, Brent
Buscay, a Director of AlphaCom, Inc., hereby consents to the following action:
RESOLVED that Robert Snyder is hereby appointed a Director of AlphaCom,
Inc., to serve until a successor is duly elected and qualified.
IN WITNESS WHEREOF, the undersigned has executed this Written Consent as
of the date hereof.
DATED AT Carson City, Nevada, this 1st day of December, 1997.
/s/ Brent Buscay
----------------------
Brent Buscay, Director
STATE OF NEVADA )
)SS.
CARSON CITY )
On this 1st day of December, in the year 1997, before me, personally appeared
Brent Buscay, personally known to me (or proved to me on basis of satisfactory
evidence) to be the person whose name is subscribed to this instrument, and
acknowledge that he executed it.
WITNESS my hand and official seal
[seal] LIN MARIE VANNECCI /s/ Lin Marie Vannecci
NOTARY PUBLIC-NEVADA -----------------------
Appt. Recorded in CARSON CITY Notary Public
No. ??? My Appt. Exp. June 21, 2000
2-4
<PAGE> 15
RESIGNATION
-----------
I, BRENT BUSCAY, an original Director and member of the first Board of
Directors of AlphaCom, Inc., a Nevada Corporation, hereby tender and submit my
resignation as a member of the Board of Directors and as an Officer of the above
named Corporation, such resignation to be effective this 1st day of December,
1997.
/s/ Brent Buscay
----------------------
Brent Buscay, Director
STATE OF NEVADA )
)SS.
CARSON CITY )
On this 1st day of December, in the year 1997, before me, personally appeared
Brent Buscay, personally known to me (or proved to me on basis of satisfactory
evidence) to be the person whose name is subscribed to this instrument, and
acknowledge that he executed it.
WITNESS my hand and official seal
[SEAL] LIN MARIE VANNECCI /s/ Lin Marie Vannecci
NOTARY PUBLIC-NEVADA -----------------------
Appt. Recorded in CARSON CITY Notary Public
No. ??? My Appt. Exp. June 21, 2000
2-5
<PAGE> 16
MINUTES OF THE BOARD OF DIRECTORS
OF
ALPHACOM, INC.
April 19, 1999
The Board of Directors of AlphaCom, Inc. (the "Company") met on April
19, 1999 at approximately 10:00 a.m. at the Company. In attendance at the
meeting were each of the directors; Robert Snyder, Dennis Snyder and Barry W.
Gilliland. Also in attendance at the meeting were Jack A. DeVrieze, Dr. Baldwin
Sawyer and J. Bruce Hunsicker of Brouse McDowell. Mr. Robert Snyder as President
and Chairman of the Board of Directors conducted the meeting.
The first order of business was to elect the 1999 officers of the
Company. Upon motion made and seconded the following slate was unanimously
approved by the Board of Directors:
President and CEO - Robert Snyder
Vice President - Barry W. Gilliland
Secretary - Dennis Snyder
Treasurer - Joe Lechiara
For the purposes of the meeting Mr. Hunsicker was asked to serve as
Assistant Secretary.
The following resolutions were made, seconded and unanimously approved
by the Board of Directors:
1. BE IT RESOLVED to authorize the retention of J. Bruce Hunsicker of
Brouse McDowell as the Company's counsel.
2. BE IT RESOLVED to retain Scott Lyons of Spector & Saulino as the
Company's auditors.
3. BE IT RESOLVED to authorize and approve the Company's proposed SB2
stock offering of 3 million shares at $1.00 per share.
4. BE IT RESOLVED to authorize the Company to enter into the licensing
agreement with Lafe Technology.
5. BE IT RESOLVED to change the Director's fee to $100.00 per meeting
and further to suspend the operation of this resolution until such
time as the Company has outside directors.
6. BE IT RESOLVED to ratify and approve the acts of the directors and
officers of the Corporation since the Company's last Board of
Directors meeting.
7. BE IT RESOLVED to approve the American Stock and Transfer Company as
the transfer agent for the Company's stock.
<PAGE> 17
8. BE IT RESOLVED to approve obtaining a loan from Marathon Capital in
the amount of $2,500,000.00 to be secured by the Company's tangible
assets, inventory, receivables and all other assets of the Company
at 12% interest, interest payable quarterly together with warrants
for 20% of the loan to be converted to shares and a stock
commission. The approval by the Board is subject to review of the
documentation by counsel for the Company and by Mr. Lechiara.
9. BE IT RESOLVED TO RESERVE 300,000 SHARES IN LIEU OF COMPANY CASH
BONUSES to employees.
10. BE IT RESOLVED to approve THE ISSUANCE OF 80,000 SHARES OF COMPANY
STOCK TO MR. LECHIARA IN RECOGNITION OF HIS OUTSTANDING SERVICE TO
THE COMPANY.
THEREAFTER, Mr. Lechiara presented the financial report of the
Corporation. He indicated that Spector & Saulino is in the process of finalizing
the year-end financial statement as of 12-31-98. He further noted that as of the
date of the meeting there were outstanding 11,983,354 shares of Company stock
out of a total of 20 million shares authorized.
THEREUPON, the Board of Directors discussed the possibility and
desirability of a stock split. Upon motion made, seconded and approved by the
Board of Directors, the Board approved the proposed two for one stock split,
subject to the approval by the shareholders of the Company to increase the
authorized shares of the Company from 20 million to 60 million shares.
THEREUPON, Mr. Robert Snyder discussed the use of funds of the
Corporation. Specifically, Mr. Snyder discussed Lafe Technology, Bell Atlantic
and the expansion of the Company's facilities.
Upon motion made and seconded the Board of Directors approved calling a
special Shareholders Meeting for the purpose of increasing the capital stock of
the Corporation from 20 million to 60 million shares. The meeting will take
place on May 6, 1999 at the Richfield Holiday Inn.
THEREUPON, the Board of Directors discussed the annual meeting of
the Shareholders of the Corporation and the recommendation by the Board of
Directors that three new directors be added to the Board of Directors as
follows: Jack Craciun, Marion Ruebel, and J. Bruce Hunsicker. The date for the
annual meeting has not yet been set but the Board expressed a desire to call the
Annual Meeting of the Shareholders in the near future.
Upon motion made and seconded, the meeting was adjourned at
approximately 11:30 a.m.
/s/ Robert Snyder
------------------------------------
Robert Snyder, President and CEO
/s/ Dennis Snyder
------------------------------------
Dennis Snyder
/s/ Barry W. Gilliland
------------------------------------
Barry W. Gilliland, Vice President
<PAGE> 18
MINUTES OF SPECIAL SHAREHOLDERS MEETING
OF
ALPHACOM, INC.
A special meeting of the Shareholders of AlphaCom, Inc. was held on
MAY 6, 1999 at the Richfield Holiday Inn pursuant to notice mailed to
Shareholders on April 15, 1999. Robert Snyder, President and Chairman of the
Board of Directors presided at the meeting. Also in attendance at the meeting
were J. Bruce Hunsicker, Esq., who served as Assistant Secretary, and Joe
Lechiara, Treasurer.
Mr. Snyder called the meeting to order promptly at 6:30 p.m. and
requested that Mr. Lechiara and Joann Nonno serve as tellers for the meeting.
Thereupon, Mr. Lechiara and Mrs. Nonno collected and tallied all proxy's and
determined the number of persons present by person or proxy. Mr. Lechiara
reported back that a quorum of the Shareholders was present in person or by
proxy.
Mr. Jack Cracium thereupon made a motion to increase the AUTHORIZED
SHARES OF STOCK OF THE COMPANY FROM 20 TO 60 MILLION SHARES. The motion was
seconded and discussion on the motion was had. After discussion the motion was
put to a vote. Mr. Lechiara reported that of the 11,983,354 shares outstanding,
10,548,421 voted in favor of the motion and therefore the motion was approved.
During the vote count, Mr. Snyder provided the Shareholders with a report as to
the current status of the Company's marketing efforts.
Thereupon, Barry Gilliland moved that the meeting be adjourned.
Joann Nonno seconded the motion and the motion was approved by the Shareholders.
The meeting adjourned at 7:15 p.m.
/s/ J. B. Hunsicker
--------------------
J. Bruce Hunsicker
Assistant Secretary
<PAGE> 19
ACTION BY WRITTEN CONSENT
OF THE
BOARD OF DIRECTORS OF
ALPHACOM, INC.
A Nevada Corporation
Pursuant to Section 78.315 of the Nevada Revised Statutes, the
following actions were taken by the undersigned, being all of the directors of
AlphaCom, Inc., a Nevada corporation (the "Corporation"), without a meeting and
by means of their unanimous written consent on the 15th day of April, 1999.
WHEREAS, it has been proposed that ARTICLE FOURTH of the Corporation's
Articles of Incorporation, as amended and restated in its entirety
effective May 27, 1998, be again amended and restated in its entirety to
read as follows:
FOURTH. The total number of shares of common stock authorized to
be issued by the Corporation is SIXTY MILLION (60,000,000) shares of
common stock at $.001 par value, and no other class of stock shall be
authorized. Said shares may be issued by the Corporation from time to
time for such considerations as may be fixed by the Board of Directors.
WHEREAS, the adoption of the proposed amendment is advisable and in the
best interest of the Corporation;
NOW, THEREFORE, IT IS HEREBY
RESOLVED, that the proposed amendment be and it hereby is adopted,
subject to approval by a majority vote of the stockholders holding at
least a majority of each class of stock outstanding and entitled to vote
thereon.
/s/ Robert G. Snyder
-----------------------
Robert G. Snyder
/s/ Dennis Snyder
----------------------
Dennis Snyder
/s/ Barry W. Gilliland
----------------------
Barry W. Gilliland
DIRECTORS
<PAGE> 20
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF
ALPHACOM, INC.
(After Issuance of Stock)
We, the undersigned President and Secretary of AlphaCom, Inc., a Nevada
Corporation (the "Corporation"), do hereby certify:
That the Board of Directors of the Corporation, by action taken without
a meeting and by means of their unanimous written consent on April 15, 1999,
adopted a resolution to further amend the Corporation's Articles of
Incorporation, as amended effective May 27, 1998, as follows:
ARTICLE FOURTH of the Corporation's Articles of Incorporation, as
amended and restated in its entirety effective May 27, 1998, shall be
again amended and restated in its entirety to read as follows:
FOURTH. The total number of shares of common stock authorized to
be issued by the Corporation is SIXTY MILLION (60,000,000) shares of
common stock at $.001 par value, and no other class of stock shall be
authorized. Said shares may be issued by the Corporation from time to
time for such considerations as may be fixed by the Board of Directors.
That the number of shares of the Corporation outstanding and entitled to
vote on such amendment to the Articles of Incorporation is 11,983,354.
