As filed with the Securities and Exchange Commission on July 14, 1999
Registration No. 333-72385
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GLOBALNET FINANCIAL.COM, INC.
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(Name of Small Business Issuer in Its Charter)
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<S> <C> <C>
Delaware 7375 06-1489574
- ------------------------------------------- -------------------------------- -----------------------------------------------
(State or Jurisdiction of (Primary Standard (IRS Employer Identification Number)
Incorporation or Organization) Industrial Classification
Code Number)
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7280 W. Palmetto Park Road
Suite 202
Boca Raton, Florida 33433
(561) 417-8053
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(Address and Telephone Number of Principal Executive Offices)
7280 W. Palmetto Park Road, Suite 202, Boca Raton, Florida 33433
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(Address of principal place of business or intended principal place of business)
Ronald B. Koenig
Chairman of the Board of Directors,
GlobalNet Financial.com, Inc.
7280 W. Palmetto Park Road
Suite 202
Boca Raton, Florida 33433
(561) 417-8053
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(Name, Address and Telephone Number of Agent for Service)
COPIES OF COMMUNICATIONS TO:
Dale S. Bergman, P.A.
Broad and Cassel
201 South Biscayne Boulevard
Suite 3000
Miami, Florida 33131
Telephone No. (305) 373-9400
Approximate date of commencement of proposed sale to the public:
From time to time 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, please check the following box. |X|
<PAGE>
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, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
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- ------------------------------------------------------------------------------------------------------------------------------
Proposed
Proposed Maximum
Title of each Class Amount Maximum Aggregate Amount of
of Securities to be Offering Price Offering Registration
to be Registered Registered Per Share (1) Price(1) Fee
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Common Stock, $.001 par value 31,250 Shares $12.00 $375,000 $110.62
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 208,334 Shares $13.86 $2,887,509 $851.00
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 170,799 Shares $17.25 $2,946,283 $869.00
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Common Stock, $.001 par value 41,667 Shares $15.75 $656,255 $193.00
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Common Stock, $.001 par value 83,334 Shares $21.75 $1,812,515 $534.00
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Common Stock, $.001 par value 129,167 Shares $18.00 $2,325,006 $686.00
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 41,667 Shares $14.76 $615,005 $181.00
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 41,667 Shares $13.86 $577,504 $170.00
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 20,834 Shares $10.50 $218,757 $64.00
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 2,071,862 Shares $21.00 $43,509,102 $12,836.00
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 274,998 Shares $21.00 $5,774,958 $1,703.08
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 4,167 Shares $2.25 $9,375 $2.76
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 4,167 Shares $1.50 $6,250 $1.84
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 4,518,167 Shares $14.76 $66,688,144 $19,673.01
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 140,000 Shares $14.25 $1,995,000 $588.52
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 41,667 Shares $6.00 $250,000 $73.75
- ------------------------------------------------------------------------------------------------------------------------------
Total $27,537.58
- ------------------------------------------------------------------------------------------------------------------------------
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1 Estimated solely for the purpose of calculating the registration fee
and pursuant to Rule 457. 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.
2 $27,537.58 was previously paid.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 14, 1999
PROSPECTUS
7,823,747 Shares
GlobalNet Financial.com, Inc.
The selling stockholders are offering for sale up to 7,823,747 shares
of common stock which includes 983,719 shares underlying certain warrants and
options. We are registering the re-sale of the shares of common stock pursuant
to commitments to these stockholders. We will pay the expenses of registering
the re-sale of the shares.
The selling stockholders may sell their shares in public or private
transactions, at prevailing market prices or at privately negotiated prices. We
will not receive any proceeds from the sales of the shares, but will receive
approximately $17,810,047 from the exercise of the warrants if all of the
warrants are exercised.
There is currently only a limited trading market for our common stock.
Our stock is quoted on the OTC Bulletin Board under the symbol "GLBN". On July
8, 1999, the last reported bid price of the common stock was $15.94 per share.
THESE SHARES HAVE NOT BEEN APPROVED BY THE SEC OR ANY STATE SECURITIES
COMMISSION. NONE OF THESE ORGANIZATIONS HAVE DETERMINED WHETHER THIS PROSPECTUS
IS COMPLETE OR ACCURATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS
-----------------
The date of this Prospectus is July , 1999
<PAGE>
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<CAPTION>
TABLE OF CONTENTS
PAGE
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Summary..........................................................................................................1
Risk Factors.....................................................................................................7
Forward-Looking Statements......................................................................................14
Use Of Proceeds.................................................................................................15
Market For Common Equity........................................................................................15
Management's Discussion And Analysis Of Financial Condition And Results Of Operations...........................18
Business........................................................................................................21
Management......................................................................................................29
Principal Stockholders..........................................................................................35
Certain Transactions............................................................................................36
Selling Stockholders............................................................................................38
Description Of Securities.......................................................................................41
Plan Of Distribution............................................................................................44
Legal Matters...................................................................................................45
Experts.........................................................................................................46
Where You Can Find More Information.............................................................................46
</TABLE>
Unless the context requires otherwise, all references in this
prospectus to "GlobalNet Financial.com, Inc.", "we", "our", "us" and "GlobalNet"
refer to GlobalNet Financial.com, Inc. and its subsidiaries.
Unless the context requires otherwise, all share information in this
prospectus has been adjusted to give effect to a one-for-six reverse stock split
implemented on July 2, 1999.
<PAGE>
SUMMARY
THIS IS A SUMMARY AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT MAY
BE IMPORTANT TO YOU. YOU SHOULD READ THE MORE DETAILED INFORMATION CONTAINED IN
THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED, ALL INFORMATION IN THIS
PROSPECTUS DOES NOT GIVE EFFECT TO 2,725,477 SHARES OF COMMON STOCK ISSUABLE
UPON THE EXERCISE OF OUTSTANDING OPTIONS UNDER OUR STOCK OPTION PLAN AS WELL AS
OTHER OUTSTANDING WARRANTS.
ABOUT US
OVERVIEW
We are a global multimedia provider of online financial information and
services to the investment community. Our U.S. based website,
www.microcap1000.com, operated through our subsidiary MicroCap1000.com, Ltd.
("MicroCap1000"), focuses on companies with a market capitalization of under
$500 million and is designed to be a leading source for information on the
MicroCap sector of the financial market. This website has nearly 165,000
registered users. Our first international site launched on April 28, 1999,
www.ukinvest.com, is operated by our subsidiary, UK-iNvest.com, Limited
("UK-iNvest"). This website was developed through an alliance with Freeserve
Limited, the United Kingdom's largest Internet Service Provider ("ISP") with
more than 1.1 million active accounts and a subsidiary of Dixons Group, plc, the
United Kingdom's largest electronics retailer. This site is the exclusive
provider of investment information on the financial markets within Freeserve's
money channel and provides information on a wide range of securities including
all publicly listed stocks and bonds.
Our goal is to be a worldwide provider of unique financial content and
financial services. We intend to achieve this goal by developing a series of
websites which will provide information on the major world markets. Once
developed, management believes these web sites will position GlobalNet as a
portal for worldwide market information and global investing. Such a portal
would enable subscribers to access information about all the different markets
throughout the world. Towards this end, GlobalNet is seeking to replicate the
model it created for UK-iNvest.com by establishing exclusive relationships with
ISP's and search engines and portals throughout the globe, leveraging its
expertise in providing unique content and investor services in partnership with
entities which have large subscriber bases.
The Company intends to leverage upon the traffic generated by our
sites, as well as those of our strategic partners, to provide financial
services, particularly on-line trading, to our viewers worldwide. As the initial
step in implementing this plan, we have entered into a letter agreement with GRO
Corporation ("GRO") of Houston, Texas, a NASD licensed broker/dealer which
provides on-line Electronic Direct Access Trading ("E-DAT") services to
institutional and individual accounts. Pursuant to this agreement we will
acquire an equity interest in GRO which will be recorded under the equity method
of accounting. This agreement will also provide on-line trading services on our
website and our affiliated website. GRO provides training and a system for
providing remote E-DAT and execution for their clients. Direct Access Trading
allows the customer to instantly enter and execute trades with stock exchanges,
market makers and Electronic Communication Networks ("ECNs"). Direct Access
Trading will complement our internet based financial content and analytical
tools. We anticipate expanding into other areas of online and E-DAT trading.
The closing of this transaction is subject to completion of due diligence,
documentation and NASD approval.
REVERSE STOCK SPLIT
Our Board of Directors has declared a one-for-six reverse common stock
split effective at the close of business on July 2, 1999. In connection with the
reverse stock split, our Certificate of Incorporation was amended to reduce our
authorized capitalization to 16,666,667 shares of Common Stock. All common share
information contained in this prospectus has been adjusted to reflect the
reverse stock split.
BUSINESS STRATEGY
Our strategy is to be a leading provider of content on the World Wide Web,
specifically in the area of business and finance. We have entered into a letter
of intent which would enable us to offer on-line execution capabilities such
that investors can instantly enter and execute trades with stock exchanges,
market makers and Electronic Communication Networks ("ECNs"). As a result,
investors utilizing direct access trading platforms do not necessarily have to
buy at the offer to sell at the bid. We anticipate offering the system on all
our sites worldwide for executions in U.S. stocks.
Our revenue model has a number of components, including:
o payments from companies which want exposure on our sites and
affiliats sites;
o potential online trading revenues assuming our successful entrance into
this business;
o advertising revenues;
2
<PAGE>
o sponsorship revenues; and
o subscription fees.
Management believes possibilities exist to segment certain proprietary
content areas on our web sites as subscription areas. We plan to offer this
proprietary content to subscribers for a fee. In connection with the fee paid
premium service, our goal is two-fold. The first is to convert a portion of free
subscribers to fee paying premium service customers. The second is to attract
new subscribers to the premium service as a result of grass roots marketing
effort on other sites. The premium service is anticipated to include real time
dynamic quotes, portfolio management tools, and proprietary research
recommendations. As traffic to our web site increases, we will review other
opportunities for deriving revenue, such as offering products and services from
advertisers and sponsors.
We are currently building our subscriber base in order to provide an
adequate platform for generating advertising fees from both the site and video
streamed presentations. Although we do not currently have any advertisers or
sponsors, we expect that ultimately we will derive substantially all of our
revenues from the sale of advertising on our web site. Once we have a large
subscriber base, we will seek to establish advertising relationships with large
corporations which wish to have access to the demographic group visiting our web
site.
Development of the subscriber base will also enable us to generate fees
from companies that are interested in accessing our subscribers who are
potential investors. While there is a lot of information available about "blue
chip" or other companies with larger market capitalizations, there are not a lot
of resources for comprehensive information about microcap companies. Because of
their relatively lower valuation, investors see opportunities in this sector and
are looking for information. Companies conducting business in this sector are
looking for mediums to educate the investing public about their companies. Our
web site addresses both of these issues. Management believes that microcap
companies would pay a fee for a forum to educate the investing public about
their companies. Accordingly, management intends to explore this an opportunity
to generate revenues. However, in order to be able to market our subscriber base
to such companies, we must spend time developing our products and increasing our
subscriber base.
As of May 13, 1999, we had five MicroCap1000.com Directory
("Directory") clients and two MicroCap1000.com CEO CyberShow clients ("CEO
CyberShow"). Both the CEO CyberShow and the Directory are located in the
Investment Opportunity Center ("IOC") located on our website
(www.microcap1000.com). The IOC offers clients an opportunity to tell their
company's story to our users for a reasonable quarterly fee. All information is
publicly available and reviewed by the client for accuracy before publication on
the site. The quarterly service charge for the CEO CyberShow is $5,000 while the
quarterly service charge for the Directory is $2,500.
We intend to utilize the U.S. and U.K. platforms to obtain, through
acquisition, complementing companies and products that will provide realtime,
value-added E-commerce programs and financial investment information to online
users worldwide.
RECENT DEVELOPMENTS
We are aggressively pursuing alliances with and investments in or by
key on-line media, Internet and technology companies as well as pursuing
strategic acquisitions in order to accelerate our revenue generation abilities,
regular user base, page view growth and brand awareness. In this regard, we note
the following recent developments:
o STRATEGIC INVESTMENT BY FREESERVE LIMITED
In May 1999 Freeserve Limited ("Freeserve") expanded its alliance with
GLBN and purchased 1,397,112 shares of GLBN representing approximately
13% of GLBN's issued and outstanding common stock in exchange for
approximately $15.0 million. The transaction consisted of the exercise
of 333,333 previously issued warrants at $6.00 and the purchase of
1,063,779 new shares at $12.00. As part of the investment, Freeserve
has been granted an option to increase its holdings in GLBN to 19.9% at
$13.50 per share and will also designate one seat on GLBN's Board of
Directors.
o STRATEGIC INVESTMENT BY ITALIAN INVESTMENT CONSORTIUM
In April 1999, an investment consortium consisting of The De Agositini
Holding Group, Banco Commercial D'Italiana and Investitori Associate
purchased 416,667 shares of GLBN representing approximately 3.8% of
GLBN's issued and outstanding common stock in exchange for $5.0
million. De Agostini is involved internationally in consumer
publishing, with group annual sales of approximately US$1.5 billion.
Banco Commerciale Italiana is Italy's fifth-largest Italian bank.
Investitori Associati is the largest leveraged buyout firm in Italy.
Separately, GLBN and the Italian Consortium are in discussions
regarding a joint venture for the development of a website covering the
Italian Financial Marketplace.
o STRATEGIC INVESTMENT BY TELESCAN
In March 1999, we entered into various agreements with Telescan, Inc.
("TSCN"). As a result of these agreements TSCN currently owns 8% of
GlobalNet (9.9% at the time of the agreement). Under the terms of the
agreements, TSCN issued to GlobalNet 520,000 shares of its common
stock, which at the time of the transaction were valued at $10.3
million in exchange for 862,694 shares of GLBN common stock. In
addition, TSCN purchased a one year option from us for 25,000 shares of
TSCN's common stock to purchase such number of shares necessary to
increase TSCN's position to 19.9% of the then current shares
outstanding. The shares may be purchased at an exercise price of $22.50
per share. The option may be exercisable at any time and until March
30, 2000.
Telescan is an industry leader in providing Internet services,
innovative solutions for online technology and data retrieval tools.
Telescan's Wall Street City(R) financial supersite
(www.wallstreetcity.com) receives between 12 and 15 million page views
per
3
<PAGE>
month and provides a comprehensive suite of search tools, technical
analysis and financial data on the Internet.
In addition, we entered into a Licensing Services Agreement pursuant to
which the parties will license contents and services to each other and
each party will provide certain system operation services to the other
in connection with the license. This technology will include the stock
trading software currently being developed for TSCN by Trading
Technologies Corporation. MicroCap1000.com will provide an exclusive
online Investment Center dedicated to MicroCap and SmallCap market
sectors on TSCN's Wall Street City(R) (www.wallstreetcity.com)
financial supersite. The Center will include daily news articles and
interviews with Wall Street analysts, the MC1000 Index and stock and
investment information for Wall Street City subscribers.
o ALLIANCE WITH MOTLEY FOOL FOR THE U.S. AND U.K.
The Motley Fool (www.fool.co.uk and www.fool.com) will provide a broad
range of content on www.ukinvest.com and daily articles for
www.microcap1000.com. The content will include a daily mix of articles
with distinctive "Fool" branding. UK articles will be written by Motley
Fool writers in the UK and Europe.
o ALLIANCE WITH THESTREET.COM FOR THE U.S. AND U.K.
TheStreet.com and GlobalNet have entered into a Content License and
Distributing Agreement. Pursuant to the Agreement, TheStreet.com will
publish articles on a daily and weekly basis for MicroCap1000 and
UK-iNvest. These articles will appear on the websites and will include
links to TheStreet.com. In addition, we will create an article that,
subject to TheStreet.com's approval, will appear on TheStreet.com's
website. The column will also contain a hyperlink to our sites. This
article on TheStreet.com and our association with TheStreet.com will
increase awareness of our name and brand.
o ALLIANCE WITH FIRST MARATHON FOR THE U.S. AND CANADA
First Marathon, Inc. ("First Marathon") and GlobalNet have entered into
a Joint Venture Agreement. Pursuant to the Agreement, First Marathon
and GlobalNet will form a holding company through which they will
establish a registered securities dealer to conduct on-line trading of
securities. They will also create and operate a website providing,
among other things, financial news, analysis and other financial
products. On June 25, 1999 First Marathon acquired 208,334 shares of
the Company's common stock for $2,500,000. In addition, the company
granted to First Marathon an option to invest up to $5.0 million in the
company's common stock at the lower of the current market price of
$3.50 per share through September 30, 1999 and a warrant to purchase
275,000 shares of the company's common stock at an exercise price of
$17.25 per share through December 15, 2001. If First Marathon exercises
the option the Company shall also grant to First Marathon a 30-month
warrant to purchase up to 333,333 shares of the Company's common stock
at an exercise price of $30.00 per share.
We are exploring additional strategic relationships, certain of which
may involve the issuance of our common stock to our strategic partners.
HISTORICALLY
We historically generated revenues primarily from the activities of our
wholly owned subsidiary International Capital Growth, Ltd. which acted as
placement agent in private financings and as a financial consultant to various
companies. However, over the last nine months we have shifted our focus almost
exclusively to financial publishing activities.