That the said change and amendment have been consented to and approved
by a majority vote of the stockholders holding at least a majority of each class
of stock outstanding and entitled to vote thereon.
/s/ Robert G. Snyder
---------------------------
Robert G. Snyder, President
/s/ Dennis Snyder
---------------------------
Dennis Snyder, Secretary
State of Ohio )
) ss.
County of Summit )
On ______________________ 1999, personally appeared before me, a Notary
Public, Robert G. Snyder, President, and Dennis Snyder, Secretary, known or
proved by satisfactory evidence to be the persons whose names appear above, and
acknowledged to me that they
<PAGE> 21
executed the above in their authorized capacity, and that by their signatures on
the instrument, the entity on behalf of which they acted executed the
instrument.
WITNESS my hand and official seal.
_____________________________
Notary Public
(NOTARY STAMP OR SEAL)
3
<PAGE> 1
Exhibit 3
[LETTERHEAD]
<TABLE>
<CAPTION>
SERVICE AGREEMENT
<S> <C> <C>
Customer Information:
- ---------------------
Name:__________________________ Distributor/Reference ID#:__________________________
Address:_______________________________________________________________________________
City:_______________________ State:_______________ Zip Code:_______________________
Service Information:
- --------------------
Serial Number:___________________ EID Number: _______________________________________
IP Assigned:_____________________ DNS Assigned:______________________________________
Side Preference: Side A Side B Comp. Server Assigned:_____________________________
CDPD Provider:___________________
Email Addresses assigned:[email protected] Incoming Server(POP):networkalpha.com
[email protected] Outgoing Server(SMTP):networkalpha.com
Email Password: ____________________________________________
Payment Option:
- ---------------
Circle One:
Yearly: $419.40 Monthly: $34.95/month Proration will apply for a partial month
BILLING SERVICE INFORMATION IF PAYING BY THE MONTH
--------------------------------------------------
SETUP AND FIRST MONTH PAYMENT:
- ------------------------------
**Setup Fee: $34.95 (setup fee is NON REFUNDABLE)
First Month: $34.95
------
Total: $69.90
Payment Method (Circle One): VISA MasterCard Discover *Check *Money Order
CREDIT CARD INFORMATION:
NAME ON CARD:__________________________________________________________________________
Card Number:_____________________________________________ Exp:_______________________
Card Holder Signature:___________________________________ Date:______________________
*If paying by check, cash, or money order please enclose payment with this form
and mail it to AlphaCom within 10 days to avoid service interruption.
**Setup fee includes: setting up of 2 email accounts, web space area, and CDPD
activation. SETUP FEE IS NOT REFUNDABLE.
</TABLE>
<PAGE> 2
Monthly Payment Authorization for $34.95 if by Credit Card:
- -----------------------------------------------------------
Card Type: MasterCard Visa Discover
Name On Card:_____________________________________________
Card Number:______________________________________________ Exp:________________
By signing this agreement you hereby authorize AlphaCom to debit your credit
card in the amount of $34.95 on a monthly basis starting the first business day
after one month of the initialization. This authority is to remain in effect
until revoked in writing at least 10 business days prior to next billing date.
This payment is for monthly service and maybe subject to change.
Cardholders Signature:____________________________________
Billing Service Information if Paying By the Year
-------------------------------------------------
Setup and 1 Year Service Payment:
- ---------------------------------
**Setup Fee $ 34.95 (Setup Fee is NON REFUNDABLE)
First Year: $419.40
-------
Total: $454.35
Payment Method (Circle One): VISA MasterCard Discover *Check *Money Order
Credit card Information:
Name On Card:___________________________________________________________________
Card Number: ______________________________________________ Exp:______________
Card Holder Signature:_____________________________________ Date:_____________
*If paying by check, cash, or money order please enclose payment with this form
and mail it to AlphaCom within 10 days to avoid service interruption.
**Setup fee includes: setting up of 2 email accounts, web space area, and CDPD
activation.
Return Policy
-------------
RIGHT TO RETURN GOODS OR MERCHANDISE - YOU MAY RETURN THE GOODS AND MERCHANDISE
TO SELLER FOR ANY REASON DURING THE FIRST TEN (10) DAYS AFTER THE DATE OF
SHIPMENT FOR A FULL REFUND OR CREDIT, PROVIDED THE GOODS AND MERCHANDISE ARE IN
GOOD WORKING ORDER AND REPAIR AND YOU HAVE FIRST OBTAINED A RETURN MERCHANDISE
AUTHORIZATION NUMBER (RMA) FROM SELLER. FREIGHT CHARGES ARE NOT REFUNDABLE. TO
OBTAIN A RMA YOU MUST CONTACT SELLER BY TELEPHONE OR E-MAIL WITHIN SAID 10 DAY
PERIOD. THE GOODS AND MERCHANDISE MUST BE PROMPTLY RETURNED IN THE ORIGINAL
PACKAGING. RETURNS AFTER 10 DAYS BUT BEFORE THIRTY (30) DAYS FROM SHIPMENT ARE
SUBJECT TO RESTOCKING FEE OF 40% OF THE INVOICE AMOUNT. NO RETURNS WILL BE
ACCEPTED WITHOUT AN RMA.
Cancellation of Service
-----------------------
If for any reason you wish to cancel your service, please contact AlphaCom
directly. Customer is responsible for payment of service from activation date
until date of cancellation.
Acceptable Use Policy
---------------------
I have read the terms of the acceptable use policy in this form and am aware
that violating terms in the acceptable use policy may result in termination of
service.
__________________________
Customers Signature
<PAGE> 3
ALPHACOM SERVICE AGREEMENT AND ACCEPTANCE CRITERIA
All provisions of AlphaCom Service Agreement apply to all of the Customer's
Accounts billed to the Customer. The benefits of or rights conferred by this
Agreement are nontransferable. Use of AlphaCom accounts is expressly limited to
the individual or business whose name appears on the account and dependents of
the account holder living at the same address. AlphaCom reserves the right to
change, without notice, its Service, including, but not limited to access
procedures, hours of operation, menu structures, commands, documents, vendors
and services offered. Telco service charges may be billed separately and are
subject to change. Customer shall be deemed to have assented to the terms
hereof, whether or not previously received, upon accepting delivery of any
service or equipment.
PROPRIETARY RIGHTS
Customer acknowledges that AlphaCom provides a certain Internet access and data
services ("Services") to Customer and that the Services contain trade secrets
belonging to AlphaCom. Trade secrets include, without limitation, the source
code, system design and specifications, programming sequences, algorithms, flow
charts and formats pertaining to the Services. Customer agrees to protect the
Services against any unauthorized or unlawful use, disclosure, dissemination or
copying. Customer agrees not to provide, lease, lend, use or otherwise allow
third parties to use the Services for their benefit. Customer further agrees it
will not allow third parties to modify, incorporate into or create a derivative
work of any part of AlphaCom Services.
TERMS AND CREDIT
Customer agrees to pay AlphaCom all charges relating to the use of Customer's
account(s) according to fees stated on invoices. FEES ARE CHARGED TO A CREDIT
CARD MONTHLY AND PAYMENT IS DUE UPON RECEIPT OF INVOICE. AlphaCom reserves the
right to vary charges or limit the amount or duration of credit to be allowed to
the Customer. Returned checks or insufficient funds on credit cards are subject
to service interruption. Service interruption does not relieve Customer from
obligation to pay unpaid account balance. In the event of Customer's default in
payment, Customer shall be responsible for all-reasonable cost and expenses
incurred by AlphaCom in collection of any sums owing by Customer (including
reasonable attorney's fees).
TAXES
Customer shall be responsible for all present and future federal, state,
municipal or other government sales, use, excise, value added or other
applicable taxes to the price, sales or delivery of any Services provided to the
Customer
ACCEPTABLE AND LAWFUL USE
Customer agrees to use Service in a manner consistent with any and all
applicable laws. Customer agrees to follow the Acceptable Use Policy of any
network user or provider with whom it connects. Any access to any networks
through AlphaCom's network must comply with the ruled appropriate for that
network. Customer may not perform activities harmful to AlphaCom or its
Customers, employees, vendors, business relationships or any other user of the
network. Customers agree to comply with obscenity laws of the United States and
any applicable local jurisdictions.
SECURITY
Customer is responsible for all use of Customer account(s) and confidentiality
of password(s). All information given to AlphaCom during the course of this
agreement shall be considered confidential. AlphaCom is not responsible for
Customer's personal files residing on AlphaCom's equipment. Customer agrees to
maintain security procedures in a manner so as to preclude reasonably
unauthorized persons from having access to business records and data and to
further ensure that all transmissions are authorized.
LIMITED WARRANTY AND LIABILITY
Data services are provided by AlphaCom on an as is, as available basis. AlphaCom
disclaims all warranties, representations and statements, expressed or implied,
statutory or otherwise, including, without
<PAGE> 4
limitation, any implied warranties of merchantability or fitness for a
particular purpose. In no event shall AlphaCom be liable for any indirect,
special, consequential, or incidental damages, however caused, including,
without limitation, any damages arising out of the use of Services, delays in
delivery or repair, loss of the Services, or damage to any documents or other
property. Further, AlphaCom shall not liable for any incidental, consequential,
indirect or special damages arising or resulting from any delay, omission or
error in the electronic transmission or receipt of any order or contract
pursuant to this agreement. AlphaCom shall not be liable for any failure to
perform its obligations where such failure results from any cause beyond
AlphaCom's control, including, without limitation, mechanical, electronic or
communications failure or degradation that prevents such party form transmitting
or receiving orders or contracts. Customer agrees to immediately notify AlphaCom
if any transmission information is received in an unintelligible or garbled
form. Customer agrees to hold AlphaCom harmless for any and all damages caused
to Customer in any manner whatsoever, if such damage is a result of a computer
virus or the like, contracted by the Customer during the time the Customer is
connected to AlphaCom's database, network, systems or during any electronic
transmission of any information between the Customer and AlphaCom Internet.
VALID ENFORCEABILITY
The terms conditions hereof are binding on the parties whether transmitted
between the parties in paper format or electronically. In the case of an
electronic transmission, the parties agree not to contest the validity or
enforceability of those terms and conditions under the provisions of any
applicable law relating to whether certain Agreements are to be in writing or
signed by the party to be bound thereby. If introduced as evidence in paper
format in any judicial, arbitration, mediation or administration proceeding,
both parties agree that the terms and conditions hereof will be admissible
against either party to the same extent and with the same force as other
documents originated and maintained in paper format.
SEVERABILITY
In the event that any provision hereof is found invalid or unenforceable
pursuant to judicial decree or decision, the remainder of this agreement shall
remain enforceable according to its terms. WITHOUT LIMITATION OF THE FOREGOING,
IT IS EXPRESSLEY UNDERSTOOD AND AGREED THAT EACH AND EVERY PROVISION OF THIS
AGREEMENT THAT PROVIDES FOR A LIMITATION OF LIABILITY, DISCLAIMER OF WARRANTIES
OR EXCLUSION OF DAMAGES IS INTENDED BY THE PARTIES TO BE SEVERABLE AND
INDEPENDENT OF ANY OTHER PROVISION AND TO BE ENFORCED AS SUCH. FURTHER, IT IS
EXPRESSLEY UNDERSTOOD AND AGREED THAT IN THE EVENT ANY REMEDY HEREUNDER IS
DETERMINED TO HAVE FAILED OF ITS ESSENTIAL PURPOSE, ALL OTHER LIMITATIONS OF
LIABILITY AND EXCLUSIONISM OF DAMAGES SET FORTH HEREIN SHALL REMAIN IN FULL
FORCE AND EFFECT. 8/12/98
<PAGE> 1
Exhibit 4(a)
LIMITED ASSET PURCHASE AGREEMENT
THIS AGREEMENT made and entered into this 2nd day of July, 1998, by and between
ALPHA BETA COMMUNICATIONS, INC., d/b/a AlphaCom, an Ohio corporation, located at
953 South Munroe, Tallmadge, Ohio 44278 herein referred to as "ABC" or "SELLER"
and ALPHACOM, INC., a Nevada corporation, located at 1035 Rosemary Blvd., Akron,
Ohio 44306, herein referred to as "ALPHACOM" or "PURCHASER".
WHEREAS, both parties agree as follows:
1. SALE OF CERTAIN ASSETS
----------------------
The SELLER shall sell to the PURCHASER, and the PURCHASER shall purchase from
the SELLER, free from all liabilities and encumbrances except as agreed and
as per items shown in Attachment A and below:
.1 The right to any trade marked or name denoting good will and any legal
derivative thereof, the SELLER'S client list and client history, including
the existing distributor base and/or subscribers.
.2 Any and all licenses in the State of Ohio.
.3 PURCHASER shall have the right to transfer or "piggyback" any and all in
place insurance policies of the SELLER and any Customer Agreements,
contracts or purchase orders if requested by PURCHASER on or before July
2, 1998.
.4 PURCHASER shall allocate and deliver up to 1,653,354 restricted shares
(hold for a minimum of one year upon issuance before free trading) of its
Common Stock to SELLER and a $200,000 cash payment to ABC's majority
shareholder, Bob Snyder. This payment is only to paid upon ALPHACOM
completing a successful Regulation A Offering of 1,000,000 shares of
Common Stock at $5.00 per share for a total of $5,000,000. PURCHASER is
not liable for any other creditor, consumer, entity or payable not listed
in Attachment B prior to July 2, 1998.
.5 ALPHACOM'S (for the sole purpose of this Agreement) net worth is being
valued by both parties at $250,000.
2. PURCHASE PRICE
--------------
.1 ABC'S limited assets to be purchased (for the sole purpose of this
Agreement) is being valued by both parties at $250,000.
.2 The capitalization of ALPHACOM as of July 2, 1998 follows: (Prior to the
purchase of ABC).
AUTHORIZED: 20,000,000 shares of common stock, par value $.001 per share
ISSUED AND OUTSTANDING: 9,297,000 shares of common stock.
ALPHACOM will deliver up to 1,653,354 shares of the common stock of
ALPHACOM to ABC's minority shareholders after closing
.3 The capitalization of ALPHACOM (after the purchase of ABC) as follows
TOTAL ISSUED AND OUTSTANDING: 10,950,354 shares of common stock, par
value at $ .001 per share.
1
<PAGE> 2
The Distribution of the Shares follows:
ABC's minority shareholders 1,653,354 shares
ALPHACOM (before closing) shareholders 9,297,000 shares
----------
Total 10,950,354 shares
3. REPRESENTATIONS BY PURCHASER
----------------------------
.1 The Closing shall take place as soon as practicable and shall take place
when all the documents are evidenced and disclosed. At the time of the
Closing, the SELLER shall execute and deliver to the PURCHASER such
contract assignments, bills of sale and other instrument as may be
necessary to transfer to the PURCHASER the assets set forth in this
Agreement. All such bills or sales and other instruments will contain the
usual warranties and affidavit of title, and will effectively transfer to
the PURCHASER full title to the assets, free and clear of all liens,
security interests and encumbrances, except as disclosed to the PURCHASER.
(Ref. Attachment A, B, C, D and Exhibits 1 through 3). SELLER agrees to
expedite the date of both closings and provide any undelivered documents
that are part of this agreement which shall be delivered within ten (10)
days after the first date of the closing takes place.
4. REPRESENTATIONS BY SELLER
-------------------------
The SELLER makes the following representations and warranties to the
PURCHASER, all of which shall survive the Closing.
.1 The SELLER is the owner of and has good and marketable title to the assets
sold by way of this Agreement, except as disclosed to the PURCHASER.
The SELLER has entered into no contract relating to the sale or other
disposition of any assets of SELLER not disclosed either prior to or
concurrently with the execution of this Agreement.
.2 Seller represents that it has not entered into any license or other
Agreement between itself, ABC and any other shareholder, creditor or
entity other than as stated in the Exhibits attached hereto.
.3 Seller represents that ABC was founded and activated on March 27, 1996.
.4 Since time is of the essence, both PURCHASER and SELLER mutually agree
that SELLER shall deliver to PURCHASER certain documents, outlined herein
within ten (10) days after the first closing takes place; however, if any
shortcoming results in stock or dollar evaluation to either party,
adjustments if any shall be based upon the values agreed to by both
parties shown herein.
5. MISCELLANEOUS
-------------
In the event SELLER makes any payments on behalf of PURCHASER, and with
PURCHASER'S authorization, prior to the date of Closing, the PURCHASER shall
reimburse the SELLER in an amount not to exceed $5,000. Upon receipt of
canceled checks or payment, PURCHASER shall pay SELLER within ten (10) days
after first closing takes place.
.1 List of ABC accounts payable as listed in Attachment B. If there are any
more payables, they must be paid by SELLER
2
<PAGE> 3
.2 Any party may, by notice hereunder to the other party, designate a
changed address for such party. Any notice, if mailed properly addressed,
postage prepaid, registered or certified mail, shall be deemed received
the fifth business day thereafter, or when it is actually received,
whichever is sooner.
.3 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective assigns, and legal representatives;
provided, however, that neither party hereto shall have the right to
assign or otherwise transfer (by operation of law or otherwise) its rights
or obligations under this Agreement except with the prior written consent
of the other party.
.4 If any controversy shall rise out of this Agreement or out of the refusal
to perform the whole or any part thereof, the parties shall be unable to
agree with respect to the matters in controversy, the same shall be
submitted for determination by a Board of Arbitrators, pursuant to the
Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered June bed entered in any court having
jurisdiction thereof.
.5 This Contract may be executed in any number of counterparts, including
counterparts transmitted by telecopier or FAX, any one of which shall
constitute and original of this Contract. When counterparts of facsimile
copies have been executed by all parties, they shall have the same effect
as if the signatures to each counterpart or copy where upon the same
document and copies of such documents shall be deemed valid as originals.
The parties agree that all such signatures June be transferred to a single
document upon the request of any party.
.6 This Agreement shall be deemed to be a contract made under the laws of the
State of Ohio, and for all purposes it shall be construed in accordance
with and governed by the laws of the State of Ohio.
.7 Whenever possible, each provision of this Agreement shall be interpreted
in such manners to be effective and valid under applicable law, but if
any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
6 This Agreement may not be and shall not be deemed or construed to have been
modified, amended, rescinded, canceled, or waived in whole or in part, except
by a written instrument signed by the parties hereto.
7 This Agreement constitutes and expresses the entire Agreement and
understanding between the parties hereto in reference to all the matter
referred to herein and any previous discussions, promises, representations,
and understanding relative thereto are merged into the terms if this
Agreement and shall have no further force and effect.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement the date
first set forth above.
SELLER: ALPHA BETA COMMUNICATIONS, INC. DBA
ALPHACOM
953 South Munroe
Tallmadge, OH 44278
By: /s/ illegible Date: 1-2-98
------------ ------
Authorized Signature
By: /s/ illegible
-----------------
Witness
3
<PAGE> 4
PURCHASER: ALPHACOM, INC.
1035 Rosemary Blvd. Suite I
Akron, OH 44306
By:/s/ illegible Date: 7/2/98
---------------- -------
Authorized Signature
By:/s/ illegible
-------------
Witness
4
<PAGE> 5
EXHIBITS
--------
1. List of Distributors as of July 2, 1998 (Subscriber Agreements) - +/- 2,500
2. SELLER's investor list, after Closing
3. Copy of office Lease.
ATTACHMENTS
-----------
A. List of equipment, hardware and software. Proof of ownership, Bill of Sale,
Purchase Orders, no liens, etc. (no Equipment Leases)
B. List of "Accounts Payable"
C. Copies of licenses, certifications or any Agreements between ABC AND:
1. CDPD Contracts
2. Master Investor List (Prior Agreements with ABC)
3. Shareholders
4. Creditors (N/A)
5. Accounts Payable, customer agreements, insurance, etc. (N/A)
6. Other (any fiduciary or contractual obligation) BETWEEN ABC AND THE
ABOVE ENTITIES
7. Any other Agreements between ABC and_______________.(if applicable).
D. "ALPHACOM" shareholder list (after Closing)
5
<PAGE> 1
Exhibit 4(b)
Addendum "A"
to the Lease dated 4/14/97 by and between John J. Piscitelli Jr. (Lessor) and
Alpha Beta Communications, Inc. (Lessee) for the leased premises at 1035
Rosemary Blvd., Suite "I", Akron, OH 44306.
The following is ACCEPTED and AGREED by Lessor and Lessee:
1. Lessee shall in addition to leasing Suite "I", lease Suite "J", commencing
on 11/15/97 and expiring on 4/14/99.
2. The lease expiration date for Suite "I" shall be extended from 4/14/98 to
4/14/99.
3. The Lease payment for Suite "I" and Suite "J" shall be combined to equal
one monthly payment due and payable on 11/15/97 and each fifteenth day of the
month thereafter, in an amount equal to the following:
11/15/97 - 4/14/98 $2,115.00 / month
4/15/98 - 4/14/99 $2,215.00 / month
4. All of the terms and conditions of the Lease for Suite "I" shall apply to
the lease of Suite "J" except as outlined in Addendum "A".
5. Lessee shall have the "Option to Renew the Lease" for Suite "I" & "J"
combined for two(2) additional One(1) year lease terms based on the following
lease payment schedule:
First Renewal Term: $28,200. paid in monthly installments of $2,350.