Our financial publishing activities have yet to generate any meaningful
revenue. For the year ended December 31, 1998 we had a net loss of approximately
$3.0 million and an accumulated deficit of $6.3 million. For the three months
ended March 31, 1999 we had a net loss of approximately $2.0 million and an
accumulated deficit of $8.3 million at March 31, 1999. We anticipate losses to
continue until such time as our financial publishing activities generate
significant revenues.
Our executive offices are located at 7280 W. Palmetto Park Road, Suite
202, Boca Raton, Florida 33433. Our telephone number is (561) 417-8053.
ABOUT THE OFFERING
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<S> <C>
Common Stock Offered by the 7,823,747 shares, of which 6,840,028 shares are
Selling Stockholders presently outstanding and 983,719 shares are
issuable upon exercise of warrants and options.
Common Stock Outstanding after the Offering 11,011,223 shares(1)
</TABLE>
4
<PAGE>
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<S> <C>
OTC Bulletin Board Trading Symbol GLBN
Use of Proceeds We will not receive any proceeds from the sale of the
shares by the selling stockholders. We are also
registering the re-sale of shares issuable upon
exercise of warrants. If the warrants are exercised, we
will receive proceeds from the exercise of the warrants.
Any proceeds received from the exercise of the warrants
will be used for working capital and general corporate
purposes.
Risk Factors The securities offered hereby involve a high degree
of risk.
</TABLE>
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(1) Does not include (i) 1,731,167 shares of Common Stock reserved for issuance
upon exercise of options granted under the Company's 1998 Stock Option Plan;
(ii) 990,311 shares of Common Stock issuable upon the exercise of warrants;
(iii) options to purchase shares of GLBN such that, after giving effect to the
shares currently owned by TSCN and Freeserve, each would upon exercise of the
option then own 19.9% of the then outstanding shares of GLBN common stock; (iv)
option granted to First Marathon, Inc. to invest up to $5.0 million in the
Company's common stock at the lower of the current market price of $21.00 per
share. If First Marathon exercises the option the Company shall also grant to
First Marathon a 30-month warrant to purchase up to 333,333 shares of the
Company's common stock at an exercise price of $30.00 per share.
5
<PAGE>
SUMMARY FINANCIAL DATA
Set forth below are selected financial data for each of the periods
indicated. The selected financial data for the years ended December 31, 1998 and
1997 as well as the periods ended March 31, 1999 and March 31, 1998 and the
selected balance sheet data as of December 31, 1998 and March 31, 1999 have been
derived from the audited and unaudited financial statements included elsewhere
in this registration statement. Results for the three months ended March 31,
1999 are not necessarily indicative of the results for the full fiscal year. All
of the information set forth below should be read in conjunction with our
consolidated financial statements, including the notes thereto, "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the other financial information included in this Prospectus.
<TABLE>
<CAPTION>
For the Years Ended For the Three Months
December 31, Ended March 31,
----------------------------------- ----------------------------------------
1998 1997 1999 1998
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<S> <C> <C> <C> <C>
Total revenue $1,281,347 $3,428,054 $225,966 $284,746
Total operating expenses 4,289,223 4,429,939 2,223,951 594,833
---------- ---------- ---------- --------
Net loss $(3,007,876) $(1,001,885) $(1,997,985) $(310,087)
Less cumulative preferred dividend 0 (29,624) 0 0
---------- ---------- ---------- --------
Net loss attributable to common
stockholders $(3,007,876) $(1,031,509) $(1,997,985) $(310,087)
---------- ---------- ---------- --------
Basic and diluted loss per common
share $(0.72) $(0.40) $(0.26) $(0.09)
========== ========== ========== ========
Weighted average common shares
outstanding -basic and diluted 4,205,500 2,609,167 7,656,000 3,302,334
========== ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998 March 31, 1999
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<S> <C> <C>
Total Assets $3,505,010 $14,156,612
Total Liabilities $1,223,435 $776,357
Long-Term Debt $0 $0
Stockholders' Equity $2,281,575 $13,380,255
</TABLE>
6
<PAGE>
RISK FACTORS
The shares offered are speculative and involve a high degree of risk.
You should carefully consider the following matters, as well as the other
information in this prospectus, before investing.
WE HAVE A LIMITED OPERATING HISTORY IN THE AREA OF ON-LINE FINANCIAL INFORMATION
SERVICES.
Our subsidiary MicroCap 1000.com, Ltd. only commenced operations in
October, 1998. Our subsidiary UK-iNvest.com Limited only commenced limited
operations in late April 1999 and is still in the start-up phase. Thus, we have
little operating history upon which you can evaluate our performance and
prospects. We face the risks frequently encountered by developing companies.
These risks include the potential inability to compete with more established
firms and to retain and maintain key personnel as well as uncertainty as to
which areas to target for growth and expansion and as to the source of funding
for operations and expansion.
WE WILL DEPEND ON ADVERTISING REVENUES AND SPONSORSHIPS.
We expect to derive a significant portion of our revenues from the sale
of advertising on our Internet sites. In order to generate significant
Internet-based advertising revenue, we will likely depend on:
o advertising agencies, which exercise substantial control over the
placement of advertising for their clients;
o our ability to convince advertisers and advertising agencies of the
benefits of advertising on our Internet sites;
o our ability to retain, broaden and diversify our future base of
advertising customers;
o the development of a larger base of users of our Internet site
possessing demographic characteristics attractive to advertisers;
If we are unable to attract and retain paying advertising customers or
we are forced to offer lower than anticipated advertising rates in order to
attract and/or retain advertising customers, our business will be harmed.
THE INTERNET MAY NOT BE ACCEPTED AS AN ADVERTISING MEDIUM.
Use of the Internet by consumers is at an early stage of development
and market acceptance of the Internet as a medium for information, commerce and
advertising is subject to a high level of uncertainty. We believe that our
success depends upon our ability to obtain significant revenues from our
Internet operations, which will require the development and acceptance of the
Internet as an advertising medium. In order for us to generate advertising
revenues, advertisers and advertising agencies must direct a portion of their
budgets to the Internet as a whole, and specifically to our Internet site. We
believe that most advertisers and advertising agencies have limited experience
with the Internet as an advertising medium and neither advertisers nor
advertising agencies have devoted a significant portion of their advertising
budgets to Internet-related advertising to date. We cannot assure you that
advertisers or advertising agencies will be persuaded, or able, to allocate or
continue to allocate portions of their budgets to Internet-based advertising,
that they will find Internet-based advertising to be more effective than
advertising in traditional media or that they will decide to advertise on our
Internet site.
7
<PAGE>
WE WILL DEPEND ON CONTINUED GROWTH OF THE INTERNET.
Rapid growth in the use of and interest in the Internet is a recent
phenomenon. We cannot assure you that acceptance and use of the Internet will
continue to develop or that a sufficient base of users will emerge to support
our business. Revenues from our Internet operations will depend largely on the
widespread acceptance and use of the Internet as a source of information and
entertainment and as a vehicle for commerce in goods and services. The Internet
may not be accepted as a viable commercial medium for a number of reasons. If
use of the Internet does not continue to grow or grows more slowly than
expected, or if the Internet infrastructure does not effectively support growth
that may occur, our business would be harmed.
WE FACE INTENSE COMPETITION.
We compete with other Internet sites for the time and attention of
consumers and for advertising and subscription revenues. Competition among
Internet sites is intense and is expected to increase significantly in the
future. In our area of focus of finance, we compete with various companies and
Internet sites, such as Yahoo Business, Inc., CBS Market Watch, CNN Financial
Network, MSN Investor, The Motley Fool, Silicon Investor, Excite Money &
Investing and TheStreet.com, among others. These companies have significantly
greater resources than we do. Many, if not all, of these competitors also offer
a wider range of products and services than we do and may be sufficiently
attractive to Internet users to attract users to their services and,
consequently, dissuade them from accessing our Internet sites. If we are unable
to continue to attract a significant number of Internet users to our Internet
site, our business will be harmed.
THERE ARE LOW BARRIERS TO ENTRY.
The market for Internet-based products and services is relatively new,
intensely competitive and rapidly evolving. There are minimal barriers to entry,
and current and new competitors can launch new Internet sites at a relatively
low cost within relatively short time periods. Accordingly, we expect
competition to persist and intensify and the number of competitors to increase
significantly in the future. We cannot assure you that our Internet sites will
compete successfully.
MANAGEMENT HAS LIMITED EXPERIENCE IN SALES AND MARKETING OF ADVERTISING.
None of our senior management team has any significant experience in
selling advertising on the Internet or any other medium, and few members of our
senior management team have any significant experience in the Internet industry.
Achieving acceptance by potential advertisers and advertising agencies of our
Internet sites as a viable marketing forum will require us to develop and
maintain relationships with key advertisers and advertising agencies. There can
be no assurance that any such relationships will be developed, on a timely basis
or at all.
8
<PAGE>
WE DEPEND ON THIRD PARTIES FOR INTERNET OPERATIONS AND CONTENT DEVELOPMENT.
We believe that the ability to advertise our Internet site on other
Internet sites and the willingness of the owners and operators of such sites to
direct users to our Internet site through hypertext links are critical to the
success of our Internet operations. Other Internet sites, particularly
search/index guides and other companies with the strategic ability to direct
user traffic, significantly affect traffic to our Internet site. We cannot
assure you that we will establish or maintain such arrangements in the future.
Our ability to develop original and compelling Internet-based products and
services is also dependent on maintaining relationships with and using products
provided by third-party vendors. Developing and maintaining satisfactory
relationships with third parties could become more difficult and more expensive
as competition increases among Internet sites. If we are unable to develop and
maintain satisfactory relationships with such third parties on terms acceptable
to us, or if our competitors are better able to leverage such relationships, our
business will be harmed.
REVENUES WILL BE UNPREDICTABLE.
As a result of our limited operating history and the emerging nature of
the Internet, including Internet-based advertising, we cannot forecast our
expenses and revenues accurately. We believe that, due primarily to the
relatively brief time the Internet has been available to the general public,
there has not yet been developed a commercially viable business model from which
to successfully operate any form of Internet-based product and/or service
business. Further, few, if any, of our operating expenses can be quickly or
easily reduced. As a result, we may be unable to adjust spending in a timely
manner to compensate for any unexpected expenditures or a shortfall in actual
revenues as compared to estimated revenues.
MANAGEMENT HAS LIMITED EXPERIENCE IN NEW BUSINESS AREA.
Development and operation of an Internet website is a new business area
for and a deviation from our historical business. Our long-term success will
depend, in part, on our ability to expand operations beyond solely relying on
Internet-based advertising revenues into areas such as subscription-based
products and services and electronic commerce, in addition to successfully
developing new Internet sites and enhancing the existing one. We cannot assure
you that we will be able to expand into such areas, develop and launch any new
Internet sites or enhance existing ones.
ACQUISITIONS AND VENTURES MAY DISRUPT OR OTHERWISE HAVE A NEGATIVE IMPACT ON OUR
BUSINESS.
We may enter into new business opportunities and ventures in a broad
range of areas. Typically, such opportunities require extended negotiations, the
investment of a substantial amount of capital and substantial burdens on our
management personnel and our financial and operational systems. We cannot assure
you that such a venture would ever achieve profitability.
TECHNOLOGICAL CHANGES MAY HARM OUR BUSINESS.
The market for Internet-based products and services is characterized by
rapid technological developments, frequent new product introductions and
evolving industry standards. The emerging character of these products and
services and their rapid evolution will require that we continually improve the
performance, features and reliability of our Internet-based products and
services. We cannot assure you that we will be successful in responding quickly,
cost effectively and sufficiently to these developments.
In addition, the widespread adoption of new Internet technologies or
standards could require substantial expenditures by us to modify or adapt our
Internet site and services and could fundamentally affect the character,
viability and frequency of Internet-based advertising, either of which could
harm our business. In addition, new Internet-based products, services or
enhancements offered by us may contain
9
<PAGE>
design flaws or other defects that could require costly modifications or result
in a loss of consumer confidence, either of which could harm our business.
WE MAY EXPERIENCE SYSTEM FAILURES.
The satisfactory performance, reliability and availability of our
Internet site and its computer network infrastructure are critical to attracting
Internet users and maintaining relationships with advertising customers. Our
Internet-based advertising revenues will be directly related to the number of
advertisement impressions delivered by us. System interruptions that result in
the unavailability of our Internet site or slower response times for users would
reduce the number of advertisements delivered, reduce the attractiveness of our
Internet sites to users and advertisers, and could harm our business. We are
dependent on third parties for uninterrupted Internet access.
WE WILL HAVE TO PROTECT AGAINST SECURITY RISKS.
We have instituted certain security measures designed to protect our
Internet site and other operations from unauthorized use and access. Such
measures cannot guarantee complete security. A party who is able to circumvent
our security measures could misappropriate proprietary information or cause
interruptions in our Internet operations. We may be required to spend
significant money and resources to protect against the threat of such security
breaches or to alleviate problems caused by such breaches. To the extent that
our activities or any third party contractors involve the storage and
transmission of proprietary information, such as computer software or credit
card numbers, security breaches could expose us to a risk of loss or litigation
and possible liability. We cannot assure you that contractual provisions
attempting to limit our liability in such areas will be successful or
enforceable, or that parties will accept such contractual provisions as part of
our agreements.
WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY.
Our success is dependent upon our ability to protect and leverage the
value, if any, of our original Internet technologies, software, content and our
trademarks, trade names, service marks, domain names and other proprietary
rights we either currently have or may have in the future. We have filed service
marks for our logo and name, as well as for the names of our site. Given the
uncertain application of existing copyright and trademark laws to the Internet,
we cannot assure you that existing laws will provide adequate protection for our
technologies, sites or domain names. Policing unauthorized use of our
technologies, content and other intellectual property rights entails significant
expenses and could otherwise be difficult or impossible to do given, among other
things, the global nature of the Internet. From time to time, we may be subject
to legal proceedings and claims in the ordinary course of business, including
claims of alleged infringement of the trademarks and other intellectual property
of third parties by us or our licensees. Such claims, even if not meritorious,
could result in the expenditure of significant financial and managerial
resources.
THE SECURITIES BUSINESS IS VERY RISKY.
Our business is concentrated in the securities industry and,
particularly, providing information about the securities industry over the
Internet. The success of our business depends, in part, on continued interest in
the securities industry. The current level of interest in the securities
industry is extremely high as a result of a very positive stock market and the
economic climate in the U.S. and perceived buying opportunities in the foreign
markets. However, many factors, including economic downturns, market conditions
and the level and volatility of interest rates, may contribute to reduced levels
of interest or participation in financing and investment transactions, generally
resulting in lower revenues for businesses, such as ours.
10
<PAGE>
CONDUCTING BUSINESS IN FOREIGN MARKETS SUBJECTS US TO A NUMBER OF RISKS.
We are the exclusive provider of investor information and services
within the financial channel of Freeserve Limited, the United Kingdom's largest
internet service provider. We intend to enter into other agreements with other
internet service providers outside of the United States. Conducting business
outside the United States will require us to become familiar with and comply
with foreign laws, rules, regulations and customs. Expansion into non-U.S.
markets may also require significant additional expenses. Our management has
limited experience conducting business outside of the United States. We cannot
assure you that we will be successful engaging in business outside the United
States. Moreover, our failure to comply with foreign laws, rules and regulations
of which we are not aware may harm our business.
Our inability to find a joint venture partner could slow down our
anticipated growth. We intend to expand into foreign markets through joint
ventures with Internet service providers or others in the target market. We
cannot assure you we will be able to find a suitable partner, or, if found, that
the joint venture will be successful. If we do not find a suitable joint venture
partner, we may enter the foreign market without a partner, which would pose
additional risks.
WE WOULD BE LIABLE FOR INFORMATION RETRIEVED FROM THE INTERNET.
As a publisher and a distributor of content over the Internet, we face
potential liability for defamation, negligence, copyright, patent or trademark
infringement and other claims based on the nature and content of the materials
that we publish or distribute. In addition, we could be exposed to liability
with respect to the content or unauthorized duplication of material indexed in
our search services. As a result, any imposition of liability that is not
covered by insurance could harm our business. We are currently in the process of
attempting to obtain insurance that would cover our activities on the Internet.
However, we cannot assure you that such insurance will be available on terms
acceptable to us or at all.
U.S. AND FOREIGN GOVERNMENT REGULATIONS MAY IMPACT OUR BUSINESS.
Currently few laws and regulations are directly applicable to the
Internet. However, it is possible that new laws and regulations will be adopted
covering issues such as access, obscene or indecent communications and the
pricing, characteristics and quality of Internet products and services and
on-line trading. As a provider of Internet-based products and services, we are
subject to the provisions of existing and future federal and local legislation
that could be applied to our operation. Such legislation could also dampen the
growth of the Internet generally and decrease the acceptance of the Internet as
an advertising medium, and could, thereby, harm our business.
NET CAPITAL REQUIREMENTS COULD IMPACT OUR BUSINESS.
The SEC, the Department of the Treasury and various other securities
and commodities exchanges and other regulatory bodies in the United States and
abroad either have or are considering the imposition of rules with respect to
net capital requirements which could affect us or our subsidiaries. A change in
such rules, or the imposition of new rules, affecting the scope, coverage,
calculation or amount of such net capital requirements, or a significant
operating loss or any unusually large charge against net capital could adversely
affect our ability to pay dividends or to expand or even maintain levels of
business.