Second Renewal Term: $29,400. paid in monthly installments of $2,450.
*Note: Formal Notice as to the exercise of the "Option to Renew the
Lease" shall be due 90 days prior to the expiration of the current
lease term from the Lessee to the Lessor. Renewal terms for Suite "I"
contained in the original lease shall be considered null and void.
AGREED AND ACCEPTED BY:
/s/ John Pisoreli Jr. /s/ Robert Snyder
- ------------------------------- ----------------------------------------
John Pisoreli Jr., (Lessor) Robert Snyder as Officer of
Alpha Beta Communications, Inc. (Lessee)
12/26/97 11/19/97
- -------- --------
Date Date
<PAGE> 2
LEASE
THIS LEASE, executed at AKRON, Ohio, this day of April 1997, by and
between JOHN J. PISCITELLI, JR., 1081 Rosemary Blvd., Akron, Ohio 44306
(hereinafter referred to as "Landlord") and Alpha Beta Communications, 953
South Munroe Road, Tallmadge, Ohio 44278 (hereinafter referred to as "Tenant").
SECTION 1. PREMISES
--------
Landlord hereby leases to Tenant and Tenant leases from Landlord on the
terms covenants and conditions set forth herein, certain combined office and
warehouse space (hereinafter the "Leased Premises") at 1035 Rosemary Blvd.
Suite "I" - Akron, Ohio 44306 (hereinafter referred to as the "Building"). The
Leased Premises consists of approximately 2,340 square feet, as measured from
the outside of the Leased Premises to the center line of any common walls of
the Leased Premises.
Landlord reserves to itself the roof and exterior walls of the Building,
or the buildings comprising the Commercial Center, and further reserves the
right to place, maintain, repair, and replace utility lines, pipes, ducts,
conduits, wires and tunneling and the like, in, over, under, upon and through
the Leased Premises or of other portions of the Building location which will
not materially interfere with Tenant's use of its Leased Premises.
SECTION 2. TERM
----
The term of this Lease shall be for a period of one (1) year commencing on
the Rental Commencement Date, as hereinafter defined unless sooner terminated
under the conditions hereinafter set forth.
Upon determination of the Rental Commencement Date of the term, Landlord
and Tenant shall, upon the request of either party, execute a Memorandum of
Lease in form for recording, setting forth the commencement and termination
dates of the term of this Lease. However, this recording shall be limited to a
Memorandum of Lease describing the property herein demised, giving the term of
this Lease and renewal rights, if any, and referring to this Lease.
SECTION 3. RENTAL COMMENCEMENT DATE
------------------------
The date upon which Tenant shall be obligated to commence the payment of
"Minimum Rent" and "Additional Charges" shall be known as the "Rental
Commencement Date" and shall be: April 15, 1997, and ending on April 14, 1998.
SECTION 4. LEASE YEAR
----------
"Lease Year" shall mean a period of twelve (12) consecutive full calendar
months. The first Lease Year shall begin on the Rental Commencement Date, if
the date occurs on the first day of a calendar month, otherwise, the first
Lease Year shall begin on the first day of the first calendar month after the
Rental Commencement Date. Each succeeding Lease Year shall begin on the
anniversary of the first Lease Year.
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SECTION 5. RENT
----
(a) MINIMUM RENT - Tenant shall pay Landlord, at the office or such other
place as Landlord may, from time to time designate as "Minimum Rent"
for the Premises during the term of this Lease, without any deduction
or setoff, the sum of Fifteen Thousand Dollars in equal monthly
installments of Twelve Hundred fifty dollars ($1,250.00)
(b) LATE PAYMENTS - If the minimum monthly rent is not paid by the fifth
(5th) day of any month, then there shall be an additional daily rent
of Ten and 00/100 Dollars ($10.00) for each day until the monthly rent
and daily additional rent is paid in full.
2
<PAGE> 4
SECTION 7. UTILITIES
---------
Commencing with the Rental Commencement Date, Tenant shall pay for all
utilities required for the proper operation of Tenant's business including
natural gas, electric, sewer and water.
SECTION 8. CONSTRUCTION
------------
Landlord shall not be required to perform or cause to be performed any
additional work in or on the Leased Premises. Tenant hereby expressly
acknowledging and representing that it accepts the Leased Premises in its
present condition as of the Rental Commencement Date.
SECTION 9. COMMON AREAS
------------
Landlord grants as a revocable license, not to interfere with access of
Tenant and Tenant's clients, to Tenant and Tenant's customers and invitees the
privilege to use, in common with all others to whom Landlord has, or may
hereafter grant privileges to use the same, the Common Areas located with the
Gateway Commercial Center. The term "Common Areas" as used in this Lease shall
mean the parking areas, roadways, hallways, common bathrooms, pedestrian
sidewalks, delivery areas, landscaped areas, and all other areas or improvements
which may be provided by Landlord for the common use of the Tenants of the
Gateway Commercial Center. Landlord hereby reserves the following rights with
respect to the Common Areas:
(a) To establish reasonable rules and regulations for the use thereof;
(b) To use or permit the use by third parties;
(c) To close or restrict the use of all, or any portion of the
Common Areas as Landlord may deem necessary; and
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<PAGE> 5
(d) To change the layout of such Common Areas, including the right to
reasonably add to or subtract from their shape and size, whether
by addition of building improvements or otherwise.
SECTION 10. USE OF PREMISES
---------------
Tenant, and no one else, shall use the Leased Premises and such use shall
be limited to the following: Sales, Service & repair of Mini Dish Satellite and
Wireless Internet related products.
SECTION 11. TENANT'S COVENANTS WITH RESPECT TO OCCUPANCY
--------------------------------------------
Tenant agrees as follows, to:
(a) occupy the Leased Premises in a safe, careful manner and in
compliance with all applicable laws, rules, ordinances,
regulations and orders of any governmental bodies and without
committing or permitting waste;
(b) neither do nor suffer anything to be done or kept in or about the
Leased Premises which contravenes Landlord's insurance policies
or increases the premiums therefore;
(c) permit no reproduction of sound which is audible outside the
Leased Premises, not permit odors to be unreasonably dispelled
from the Leased Premises;
(d) place no draperies, blinds, signs, advertising matter or material
on the exterior or on the interior of the Building or the Leased
Premises, where possible to be seen from the exterior, of the
Leased Premises, or of the building in which the Leased Premises
are located, without the prior written consent of Landlord;
(e) place no merchandise sign or other thing of any kind in the
vestibule or entry of the Leased Premises or on the sidewalks or
other Common Areas adjacent thereto or elsewhere on the exterior
of the Leased Premises;
(f) keep any refuse in proper containers in the interior of the
Leased Premises until same is removed, and to permit no refuse to
accumulate around the exterior of the Leased Premises;
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<PAGE> 6
(g) place no load upon any floor of the Leased Premises exceeding the
floor load per square foot area which it was designed to carry
and which is allowed by law. Landlord reserves the right to
prescribe the weight and position of all safes, business machines
and mechanical equipment. Such installations shall be placed and
maintained by Tenant, at Tenant's expense, in settings
sufficient, in Landlord's judgment, to absorb and prevent
vibration, noise and annoyance;
(h) permit Landlord free access to the Leased Premises at all
reasonable times with reasonable notice for the purpose of
examining the same or making alterations or repairs to the Leased
Premises that Landlord may deem necessary for the safety or
preservation thereof;
(i) place no additional locks or latches upon any doors without
written consent of the Landlord. Tenant, at the termination of
its Lease of the Leased Premises, shall return to Landlord all
keys to doors in the Building;
(j) cause or permit no lien upon the Leased Premises and to suffer no
other matter or thing whereby the estate, right, and interest of
Landlord in the Leased Premises, or any part thereof, might be
impaired;
(k) solicit no business in the Common Areas, nor distribute handbills
or other advertising matter to customers nor place same in or on
automobiles in the Common Areas; and
(l) comply with all reasonable rules and regulations which Landlord
may establish for the use and care of the Leased Premises, the
Common Areas, and other facilities and buildings on the
Commercial Center.
SECTION 12. REPAIRS, ALTERATIONS, MECHANIC'S LIENS
--------------------------------------
(a) REPAIRS TO LEASED PREMISES - Landlord agrees to keep the roofs in good
order as well as the exterior walls, and shall repair any structural
damages that may occur during the term of this Lease that have not
been caused by the negligent or intentional acts of the Tenant, their
employees, invitees, patrons or licensees (which such damages shall be
repaired by Tenant). Tenant agrees to keep the interior of the
building, including
5
<PAGE> 7
but not limited to heating, plumbing and electrical systems, in good
order, and repair and maintain the same and the interior walls during
the term hereof or any extension and, upon the expiration of the term
or any extension thereof or earlier termination of this lease, to
deliver possession of said premises with the interior of the building
including but not limited to heating, plumbing and electrical systems
thereof in as good condition as the same now is, natural wear and tear
excepted. In the event that Tenant fails to make repairs or do
maintenance deemed necessary to Landlord within fifteen (15) days of
written notification thereof by Landlord to Tenant, Landlord shall
have the right, but not the obligation, to make said repairs and/or do
said maintenance. In such event the amount expended by Landlord for
such repairs and/or maintenance shall be paid by Tenant to Landlord as
Additional Rent on the next rental due date. The provisions of this
Section shall not apply in the case of damage or destruction by fire
or other casualty or by eminent domain, in which events the
obligations of Landlord and Tenant shall be controlled by either
SECTION 13 or 16 hereof.
(b) ALTERATIONS OR IMPROVEMENTS BY TENANT - Tenant shall not, without
Landlord's prior written consent, make, nor permit to be made, any
alterations, addition, or improvements to the Leased Premises.
(c) REMOVAL OF IMPROVEMENTS - All items of Landlord's construction, all
heating and air conditioning equipment, and all alterations and other
improvements shall be the property of Landlord and shall not be
removed from the Leased Premises. All furniture, trade fixtures,
furnishings and signs installed in the Leased Premises by Tenant and
paid for by Tenant, unless they have been so affixed that they have
become part of the Leased Premises, shall remain the property of
Tenant and may be removed upon the expiration of the term of this
Lease, provided that:
(1) any of such items may be removed only if Tenant repairs any
damage caused by such removal;
(2) Tenant shall have fully performed all of the covenants and
agreements to be performed by Tenant and no payments are due or
will thereafter become due from Tenant to Landlord, under the
provisions of this Lease.
6
<PAGE> 8
If Tenant fails to remove such items from the Leased Premises prior to the
expiration or earlier termination of this Lease, all such trade fixtures,
furniture, furnishings and signs shall become the property of Landlord, unless
Landlord elects to require their removal, in which case Tenant shall promptly
remove same and restore the Leased Premises to its prior condition.
SECTION 13. INDEMNITY AND INSURANCE
-----------------------
(a) INDEMNIFICATION BY TENANT -- Tenant will indemnify and hold Landlord
harmless from and against all loss, cost, expense and liability
whatsoever (including Landlord's cost of defending against the
foregoing, such cost to include attorney fees) resulting or occurring
by reason of Tenant's use, or occupancy of the Leased Premises.
(b) PUBLIC LIABILITY INSURANCE -- Tenant, at its own expense, shall carry
public liability insurance covering the Leased Premises and Tenant's
use thereof in companies and in a form satisfactory to Landlord, with
minimum coverages of $500,000 on account of bodily injuries to or death
of one (1) person, $1,000,000 on account of bodily injuries to or death
of more than one (1) person as a result of any occurrence and $100,000
coverage for property damage, and deposit said policy(ies) (or
certificates thereof) with Landlord prior to the date of any use or
occupancy of the Leased Premises by Tenant; said policy or policies
shall name Landlord and Tenant as insureds and shall bear endorsements
to the effect the insurer agrees to notify Landlord not less than
thirty (30) days in advance of any modification or cancellation
thereof.
(c) LANDLORD'S LIABILITY -- Landlord shall not be liable for any:
(1) damage to Tenant's property located in the Leased Premises,
regardless of cause of such damage; nor
(2) acts or omissions of other tenants of the Gateway Commercial
Center; nor
(3) conditions of the Leased Premises whatsoever unless Landlord is
responsible for the repair thereof, and has failed to make such
repair after notice from Tenant of the need therefore, and
expiration of a reasonable time for the making of such repair.
7
<PAGE> 9
(d) FIRE AND EXTENDED COVERAGE INSURANCE -- Landlord agrees to carry
policies insuring the improvements and the Building against fire and
such other perils as are normally covered by extended coverage
endorsements in the county where the Leased Premises are located, in an
amount equal to at least eighty percent (80%) of the insurable value of
such improvements, together with insurance against such other risks
(including loss of rent) and in such amounts as Landlord deems
appropriate. Landlord agrees to pay the fire and extended coverage
insurance subject to SECTION 6 of this Lease.
(3) MUTUAL WAIVER OF SUBROGATION -- Landlord and Tenant each agree to cause
to be included in their respective policies of fire and extended
coverage insurance the agreement of the issuer thereof that said
policies shall not be invalidated by a waiver of claim by the insured
against the Landlord or Tenant, as the case may be, and each will
furnish evidence thereof to the other. In addition to any other waiver
herein, Landlord and Tenant each hereby waive any claim against the
other for any loss resulting from any cause, including the negligence
of the other, in excess of the insurance proceeds available therefor.
SECTION 14. DAMAGE AND DESTRUCTION
----------------------
If the Leased Premises are damaged by any peril covered by standard
policies of fire and extended coverage insurance to an extent which is less than
twenty-five percent (25%) of the cost of replacement (as determined by
Landlord's insurer) of the Leased Premises, the damages shall, except as
hereinafter provided, promptly be repaired by Landlord, at Landlord's expense,
but that in no event shall Landlord be required to repair or replace Tenant's
stock in trade, trade fixtures, furniture, furnishings, equipment, personal
property, or property, or leasehold improvements. If
(a) the Leased Premises are damaged by any cause, to the extent of
twenty-five percent (25%) or more of the cost of replacement of the
Leased Premises; or
(b) the buildings are damaged by any cause to the extent of fifty percent
(50%) or more of the cost of replacement;
(c) any damage by any cause to the Leased Premises occurs during the last
year of the term of this Lease:
Landlords may elect either to repair or rebuild the Leased Premises or the
buildings, as the case may be, or to terminate this Lease upon giving notice of
such election in writing to Tenant within ninety (90) days after the event
causing the damage.
8
<PAGE> 10
If the casualty, repairing, or rebuilding shall render the Leased Premises
untenantable, in whole or in part, a proportionate abatement of the Minimum Rent
shall be allowed until the date Landlord completes the repairs or rebuilding.
If Landlord is required or elects to repair the Leased Premises, Tenant shall
repair or replace its stock in trade, trade fixtures, furniture, furnishings,
equipment and personal property in a manner and to at least a condition equal
to that prior to its damage or destruction and the proceeds of all insurance
carried by Tenant shall be held in trust by Tenant for the purpose of such
repair or replacement.
SECTION 15. ASSIGNING AND SUBLETTING
------------------------
Tenant, voluntarily, or involuntarily, shall not assign, convey, mortgage,
encumber or otherwise transfer this Lease or any interest hereunder, nor shall
Tenant allow any transfer hereof or any lien upon Tenant's interest hereunder
by operation of law or otherwise, nor shall Tenant sublet the Leased Premises
or any part thereof, or permit the use or occupancy of the Leased Premises or
any part thereof by any person or entity other than Tenant, without the prior
written consent of Landlord.
The Landlord shall not unreasonably withhold written consent to the
assignment of this lease, or subletting of the premises, to any financially
responsible party of good reputation PROVIDED, further, that no assignment,
transference, or subleasing shall, in any way, relieve or release Tenant of his
obligation hereunder, unless such release is expressly agreed to by Landlord in
writing.
Any consent by Landlord shall not constitute a waiver of the necessity for
such consent to any subsequent assignment, conveying, mortgaging, encumbering
or otherwise transferring this Lease or any interest hereunder, or allowing any
transfer hereof or any lien upon Tenant's interest hereunder by operation of
law or otherwise, or subletting the Leased Premises or any part thereof, or
permitting the use or occupancy of the Leased Premises or any part thereof by
any person or entity other than Tenant.
SECTION 16. EMINENT DOMAIN
--------------
In the event the premises or any part thereof, shall be taken or condemned
either permanently or temporarily for any public or quasi-public use or purpose
by any authority in appropriation proceedings or by any right of eminent
domain, the entire compensation awarded therefore, including but not limited
to, all damages as compensation for diminution in value of the leasehold,
reversion and fee, shall belong to Landlord without any deduction therefrom for
any present or future estate of Tenant, and Tenant hereby assigns to Landlord
all its right, title and interest to such award. However, Tenant shall have the
right to recover from the condemning authority, but not from Landlord, such
compensation as may be separately awarded to Tenant on account of interruption
of Tenant's business and for moving and relocation expenses. In the event of a
taking under the power of eminent domain:
(a) of more than twenty-five percent (25%) of the Leased Premises;
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(b) a sufficient portion of the premises so that after such taking less
than fifty percent (50%) of the floor area within all buildings
occupied by tenants (as constituted prior to such taking) are occupied
by tenants,
either Landlord or Tenant shall have the right to terminate this Lease by
notice in writing given within ninety (90) days after the condemning authority
takes possession, in which event all rents and other charges shall be pro rated
as of the date of such termination.
SECTION 17. DEFAULT BY TENANT
-----------------
If Tenant fails to pay Minimum Rent or Additional Charges within five (5)
days from the due date or fails to remedy any default other than the payment of
rent or charges within ten (10) days after written notice from Landlord (unless
such default cannot be remedied within the 10-day period and Tenant commences
to remedy such default within the 10-day period and diligently pursues
correction thereof in which event the remedy time shall be extended to the time
reasonably required therefor); or if a receiver of any property of Tenant on
the Leased Premises is appointed or Tenant's interest in the Leased Premises is
levied upon by legal process and Tenant fails within thirty (30) days to cause
the vacation of such appointment, levy or adjudication or if Tenant files a
voluntary petition in bankruptcy, disposes of all or substantially all of its
assets in bulk, or makes an assignment for the benefit of its creditors, then
in any such instance, without further notice to Tenant, Landlord may enter upon
the Leased Premises and terminate this Lease. Landlord, or his agent, may
re-enter said premises by summary proceeding, by force, or otherwise, take
possession thereof, and remove all persons and property therefrom. Despite such
termination Tenant shall not be released from any sums due Landlord for rent or
otherwise to the date of such entry; additionally, Tenant shall remain liable
to Landlord in damages for Tenant's breach of this lease (including the rentals
due for the unexpired portion of the term of this lease, attorney's and
broker's fees) as fully as though there had been no termination, which said
damages Landlord shall have the right to recover. In addition, Landlord may
enter upon the Leased Premises without terminating this Lease and may relet
them in its own name for the account of Tenant for the remainder of the term at
the highest rent then obtainable and immediately recover from Tenant any
deficiency for the balance of the term between the amount for which the Leased
Premises were relet, less expense of reletting (including broker and attorney
fees) and the rent provided hereunder.
If Tenant at any time shall fail to pay any taxes, assessments, or liens,
or fails to make any payment or perform any act required by this Lease to be
made or performed by it, Landlord, without waiving or releasing Tenant from any
obligation or default under this Lease, may (but shall be under no obligation
to) at any time thereafter make such payment or perform such act for the
account of and at the expense of Tenant. All sums so paid by Landlord and all
costs and expenses so incurred shall accrue interest at the rate of twelve
percent (12%) from their due date until paid, said interest to
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<PAGE> 12
be so much additional rent under this Lease and shall be paid to Landlord by
Tenant upon demand.
All rights and remedies of Landlord herein enumerated shall be cumulative,
and none shall exclude any other remedies allowed at law or in equity.
SECTION 18. SECURITY DEPOSIT
----------------
To secure the faithful performance by Tenant of the covenants, conditions
and agreements set forth in this Lease to be performed by it, Tenant has
deposited with Landlord the sum of Twelve Hundred Fifty Dollars ($1,250.00 on
the understanding that:
(a) Landlord shall not be obligated to but may apply such deposit or any
portion thereof to the curing of any default that may exist, without
prejudice to any other remedy or remedies which Landlord may have on
account thereof, and upon such application Tenant shall pay Landlord
on demand the amount so applied which shall be added to the security
deposit so the same will be restored to its original amount;
(b) should the Leased Premises be transferred by Landlord, the security
deposit or any balance thereof may be turned over to Landlord's
successor transferee, and Tenant agrees to look solely to such
successor or transferee for such application or return;
(c) Landlord or its successors shall not be obligated to hold the security
deposit as a separate fund, but may co-mingle it with other funds;
(d) in no event shall Landlord be obligated to apply the security deposit
against amounts due during or on account of the final month of the
term; and
(e) if Tenant shall faithfully perform all of the covenants and agreements
in this Lease contained on the part of Tenant to be performed, the
security deposit, or any then-remaining balance thereof, shall be
returned to Tenant, without interest, within thirty (30) days after
the expiration of the term hereof.
Notwithstanding anything aforementioned to the contrary, Tenant hereby
agrees not to look to the mortgagee, as mortgagee, mortgagee in possession, or
successor in title to the property, for accountability for any security deposit
required by Landlord hereunder, unless said sums have actually been received by
said mortgagee as security for Tenant's performance of this Lease.