WE DEPEND ON KEY PERSONNEL AND DO NOT HAVE AGREEMENTS WITH THEM.
Our success will depend upon the services of our executives and certain
key personnel, including Ronald B. Koenig, our Chairman of the Board of
Directors; Stanley Hollander our President and Chief Executive Officer; Alan L.
Jacobs, our Executive Vice President; Michael Jacobs our Chief Operating
Officer; Jay Matulich our Senior Vice President; John Flanders our Chief
Technical Officer and Richard
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<PAGE>
Hefter our Editor-in-Chief. Competition among financial services firms for
executives and other professional personnel is intense and subject to escalating
compensation expenses. We cannot assure you that we will be able to successfully
attract and retain key personnel. The loss of the services of any one or more of
such personnel or inability to attract such personnel could harm our business.
We do not have employment or non-competition agreements with any key officer or
director. Further, we do not maintain key man life insurance on any of our
executives or key personnel. We cannot assure you that such officers and
directors will remain associated with us in any particular capacity or that they
will not currently, or in the future, compete, directly or indirectly, with us.
EXERCISE OF WARRANTS AND OPTIONS WILL HAVE DILUTIVE EFFECT.
We currently have outstanding warrants and options to purchase
2,753,109 shares of common stock and are registering the re-sale of 983,719
shares underlying warrants and options. This will provide an opportunity for the
holders thereof to profit from a rise in the market price of our common stock
with resulting dilution in the ownership interest in us held by the then present
stockholders. Because holders of these securities would most likely opt to
exercise their securities and receive the underlying common stock at a time when
we may be able to obtain capital by a new offering of securities on terms more
favorable than those provided by such securities, the terms on which we may be
able to obtain additional capital would be adversely affected.
WE MAY HAVE SUBSTANTIAL SALES OF OUR COMMON STOCK WHICH COULD HAVE A NEGATIVE
EFFECT ON OUR STOCK PRICE.
Of our 11,011,223 shares outstanding, 8,049,230 are restricted shares
as that term is defined in Rule 144 promulgated under the Securities Act. Of
such 8,049,230 shares of common stock, 6,840,028 shares being registered
hereunder will be freely tradable without restriction or further registration
under the Securities Act. In addition, we are registering the resale of 983,719
shares underlying warrants, which shares will also be freely tradeable.
Prospective investors should be aware that the possibility of sales
may, in the future, depress the price of the common stock in any market which
may develop and, therefore, the ability of any investor to market shares may be
dependent directly upon the number of shares that are offered and sold.
Shareholders may sell their shares during a favorable movement in the market
price of the common stock, which may have a negative effect on the price per
share of the common stock.
PROVISIONS COULD MAKE IT MORE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US.
We have 20,000,000 authorized shares of preferred stock, none of which
are currently issued and outstanding. The preferred stock may be issued with
such designations, rights and preferences as may be determined from time to time
by the Board of Directors. Accordingly, the Board of Directors is empowered,
without stockholder approval (but subject to applicable government regulatory
restrictions), to issue preferred stock with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting power or other
rights of the holders of our common stock. If issued, the preferred stock could
be utilized, as a method of discouraging, delaying or preventing a change in
control. Although we have no present intention to issue any additional shares of
our preferred stock, we cannot assure you that we will not do so in the future.
12
<PAGE>
THERE HAS BEEN A LIMITED TRADING MARKET FOR OUR COMMON STOCK.
Our common stock has been quoted on the OTC Bulletin Board since June
12, 1997. Our common stock has only a limited trading market. We cannot assure
you that a more active trading market will develop or, if developed, that it
will be maintained. We cannot predict the effect, if any, that the sale of
restricted shares of common stock or shares of common stock issuable upon
exercise of the warrants or the availability of such securities for sale will
have on the market price of the common stock. As a result, an investor might
find it difficult to dispose of, or to obtain accurate quotations as to the
value of, the common stock.
OUR LISTING ON OTC BULLETIN BOARD SUBJECTS INVESTORS TO ADDITIONAL REGULATIONS.
Our common stock has limited active trading market and the trading
price of the common stock, without giving effect to our recent reverse stock
split has historically been less than $5.00 per share. Therefore, trading in the
common stock may be subject to the requirements of Rule 15g-9 promulgated under
the Exchange Act. Under such rule, broker-dealers who recommend low-priced
securities to persons other than established customers and accredited investors
must satisfy special sales practice requirements. The common stock is also
subject to the Securities Enforcement Remedies and Penny Stock Reform Act of
1990, which requires additional disclosure in connection with any trades
involving a stock defined as a penny stock (generally, according to recent
regulations adopted by the SEC, any equity security not traded on an exchange or
quoted on Nasdaq that has a market price of less than $5.00 per share, subject
to certain exceptions). Such requirements could severely limit the market
liquidity of the common stock and the ability of purchasers in this offering to
sell their securities in the secondary market.
WE MAY NOT MAINTAIN CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION IN
CONNECTION WITH THE EXERCISE OF THE WARRANTS.
We will be able to issue the shares issuable upon the exercise of the
warrants only if (1) there is a current Prospectus relating to the securities
offered under an effective Registration Statement filed with the SEC, and (2)
such common stock is then qualified for sale or exempt therefrom under
applicable state securities laws of the jurisdictions in which the various
holders of such Warrants reside. While this Prospectus relates to a current,
effective Registration Statement, there can be no assurance, that we will be
successful in maintaining a current Registration Statement. After a Registration
Statement becomes effective, it may require updating by the filing of
post-effective amendments.
WE ANTICIPATE INCREASED OPERATING EXPENSES AND MAY EXPERIENCE LOSSES.
As of March 31, 1999, we had an accumulated deficit of $8.3 million.
Because of our limited operating history and the uncertain nature of the
rapidly-changing markets we serve, we believe the prediction of future results
of operations is difficult or impossible. In addition, we believe that
period-to-period comparisons of our operating results are not meaningful. You
should not rely on the results for any period as an indication of future
performance. In particular, although we experienced strong revenue growth during
1998, we do not believe that this level of revenue growth will be sustained in
future periods. We currently expect that our operating expenses will continue to
increase significantly as we expand our sales and marketing operations, continue
to develop and extend the GLBN brand, fund greater levels of product
development, develop and commercialize additional media properties, and acquire
complementary businesses and technologies. As a result, we may experience losses
on a quarterly and annual basis.
THE YEAR 2000 BUG COULD CAUSE OUR SOFTWARE PRODUCTS AND THOSE OF OUR SUPPLIERS
TO MALFUNCTION, WHICH PREVENT OR LIMIT ACCESS TO OUR ONLINE PROPERTIES AND COULD
BE COSTLY TO REMEDY.
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field and cannot
distinguish 21st century dates from 20th century dates. These
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<PAGE>
date code fields will need to distinguish 21st century dates from 20th century
dates and, as a result, many companies' software and computer systems may need
to be upgraded or replaced in order to comply with such "Year 2000"
requirements.
We are currently assessing the Year 2000 issue and expect to complete
the program by the spring of 1999. We have not incurred material costs to date
in this process, and currently do not believe that the cost of additional
actions will have a material effect on our results of operations or financial
conditions. Although we currently believe that our systems are Year 2000
compliant in all material respects, our current systems and products may contain
undetected errors or defects with Year 2000 date functions that may result in
material costs. Although we are not aware of any material operational issues or
costs associated with preparing our internal systems for the Year 2000, we may
experience serious unanticipated negative consequences or material costs caused
by undetected errors or defects in the technology used in our internal systems.
FORWARD-LOOKING STATEMENTS
Some of the information in this Prospectus contains forward-looking
statements within the meaning of the federal securities laws. These statements
include, among others, website development plans, strategies, expectations
regarding competition and market acceptance of our products and the Internet as
a secure and reliable communications and commerce medium, and possible effects
of pending and future government regulation. Forward-looking statements
typically are identified by use of terms like "may," "will," "expect,"
"anticipate," "estimate" and similar words, although some forward-looking
statements are expressed differently. You should be aware that our actual
results could differ materially from those contained in the forward-looking
statements due to a number of factors, including our limited operating history
and operating losses, dependence on advertising revenues, inability to
effectively compete, economic conditions, unanticipated difficulties in product
development, inability to gain market acceptance and market share, ability to
manage growth, Internet security risks and uncertainty relating to the evolution
of the Internet as a medium for commerce, dependence on third party content
providers, dependence on our key personnel, Year 2000 problems and the impact of
future government regulation on our business. You should also consider carefully
the risks described in this prospectus or detailed from time to time in our
filings with the Securities and Exchange Commission.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares offered by
the selling stockholders. We will receive proceeds only upon the exercise of the
warrants for which we are registering the underlying shares of common stock, if
these warrants are exercised. We would receive approximately $17,810,047 from
the exercise of the warrants and options assuming all of the warrants and
options were exercised. We cannot assure you as to when, if ever, any or all of
such warrants will be exercised. Proceeds, if any, received from the exercise of
the warrants will be used for working capital requirements and other general
corporate purposes.
We estimate we will spend approximately $125,000 in registering the
shares.
MARKET FOR COMMON EQUITY
Our common stock is currently quoted on the OTC Bulletin Board under
the symbol "GLBN". The table set forth below presents the high and low bid
prices of the common stock for the period indicated based on information
provided by the OTC Bulletin Board. Such over-the-counter market quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commissions
and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
1997 HIGH LOW
- ---- ---- ---
<S> <C> <C>
Quarter ended June 30, 1997 (commencing June 6, 1997) $16.50 $13.50
Quarter ended September 30, 1997 $16.50 $13.50
Quarter ended December 31, 1997 $15.00 $ 4.50
<CAPTION>
1998 HIGH LOW
- ---- ---- ---
<S> <C> <C>
Quarter ended March 31, 1998 $6.00 $1.25
Quarter ended June 30, 1998 $6.00 $3.00
Quarter ended September 30, 1998 $1.50 $4.26
Quarter ended December 31, 1998 $2.25 $7.50
<CAPTION>
1999 HIGH LOW
- ---- ---- ---
<S> <C> <C>
Quarter ended March 31, 1998 $23.76 $ 6.36
Quarter ended June 30, 1999 $27.36 $10.50
</TABLE>
On July 12, 1999, the last reported bid price of the common stock was
$15.75.
As of July 12, 1999, there were approximately 436 holders of record of
the common stock.
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DIVIDEND POLICY
As of March 25, 1997, the Board of Directors declared an annual
cumulative dividend of $1.35 per share on the common stock for the calendar
years 1997 and 1998. The dividend is due and payable to the holders of record on
the day the Board of Directors adopted the resolution to pay such dividend and
is subject to (1) the payment of dividends on any class of capital stock with
priority over the common stock, (2) applicable net capital requirements and (3)
restrictions under applicable law. The dividend, which began accruing as of
January 1, 1997, was payable on a quarterly basis ending on December 31, 1998.
Although we made all prior dividend payments in a timely manner, we determined,
due to our limited cash resources, not to make the June 30, 1998, September 30,
1998 and December 31, 1998 dividend payments. We recognize such payment as an
obligation.
On October 12, 1997, each of our 1,080,000 shares of 5% Cumulative
Convertible Series A Preferred Stock and 4,001,334 shares of 5% Cumulative
Convertible Series B Preferred Stock converted into one share of Class B common
stock. Pursuant to the terms of the Certificates of Designation of such
preferred stock, the holders thereof were entitled to 5% per share annual
cumulative dividends prior to payment of dividends on any other class of capital
stock. The cumulative dividends on such preferred stock have accrued unpaid
since October 12, 1997 and were payable on a quarterly basis commencing December
31, 1996 and on October 24, 1997, ten business days after the conversion
thereof. The aggregate amount of such arrearage owed by us to the former holders
of such preferred stock as of December 31, 1998 is $38,154.
We do not anticipate declaring any additional dividends on any of our
classes of capital stock. Any future dividend declarations and payments would be
subject to the restrictions set forth above, approval of our Board of Directors
and any contractual restrictions.
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CAPITALIZATION
The following table sets forth our capitalization at December 31, 1998
and March 31, 1999, and should be read in conjunction with the financial
statements and notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
------------ ---------
<S> <C> <C>
Accounts payable and accrued expenses...................................................... $607,656 $165,578
Dividends payable - preferred stockholders................................................. 38,154 38,154
Dividends payable - common stockholders.................................................... 572,625 572,625
Deferred revenue........................................................................... 5,000 0
--------- -------
Total liabilities.................................................................. $1,223,435 $776,357
--------- -------
Stockholders' equity
Preferred stock, $.001 par value, 20,000,000
shares authorized, none outstanding........................................
Class B common stock - $.001 par value, 25,000,000
shares authorized, none outstanding........................................
Common stock, $.001 par value, 16,666,667
shares authorized; 7,389,650 issued at December 31, 1998 and
8,772,410 shares at March 31, 1999(1)...................................... $7,390 $8,772
Additional paid-in capital.......................................................... 8,889,809 29,992,322
Accumulated deficit................................................................. (6,298,121) (8,296,110)
Unearned compensatory costs......................................................... (276,253) (8,408,729)
Accumulated other comprehensive income/(loss)....................................... (11,250) 114,000
Treasury stock (2,500 shares)...................................................... (30,000) (30,000)
--------- ----------
Total stockholders' equity.......................................................... $2,281,575 $13,380,255
--------- ----------
Total capitalization................................................................ $2,281,575 $13,380,255
--------- ----------
</TABLE>
- --------------
(1) Does not include (i) 416,667 issued to an Italian Investment Consortium
in April, 1999 for gross proceeds of $5,000,000; (ii) 74,750 shares
issued in connection with a private placement which occurred in May,
1999 for gross proceeds of $897,000 and (iii) 1,397,112 shares issued
in connection with the investment made by Freeserve, Ltd. in May, 1999
for gross proceeds of $14,765,338 (iv) 112,500 shares issued to various
consultants; (v) 4,167 shares issued for the acquisition of
UK-iNvest.com, Limited (formerly Capital Growth Europe Limited) and
(vi) 41,667 shares issued in connection with a private placement which
occurred in June, 1999 for gross proceeds of $500,000 (vii) 1,735,167
shares of Common Stock reserved for issuance upon exercise of options
granted under the Company's 1998 Stock Option Plan; (viii) options
to purchase shares of GLBN such that, after giving effect to the shares
currently owned by TSCN and Freeserve, each would upon exercise of the
option then own 19.9% of the then outstanding shares of GLBN common
stock and (ix) option granted to First Marathon, Inc. to invest up to
$5.0 million in the Company's common stock at the lower of the current
market price of $21.00 per share. If First Marathon exercises the
option the Company shall also grant to First Marathon a 30-month
warrant to purchase up to 333,333 shares of the Company's common stock
at an exercise price of $30.00 per share.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are a global multimedia provider of online financial information and
services to the investment community. Our U.S. based web-site,
www.microcap1000.com, operated through our subsidiary MicroCap1000.com, Ltd.
("MicroCap1000"), focuses on companies with a market capitalization of under
$500 million and is designed to be a leading source for information on the
MicroCap sector of the financial market. This Website has nearly 165,000
registered users. Our first international site, www.uk-invest.com's, operated by
our subsidiary, UK-iNvest.com, Limited ("UK-iNvest"). This website was developed
through an alliance with Freeserve Limited, the United Kingdom's largest and
fastest growing Internet Service Provider ("ISP") and a subsidiary of Dixons
Group, plc, the United Kingdom's largest electronics retailer. This site is the
exclusive provider of investment information of the financial market within
Freeserve's money channel and provides information on a wide range of securities
including all publicly listed stocks and bonds. However, the financial
statements attached and discussion below do not predominantly reflect those
activities.
We historically generated revenues primarily from the activities of our
wholly owned subsidiary International Capital Growth, Ltd. which acted as
placement agent in private financings and as a financial consultant to various
companies. However, over the last nine months we have shifted our focus almost
exclusively to financial publishing activites. Therefore, the financial
statements attached and described below are not reflective of current operations
and cannot be indicative of future results. Among other differences, revenues
are anticipated to initially decrease and operating expenses are anticipated to
significantly increase as a result of such activities. We have added additional
personnel and incurred additional expenses consistent with the launch of a new
business.
We anticipate that our net loss will increase until such time as our
electronic publishing and other activities generate meaningful revenues. These
activities have not generated any revenue to date and there is no guarantee that
it will do so in the future.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AS COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1998
For the three months ended March 31, 1999 total revenues decreased
by $58,750 to $225,966 from $284,746 in the three months ended March 31, 1998.
The revenues generated in the first quarter's of both 1999 and 1998 resulting
primarily from activities of the Company's investment banking subsidiary,
International Capital Growth, Ltd. ("ICG") which acted as placement agent and
financial consultants for certain entities. The Company has shifted its focus
from ICG to financial publishing. Revenues generated in the first quarter
of 1999 result from the marking to market of ICG's portfolio of securities. The
value of the portfolio increased by $394,850 generating revenue of $194,513 for
the quarter ending March 31, 1999 compared to a loss of ($200,319) during the
same period in 1998. This was primarily the result of the increase in value of
one of the Company's portfolio positions, Common Stock of Worlds, Inc. The
Company anticipates liquidating ICG's portfolio during 1999. Revenues generated
from consulting fees decreased from $51,750 to $0. Interest income increased
by $5,177 to $11,418 as compared to $6,241 during the same quarter in 1998.