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SECTION 19. NOTICE AND PAYMENTS
-------------------
Any notice of consent required to be given by or on behalf of either party
to the other shall be deemed given when mailed by registered or certified mail,
return receipt requested, addressed to Landlord and Tenant at the addresses
hereinabove specified, or the Leased Premises, or at such other address as may
be specified from time to time by notice in the manner herein set forth. Minimum
Rent and Additional Charges payments shall be considered delivered on the date
actually received.
SECTION 20. MORTGAGE SUBORDINATION
----------------------
Upon written request or notice by Landlord, concurred in by any mortgagee
or by any person, firm or corporation intending to become such a mortgagee or
trustee, Tenant agrees to subordinate its right under this Lease to the liens of
any mortgages or deeds of trust that may hereafter be placed upon the Building
and the Leased Premises and to any and all advances to be made thereunder, and
to the interest thereon and all renewals, replacements and extensions thereof,
provided the mortgagee or trustee named in said mortgages or deeds of trust
shall agree to recognize the lease of Tenant in the event of foreclosure if
Tenant is not in default. Tenant also agrees that any mortgagee or trustee may
elect to have this Lease prior to the lien of its mortgage or deed of trust, and
upon notification by such mortgagee or trustee to Tenant to that effect, this
Lease shall be deemed prior in lien to the said mortgage or deed of trust,
whether this Lease is dated prior to or subsequent to the date of said mortgage
or trust deed. Tenant agrees that, upon the request of the Landlord, any
mortgagee, or any trustee named in such mortgages or trust deeds, it shall
execute and deliver whatever instruments may be required for such purposes and
to carry out the intent of this section.
SECTION 21. CERTIFICATE OF LEASE INFORMATION
--------------------------------
At any time and from time to time, Tenant agrees to execute and deliver to
Landlord, for the benefit of such persons as Landlord requests, a statement in
writing, satisfactory to Landlord certifying such facts are true and
ascertainable. Failure to comply with such constitutes a default.
SECTION 22. QUIET ENJOYMENT
---------------
Landlord hereby covenants and agrees that if Tenant shall perform all the
covenants and agreements herein stipulated to be performed on Tenant's part,
Tenant shall at all times during the continuance hereof have the peaceable and
quiet enjoyment and possession of the Leased Premises without any manner of let
or hindrance from Landlord or any person or persons lawfully claiming the Leased
Premises.
SECTION 23. LIABILITY OF LANDLORD
---------------------
If Landlord shall fail to perform any covenant, term or condition of this
Lease upon Landlord's part to be performed and, as a consequence of such
12
<PAGE> 14
default, Tenant shall recover a money judgment against Landlord, such judgment
shall be satisfied only out of the proceeds of sale received upon execution of
such judgment and levy thereon against the right, title and interest of Landlord
in the Building as the same may then be encumbered and neither Landlord, nor if
Landlord be a partnership, any of the partners comprising such partnership,
shall be liable for any deficiency. It is understood that in no event shall
Tenant have any right to levy execution against any property of Landlord other
than its interest in the Building as hereinbefore expressly provided. In the
event of the sale or other transfer of Landlord's right, title and interest in
the Leased Premises of the Building, Landlord shall be released from all
liability and obligations hereunder.
SECTION 24. MISCELLANEOUS PROVISIONS
------------------------
(a) WAIVER -- No waiver of any condition or legal right or remedy shall be
implied by the failure of Landlord to declare a forfeiture, of for any
other reason, and no waiver of any condition or covenant shall be valid
unless it be in writing signed by Landlord. No waiver by Landlord with
respect to one or more tenants or occupants of the Gateway Commercial
Center shall constitute a waiver of or a breach of any condition nor be
claimed or pleaded as an excuse of a future breach of the same
condition or covenant.
(b) SURRENDER AND HOLDING OVER -- Tenant shall deliver up and surrender to
Landlord possession of the Leased Premises upon the expiration of the
Lease, or its termination in any way, in as good condition and repair
as the same shall be at the commencement of said term (damage by fire
and other perils covered by standard fire and extended coverage
insurance and normal wear and decay only excepted). Should Tenant
remain in possession of the Leased Premises after any termination of
this Lease, no tenancy or interest in the Leased Premises shall result
therefrom but such holding over shall be subject to immediate eviction
and removal, and Tenant shall, upon demand, pay to Landlord, as
liquidated damages, a sum equal to double the Minimum Rent as specified
herein for any period during which Tenant shall hold the Leased
Premises after the stipulated term of this Lease may have terminated.
(c) TRANSFER OF LANDLORD'S INTEREST -- Landlord shall be liable under this
Lease only while the owner of the Leased Premises, and if Landlord
should sell or otherwise transfer Landlord's interest in the Leased
Premises upon an undertaking by the purchaser, or transferee, to be
responsible for all of the covenants and undertakings of Landlord,
Tenant agrees that
13
<PAGE> 15
??????????????????????? have no liability to Tenant under his Lease or any
modification or amendment thereof, except for such liabilities which might
have accrued prior to the date of such sale or transfer of Landlord's
interest.
(e) OPTION TO EXTEND - If Tenant has fully complied with all provisions of the
Lease, Tenant may extend this Lease for two (2) additional terms, the
first term for a period of one (1) year by giving written notice to
Landlord on or before one hundred twenty (120) days prior to the
termination date of the Lease. The extension term shall be upon the same
terms and provisions hereof, except as to Minimum rent. Minimum Rent shall
be $16,200.00 payable to equal monthly installments of Thirteen Hundred
Fifty dollars ($1,350.00) per month. The second additional term shall be
for a period of one (1) year with minimum rent of $17,400.00 at $1,450.00
per month.
(f) BENEFIT - This Agreement inures to the benefit of, and shall be binding
upon the parties, their heirs, successors, assigns and legal
representatives, subject only to the provisions restricting assignment and
subleasing.
(g) JOINT AND SEVERAL LIABILITY - The parties to this Lease, as shown on the
face plate on Page 1, are jointly and severally liable under all terms,
conditions, and covenants of this Lease.
(h) ADDITIONAL PROVISIONS:
During the continuation of this Lease, including any permitted assignment
or subletting, the premises will be used and occupied only for wholesale
printing and for no other purpose without the prior written consent of the
Landlord, which consent shall not be unreasonably withheld. Tenant agrees
that it will not use or permit any person to use the premises or any part
thereof for any other use or purpose in violation of any applicable laws,
orginances, or other regulations, including but not limited to environment
laws. During the continuation of this Lease, Tenant will keep the premises
and every part thereof, and all buildings and improvements at any time
situated thereon, in a clean and wholesome condition and generally will
comply with all laws, rules, ordinances, and regulations, including, but
not limited to environmental laws. Tenant represents and warrants to
Landlord that none of the property which it or any of its employees,
agents, or contractors will bring on the Real Property or in the premises
will contain any hazardous or toxic substance, material, or waste which is
or becomes regulated by any local governmental authority, the State of
Ohio, or the United States Government in violation of any law or regulation
of any such
<PAGE> 16
/s/ [illegible] LANDLORD: JOHN J. PISCITELLI, JR.
- ---------------------------------
WITNESS
/s/ [illegible]
- --------------------------------- BY: /s/ [illegible]
WITNESS -------------------------------
/s/ [illegible]
- --------------------------------- TENANT: ALPHA BETA COMMUNICATIONS
WITNESS
/s/ [illegible]
- --------------------------------- BY: /s/ [illegible]
WITNESS -------------------------------
STATE OF OHIO )
) SS
SUMMIT COUNTY )
BEFORE ME, a Notary Public in and for said county and state, personally
appeared the named JOHN J. PISCITELLI, JR., who acknowledged that he did sign
the foregoing instrument and that the same is his free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Akron, Ohio, this 14 day of April, 1997.
/s/ [illegible]
-------------------------------
NOTARY PUBLIC
JOSEPH [illegible], Notary Public
Resident Summit County
[illegible]
My Commission Expires March 23, 2000
STATE OF OHIO )
) SS
SUMMIT COUNTY )
BEFORE ME, a Notary Public in and for said county and state, personally
appeared Terry G. Wigton, for Alpha Beta Communications, it's V. Pres who
acknowledged that he/she did sign the foregoing instrument and that the same is
his/her free act and deed.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Akron, Ohio, this 10 day of April, 1997.
/s/ Larry A. Winkler
-------------------------------
NOTARY PUBLIC
LARRY A. WINKLER, JR., Notary Public
STATE OF OHIO
Resident Summit County
My Commission Expires May 2, 2000
<PAGE> 1
Exhibit 4(c)
[LOGO]
ALPHACOM AND ITEM:
A Preliminary Agreement to Establish
a Manufacturing and Distribution Joint Venture
for the Territory of Asia / Romania, Hungry and Bulgaria
This PRELIMINARY AGREEMENT (hereafter the "Agreement") is made on the 9 January
1999, in the City of Akron, County of Summit, State of Ohio, by and among Mr.
Robert Snyder, President of AlphaCom, Inc. (hereafter "AlphaCom"), a company
based in Akron, Ohio, and Mr. John Craciun, III, Chairman / CEO of ITM Group
(hereafter "ITM"), a company based in Hong Kong.
The Parties listed above, understand, recite, and stipulate the following:
A. Under this Agreement AlphaCom, / ITM have agreed to negotiate a
Joint-Venture agreement that will contribute to the development of a
Joint-Venture Company to be named AlphaCom International Ltd.
B. The purpose of the AlphaCom International Ltd. is to exclusively
manufacture, market, license and distribute AlphaCom equipment, products,
software and services in certain countries or terratories (hereafter referred to
as the "Territory"). Herewith attached see addendum I., which defines the
"Territory";
C. ITM, has responded to the request by AlphaCom, Inc., to open
extensive discussions, to share communications, to consult with each other and
to perform comprehensive due diligence regarding the "Territory" and the ITM
exclusive representation of AlphaCom in the "Territory";
D. The Parties do hereby agree that it is in the best interest of the
Parties, to complete a "Preliminary Agreement" as follows;
Upon the execution of this Agreement:
1. ITM agrees to begin research within the "Territory," to negotiate
the agreement of the Joint-Venture Company and to complete the incorporation of
AlphaCom International Ltd., under the laws of the territory of Hong Kong.
2. AlphaCom shall establish an Asian / Romania, Hungry and Bulgaria
Development Department and appoint Mr. John Craciun III, and or his assigns as
the Manager of the Department, until such time that AlphaCom International Ltd
is incorporated and ITM will assume all expences in connection with the
development of the Department.
3. AlphaCom grants the Exclusive Agent Representation Right(s) of the
"Territory to ITM and or its Assigns.