Our total operating expenses increased by $1,629,118, to $2,223,951 as
compared to $594,833 during the comparable quarter in 1998. This increase was
due to the shift in business focus and the start-up costs for our U.S. website
(www.microcap1000.com) and the Company's U.K. website (www.invest.com) and
subsequent website development fees.
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<PAGE>
FOR THE YEAR ENDED DECEMBER 31, 1998 AS COMPARED TO DECEMBER 31, 1997
We generated $1,688,098 in revenues during the fiscal year ended
December 31, 1998 ("Fiscal 1998") compared to $3,743,051 during the fiscal year
ended December 31, 1997 ("Fiscal 1997"). All of such revenues were generated by
our investment banking subsidiary, International Capital Growth, Ltd. ("ICG"),
which acted as a placement agent and financial consultant for certain entities.
This decrease reflects a shift in business focus from ICG activities to
financial publishing. In addition, we earned interest income in the amount of
$30,309 during Fiscal 1998 as compared to $94,170 during Fiscal 1997. We
recognized $437,060 in net losses on ICG's securities portfolio during Fiscal
1998 as compared to $448,971 in net losses during Fiscal 1997. The decrease is
primarily due to the decline in the carrying value of our largest portfolio
position, common stock of First American Railways, Inc. On October 6, 1998,
First American Railways, Inc. filed for a Chapter 7 bankruptcy liquidation. We
acquired this security position as a result of providing investment banking
activities for First American Railways, Inc. We realized a $39,804 gain on
settlement of debt during Fiscal 1997.
Operating expenses for Fiscal 1997 were $4,289,223 compared to
$4,429,939 during Fiscal 1998. Operating expenses include general and
administrative expenses of $3,448,980 during Fiscal 1997 compared to $3,941,773
during Fiscal 1998. The increase was due to the shift in business focus and the
start up costs for our U.S. web site www.microcap1000.com and web site
development consulting fees. Commission expenses decreased from $859,844 during
Fiscal 1997 compared to $286,381 during Fiscal 1998. ICG, consummated fewer
private placement during 1998 due to the shift in business focus and therefore
paid fewer commissions. The recognition of the equity in the net loss of our
unconsolidated subsidiary, Capital Growth Europe, Limited ("CGE"), decreased
from $121,115 during Fiscal 1997 to $61,069 during Fiscal 1998.
As a result of the foregoing, we had a net loss of $3,007,876 during
Fiscal 1998 compared to a net loss of $1,001,885 during Fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
The implementation of the business plan is capital intensive as a
result of the costs incurred in launching financial oriented sites in new
countries. In order to reduce these costs, the company seeks to partner with and
receive investments from strategic investors. To this end, in May 1999, the
Company received an investment of approximately $15.0 million from its UK
partner Freeserve, Ltd. and $5.0 million from an Italian Investment Consortium
we are in discussions with to launch a financially oriented site in Italy.
On March 31, 1999 we acquired 545,000 shares of Common Stock of
Telescan, Inc. ("Telescan") which was received through a share exchange
agreement with telescan, which at March 31, 1999 was valued at $9,333,125.
Capital has been provided by the investments made by the initial
stockholder group and through private placements of our securities. In March
1997, we raised net proceeds of approximately $922,000 in a private placement of
91,583 shares of our Common Stock. During 1998, we raised net proceeds of
approximately $2,904,000 in a private placement of 3,784,734 shares. In February
1999, we raised net proceeds of approximately $2,575,400 in a private placement
of 429,234 shares. In April 1999, we raised net proceeds of approximately
$4,650,000 in a private placement of 416,667 shares. In May 1999 we received
$14,765,338 from Freeserve, Ltd. which represented the purchase of 1,063,779
shares of common stock at $2.00 per share and the exercise of a warrant for
333,333 shares of common stock at $1.00 per share. In May, 1999 we raised an
additional $897,000 in a private placement of 74,750 shares of Common Stock. In
June, 1999 we raised an additional $500,000 in a private placement of 41,667
shares of common stock. The proceeds are being held for additional investment in
MicroCap1000 and UK-iNvest as well as to fund additional websites we anticipate
launching as well as for future working capital.
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VARIABILITY OF RESULTS
We anticipate that our future financial results will vary dramatically.
This is the result of the start-up and uncertain nature of MicroCap1000 and
UK-iNvest as well as the other web sites we anticipate launching.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs and other
business systems being written using two digits rather than four to represent
the year. Many of our time-sensitive applications and business systems and our
vendors may recognize a date using "00" as the year 1900 rather than the Year
2000, which could result in system failure or disruption of operations. An
assessment of the Year 2000 exposure has been made by us and the plans to
resolve the related issues are being implemented. We believe we will be able to
achieve Year 2000 compliance in a timely manner. We believe that we will
satisfactorily resolve all significant Year 2000 problems and that the related
costs will not be material. Estimates of Year 2000 related costs are based on
numerous assumptions, including the continued availability of certain resources,
the ability to correct all relevant applications and third party remediation
plans. There is no guarantee that the estimates will be achieved and actual
costs could differ materially from those anticipated.
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BUSINESS
GENERAL
We are a global multimedia provider of online financial information and
services to the investment community. Our U.S. based website,
www.microcap1000.com, operated through our subsidiary MicroCap1000.com, Ltd.
("MicroCap1000"), focuses on companies with a market capitalization of under
$500 million and is designed to be a leading source for information on the
MicroCap sector of the financial market. This website has nearly 165,000
registered users. Our first international site launched on April 28, 1999,
www.ukinvest.com, is operated by our subsidiary, UK-iNvest.com, Limited
("UK-iNvest"). This website was developed through an alliance with Freeserve
Limited, the United Kingdom's largest Internet Service Provider ("ISP") with
more than 1.1 million active accounts and a subsidiary of Dixons Group, plc, the
United Kingdom's largest electronics retailer. This site is the exclusive
provider of investment information on the financial markets within Freeserve's
money channel and provides information on a wide range of securities including
all publicly listed stocks and bonds.
Our goal is to be a worldwide provider of unique financial content and
financial services. We intend to achieve this goal by developing a series of
websites which will provide information on the major world markets. Once
developed, management believes these web sites will position GlobalNet as a
portal for worldwide market information and global investing. Such a portal
would enable subscribers to access information about all the different markets
throughout the world. Towards this end, GlobalNet is seeking to replicate the
model it created for UK-iNvest.com by establishing exclusive relationships with
ISP's and search engines and portals throughout the globe, leveraging its
expertise in providing unique content and investor services in partnership with
entities which have large subscriber bases.
The Company intends to leverage upon the traffic generated by our
sites, as well as those of our strategic partners, to provide financial
services, particularly on-line trading, to our viewers worldwide. As the initial
step in implementing this plan, we have entered into a letter agreement with GRO
Corporation ("GRO") of Houston, Texas, a NASD licensed broker/dealer which
provides on-line Electronic Direct Access Trading ("E-DAT") services to
institutional and individual accounts. Pursuant to this agreement we will
acquire an equity interest in GRO and provide on-line trading services on our
website and our affiliated website. GRO provides training and a system for
providing remote E-DAT and execution for their clients. Direct Access Trading
allows the customer to instantly enter and execute trades with stock exchanges,
market makers and Electronic Communication Networks ("ECNs"). Direct Access
Trading will complement our internet based financial content and analytical
tools. We anticipate expanding into other areas of online and E-DAT trading.
The closing of this transaction is subject to completion of due diligence,
documentation and NASD approval.
INDUSTRY
The Internet is a global connection of thousands of computer networks
interconnected to enable commercial organizations, educational institutions,
government agencies and individuals to communicate, access and share information
and conduct business electronically or by using their computers. Much of the
growth to date in the use of the Internet by businesses and individuals is due
to the emergence of the World Wide Web. The World Wide Web is a network medium
that includes a wide range of content and activities. Within the World Wide Web
there can be found content such as a magazines, news and sports information,
radio broadcasts, and corporate, product, financial, educational, research and
political information, as well as activities such as customer service,
electronic commerce, hotel and airline reservations, banking, games and
discussion groups. Electronic documents or "web pages", which may contain
textual, audio and video information, are published on the World Wide Web on
what is referred to as "web sites". Users of the World Wide Web can view these
web sites by using software called web browsers such as Netscape Navigator or
Microsoft Internet Explorer. Users specify which electronic documents they wish
to view with their web browser by entering a documents unique electronic
address.
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MARKET OPPORTUNITY
Increasingly, people are using the Internet to access information and
conduct business. The World Wide Web provides the opportunity for Internet
content providers to offer information in a manner not typically produced by
traditional forms of media. Management believes that a significant opportunity
exists for companies providing original, entertaining, informative and
compelling content on the Internet. Specifically, management believes that a
significant opportunity exists to exploit certain niches of the Internet user
community by providing business and finance related content, with complementary
technologies such as search/index guides.
Internet content providers will benefit from the increasing number of
Internet users since advertisers will more likely advertise on Web sites that
demonstrate a high volume of user traffic and provide advertising programs
designed for specific demographic groups. In addition, content providers may be
able to charge a subscription fee for users to access certain of their content.
Additionally, we believe that the growth of the Internet and its adaptation to
commercial use presents a significant new opportunity for merchants to reach a
wide customer base or for companies to educate potential investors about their
businesses and potential investment opportunities.
In the summer of 1998, management saw that there was a limited amount
of information available about microcap companies, companies with a market
capitalization of less than $500 million. Management also saw the impact the
Internet was having on the way people gathered information and conducted
business particularly regarding accessing investment information. Management
believed that very few, if any, web sites that provided quality information
regarding the microcap sector. Management believed there a significant
opportunity existed to exploit this niche of Internet users by providing
information on microcap companies with sophisticated search/index guides and
content delivery systems. Since then, management has also noted that there are
also very few websites that offer information regarding international financial
markets. Moreover, many investors see buying opportunities in the foreign
markets and/or want to diversify their portfolios.
MICROCAP1000.COM
In October 1998, we fully launched our web site, www.microcap1000,
which is designed to be the premiere source of information on the MicroCap
sector. The web site provides comprehensive Internet-based electronic publishing
of unique content on the MicroCap sector, online Internet investor access
services and hosts the MC 1000 index, the only realtime index covering the
MicroCap sector. The web site has the following features:
o hosts a model portfolio which is up 34.5% for the year ending 1998 as
compared to +6.98% for DJIA and +10.33% for Nasdaq and down 6.65% for
the Russell 2000.
o Provides unique content consisting of news and analysis from well-known
Wall Street analysts and money managers specifically targeting
companies with market capitalizations of under $500 million.
o assists investors in information and ideas to make investment
decisions.
Included on Microcap1000.com is the Microcap1000 Index. The
Microcap1000 Index was created based upon proprietary tools and techniques and
is designed to contain information on 1000 Microcap companies with the greatest
opportunities for growth. Criteria for membership in the index includes, among
others:
o market capitalization of between $25 and $500 million;
o revenue in excess of $25 million;
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o net income in excess of $2.5 million;
o quarter over quarter earnings growth;
o liquidity measures; and
o management ownership measures.
Our goal with the index is to utilize the index to increase the
exposure of the microcap sector by getting the index quoted with other market
barometers such as the Dow Jones Industrial Average, NASDAQ 500 Index and
Russell 2000. Microcap1000.com hosts unique financial content on the microcap
sector and microcap companies. This content is written by well known analysts
and money managers known as MC1000 Gurus, as well as our editorial staff. This
content includes:
o Microcaps on the Move: updated twice daily focussing on the sector's
performance
o Company News: highlights and performance on selected microcap companies
o Ideas and Trends: unique investment opportunities
o Interviews: questions and answers with money managers and analysts
o Sectors/Industries: industry discussion and analyses on featured
Industry
In addition to general commentary, Microcap1000 is designed to offer
investors investment recommendations. As a result, the site offers stock picks
from experts on the microcap sector and a model portfolio. The model portfolio
consists of 15 stocks, each of which is out of the Microcap1000 Index, which the
experts believe have significant upside potential.
Currently, there are over 80 web sites which carry MicroCap1000.com's
content and/or index including but not limited to CBS Marketwatch, Lycos,
EarthLink, StockPoint, InfoBeat and Wall Street City.
UK-INVEST.COM
UK-iNvest.com was launched in April 1999. We have initiated our global
Internet expansion through an alliance with the UK's largest Internet service
provider, Freeserve Limited, a subsidiary of Dixon's Group, plc, the UK's
largest electronics retailer. The site can be reached through www.ukinvest.com
or by clicking on "Money" on Freeserve's home page located at www.freeserve.net.
Uk-iNvest.com is the exclusive provider of news and information. The site
provides potential investors information and services about all UK securities
within Freeserve's financial channel through its web site WWW.UK-INVEST.COM. The
web site has the following characteristics:
o Market Roundup: featuring a summary of the day's market highlights
o Stocks to Watch: updated hourly featuring top stock losers and gainers
o Company Focus: highlights and performance on selected companies
o Weekly Internet Report: focussing on the highlights and performance of
selected internet companies
o Small Cap Corner: highlights two new ideas in the SmallCap Sector
o Foolish Investing: Daily investing ideas from the Motley Fool
o Opportunities for commerce over the Internet, or E-commerce, including
premium pay data and tools packages
o The ability to effect brokerage transactions over the Internet
o 24-7 hired as advertising agency in the UK
Pursuant to the terms of the FreeServe Agreement, we made certain
payments and granted to FreeServe warrants to purchase shares of common stock
which warrants were subsequently exercised. If the Agreement is extended for an
additional two-year term (after the initial term of two years), we will be
required to make additional cash payments.
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RECENT DEVELOPMENTS
We are aggressively pursuing alliances with key on-line media, Internet
and technology companies as well as pursuing strategic acquisitions in order to
accelerate our revenue generation abilities, regular user base, page view growth
and brand awareness. In this regard, we note the following recent developments:
o STRATEGIC INVESTMENT BY FREESERVE LIMITED
In May 1999 Freeserve Limited ("Freeserve") expanded its alliance with
GLBN and purchased 1,397,112 shares of GLBN representing approximately
13% of GLBN's issued and outstanding common stock in exchange for
approximately $15.0 million. The transaction consisted of the exercise
of 333,333 previously issued warrants at $6.00 and the purchase of
1,063,779 new shares at $12.00. As part of the investment, Freeserve
has been granted an option to increase its holdings in GLBN to 19.9% at
$13.50 per share and will also designate one seat on GLBN's Board of
Directors.
o STRATEGIC INVESTMENT BY ITALIAN INVESTMENT CONSORTIUM
In April 1999, an investment consortium consisting of The De Agositini
Holding Group, Banco Commercial D'Italiana and Investitori Associate
purchased 416,667 shares of GLBN representing approximately 3.8% of
GLBN's issued and outstanding common stock in exchange for $5.0
million. De Agostini is involved internationally in consumer
publishing, with group annual sales of approximately US$1.5 billion.
Banco Commerciale Italiana is Italy's fifth-largest Italian bank.
Investitori Associati is the largest leveraged buyout firm in Italy.
Separately, GLBN and the Italian Consortium are in discussions
regarding a joint venture for the development of a website covering the
Italian Financial Marketplace.
o STRATEGIC INVESTMENT BY TELESCAN
In March 1999, we entered into various agreements with Telescan, Inc.
("TSCN"). As a result of these agreements TSCN currently owns 8% of
GlobalNet (9.9% at the time of the agreement). Under the terms of the
agreements, TSCN issued to GlobalNet 520,000 shares of its common
stock, which at the time of the transaction were valued at $10.3
million in exchange for 862,694 shares of GLBN common stock. In
addition, TSCN purchased a one year option from us for 25,000 shares of
TSCN's common stock to purchase such number of shares necessary to
increase TSCN's position to 19.9% of the then current shares
outstanding. The shares may be purchased at an exercise price of $22.50
per share. The option may be exercisable at any time and until March
30, 2000.
Telescan is an industry leader in providing Internet services,
innovative solutions for online technology and data retrieval tools.
Telescan's Wall Street City(R) financial supersite
(WWW.WALLSTREETCITY.COM) receives between 12 and 15 million page views
per month and provides the most comprehensive suite of search tools,
technical analysis and financial data on the Internet.
In addition, we entered into a Licensing Services Agreement pursuant to
which the parties will license contents and services to each other and
each party will provide certain system operation services to the other
in connection with the license. This technology will include the stock
trading software currently being developed for TSCN by Trading
Technologies Corporation. MicroCap1000.com will provide an exclusive
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online Investment Center dedicated to MicroCap and SmallCap market
sectors on TSCN's Wall Street City(R) (www.wallstreetcity.com)
financial supersite. The Center will include daily news articles and
interviews with Wall Street analysts, the MC1000 Index and stock and
investment information for Wall Street City subscribers.
o ALLIANCE WITH MOTLEY FOOL FOR THE U.S. AND U.K.
The Motley Fool (www.fool.co.uk and www.fool.com) will provide a broad
range of content on UK-iNvest and daily articles for MicroCap1000. The
content will include a daily mix of articles with distinctive "Fool"
branding. UK articles will be written by Motley Fool writers in the UK
and Europe.
o ALLIANCE WITH THESTREET.COM FOR THE U.S. AND U.K.
TheStreet.com and GlobalNet have entered into a Content License and
Distributing Agreement. Pursuant to the Agreement, TheStreet.com will
publish articles on a daily and weekly basis for MicroCap 1000 and
UK-iNvest. These articles will appear on the websites and will include
links to The Street.com. In addition, we will create articles that,
subject to TheStreet.com's approval, will appear on TheStreet.com's
website. The column will also contain a hyperlink to our sites. This
article on TheStreet.com and our association with TheStreet.com will
increase awareness of our name and brand.
o ALLIANCE WITH FIRST MARATHON FOR THE U.S. AND CANADA
First Marathon and GlobalNet have entered into a Joint Venture
Agreement. Pursuant to the Agreement, First Marathon and GlobalNet will
form a holding company through which they will establish a registered
securities dealer to conduct on-line trading of securities. They will
also create and operate a website providing, among other things,
financial news, analysis and other financial products. On June 25, 1999
First Marathon acquired 208,334 shares of the Company's common stock
for $2,500,000. In addition, the company granted to First Marathon an
option to invest up to $5.0 million in the company's common stock at
the lower of the current market price of $3.50 per share through
September 30, 1999 and a warrant to purchase 275,000 shares of the
company's common stock at an exercise price of $17.25 per share through
December 15, 2001. If First Marathon exercises the option the Company
shall also grant to First Marathon a 30-month warrant to purchase up to
333,333 shares of the Company's common stock at an exercise price of
$30.00 per share.
We are exploring additional strategic relationships, certain of which
may involve the issuance of our common stock to our strategic partners.
REVERSE STOCK SPLIT
Our Board of Directors has declared a six-for-one reverse common stock
split effective at the close of business on July 2, 1999. In connection with the
reverse stock split, our Certificate of Incorporation was amended to reduce our
authorized capitalization to 16,666,667 of Common Stock. The information
contained in this prospectus has been adjusted to reflect the reverse common
stock split.
BUSINESS STRATEGY
Our strategy is to be a leading provider of content on the World Wide
Web, specifically in the areas of business and finance. We have entered into
agreements to enable us to offer on-line execution capabilities such that
investors can instantly enter and execute trades with stock exchanges, market
makers and Electronic Communication Networks ("ECNs"). As a result, investors
utilizing direct access trading platforms do not necessarily have to buy at the
offer to sell at the bid. We anticipate offering the system on all our sites
worldwide for executions in U.S. stocks.
Our revenue model has a number of components and includes:
o payments from companies which want exposure on our sites and affiliates
sites;
o potential online trading revenues assuming our successful entrance into
this business;
o advertising revenues;
o sponsorship revenues; and
o subscription fees.
Management believes possibilities exist to segment certain proprietary
content areas on our web sites as subscription areas. We plan to offer this
proprietary content to subscribers for a fee. In connection with the fee paid
premium service, our goal is two-fold. The first is to convert a portion of free
subscribers to fee paying premium service customers. The second is to attract
new subscribers to the premium service as a result of grass roots marketing
effort on other sites. The premium service is anticipated to include real time
dynamic quotes, portfolio management tools, and proprietary research
recommendations. As traffic to our web site increases, we will review other
opportunities for deriving revenue, such as offering products and services from
advertisers and sponsors.
We are currently building our subscriber base in order to provide an
adequate platform for generating advertising fees from both the site and video
streamed presentations. Although we do not currently have any advertisers or
sponsors, we expect that ultimately we will derive substantially all of our
revenues from the sale of advertising on our web site. Once we have a large
subscriber base, we will
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seek to establish advertising relationships with large corporations which wish
to have access to the demographic group visiting our web site.
Development of the subscriber base will also enable us to generate fees
from companies that are interested in accessing our subscribers who are
potential investors. While there is a lot information available about "blue
chip" or other companies with larger market capitalizations, there are not a lot
of resources for comprehensive information about microcap companies. Because of
their relatively lower valuation, investors see opportunities in this sector and
are looking for information. Companies conducting business in this sector are
looking for mediums to educate the investing public about their companies. Our
web site addresses both of these issues. Management believes that microcap
companies would pay a fee for a forum to educate the investing public about
their companies. Accordingly, management intends to explore this an opportunity
to generate revenues. However, in order to be able to market our subscriber base
to such companies, we must spend time developing our products and increasing our
subscriber base.
As of May 13, 1999, we had five MicroCap1000.com Directory
("Directory") clients and two MicroCap1000.com CEO CyberShow clients ("CEO
CyberShow'). Both the CEO CyberShow and the Directory are located in the
Investment Opportunity Center ("IOC") located on our website
(www.microcap1000.com). The IOC offers clients an opportunity to tell their
company's story to our users for a reasonable quarterly fee. All information is
publicly available and reviewed by the client for accuracy before publication on
the site. The quarterly service charge for the CEO CyberShow is $5,000 while the
quarterly service charge for the Directory is $2,500.
We intend to utilize the U.S. and U.K. platforms to obtain, through
acquisition, complementing companies and products that will provide realtime,
value-added E-commerce programs and financial investment information to online
users worldwide.
COMPETITION
We compete with other Internet content providers for the time and
attention of consumers and for advertising and subscription revenues.
Competition among Internet content providers is intense and is expected to
increase significantly in the future. Our Internet site competes against a
variety of companies that provide similar content through one or more media,
such as print, radio, television and the Internet. To compete successfully, we
must develop and deliver popular, original, informative and compelling Internet
content to attract Internet users and to support advertising and, in the future,
subscription fees. In our niche of business and finance, in addition to
competing with numerous newspapers, magazines, television programs and radio
broadcasts that cover the same material, we compete with various Internet
content providers such as Yahoo Business, Inc; CBS Market Watch; CNN Financial
Network, MSN Investor; The Motley Fool; Silicon Investor; and Excite Money &
Investing, among others. Many, if not all, of these competitors also offer a
wider range of services than we do, which services may be sufficiently
attractive to Internet users to attract users to their services and,
consequently, dissuade them from accessing Internet site. If we are unable to
attract a significant number of Internet users to our Internet site business, we
will be harmed.
The market for Internet content and services is relatively new,
intensely competitive and rapidly evolving. There are minimal barriers to entry,
and current and new competitors can launch new Internet sites at relatively low
cost within relatively short time periods. In addition, we compete for the time
and attention of Internet users with thousands of non-profit Internet sites
operated by, among other persons, individuals, government and educational
newspaper publishers, cable television companies and start-up ventures attracted
to the Internet market. Accordingly, we expect competition to persist and
intensify and the number of competitors to increase significantly in the future.
Should we seek in the future to attempt to expand the scope of our Internet
site, we will compete with a greater number of Internet sites and other media
companies. Because the operations and strategic plans of existing and future
competitors are undergoing rapid change, it is extremely difficult for us to
anticipate which companies are likely to offer
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competitive content and services in the future. We cannot assure you that our
Internet site will compete successfully.
We believe that the competitive factors attracting Internet users
include the quality of presentation and the relevance, timeliness, depth and
breadth of information and services offered by us. With respect to attracting
advertisers and advertising agencies, we believe that the competitive factors
include, among others, the number of users accessing our Internet site, the
demographics of such user base, our ability to deliver focused and compelling
advertising and interactivity through our Internet site and the overall
cost-effectiveness and value of advertising offered by us. In addition, the
success of our business strategy depends on the sale of future Internet
advertising at premium prices, based in part on the demographic characteristics
of our Internet users. With respect to attracting subscription-based users in
the future, we believe that the competitive factors include, among others, the
quality, uniqueness and usefulness of the content being provided, the price
charged for such content and the cost and accessibility of similar content
through the Internet or competing media. Given the intense competition among
Internet content providers and other media, we cannot assure you that we will be
able to compete successfully with respect to any of these factors. Many, if not
all, of our current and potential competitors have significantly greater
financial, editorial, technical and marketing resources, longer operating
histories, greater name recognition, and greater experience than us; and also
have established relationships with advertisers and advertising agencies. Many,
if not all, of such competitors may be able to undertake more extensive
marketing campaigns, adopt more aggressive advertising and subscription price
policies and devote substantially more resources to developing Internet content
than us. We cannot assure you that we will be able to compete successfully
against current or future competitors or that competitive pressures faced by us
will not harm our business. In addition, in response to competitive pressures,
we may make certain pricing, content and/or marketing decisions or enter into
acquisitions or new ventures that could harm our business.
EMPLOYEES
As of June 30, 1999, we had a total of 20 full-time employees and one
part-time employee. None of our employees are represented by a union and we have
not experienced any work stoppages. We believe our relations with our employees
is good.
DESCRIPTION OF PROPERTIES
GlobalNet, our subsidiaries and affiliates share or plan to share the
use of office space as described below.
1. Approximately 1764 square feet at 7280 W. Palmetto Park Road,
Suite 202, Boca Raton, Florida 33433 for use by the Company,
ICG and Microcap1000 pursuant to a monthly tenancy in favor of
ICG for monthly rent of $3,783.31 which payments are allocated
among the entities;
2. Approximately 2,040 square feet at 2425 Olympic Boulevard
#660E, Santa Monica, California 90404 for use by the Company,
ICG and Microcap1000 pursuant to a lease held by ICG expiring
on November 30, 2000 for monthly rent of $6,664.40 which
payments are allocated among the entities; and
3. Approximately 325 square feet of office space at 4 Hill
Street, London, England W1X 7FU, consisting of one separate
office for use by the Company, ICG and Microcap1000 pursuant
to a sub-lease held by Capital Growth International, Ltd.
expiring in October 2111 for monthly rent of $2,467.50 which
payments are allocated among the entities. See "Certain
Transactions."
4. Approximately 1,669 square feet of office space at 16150
Arrowhead Fountains Center Drive, Suite 240, Peoria, Arizona,
for use by the Company and MicroCap1000 pursuant to a lease
held by MicroCap1000 expiring on April 23, 2002 for a monthly
rent of $3,164.14 which payments are allocated among the
entities.
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LEGAL PROCEEDINGS
ICG and three of our principals, Ronald Koenig, Stanley Hollander and
Jay Matulich, have been named as defendants in a lawsuit entitled MARTIN S.
STOLZOFF, ET AL. v. WASTE SYSTEMS INTERNATIONAL, INC., ET AL., No. 99-01664A
Superior Court, Middlesex County, Massachusetts. The Complaint was filed on
April 1, 1999 and asserts counts for common law fraud, negligent
misrepresentation and violation of the Massachusetts Blue Sky Laws in connection
with the purchase by plaintiffs of securities of a company called Waste Systems
International, Inc. ("WSI"). We acted as a financial consultant and placement
agent in connection with a private offering of WSI common stock in March 1995.
The Complaint alleges that the Defendants made a series fraudulent and negligent
misrepresentations to Plaintiffs during the period from January 1995 to February
1997. The Complaint further alleges that Plaintiffs purchased WSI securities and
thereafter declined to sell their existing WSI securities despite their
inclination to do so in reliance on the alleged misrepresentations. Plaintiffs
allege damages of approximately $990,000 plus prejudgment interest and punitive
damages. We deny Plaintiffs' allegations and intend to vigorously defend this
action.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
<S> <C> <C>
Ronald B. Koenig 65 Chairman of the Board of Directors
Stanley Hollander 61 Chief Executive Officer and President
Alan L. Jacobs 57 Executive Vice President and Director
Michael S. Jacobs 34 Senior Vice President, Secretary and Treasurer
Jay J. Matulich 44 Senior Vice President
N. Bulent Gultekin 51 Director
Christopher D. Jennings 45 Director
</TABLE>
Each director listed in the above table holds office until the next
annual meeting of stockholders and until their respective successors have been
elected and qualified. Each executive officer of the Company listed in the table
above serves at the discretion of our Board of Directors.
There is no family relationship among any of the directors or executive
officers of GlobalNet or ICG except that Alan L. Jacobs and Michael S. Jacobs
are father and son, respectively.
RONALD B. KOENIG. Mr. Koenig is our Chairman of the Board of Directors.
In addition, Mr. Koenig has been Chairman of the Board of Directors, President
and Chief Executive Officer of International Capital Growth, Ltd. since March
1996. Since August, 1998 he has been a Director of MicroCap1000.com, Ltd. He has
served as Chairman of the Board, Chief Executive Officer and a Director of
Emerging Growth Acquisition Corporation I, a publicly-held corporation, since
July 1996. Mr. Koenig has been Chairman, from October 1994 to July 1995, and
co-founder of U.S. Sachem Financial Consultants, L.P. and, since July 1995, of
its successor Capital Growth International, L.L.C. From 1989 to 1993, Mr. Koenig
was a Senior Managing Director and department head of corporate finance at
Gruntal & Co., Incorporated. From 1974 to 1985, Mr. Koenig was a Managing
Director, and from 1985 to 1989, Chairman of the Board, of Ladenburg Thalmann &
Co., Inc. From 1972 to 1974, he served as Vice President, Institutional Sales at
Jas. H. Oliphant & Co., an institutional research boutique. From 1968 to 1972,
he held a position in sales with Leif Werle & Co., an NYSE specialist firm. Mr.
Koenig was educated at the University of Pennsylvania (The Wharton School) and
holds a B.S. in economics. Mr. Koenig presently serves on The Wharton School
Undergraduate Executive Board and is on the business advisory board to Sterling
National Bank & Trust Company of New York.
STANLEY HOLLANDER. Mr. Hollander is our President and Chief Executive
Officer. In addition, Mr. Hollander has served as Senior Vice President and a
Director of GlobalNet since March 1997 and President and a Director of
International Capital Growth, Ltd. since March 1996. Since August, 1998 he has
been a Director of MicroCap1000.com, Ltd. He has served as President and a
Director of Emerging Growth Acquisition Corporation I, a publicly-held
corporation, since July 1996. Since 1993, Mr. Hollander has served as President,
Chief Executive Officer and co-founder of U.S. Sachem Financial Consultants,
L.P. and, since July, 1995, its successor Capital Growth International, L.L.C.
From December 1995 to present, Mr. Hollander has been a Director of Capital
Media Group, Ltd., a publicly-held company. From 1989 to 1993 he served as a
Managing Director and joint head of corporate finance at Gruntal & Co.,
Incorporated. From 1985 to 1989 he served as a Managing Director of Investment
Banking at Ladenburg Thalmann & Co., Inc. From 1979 to 1985 he was co-owner and
Vice President of Zemex Electronics-Stanlee, distributors of consumer
electronics. From 1959 to 1979, Mr. Hollander was president of All Brand
Appliances Brandmart, distributors of consumer electronics. Mr. Hollander was
educated at the University of Alabama.
29
<PAGE>
ALAN L. JACOBS. Mr. Jacobs has served as our Executive Vice President
and a Director since March 1997. Since March 1996, Mr. Jacobs has served as
Senior Managing Director, Executive Vice President and a Director of
International Capital Growth, Ltd. and, since January 1995, of Capital Growth
International, L.L.C. He has served as Chief Operating Officer and a Director of
Emerging Growth Acquisition Corporation I, a publicly-held corporation, since
July 1996. From February 1995 to October 1997 and from July 1993 to September
1994, Mr. Jacobs served as a Director of Boca Raton Capital Corporation, a
publicly-held Florida corporation ("BRCC"). He was Chairman of the Board of
Directors of BRCC from November 1993 to September 1994 and Chief Executive
Officer of BRCC from November 1993 to October 1997 . From January 1992 to
December 1995, Mr. Jacobs served as Associate Director of Investment Banking at
Josephthal Lyon & Ross Incorporated. From May 1985 to December 1991, Mr. Jacobs
served as Managing Director of Investment Banking with Ladenburg Thalmann & Co.,
Inc., an investment banking firm. Mr. Jacobs earned an A.B. in liberal arts in
1963 from Franklin & Marshall College and a J.D. from Columbia Law School in
1966.
MICHAEL S. JACOBS. Mr. Jacobs has served as our Senior Vice President,
Secretary and Treasurer since March 1997 and of International Capital Growth,
Ltd. since March 1996. Since August 1998 he has served as Treasurer for
MicroCap1000.com, Ltd. He has served as Chief Financial Officer and Treasurer of
Emerging Growth Acquisition Corporation I, a publicly-held corporation, since
July 1996. Since February 1995, Mr. Jacobs has been a Senior Vice President of
U.S. Sachem Financial Consultants, L.P. and, since July 1995, its successor
Capital Growth International, L.L.C. From 1993 to 1995 he was a Vice President
of Investment Banking at Josephthal Lyon & Ross Incorporated, and from 1990 to
1993, Mr. Jacobs was an associate in corporate finance at Gruntal & Co.,
Incorporated. From 1989 to 1990, Mr. Jacobs was a financial analyst at Ladenburg
Thalmann & Co., Inc. Educated at New York University's Stern School of Business
and Emory University, he holds an M.B.A. in finance and a B.B.A. degree.
JAY J. MATULICH. Mr. Matulich has served as our Senior Vice President
since March 1997 and Vice President of International Capital Growth, Ltd. since
March 1996. Since August, 1998 he has served as Chairman of MicroCap1000.com,
Ltd. He has served as Secretary of Emerging Growth Acquisition Corporation I, a
publicly-held corporation, since July 1996. Since October 1994, Mr. Matulich has
been a Senior Vice President of U.S. Sachem Financial Consultants, L.P. and,
since July 1995, of its successor Capital Growth International, L.L.C. Since
April 1995, Mr. Matulich has served as a Director of Waste Systems
International, Inc., a publicly-held company. From March 1996 to June 1996, Mr.