4. AlphaCom grants ITM the exclusive right to sell sub-licenses within
the Territory.
<PAGE> 2
[LOGO]
Page 2. Preliminary Joint Venture agreement AlphaCom/ITM
5. AlphaCom shall expressly, formally, disclose to all inquiring,
potential and prospective Clients of/ or regarding the Territory, that ITM is
its partner and exclusive agent of the "Territory";
6. AlphaCom agrees not to directly answer questions and/or to discuss
the "Territory" with any prospective Client regarding the "Territory." AlphaCom
agrees to direct all inquiries from, the "Territory" to the attention of Mr.
John Craciun III. Mr. Craciun III will qualify each inquiry and communicate
relevant information directly to AlphaCom Inc.
7. AlphaCom shall be responsible within the "Territory" for: the
development of technology, the supply of detailed documentation and educational
programs to affect the transfer of technology (including price lists); supply
equipment and products for testing (at no cost to AlphaCom) and technical
evaluation reports; and contribute to the completion of the transfer of
technology.
8. ITM shall be responsible within the Territory for: completing
comprehensive government, commercial and consumer marketing research programs;
prepare a manufacturing feasibility study, obtain the required approvals from
the relevant authorities of government, and qualify potential Joint - Venture
partners and sub - licensees; research application(s), penetration potentials
and evaluate wholesale and retail price considerations for AlphaCom equipment,
products, software and services; negotiate Joint - Venture partner and
sup-licensee fee structures; and develop "show case(s)" for AlphaCom equipment,
products, software and service Programs.
9. AlphaCom International Ltd., agrees to pay AlphaCom 50% of the sub -
licensing fees earned from the "Territory" up until the sub - licensing fee
payments to AlphaCom equal US$650,000.
10. AlphaCom International Ltd., agrees to pay AlphaCom a mutually
agreed upon US dollar amount for subscriber fees and for AlphaCom equipment,
products, software and service;
II. AlphaCom / ITM have agreed to the following:
a) J. V. Name: AlphaCom International, Ltd.
b) Shareholders: ITM / AlphaCom.
c) Shares: ITM = 95%, AlphaCom = 5%.
d) Directors: AlphaCom = 1 seat.
e) Officers: Mr. John Craciun III and Mr. Bob Snyder
g) J. V. Term: Ten (10) years.
<PAGE> 3
[LOGO]
Page 3. Preliminary Joint Venture agreement AlphaCom / ITM
12. Although this Agreement is a "Preliminary Agreement," any
subsequent amendments shall be made with the consent of both parties.
13. Any disputes arising from or in connection with this agreement
shall be resolved under the laws of the State of Ohio.
14. It is agreed that all facsimile transmitted documents shall be
considered as original and binding unless or until substituted by original hard
copy documents.
15. This Agreement consists of three originals, with each party holding
one original, and shall be effective upon execution.
Accepted by:
/s/ Bob Snyder Date: January 9, 1999
- -------------------------------- -----------------
Mr. Bob Snyder,
President of the Alpha Com, Inc.
Accepted by:
/s/ John J. Craciun III Date: January 9, 1999
- -------------------------------- -----------------
John J. Craciun III,
Chairman/CEO of the ITM Group
<PAGE> 4
ADDENDUM I
Asian Territory Definition
Afghanistan Macao
Bangladesh Malaysia
Brunci Mongolia
Burma Nepal
Cambodia Pakistan
China Philippines
Hong Kong Singapore
Taiwan Sri Lanka
Japan Thailand
India Vietnam
Indonesia
Korea North
Korea South
Laos
Eastern - Europe Territory Definition
Romania Hungry
Bulgaria
<PAGE> 5
POWER OF ATTORNEY
I, Robert Snyder, President of AlphaCom, Inc., residing in Akron, Ohio, United
States of America, with the approval of the Board of Directors of the company,
hereby appoint Jack Craciun III, Chairman / CEO of the ITM Group as our
Attorney-in-Fact and Exclusive Agent.
My Agent shall have the full power and authority to act on my behalf within the
territory of Asia and in the countries of Romania, Hungry and Bulgaria,
hereinafter referred to as the "Territory." This power and authority shall
authorize my Agent to manage and conduct the affairs of AlphaCom Inc., as
described below.
My Agents powers shall include, the power to:
1. Perform market research, prepare a manufacturing feasibility
studies, obtain approvals from the relevant authorities of the governments
within the "Territory", identify partners, research application(s) and
penetration potentials, and evaluate wholesale and retail price considerations
of AlphaCom equipment, products, software and services within the "Territory";
define sub-licensee qualifications, fee structures, and develop international
"show cases" of AlphaCom equipment, products, software and service programs in
the "Territory."
I grant this Power of Attorney to Mr. Jack Craciun, III to support his effort to
provide ITM and AlphaCom with the relevant research, feasibility studies and
other information required to negotiate an agreement that will directly
contribute to the development and ownership of a Joint-Venture company, named
AlphaCom International Ltd. (in organization) by AlphaCom and ITM.
The purpose of the AlphaCom International Ltd., will be to exclusively
manufacture, market, license and distribute AlphaCom equipment, products,
software and services throughout the "Territory."
Further, I hereby appoint Mr. Jack Craciun III, the Manager of the AlphaCom
Department of Asian, Romania, Hungary and Bulgaria Development, until the
intended Joint-Venture Company is completed.
My agent shall be liable for any loss that results from a judgment error made in
good faith or for willful misconduct or the failure to act in good faith while
acting under the authority of this Power of Attorney.
The Agent is hereby notified and required, to indemnify and hold harmless, Mr.
Snyder, AlphaCom Inc., and any third party that accepts and acts under this
document.
My Agent, or any third party, shall not be entitled to any compensation for any
service provided as Agent(s) unless previously agreed upon, in writing, by
AlphaCom, Inc.
This power of attorney shall become effective immediately and remain in effect
for one year or up to the date that the above-mentioned Joint-Venture Company is
incorporated. This Power of Attorney supersedes all other Powers of Attorney
granted prior to this date.
By: /s/Bob Snyder By: /s/Jack Craciun III Date: January 9, 1999
--------------------- -------------------- ----------------
Mr. Bob Snyder Mr. Jack Craciun III
President, AlphaCom Inc. Chairman/CEO ITM Group
<PAGE> 1
Exhibit 4(d)
JOINT VENTURE AGREEMENT
THIS AGREEMENT is entered into between ALPHACOM, INC., a Nevada corporation,
located at 1035 Rosemary Boulevard, Suite I, Akron, Ohio 44306, hereinafter
referred to as "ALPHACOM" and AMERICAN MILLENIUM CORPORATION, a Delaware
corporation, located at 17835 RCR 29, Oak Creek, Colorado 80467, hereinafter
referred to as "AMC".
WHEREAS, ALPHACOM is a Nationwide, Wireless and Wireline Internet Service
Provider; and
WHEREAS, ALPHACOM is also a Network Marketing Company with over 2,000
Distributors.; and
WHEREAS, ALPHACOM is in the process of filing a Regulation A Common Stock
Offering for $5,000,000.00 and expects to be effective within 30 days; and
WHEREAS, AMC is a research and developmental company; and
WHEREAS, AMC is 80% owned by Energy Optics, Inc. (NASDAQ OTC: EOPT), a New
Mexico corporation and is seeking investment as per attached Exhibit 1 - Summary
of Events; and
WHEREAS, AMC has an unlimited license under a License Agreement dated March 17,
1997 from Pegasus Data Systems, Inc. (Pegasus), Harold Walker, Milly Walker
and/or National MultiPlex Corporation, as per attached Exhibit 2, for a patented
technology called Very Minimal Shift Key (VMSK) and VMSK/2, as per attached
Exhibit 3 Definition and Applications of VMSK, and as per attached Exhibit 4 -
Copy of Article in Wireless Magazine, hereinafter referred to as "Technology";
and
WHEREAS, AMC is developing other technologies, such as a Video Card allowing
full motion or tv like quality over a normal phone line (9.6kbps) and and a
powerline modem allowing up to 3 MB/sec. Data transfer over normal copper,
electronic wiring in a home or building; and
NOW, THEREFORE, in consideration of their mutual promises, covenants and
conditions herein, the parties agree as follows:
1. PURPOSE AND CONTRIBUTIONS:
--------------------------
1.1. AMC agrees to provide its "rights" to the TECHNOLOGY as outlined in
Exhibits 2 and 3 under the Field of Use below to this Joint Venture.
2. HELD OF USE:
------------
2.1. Both ALPHACOM and AMC shall have the exclusive rights to use, develop,
market and/or resell the use of the TECHNOLOGY noted above except for
using said TECHNOLOGY into cable boxes used in the video delivery
system.
1
<PAGE> 2
3. FUTURE DEVELOPMENTS:
--------------------
3.1. ALPHACOM shall have the first right of refusal for a video card as
mentioned above without any further licensing costs; however, royalties
shall be applicable and agreed to under a separate contract or
agreement. Currently, AMC is testing the video card at its own expense
and agrees to deliver reports on the video card specifications and
performance to ALPHACOM.
3.2. ALPHACOM shall have the first right of refusal to share in the Marketing
and further development with AMC for the powerline modem as mentioned
above without any further licensing costs; however, royalties shall be
applicable and agreed to under a separate contract or agreement.
Currently, AMC is testing the powerline modem at its own expense and
agrees to deliver reports on the powerline modem specifications and
performance to ALPHACOM.
4. Both parties agree that any further funds, outside the aforementioned
royalties received by the Joint Venture shall be deemed for development
purposes and as a short-term loan unless otherwise agreed and the terms
of said loan shall be on a case by case basis and further agreed to by
both parties.
5. OWNERSHIP:
----------
5.1. ALPHACOM shall own 51% of this Joint Venture and AMC shall own the
remaining 49%.
6. ESTABLISHING, AUDITING OF ROYALTIES ACCOUNTS AND PAYMENT OF ROYALTIES
---------------------------------------------------------------------
6.1 For each unit utilizing the TECHNOLOGY, a royalty payment of $100.00
per server in addition to the actual hardware and software costs (if
applicable), $5.00 per end user modem and $.50 per month for each end
user modem active and covered by a service carrier contract $5.00
per unit will be paid to this Joint Venture.
6.2 A separate royalties account shall be maintained for each party and
shall be designated Royalties Account- ALPHACOM and Royalties
Account-AMC. The separate royalties accounts shall consist solely of
royalties on products developed and paid into the account by the Joint
Venture.
6.3 The Joint Venture's books shall be closed and balanced by an
independent certified public accountant at the end of each fiscal year
of this Joint Venture.
6.4 The fiscal year of the Corporation shall be December 31.
6.5 At the end of each month the aggregate sum of the royalties will be
paid base on the percentage owned by each party hereto. Each party's
percentage of the aggregate sum
2
<PAGE> 3
of royalties to be paid from this Joint Venture below shall be
calculated and credited to his individual royalties account.