Matulich served as Chairman of BioSafe International, Inc. From May 1990 to
October 1994, Mr. Matulich was a Vice President of Gruntal & Co., Incorporated.
From 1989 to May 1990, Mr. Matulich served as an associate in the Shansby Group,
a San Francisco-based leveraged buy-out firm. From 1986 to 1989, Mr. Matulich
was a Senior Manager at Arthur Young & Co., accountants in the merger and
acquisitions group. Educated at Brigham Young University, Mr. Matulich has a
B.A. degree.
N. BULENT GULTEKIN. Mr. Gultekin has been a Director of the Company
since March 1997 and of International Capital Growth, Ltd. since March 1996.
Since 1981, Mr. Gultekin has been an Associate Professor of Finance at The
Wharton School of the University of Pennsylvania. From 1993 to 1994, he served
as the Governor of the Central Bank of the Republic of Turkey. From 1989 to
1991, Mr. Gultekin served as Chief Advisor to Prime Minister Mesut Yilmaz of the
Republic of Turkey. From 1990 to 1992, Mr. Gultekin was a director of The Bell
Atlantic Mutual Funds. Mr. Gultekin earned a BSC in 1965 and an MBA in 1973 from
Turkish universities and a Ph.D. in finance and statistics in 1976 from The
Wharton School of the University of Pennsylvania.
CHRISTOPHER K. JENNINGS. Christopher D. Jennings has served as a
director of the Company since May 1999. Since April, 1998 Mr. Jennings has been
a Managing Director of Investment Banking of Friedman, Billings, Ramsey & Co. In
1995 Mr. Jennings served as a Managing Director of Cruttenden Roth Incorporated
("Cruttenden Roth"), an investment banking firm. From 1992 to 1994, Mr. Jennings
served as a Managing Director of investment banking at Sutro & Co., an
investment banking firm. From 1989 to 1992, Mr. Jennings served as a Senior
Managing Director at Maiden Lane Associates, Ltd., a private
30
<PAGE>
equity fund. Prior to 1989, Mr. Jennings served in various positions with, among
others, Dean Witter Reynolds, Inc. and Warburg Paribas Becker, Inc., both of
which are investment banking firms. Mr. Jennings serves as a member of the
Compensation Committee of the Board of Directors.
KEY EMPLOYEES
JOHN FLANDERS. Since October, 1998, Mr. Flanders has been our Chief
Technical Officer. From 1991 through 1992 John Flanders was COO of Flanders,
Brunetti and Flanders Investment Management, Inc. For the period 1992 through
1995 Mr. Flanders was Director of Sales for THOR24. During the period 1995
through 1996 he was Senior Manager of Marketing and Business Development at
NETCOM Online Communications Services and during the period 1996 through 1997 he
was Senior Manager of Strategic Market Development at Orbit Network.
Subsequently, Mr. Flanders was Vice President of Sales and Marketing at eMerging
Media, Inc. and has since co-founded and become CEO of CyberJunction.com Online.
RICHARD HEFTER. Since February 11, 1999, Mr. Hefter has acted as our
Editor-in-Chief. From 1994 to 1998, Mr. Hefter was a faculty member in English
at Northwestern University and associate director of communications in
Northwestern's office of Development. Prior to that he was a public relations
writer for the Office of Health Science Relations at the University of Iowa.
From 1990 to 1992 Mr. Hefter was literary editor of New City Newspaper. During
the period 1988 through 1990 he was senior editor of INSIDE CHICAGO. He holds a
Bachelor of Arts degree in English from Stanford University and a Master of Fine
Arts degree in creative writing from the University of Iowa Writers' Workshop.
INDEMNIFICATION
Our Certificate of Incorporation provides for indemnification rights of
officers, directors, and others and limits the personal liability of directors
for monetary damages to the extent permitted by Delaware Law. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act"), may be permitted for our directors, officers and
controlling persons, 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 and is, therefore, unenforceable.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company for
services rendered in all capacities to certain officers of the Company for the
periods indicated.
31
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL SECURITIES
COMPENSATION UNDERLYING
NAME AND POSITION FISCAL YEAR SALARY OPTIONS
<S> <C> <C> <C>
Ronald B. Koenig 1998 $200,000 236,667(4)
Chairman of the Board, Co-Chief 1997 $250,000 -----
Executive Officer and Director 1996(2) $ 48,076 -----
Stanley Hollander 1998 $196,000 236,667(4)
Co-Chief Executive Officer,
President and Director 1997 $263,000 -----
1996(2) $ 48,076 -----
Alan Jacobs 1998(3) $ 17,306 80,000(4)
Executive Vice President, Senior 1997 $225,000 -----
Managing Director and Director 1996(2) $ 43,269 -----
Michael Jacobs 1998 $150,000 150,000(4)
Senior Vice President, Secretary 1997 $150,000 41,667(1)
And Treasurer 1996(2) $ 32,588 -----
Jay J. Matulich 1998(4) $131,000 150,000(4)
Vice President 1997 $125,000 41,667(1)
1996(2) $ 24,038 -----
</TABLE>
- ---------------------
(1) Represents shares underlying stock options granted under the 1997 Stock
Option Plan which plan and options were terminated August 15, 1998.
(2) Covers the period from February 26, 1996 through December 31, 1996, our
fiscal year for such period.
(3) Covers the period from January 1, 1998 through January 31, 1998 prior
to Mr. Jacobs' temporary leave of absence commenced.
(4) Represents shares of common stock underlying stock options granted
under the 1998 Stock Option Plan.
We currently pay annual salaries to Messrs. Koenig, Hollander, A.
Jacobs, M. Jacobs and Matulich of $224,000, $315,000, $180,000, $150,000 and
$150,000 respectively. Alan L. Jacobs, GlobalNet's and ICG's Executive Vice
President, had taken a temporary leave of absence from his full-time employee
responsibilities with such entities. During that leave of absence, Mr. Jacobs
continued in such capacities on a part-time basis and as director. Mr. Jacobs
was Senior Advisor to and was being compensated by First American Railways,
Inc., a client of ICG. Mr. Jacobs did not receive any salary from the GlobalNet
or ICG while on leave of absence but received, during that time, 25% of the net
profit on any financing transaction introduced by Mr. Jacobs. In October, 1998,
Mr. Jacobs rejoined GlobalNet. Other than as set forth above, none of our
executive officers or directors received any salary or wages or other
compensation from us during the last three completed fiscal years.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants
of stock options made during Fiscal 1998 to any of the Named Executive Officers:
32
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF TOTAL EXERCISE
UNDERLYING OPTIONS GRANTED PRICE EXPIRATION
NAME OPTIONS IN FISCAL YEAR PER SHARE DATE
- ---------------------------- ---------------------- -------------------- ----------------- -----------------------
<S> <C> <C> <C> <C>
Ronald Koenig 236,667 20.19% $2.25 October 20, 2008
Stanley Hollander 236,667 20.19% $2.25 October 20, 2008
Alan L. Jacobs 80,000 6.8% $2.25 October 20, 2008
Michael S. Jacobs 41,667 3.55% $1.50 August 20, 2008
Michael S. Jacobs 108,334 9.24% $2.25 October 20, 2008
Jay J. Matulich 41,667 3.55% $1.50 August 20, 2008
Jay J. Matulich 108,334 9.24% $2.25 October 20, 2008
</TABLE>
AGGREGATED OPTION EXERCISE IN FISCAL YEAR
ENDED DECEMBER 31, 1998
AND OPTION VALUES AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
UNDERLYING VALUE OF
UNEXERCISED OPTIONS UNEXERCISED
--------------------------------- --------------------
NAME EXERCISABLE UNEXERCISABLE IN-THE-MONEY OPTIONS
----------- ------------- --------------------
<S> <C> <C> <C>
Ronald Koenig 118,334 118,333 $1,545,442
Stanley Hollander 118,334 118,333 $1,545,442
Alan L. Jacobs 40,000 40,000 $ 522,400
Michael S. Jacobs 75,001 75,000 $ 995,139
Jay J. Matulich 75,001 75,000 $ 995,139
Bulent Gultekin 3,334 3,333 $ 49,793
</TABLE>
1998 STOCK OPTION PLAN. Effective August 15, 1998, the Board of
Directors and a majority of our stockholders adopted the 1998 Stock Option. We
believe such a plan is desirable in order to attract and retain executive
officers, other key employees and directors and to further our growth and
profitability. Under the Stock Option Plan, options to purchase an aggregate of
not more than 1,666,667 shares of common stock may be granted from time to time
to key employees (including executive officers), consultants and directors.
Options shall be designated as Incentive Stock Options ("ISOs") or Nonqualified
Stock Options ("NQSOs").
The Stock Option Plan is anticipated to be administered by Mr. Bulent
Gultekin, an outside director of GlobalNet. Upon the election of an additional
outside director, such person would be asked to join a committee with Mr.
Gultekin to administer the Stock Option Plan. Mr. Gultekin is, and upon such
appointment, the committee would be generally empowered to interpret the Stock
Option Plan; to prescribe rules and regulations relating thereto; to determine
the terms of the option agreements; to amend the option agreements with the
consent of the optionee; to determine the key employees and directors to whom
options are to be granted; and to determine the number of shares subject to each
option and the
33
<PAGE>
exercise price thereof. The per share exercise price of options granted under
the Stock Option Plan will be not less than 100% (110% for ISOs if the optionee
owns more than 10% of the common stock) of the fair market value per share
of common stock on the date the options are granted.
Options will be exercisable for a term that will not be greater than
ten years from the date of grant (five years from the date of grant of an ISO if
the optionee owns more than 10% of the common stock). In the event of the
termination of such relationship between the option holder and GlobalNet for
cause (as defined in the Stock Option Plan), all options granted to that option
holder terminate immediately. Options may be exercised during the option
holder's lifetime only by the option holder, his or her guardian or legal
representative.
Options granted pursuant to the Stock Option Plan which are ISOs are
intended to enjoy the attendant tax benefits provided under Sections 421 and 422
of the Code. Accordingly, the Stock Option Plan provides that the aggregate fair
market value (determined at the time an ISO is granted) of the common stock
subject to ISOs exercisable for the first time by an option holder during any
calendar year (under all plans of the company) may not exceed $100,000. The
Board may modify, suspend or terminate the Stock Option Plan; provided, however,
that certain material modifications affecting the Stock Option Plan must be
approved by the stockholders, and any change in the Stock Option Plan that may
adversely affect an option holder's rights under an option previously granted
under the Stock Option Plan requires the consent of the option holder.
34
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our capital stock as of the date of this prospectus, by
(i) any person who is known to us to be the beneficial owner of more than five
percent of our capital stock; (ii) each director; (iii) our chief executive
officer during the last completed fiscal year; (iv) each officer; and (v) all
current directors and officers as a group. Except as noted below, each person
has sole voting and investment power with respect to all shares of capital stock
listed as owned by such person.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF CLASS
NAME AND ADDRESS OF BENEFICIAL BENEFICIALLY OUTSTANDING(2)
OWNER(1) OWNED
<S> <C> <C>
Ronald B. Koenig..................................... 630,379(4) 5.83%
Stanley Hollander.................................... 659,545(5)(3) 6.08%
Alan L. Jacobs....................................... 451,938(8) 4.21%
Hollander Family Partnership LP...................... 659,545(5)(3) 6.08%
Michael S. Jacobs.................................... 154,500(6) 1.43%
Jay J. Matulich...................................... 152,667(7) 1.41%
N. Bulent Gultekin................................... 1,334(9) .031%
Christopher K. Jennings.............................. 50,000(13) .23%
All directors and executive officers.................
as a group (6 persons)(7)(10)........................ 2,100,363(7)(10) 18.56%
5% OR GREATER HOLDERS
Freeserve, Ltd. 1,397,112(14) 19.9%
Maylands Avenue
Hemel Hempstead HP27TG
Telescan, Inc. 862,694(11) 19.9%
5959 Corporate Drive
Suite 2000
Houston, TX 77036
Dion R. Friedland 1,437,500(12) 13.45%
28 Sloane Street
Flat #8
London SW1X9NE
United Kingdom
</TABLE>
- -------------
(1) Each beneficial owner for which an address is not listed has an address
c/o GlobalNet Financial.com, Inc. 7280 W. Palmetto Park Road, Suite
202, Boca Raton, FL 33433.
(2) Based on a total of 11,011,223 shares of common stock outstanding.
(3) Stanley Hollander, our President and Chief Executive Officer, may be
deemed to be the beneficial owner of our shares, held by Hollander
Family Partnership LP. Other than such holdings, Mr. Hollander owns no
capital stock of GlobalNet.
(4) Consists of 512,045 shares of common stock and options exercisable to
purchase 118,334 shares of common stock which are currently vested. Mr.
Koenig holds options to purchase a total of 236,667 shares of common
stock which vest at the rate of 50% of the total grant immediately and
50% at the first anniversary of the date of the grant, October 20,
1998.
(5) Consists of 499,545 shares of common stock and options exercisable to
purchase 160,000 shares of common stock which are currently vested. Mr.
Hollander holds options to purchase a
35
<PAGE>
total of 320,000 shares of common stock which vest at the rate of 50%
of the total grant immediately and 710,000 on October 29, 1999 and
41,667 on January 4, 2000.
(6) Consists of 124,500 shares of common stock and options exercisable to
purchase 75,000 shares of common stock that are currently vested. Mr.
Jacobs holds options to purchase a total of 150,000 shares of common
stock which vest at the rate of 50% of the total grant immediately and
50% at the first anniversary of the date of the grant, October 20,
1998.
(7) Consists of 122,667 shares of common stock and options exercisable to
purchase 75,000 shares of common stock that are currently vested. Mr.
Matulich holds options to purchase a total of 150,000 shares of common
stock which vest at the rate of 50% of the total grant immediately and
50% at the first anniversary of the date of the grant, October 20,
1998.
(8) Consists of 435,938 shares of common stock and options exercisable to
purchase 240,000 shares of common stock that are currently vested. Mr.
Jacobs holds options to purchase a total of 80,000 shares of common
stock which vest at the rate of 50% of the total grant immediately and
50% at the first anniversary of the date of the grant, October 20,
1999.
(9) Consists of stock options exercisable to purchase 3,334 shares of
common stock that are currently vested. Mr. Gultekin holds options to
purchase a total of 6,667 shares of common stock which vest at the rate
of 50% of the total grant immediately and 50% at the first anniversary
of the date of the grant, October 20, 1998.
(10) Consists of 1,696,195 shares of common stock and stock options
exercisable to purchase shares of common stock.
(11) Warrant to purchase shares of GLBN such that, after giving effect to
the 862,694 shares currently owned by TSCN, TSCN would upon exercise of
the warrant then own 19.9% of the then outstanding shares of GLBN
Common Stock.
(12) Represents shares held by investment funds for which Mr. Friedland
makes the investment and voting decisions.
(13) Consists of stock options exercisable to purchase 25,000 shares of
common stock that are currently vested. Mr. Jennings holds options to
purchase a total of 50,000 shares of common stock which vest at the
rate of 50% of the total grant immediately and 50% at the first
anniversary of the date of grant, April 16, 1999.
(14) Warrant to purchase shares of GLBN such that, after giving effect to
the 1,397,112 shares currently owned by Freeserve, Freeserve would upon
exercise of the warrant then own 19.9% of the then outstanding shares
of GLBN Common Stock.
CERTAIN TRANSACTIONS
We require that all material transactions with affiliates be made on
terms that are no less favorable to us than those that can be obtained from
unaffiliated third parties. Such transactions are approved by a majority of our
independent directors.
On March 14, 1997, we issued an aggregate of 484 additional shares of
common stock to certain stockholders and former officers in exchange for the
release by such individuals of obligations owed to them from us in the aggregate
of $46,343, thereby converting such debt into equity. Such shares were valued at
their fair value of $6,539 ($13.50 per share) and GlobalNet, in connection with
such issuance, recorded a gain of $39,804.
On March 26, 1997, we loaned $200,000 to an entity controlled by
Messrs. Ronald B. Koenig and Stanley Hollander, two of our Directors. The note,
which was due on March 26, 1998 and carried interest at the rate of 6% per
annum. Such note, when issued, was approved by a majority of the independent
members of the Board of Directors. The note was repaid on April 9, 1998.
On March 27, 1997, we completed a private offering (the "Private
Offering") of our common stock at $13.50 per share pursuant to Regulation D and
Regulation S, each as promulgated under the Securities Act. The Private
Offering, which yielded gross proceeds to us of $1,236,366, was offered and
36
<PAGE>
sold through Capital Growth International LLC ("CGI"), as placement agent, which
was paid $74,181.96 in commissions in connection therewith, $39,074.76 of which
was used to compensate certain sub-placement agents. CGI is an affiliate of
GlobalNet and ICG. Several of the officers and directors of GlobalNet and ICG
are also officers and directors of CGI. Additionally, the beneficial holders of
100% of the membership interests in CGI beneficially held 23.25% of our
outstanding capital stock, which holds 100% of the outstanding capital stock of
ICG. Messrs. Ronald B. Koenig, Chairman of the Board of Directors, President and
Chief Executive Officer of GlobalNet and ICG, and Stanley Hollander, Senior Vice
President and a Director of GlobalNet and Vice President and a Director of ICG,
each own a 50% interest in Sachem Financial Consultants, L.P., which held a 60%
membership interest in CGI. Messrs. Koenig and Hollander beneficially own 7.13%
and 6.99% of the outstanding capital stock of the Company, respectively.
Effective January 1, 1997, CGI assigned to ICG all rights and
obligations in connection with two Financial Advisory and Consulting Agreements
(the "Consulting Agreements") each of which are between CGI and a separate
publicly-held company. The Consulting Agreements, which were entered into in
connection with CGI's investment banking business, were assigned to ICG for no
consideration. One Consulting Agreement, which expires on July 30, 1998,
currently provides for monthly payments to ICG of $2,500 and compensation rights
in favor of ICG if certain business transactions introduced by ICG to such
public company are consummated. The other Consulting Agreement currently grants
to ICG a right of first refusal, exercisable until April 26, 1998, to offer
securities of such public company and provides for certain compensation rights
in favor of ICG if certain business transactions introduced by ICG to such
public company are consummated.
During the fiscal year ended December 31, 1997, we paid consulting fees
of $99,000 to Helix Investments Limited, a stockholder of CGH, in connection
with the organization of road show presentations in London, England relating to
an offering made pursuant to Regulation S as promulgated under the Securities
Act for which ICG acted as placement agent.
On May 19, 1998, ICG sold to John Booth, who resigned as our director
as of June 1, 1998, ICG's 50% interest in Capital Growth Europe for
approximately $4,000, which price represented approximately 50% of the value of
Capital Growth Europe's cash accounts. Such transaction was approved by a
majority of our disinterested directors. The Company has subsequently reacquired
Capital Growth Europe for a total purchase price of $43,000 as well as 4,167
shares of Common Stock of GLBN. The name of Capital Growth Europe has been
changed to UK-iNvest.com Limited.
On December 31, 1998, we granted 16,667 shares of common stock to its
former CEO of MicroCap1000.com, Ltd. upon termination of employment
37
<PAGE>
SELLING STOCKHOLDERS
The shares of common stock offered hereby are owned by the selling stockholders.
The following table sets forth certain information with respect to the ownership
of the common stock by each selling stockholder as of the date of this
prospectus.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
SHARES BENEFICIALLY BEFORE AFTER THE OFFERING OWNED
--------------------------------------------- SHARES AFTER THE
NAME OF SELLING STOCKHOLDER SHARES(1) PERCENTAGE(1) REGISTERED OFFERING
- --------------------------- --------- ------------- ---------- --------
<S> <C> <C> <C> <C>
Freeserve Ltd. 1,397,112 13.07% 1,397,112 0
Giant Trading Inc. 420,000 3.93% 420,000 0
First Marathon, Inc. 379,133(6) 379,133 0
Rosebud Capital Growth Fund 341,667(5) 3.19% 341,667 0
Limited
Robert S. London 318,750(5) 2.98% 318,750 0
Rush & Co. 305,834(5) 2.86% 305,834 0
Fontenelle LLC 266,667 2.49% 266,667 0
Alan Gaines 266,667 2.49% 266,667 0
Cameo Trust Corporation 227,917(5) 2.13% 227,917 0
Kingston Comercio Internacional LDA 208,334 1.95% 208,334 0
De Agostini Holding Lugano
Branch 208,334 1.95% 208,334 0
Archdream Limited 203,400 1.90% 203,400 0
Cass & Co. Magnum US Equity 200,000 1.87% 200,000 0
Fund
Cass & Co. Magnum Capital 186,667 1.74% 186,667 0
Growth Fund
Bradley Properties SA 166,667 1.56% 166,667 0
Salahi Ozturk 150,000 1.40% 150,000 0
Interactive Marketing, Inc. 140,000 1.31% 140,000 0
Banca Del Gottardo 138,967(5) 1.30% 138,967 0
Cass & Co. Magnum Turbo
Growth Fund 133,334 133,334 0
Cass & Co. Magnum Edge Fund 133,334 1.24% 133,334 0
Ron Posner 129,167(3) 129,167 0
Joseph A.Bauer 112,500(5) 1.24% 112,500 0
Cass & Co. Magnum
Opportunity Fund 106,667 1.05% 106,667 0
Cass & Co. Magnum Tech Fund 86,667 * 86,667 0
Unity Venture Capital
Associates, Ltd. 83,334 * 83,334 0
Katrinia Tarizzo 83,334 * 83,334 0
Del Mar Group 75,000 * 75,000 0
Irv Freiberg(2) 70,834 * 70,834 0
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
SHARES BENEFICIALLY BEFORE AFTER THE OFFERING OWNED
--------------------------------------------- SHARES AFTER THE
NAME OF SELLING STOCKHOLDER SHARES(1) PERCENTAGE(1) REGISTERED OFFERING
- --------------------------- --------- ------------- ---------- --------
<S> <C> <C> <C> <C>
Robert B. Prag 66,667 * 66,667 0
Cass & Co. Magnum Global
Equity Fund 66,667 * 66,667 0
Napier Brown Holdings 68,750(5) * 68,750 0
Cogefin (Bermuda) Limited 41,667 * 41,667 0
The Shemano Group 41,667(3) * 41,667 0
Magnum Growth Fund LP 40,000 * 40,000 0
CyberJunction 37,500 * 37,500 0
Twice International S.A. 36,667 * 36,667 0
Gloria Stasior 33,334 * 33,334 0
Richard A. Kunin MD Profit 33,334 * 33,334 0
Sharing Plan
Paul T. Mannion, Jr. 33,334 * 33,334 0
Marvin Shiller 33,334 * 33,334 0
Frank J. Nigro, III 33,334 * 33,334 0
Donald Sanders IRA, CIBC Oppenheimber,
Trustee 29,167 * 29,167 0
Edgeport Nominees Limited 28,334(5) * 28,334 0
Wellness and Prevention
Marketing
LLC 26,667 * 26,667 0
SF Consulting Co 26,667 * 26,667 0
Magnum Low Volatility Fund
LP 26,667 * 26,667 0
Joseph Matulich & Lillian
Matulich 26,667 * 26,667 0
Richard Carpetner 25,834 * 25,834 0
Jeffery Lambertson 25,834 * 25,834 0
Michael Abadi 25,000(5) * 25,000 0
Mark L. Friedman 25,000 * 25,000 0
S. Greenberg Sep. Prop. Trust 24,167 * 24,167 0
David E. Wise 24,583 * 24,583 0
Top Meadows Investments 20,834(3) * 20,834 0
Tom Hodgson 20,834(3) * 20,834 0
Harvey R. Brice 20,834(5) * 20,834 0
Fairnoon Management Ltd. 20,834(5) * 20,834 0
City Financial Communications 20,834(3) * 20,834 0
David Greenberg IRA Rollover 20,000 * 20,000 0
Matthew Stasior 16,667 * 16,667 0
Gems Opportunity Fund 16,667(5) * 16,667 0
Gary Fischoff(2) 16,667 * 16,667 0
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
SHARES BENEFICIALLY BEFORE AFTER THE OFFERING OWNED
--------------------------------------------- SHARES AFTER THE
NAME OF SELLING STOCKHOLDER SHARES(1) PERCENTAGE(1) REGISTERED OFFERING
- --------------------------- --------- ------------- ---------- --------
<S> <C> <C> <C> <C>
Devrim AKA 16,667 * 16,667 0
Camden Commercial Services Limited 15,625 * 15,625 0
Millgrove Holdings Limited 15,625 * 15,625 0
Twin Key, Inc. 12,500 * 12,500 0
P.G. Ridgwell 12,500(5) * 12,500 0
Corner Bank, Ltd. 12,500 * 12,500 0
David Boyer and Susan Boyer 10,500 * 10,500 0
RNB (France) Monaco 8,334 * 8,334 0
Kimberly A. Goguen 8,334 * 8,334 0
Richard Golob 6,667 * 6,667 0
David Christensen 6,667 * 6,667 0
Stolzoff Family Trust dtd 2/5/95 6,250(5) * 6,250 0
Vital Miljo AS 5,156(5) * 5,156
James C. Gale 5,000 * 5,000 0
Alan Mandel 5,000 * 5,000 0
Monique MacLaren 4,167 * 4,167 0
Luciano R. Nicasio 4,167(5) * 4,167 0
Lisa Taylor 4,167 * 4,167 0
Leonard Block 4,167 * 4,167 0
John Booth 4,167 * 4,167 0
Gary Barnett 4,167(5) * 4,167 0
Edgar Astaire 4,167 * 4,167 0
Anthony Hopenhajm 4,167(5) * 4,167 0
Saracen International
Incorporated 4,167(5) * 4,167 0
Evert A. Bruckner Family Trust 4,000 * 4,000 0
UA dtd Dec. 10, 1993
Chad L. Kiefer 4,000 * 4,000 0
Pyramid Partners, LP 2,917(5) * 2,917 0
Robert Zelinka 2,771(5) * 2,771 0
Luke Bruckner 2,667 * 2,667 0
Christopher M. Stevens 2,667 * 2,667 0
John Malmberg 2,084 * 2,084 0
Shelby Developments Limtied 2,084(5) * 2,084 0
Michael Ralby 2,084(5) * 2,084 0
Mamimu Ltd. 2,084(5) * 2,084 0
Edward Haymes 2,084 * 2,084 0
Allen M. Rudnick IRA R/O 2,084(5) * 2,084 0
Lynn-Rose Saltzman 1,667 * 1,667 0
Michael Crowl 1,600 * 1,600 0
Eurocapital, Ltd. 1,548(5) * 1,548 0
Jay S. Kunin 1,250 * 1,250 0
Asher Plaut and Evelyn Plaut
JTWROS 1,042(5) * 1,042 0
Craig Blumberg 1,042(5) * 1,042 0
Larry W. Gellman 834 * 834 0
Scott W. Springer 834 * 834 0
Brill Securities, Inc. 636(5) * 636 0
Edward P. Clark 417 * 417 0
Robert L. Gordon and Andrea S. Gordon 417 * 417 0
Fred and Josephine Lionetti 417 * 417 0
Pellet Investments 305(5) * 305 0
Joan Martino 84 * 84 0
</TABLE>
40
<PAGE>
- -------------
* Less than 1%
(1) Unless otherwise indicated, each stockholder has sole voting and
investment power with respect to the common stock indicated as
beneficially owned thereby.
(2) These share amounts include up to an aggregate of 41,667 shares which
may be issued to certain selling stockholders upon the exercise of the
Consultant Warrants.
(3) In accordance with Rule 13d-2 of the Exchange Act, shares that are not
outstanding, but that are issuable pursuant to the exercise of
outstanding Warrants, all of which are exercisable within 60 days of
the date of this Prospectus, have been deemed to be outstanding for the
purpose of computing the percentage of outstanding shares owned by the
individual having such right, but have not been deemed outstanding for
the purpose of computing the percentage for any other person. See
"Description of Securities."
(4) With respect to the selling stockholders, it has been assumed that all
their shares so offered will be sold.
(5) These share amounts include up to an aggregate of 274,998 shares which
may be issued to certain selling stockholders upon the exercise of
Warrants.
(6) This share amount includes up to an aggregate of 170,799 shares which
may be issued to certain selling stockholders upon the exercise of
warrants.
DESCRIPTION OF SECURITIES
We have 61,666,667 shares of authorized capital stock, consisting of
16,666,667 shares of common stock, par value $.001 per share ("Common Stock"),
25,000,000 shares of Class B common stock, par value $.001 per share ("Class B
Common Stock") and 20,000,000 shares of preferred stock, par value $.001 per
share ("Preferred Stock").
COMMON STOCK
Each holder of common stock is entitled to one vote for each share held
of record on all matters to be voted on by stockholders. The holders of common
stock vote in one class. There is no cumulative voting with respect to the
election of directors, with the result that the holders of more than 50% of the
shares voted for the election of directors can elect all of the directors.
Subject to a $38,000 arrearage on our converted Series A and Series B Preferred
Stock and any preferences that may be applicable to any future issuances of
preferred stock, the holders of common stock are entitled to receive dividends
when, as and if declared by the Board of Directors out of our funds legally
available therefor. See "Dividend Policy." In the event of liquidation,
dissolution or winding up, the holders of common stock are entitled to share
ratably in all assets remaining available for distribution to them after payment
of liabilities and after provision has been made for any class of stock that may
be granted in the future having preference over 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 fully paid and nonassessable.
The approval of holders of a majority of the outstanding shares of common stock
is required to vary the rights of the common stock.
PREFERRED STOCK
The preferred stock may be issued in series from time to time with such
designation, rights, preferences and limitations as the Board of Directors may
declare by resolution. The rights, preferences and limitations of separate
series of preferred stock may differ with respect to such matters as may be
determined by the Board of Directors, including, without limitation, the rate of
dividends, method and nature of payment of dividends, terms of redemption,
amounts payable on liquidation, sinking fund provisions (if any), conversion
rights (if any) and voting rights. The potential exists, therefore, that
additional shares of preferred stock might be issued which would grant dividend
preferences and liquidation preferences to preferred stockholders over common
stockholders in addition to those already in existence with respect to the
designated preferred stock. Unless the nature of a particular transaction
41
<PAGE>
and applicable statute require such approval, the Board of Directors has the
authority to issue shares of preferred stock without stockholder approval. The
issuance of preferred stock may have the effect of delaying or preventing a
change in control without any further action by stockholders.
REDEEMABLE WARRANTS
We currently have 274,998 Redeemable Warrants issued and outstanding.
The following is a brief summary of certain provisions of the Redeemable
Warrants.
Each Redeemable Warrant entitles the registered holder to purchase one
share of common stock at an initial exercise price of $24.00 per share (subject
to adjustment for stock splits, combinations and reclassifications) at any time
prior to redemption from October 3, 1996, October 15, 1996, March 20, 1997, and
March 27, 1997 until October 3, 1999, October 15, 1999, March 20, 2000 and March
27, 2000, respectively, as the case may be. Redeemable Warrants may be redeemed
by us at $.30 per Redeemable Warrant on 30 days' notice, provided that (i)
certain securities are registered under the Securities Act and applicable state
blue sky laws, (ii) a current Prospectus is then available for the sale of such
securities, and (iii) the closing bid price for the common stock as reported by
Nasdaq, the OTC Bulletin Board, or such other market on which the common stock
is then traded equals or exceeds $36.00 for any 20 trading days within a period
of 30 consecutive trading days ending on the fifth trading day prior to the date
of the notice of redemption.
The Redeemable Warrants are not exercisable or redeemable unless, at
the time of the exercise or redemption, we have a current prospectus covering
the shares of common stock issuable upon the exercise of such warrants, or such
shares have been registered, qualified or deemed to be exempt under the
securities laws of the state of residence of the exercising holder of such
warrants. Moreover, if the shares of common stock underlying the Redeemable
Warrant are not registered or qualified for sale in the state in which a warrant
holder resides, such holder might not be permitted to exercise the Redeemable
Warrants.
If we have a current prospectus covering the shares of common stock
issuable upon exercise of the Redeemable Warrants, or such shares have been
registered, qualified or deemed exempt under Federal and applicable State
securities laws, each Redeemable Warrant may be exercised by surrendering the
warrant certificate, with the subscription form attached to the warrant
certificate properly completed and executed, together with payment of the
exercise price to the warrant agent. The Redeemable Warrants may be exercised in
whole or from time to time in part. If less than all of the Redeemable Warrants
evidenced by a warrant certificate are exercised, a new warrant certificate will
be issued for the remaining number of Redeemable Warrants. The Redeemable
Warrants do not confer upon the holders thereof any voting, dividend or other
rights as stockholders.
CONSULTING WARRANTS
We issued redeemable warrants to purchase up to 41,667 shares of common
stock (the "Consulting Warrants") in exchange for consulting services to be
rendered on behalf of us. Of the 8,681 Consulting Warrants, 8,681 vested on a
pro rata basis based upon the period of time that such consulting services were
provided to us and the balance were forfeited. In accordance with such vesting
schedule, the Consulting Warrants entitle the registered holder to purchase up
to 8,681 shares of common stock at an initial exercise price of $12.00 per share
(subject to adjustment for stock splits, combinations and reclassifications) at
any time prior to redemption from the date of issuance until November 3, 1999.
The Consulting Warrants may be redeemed by us at $.30 per Redeemable Warrant on
30 days' notice, provided that (a) the shares of common stock underlying the
Consulting Warrants are registered under the Securities Act and applicable state
blue sky laws, (b) a current prospectus is then available for the sale of the
common stock, and (c) the closing bid price for the common stock as reported by
Nasdaq, the OTC Bulletin Board, or such other market on which the
42
<PAGE>
common stock is then traded equals or exceeds $36.00 for any 20 trading days
within a period of 30 consecutive trading days ending on the fifth trading day
prior to the date of the notice of redemption.
DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
Under Delaware law, directors and officers of a Delaware corporation
can generally be held liable for certain types of negligence and other acts and
omissions in connection with the performance of their duties to the corporation
and its stockholders. As permitted by the Delaware General Corporation law (the
"Delaware GCL"), however, our certificate of incorporation contains a provision
eliminating the liability of the Company's directors and officers for monetary
damages for breaches of their duty of care to GlobalNet and the stockholders,
except as described below.
Such provision does not eliminate liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders; (ii) for acts
of omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) for unlawful payments of dividends or unlawful
stock purchases or redemptions as provided in Section 174 of the Delaware GCL;
or (iv) for any transaction from which the director derives an improper personal
benefit. Such provision does not eliminate the duty of care, but only eliminates
liability for monetary damages for breaches of such duty under various
circumstances. Accordingly, such provision has no effect on the availability of
equitable remedies, such as an injunction or rescission, based upon a breach of
the duty of care. Equitable remedies may not, however, be wholly effective to
remedy the injury caused by any such breach.