6.6 51% of the aggregate sum of royalties calculated shall be paid into
the Royalties Account-ALPHACOM on behalf of ALPHACOM and 49% of the
aggregate sum of royalties calculated shall be paid into the Royalties
Account-AMC on behalf of AMC.
6.7 In the event either party sub-licenses and/or joint ventures with any
other party for the TECHNOLOGY, that party owes this Joint Venture
TWENTY PERCENT (20%) of / the net proceeds of said license and/or
joint venture.
7 The parties hereto agree that each party and/or his duly authorized
representative, attorney, or attorney in fact shall have the right, upon
reasonable request, to inspect his individual Royalties Account the
Corporation is required to maintain pursuant to Paragraph IV above.
8 Any party may, by notice hereunder to the other party, designate a changed
address for such party. Any notice, if mailed properly addressed, postage
prepaid, registered or certified mail, shall be deemed received the fifth
business day thereafter, or when it is actually received, whichever is
sooner.
9 If any controversy shall rise out of this Agreement or out of the refusal to
perform the whole or any part thereof, the parties shall be unable to agree
with respect to the matters in controversy, the same shall be submitted for
determination by a Board of Arbitrators, pursuant to the Commercial
Arbitration Rules of the American Arbitration Association, and judgment upon
the award rendered may bed entered in any court having jurisdiction thereof.
10 This Contract may be executed in any number of counterparts, including
counterparts transmitted by telecopier or FAX, any one of which shall
constitute and original of this Contract. When counterparts of facsimile
copies have been executed by all parties, they shall have the same effect as
if the signatures to each counterpart or copy where upon the same document
and copies of such documents shall be deemed valid as originals. The parties
agree that all such signatures may be transferred to a single document upon
the request of any party,
11 This Agreement shall be deemed to be a contract made under the laws of the
State of Ohio, and for all purposes it shall be construed in accordance with
and governed by the laws of the State of Ohio.
12 Whenever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under
applicable law, such pro vision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
13 This Agreement may not be and shall not be deemed or construed to have been
modified, amended, rescinded, canceled, or waived in whole or in part,
except by a written instrument signed by the parties hereto.
3
<PAGE> 4
14 This Agreement constitutes and expresses the entire Agreement and
understanding between the parties hereto in reference to all the matter
referred to herein and any previous discussions, promises, representations,
and understanding relative thereto are merged into the terms if this
Agreement and shall have no further force and effect.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement the date first
set forth above.
BY: AMERICAN MILLENNIUM CORPORATION, INC.
17835 RCR
Oak Creek, CO 80467
By: /s/ Stephen F. Watwood Date: 5-14-98
----------------------- --------
It's President: Stephen F. Watwood
By:/s/ illegible
-------------
Witness
BY: ALPHACOM, INC.
1035 Rosemary Blvd, Suite I
Akron, OH 44306
By:/s/ Robert Snyder Date: 5-14-98
----------------- --------
It's President: Robert Snyder
By:/s/ illegible
-------------
Witness
4
<PAGE> 5
EXHIBITS
--------
1. Summary of Events of Energy Optics, Inc. from August 20, 1997 - April 20,
1998.
2. AMC's unlimited license from Pegasus Data Systems, Inc. (Pegasus), Harold
Walker, Milly Walker and/or National MultiPlex Corporation for a patented
technology called Very Minimal Shift Key (VMSK) and VMSK/2.
3. Definition and Applications of VMSK.
4. Copy of Article in Wireless Magazine.
5
<PAGE> 1
Exhibit 7
D.G. BARNHART
ATTORNEY AT LAW
------------------------------
2533 NORTH CARSON STREET
CARSON CITY, NV 89706
Tel. 775-886-0271 Fax 775-883-4874
June 23, 1999
Securities and Exchange Commission
450 5th Street N.W.
Washington D.C. 20549
Re: AlphaCom, Inc.
Ladies and Gentlemen:
In connection with the issuance by AlphaCom, Inc. (the Issuer) of securities, I
herewith provide the following as special counsel for the Issuer.
I am an attorney duly licensed to practice in the state of Nevada with offices
in Carson City, Nevada. In my capacity as special counsel to the Issuer, I have
examined copies of the following:
A. Articles of Incorporation of AlphaCom, Inc. filed in the Office of the
Secretary of State of the State of Nevada December 1, 1997.
B. Minutes of special shareholders meeting held on May 6, 1999.
C. Action By Written Consent of the Board of Directors April 15, 1999
amending Articles of Incorporation.
D. Certificate of Amendment of Articles of Incorporation (undated).
E. Certificate Amending Articles of Incorporation filed June 4, 1998.
F. Certified statement of J.M. Lechiara dated June 23, 1999 (Attachment 1)
G. Status reports for AlphaCom, Inc. issued by the Nevada Secretary of State
and obtained electronically June 18, 1999 and June 23, 1999. (Attachments
2 and 2A)
H. Annual list of Officers and Directors of AlphaCom, Inc. filed January 4,
1999.
I. Certificate of Nevada Secretary of State filed May 28, 1998.
In rendering this opinion, I have relied on representations made to me and have
made reasonable inquiry as to the accuracy of those representations. Nothing has
come to my attention which leads me to believe that such reliance is not
justified.
1
<PAGE> 2
Based on examination of the foregoing documents and representations made to me,
it is my opinion that:
1. The Issuer has been duly incorporated and is a corporation in good
standing under the laws of the state of Nevada.
2. The Issuer is provided with authority under its original Articles of
Incorporation to issue twenty million (20,000,000) shares of common
stock, and under Amended Articles of Incorporation to issue sixty
million (60,000,000) shares of common stock.
I express no opinion as to any other related matters and the opinions expressed
are derived from the information and documents herein referenced. The opinions
expressed concern only the effect of the laws of the state of Nevada and I
express no opinion as to the laws of any other jurisdiction. I assume no
obligation to supplement this opinion if any applicable laws change after the
date of this opinion or if I become aware after this date of any facts that
might change the opinions expressed.
In basing the opinions set forth in this opinion as "my knowledge", the words
"my knowledge" signify that, in the course of my representation of the Issuer,
no facts have come to my attention that would give me actual knowledge or actual
notice that any such opinion or other matters are not accurate. Except as
otherwise stated in this opinion, I have undertaken no investigation or
verification of such matters. Further, the words "my knowledge" as used in this
opinion are intended to be limited to my actual knowledge.
I confirm that I do not have any financial interest in the business or assets of
the Issuer and do not serve as a director, officer, or employee of the Issuer or
any of its affiliates. I have no undisclosed interest in the subject matters of
this opinion.
The foregoing opinions are for the exclusive reliance of the Issuer. I
understand that certain opinions will also be given to the corporation by Miles
Garnett and that in relying on such opinions, Miles Garnett may rely on this
opinion as to matters of Nevada law.
Regards,
/s/D.G. Barnhart
D.G. Barnhart, Esq.
DGB/jb
Enc.
2
<PAGE> 1
Exhibit 8
Miles Garnett
Attorney at Law
66 Wayne Avenue
Atlantic Beach, N.Y. 11509-1537
Tel. (516) 371-4598
---------------------------
July 12, 1999
AlphaCom, Inc.
1035 Rosemary Boulevard; Suite I
Akron, Ohio 44306
Attention: Board of Directors
Dear Persons,
This letter is in connection with the public offering of up to five
million three hundred twenty thousand shares of common stock, par value $.001
per share of AlphaCom, Inc. a Nevada corporation (the "Company"), under its Form
SB-2 Registration Statement under the Securities Act of 1933 (the "Registration
Statement"). Pursuant to such Registration Statement the Company and Selling
Shareholders propose to sell 5,320,000 shares of common stock.
I have examined such corporate records, certificates and other
documents as I have considered necessary and proper for the purpose of this
opinion. In such examination, I have assumed the genuiness of all signatures,
the authenticity of all documents submitted to me as originals, the conformity
to the original documents submitted to me as copies and the authenticity of of
the originals of such latter documents. As to any facts material to my opinion,
I have, when relevant facts were not independently established, relied upon the
aforesaid record, certificates and documents.
Based on the foregoing, It is my opinion that when (i) the Registration
Statement shall have become effective under the Securities Act of 1933, as
amended, (ii) the Certificates for the Company's Shares of the Common Stock have
been duly executed, countersigned, registered and delivered and the
consideration therefor paid to the Company, then the Stock shall be validly
issued, fully paid and non-assessable.
<PAGE> 2
AlphaCom, Inc.
July 12, 1999
Page 2
In rendering the foregoing opinion, as to matters covered by the laws
of Nevada, I have relied on the opinion of D.G. Barnhart, delivered separately
to you.
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
statement made in reference to me under the caption "Legal Matters" and this
opinion in the Prospectus constituting a part of the Registration Statement.
Very truly yours,
/s/ Miles Garnett
Miles Garnett
<PAGE> 1
EXHIBIT 23.5
------------
ACCOUNTANTS' CONSENT
To the Stockholders and
Board of Directors of AlphaCom, Inc. and Subsidiary:
We consent to the inclusion of our reports dated June 8, 1999 and February 17,
1999 with respect to the consolidated balance sheets of AlphaCom, Inc. and
Subsidiary as of April 30, 1999 and 1998 and December 31, 1998 and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the four month periods ended April 30, 1999 and 1998 and the year ended December
31, 1998 included herein and to the reference to our firm under the heading
"Experts" included in the Registration Statement (Form SB-2) and the related
prospectus of AlphaCom, Inc.
SPECTOR & SAULINO, CPAs, L.L.C.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Form SB-2 as
of and for the year ended December 31, 1998 and is qualified entirely by
reference to such consolidated financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,387
<SECURITIES> 0
<RECEIVABLES> 15,458
<ALLOWANCES> (7,000)
<INVENTORY> 20,635
<CURRENT-ASSETS> 323,987
<PP&E> 166,041
<DEPRECIATION> (19,072)
<TOTAL-ASSETS> 1,276,205
<CURRENT-LIABILITIES> 2,344,862
<BONDS> 0
0
0
<COMMON> 11,983
<OTHER-SE> 25,002
<TOTAL-LIABILITY-AND-EQUITY> 1,276,205
<SALES> 91,255
<TOTAL-REVENUES> 122,068
<CGS> 6,557
<TOTAL-COSTS> 21,454
<OTHER-EXPENSES> 1,697,126
<LOSS-PROVISION> 7,000
<INTEREST-EXPENSE> 195,806
<INCOME-PRETAX> (1,792,318)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,792,318)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,792,318)
<EPS-BASIC> (.17)
<EPS-DILUTED> (.17)
</TABLE>