Our certificate of incorporation provides that we shall indemnify our
directors and officers to the fullest extent permitted by Delaware law and
advance expenses to such directors and officers to defend any action for which
rights of indemnification are provided. In addition, the Certificate of
Incorporation permits us to grant such rights to our employees and agents. We
believe that these provisions will assist us in attracting and retaining
qualified individuals to serve as directors, officers and employees.
We are subject to the provisions of Section 203 of the Delaware GCL, an
anti-takeover law. In general, Section 203 prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is, or the transaction in which the person became an interested
stockholder was, approved in a prescribed manner or certain other exceptions
apply. For purposes of Section 203, a "business combination" is defined broadly
to include a merger, asset sale or other transaction resulting in a financial
benefit to the interested stockholder, and subject to certain exceptions, an
"interested stockholder" is a person who, together with affiliates and
associated, owns (or within three years prior, did own) 15% or more of the
corporation's voting stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American
Securities Transfer & Trust, Inc., Lakewood, Colorado.
43
<PAGE>
PLAN OF DISTRIBUTION
This Prospectus covers the sale of shares by the selling stockholders.
Any distribution of any such securities by the selling stockholders, or by their
pledgees, donees, transferees or other successors in interest may be effected
from time to time in one or more of the following transactions: (a) to
underwriters who will acquire securities for their own account and resell them
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale (any
public offering price and any discount or concessions allowed or reallowed or
paid to dealers may change from time to time); (b) through brokers, acting as
principal or agent, in transactions (which may involve block transactions) on
the OTC Bulletin Board or on one or more exchanges on which the securities are
then listed, in special offerings, exchange distributions pursuant to the rules
of the applicable exchanges or in the over-the-counter market, or otherwise, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices or at fixed prices; (c) directly
or through brokers or agents in private sales at negotiated prices; or (d) by
any other legally available means. ICG, our wholly-owned subsidiary, is a
registered broker-dealer with the SEC and a member of the NASD, will not
participate in the distribution of this offering in any capacity.
We will not receive any proceeds from the sale of the shares offered
hereby. The aggregate proceeds to the selling stockholders from the securities
offered hereby will be the offering price less applicable commissions or
discounts, if any. There is no assurance that the selling stockholders will sell
any of the securities offered hereby.
The selling stockholders and such underwriters, brokers, dealers or
agents, upon effecting a sale of securities, may be considered "underwriters" as
that term is defined in the Securities Act. Sales effected through agents,
brokers or dealers will ordinarily involve payment of customary brokerage
commissions although some brokers or dealers may purchase such securities as
agents for others or as principals for their own account. The selling
stockholders will pay any sales commissions or other sellers' compensation
applicable to such transactions. A portion of any proceeds of sales and
discounts, commissions or other sellers' compensation may be deemed to be
underwriting compensation for purposes of the Securities Act.
Pursuant to applicable rules and regulations under the Exchange Act,
any person engaged in the distribution of the securities offered hereby may not
simultaneously engage in market making activities for the common stock for a
period of five business days prior to the commencement of such distribution. In
addition, each selling stockholder and any other person who participates in a
distribution of the securities will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Regulation M,
which provisions may limit the timing of purchases and may affect the
marketability of the securities and the ability of any person to engage in
market making activities for the common stock.
At the time a particular offering of securities is made, to the extent
required, a prospectus supplement will be distributed which will set forth the
number of securities being offered and the terms of the offering, including the
purchase price or the public offering price, the name or names of any
underwriters, dealers or agents, the purchase price paid by any underwriters for
securities purchased from the selling stockholders, any discounts, commissions
and other items constituting compensation from the selling stockholders and any
discounts, commissions or concessions allowed or reallowed or paid to dealers.
In order to comply with the securities laws of certain states, if
applicable, the securities will be sold in such jurisdictions, if required, only
through registered or licensed brokers or dealers. In addition, in certain
states the securities may not be sold unless the securities have been registered
or qualified for sale in such state or an exemption from registration or
qualification is available and the conditions of such exemption have been
satisfied.
44
<PAGE>
We have agreed that we will bear all costs, expenses and fees in
connection with the registration or qualification of the Shares under federal
and state securities laws. We and each selling stockholder have agreed to
indemnify each other and certain other persons against certain liabilities in
connection with the offering of the securities, including liabilities arising
under the Securities Act.
SHARES ELIGIBLE FOR FUTURE SALE
We have 11,011,223 shares of common stock outstanding. Of these shares,
the 6,839,995 shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act. In addition, we
are registering the resale of 975,385 shares underlying warrants, which shares
will also be freely tradeable. The remaining 4,171,228 shares are deemed to be
"restricted securities," as that term is defined under Rule 144 promulgated
under the Securities Act, as such shares were issued in private transactions not
involving a public offering.
In general, under Rule 144, a stockholder (or stockholders whose shares
are aggregated), including an affiliate of GlobalNet, who beneficially has owned
his or her restricted securities (as that term is defined in Rule 144) for at
least one year from the later of the date such securities were acquired from the
Company or (if applicable) the date they were acquired from an affiliate, is
entitled to sell, within any three-month period, a number of such shares that
does not exceed the greater of one percent of the then outstanding shares of
common stock (approximately 110,113 shares immediately after this offering) or
the average weekly trading volume in the common stock during the four calendar
weeks preceding the date on which notice of such sale was filed under Rule 144,
provided certain requirements concerning availability of public information,
manner of sale and notice of sale are satisfied. In addition, affiliates of
GlobalNet must comply with the restrictions and requirements of Rule 144, other
than the one-year holding period requirement, in order to sell shares of common
stock which are not restricted securities. Under Rule 144(k), if a period of at
least two years has elapsed between the later of the date restricted securities
were acquired from the Company and the date they were acquired from an affiliate
of GlobalNet, a stockholder who is not an affiliate of GlobalNet at the time of
sale and has not been an affiliate at any time during the 90 days prior to the
sale would be entitled to sell the shares immediately without compliance with
the foregoing requirements under Rule 144, other than the requirements as to the
availability of current public information about us.
There has been only a limited public market for the common stock. We
can not make predictions as to the effect, if any, that sales of shares of
common stock or the availability of shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of substantial amounts
of common stock in the public market could adversely affect the market price of
the common stock and could impair our ability to raise capital through the sale
of its equity securities.
LEGAL MATTERS
Certain legal matters with respect to the shares of common stock
offered hereby will be passed upon for the Company by Broad and Cassel, a
partnership including professional associations, Miami, Florida.
45
<PAGE>
EXPERTS
The financial statements of GlobalNet Financial.com, Inc. (formerly
known as MicroCap Financial Services.com, Inc.) as of December 31, 1998 and for
years ended December 31, 1998 and 1997 appearing in this Prospectus and
Registration Statement have been audited by Richard A. Eisner & Company, LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein and in the Registration Statement, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any report or document we
file at the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 and at the SEC's regional
offices located at Seven World Trade Center, Suite 1300, New York, New York
10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Please
call the SEC at 1-800-SEC-0880 for more information about the public reference
rooms. Our SEC filings are also available from the SEC's web site located at
HTTP://WWW.SEC.GOV.
Quotations for the prices of our common stock appear on the OTC
Bulletin Board and reports, and other information about us can also be inspected
at the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
We have filed with the SEC a Registration Statement on Form SB-2 under
the Securities Act with respect to the common stock covered by this Prospectus.
This Prospectus, which is a part of the Registration Statement, does not contain
all the information set forth in, or annexed as exhibits to, the Registration
Statement, as permitted by the SEC's rules and regulations. For further
information with respect to us and the common stock offered under this
Prospectus, please refer to the Registration Statement, including the exhibits.
Copies of the Registration Statement, including exhibits, may be obtained from
the SEC's public reference facilities listed above upon payment of the fees
prescribed by the SEC, or may be examined without charge at these facilities.
Statements concerning any document filed as an exhibit are not necessarily
complete and, in each instance, we refer you to the copy of the document filed
as an exhibit to the Registration Statement. We will provide, without charge, to
each person to whom a copy of this Prospectus is delivered, upon request, a copy
of any or all of the information incorporated herein by reference. Exhibits to
any of the documents, however, will not be provided unless such exhibits are
specifically incorporated by reference into such documents. The requests should
be addressed to: GlobalNet Financial.com, Inc., 7280 West Palmetto Park
Road, Suite 202, Boca Raton, Florida 33433, telephone number (561) 417-8053.
46
<PAGE>
Contents
PAGE
----
CONSOLIDATED FINANCIAL STATEMENTS
Independent auditors' report......................................... F-2
Balance sheet as of December 31, 1998................................ F-3
Statements of operations for the years
ended December 31, 1998 and 1997.................................... F-4
Statements of changes in stockholders' equity for the years
ended December 31, 1998 and 1997.................................... F-5
Statements of cash flows for the years
ended December 31, 1998 and 1997.................................... F-6
Notes to financial statements........................................ F-7
Balance sheet as of March 31, 1999 (unaudited)....................... F-19
Statements of operations for the three months
ended March 31, 1999 and 1998 (unaudited)........................... F-20
Consolidated statement of comprehensive loss......................... F-20
Statements of cash flows for the three months
ended March 31, 1999 and 1998 (unaudited)........................... F-21
Notes to financial statements (unaudited)............................ F-22
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
GlobalNet Financial.Com, Inc.
Boca Raton, Florida
We have audited the accompanying consolidated balance sheet of GlobalNet
Financial.com, Inc. (formerly Microcap Financial Services.Com, Inc.) and
subsidiaries as of December 31, 1998, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for the years ended
December 31, 1998 and 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly, in all
material respects, the consolidated financial position of GlobalNet
Financial.com, Inc. (formerly Microcap Financial Services.Com, Inc.) and
subsidiaries as of December 31, 1998, and the consolidated results of their
operations and their consolidated cash flows for the years ended December 31,
1998 and 1997 in conformity with generally accepted accounting principles.
Richard A. Eisner & Company, LLP
New York, New York
February 5, 1999
With respect to Note N
April 13, 1999
With respect to Note O
June 17, 1999
F-2
<PAGE>
GLOBALNET FINANCIAL.COM, INC. AND SUBSIDIARIES
(formerly Microcap Financial Services.Com, Inc.)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(Notes A and B)
ASSETS
Current assets:
Cash and cash equivalents (Note C[8]) $1,941,774
Restricted cash (Note L[1]) 104,664
Due from broker 44,930
Securities owned at market value
(cost $551,000) (Note C[6]) 552,719
Securities not readily marketable,
at fair value (cost $1,217,525) 132,492
Prepaid expenses 61,438
----------
Total current assets 2,838,017
Furniture, fixtures, equipment, and leasehold improvements
(net of accumulated depreciation of $57,890)
(Notes C[1] and D) 290,113
Licensing and promotion agreements, net of accumulated
amortization of $26,459 (Note E) 354,726
Other assets 22,154
----------
$3,505,010
==========
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 607,656
Deferred revenue 5,000
Dividends payable - preferred stockholders 38,154
Dividends payable - common stockholders 572,625
----------
Total current liabilities 1,223,435
----------
Commitments and other matters (Notes I, J, L and N)
STOCKHOLDERS' EQUITY (NOTES A, F, G, H, AND N)
Preferred stock - $.001 par value;
20,000,000 shares authorized, none outstanding
Class B common stock - $.001 par value;
25,000,000 shares authorized, none outstanding
Common stock - $.001 par value; 16,666,667 shares
authorized; 7,389,650 shares issued 7,390
Additional paid-in capital 8,889,809
Accumulated deficit (6,298,121)
Unearned compensatory costs (276,253)
Accumulated other comprehensive loss (11,250)
Treasury stock - at cost (2,500 common shares) (30,000)
----------
2,281,575
----------
$3,505,010
==========
See notes to financial statements
F-3
<PAGE>
GLOBALNET FINANCIAL.COM, INC. AND SUBSIDIARIES
(formerly Microcap Financial Services.Com, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED
DECEMBER 31,
---------------------------
1998 1997
- --------------------------------------------------------------------------------
Revenue (Notes B, C[6] and C[9]):
Consulting fees $ 405,071 $ 359,914
Private placement fees 1,283,027 3,383,137
Net realized and unrealized loss on marketable
and not readily marketable securities (437,060) (448,971)
Gain on debt settlement 39,804
Interest income 30,309 94,170
----------- -----------
1,281,347 3,428,054
----------- -----------
Operating expenses:
Commission 286,381 859,844
General and administrative 3,941,773 3,448,980
Equity in loss of unconsolidated affiliate
and write-down of advance
(net gain on sale of $3,931) 61,069 86,115
Write-down of advances to unconsolidated affiliate 35,000
----------- -----------
4,289,223 4,429,939
----------- -----------
Net loss (3,007,876) (1,001,885)
----------- -----------
Less cumulative preferred dividend (29,624)
----------- -----------
Net loss attributable to common stockholders $(3,007,876) $(1,031,509)
=========== ===========
Basic and diluted loss per common share
(Note C[4]) $(0.72) $(.40)
======= ======
Weighted average number of common shares
outstanding - basic and diluted (Note C[4]) 4,205,500 2,609,167
=========== ===========
See notes to financial statements
F-4
<PAGE>
GLOBALNET FINANCIAL.COM, INC. AND SUBSIDIARIES
(formerly Microcap Financial Services.Com, Inc.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (NOTES A AND B)
<TABLE>
<CAPTION>
SERIES A SERIES B
CLASS B CONVERTIBLE CONVERTIBLE
COMMON STOCK COMMON STOCK PREFERRED PREFERRED ADDITIONAL
--------------------- -------------------- ------------------ ------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
------ ------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1996 424,833 $3,088,260 1,891,611 $334,803 4,001,334 $560,187 1,080,000 $226,800
Consulting expense
attributable $35,417
to warrants
(Note G)
Dividends declared
Recapitalization
resulting from the
acquisition of
Microcap Financial
Services.Com, Inc. 49,516 (46,322)
Issuance of
common stock
(Note F[4]) 91,583 922,075
Collection of
subscription
Receivable
Issuance of common stock
to settle debt
(Note I) 484 6,539
June 1997, exchange of
shares of no par
shares for $.001 par
value shares (4,016,307) (332,911) 4,349,218
Conversion of
Series A and B
preferred
stock into Class B
common stock (Note F[1]) 846,889 847 (4,001,334) (560,187) (1,080,000) (226,800) 786,140
Purchase of
common stock
(Note F[6])
Net loss
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE -
DECEMBER 31, 1997 566,416 567 2,738,500 2,739 0 0 0 0 5,124,453
Sale of common stock
(Note F[4]) 3,874,734 3,874 2,900,066
Collection of
subscription
receivable
Shares issued
to acquire
securities
(Note F[6]) 166,667 166 135,834
Value of options
issued as
compensation
to consultants 247,000
Value of
warrants issued
to consultant
(Note F[6]) 117,500
Value of stock
issued to a
former employee
(Note F[6]) 16,667 17 124,983
Value of stock
issued to
consultant
(Note F[6]) 26,667 27 239,973
Conversion of
Class B common stock 2,738,500 2,739 (2,738,500) (2,739)
Dividends declared
Net loss
Other comprehensive loss
Unrealized loss
on securities
(Note F[6])
Comprehensive loss
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE -
DECEMBER 31, 1998 7,389,650 $7,390 0 $ 0 0 $ 0 0 $0 $8,889,809
====================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ACCUMULATED
UNEARNED OTHER
COMPENSATORY COMPREHENSIVE ACCUMULATED COMPREHENSIVE SUBSCRIPTION TREASURY STOCK
COSTS LOSS DEFICIT LOSS RECEIVABLE SHARES AMOUNT TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1996 $ (718,616) $ (55,600) $3,435,834
Consulting expense
attributable
to warrants
(Note G) 35,417
Dividends declared (805,083) (805,083)
Recapitalization
resulting from the
acquisition of
Microcap Financial
Services.Com, Inc. (46,322)
Issuance of
common stock
(Note F[4]) 922,075
Collection of
subscription
Receivable 2,000 2,000
Issuance of common stock
to settle debt
(Note I) 6,539
June 1997, exchange of
shares of no par
shares for $.001 par
value shares 0
Conversion of
Series A and B
preferred
stock into Class B
common stock (Note F[1]) 0
Purchase of
common stock
(Note F[6]) 2,500 $(30,000) (30,000)
Net loss (1,001,885) (1,001,885)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE -
DECEMBER 31, 1997 (2,525,584) (53,600) 2,500 (30,000) 2,518,575
Sale of common stock
(Note F[4]) 2,903,940
Collection of
subscription
receivable 53,600 53,600
Shares issued
to acquire
securities
(Note F[6]) 136,000
Value of options
issued as
compensation
to consultants 247,000
Value of
warrants issued
to consultant
(Note F[6]) $(96,253) 21,247
Value of stock
issued to a
former employee
(Note F[6]) 125,000
Value of stock
issued to
consultant
(Note F[6]) (180,000) 60,000
Conversion of
Class B common stock 0
Dividends declared (764,661) (764,661)
Net loss $(3,007,876) (3,007,876) (3,007,876)
Other comprehensive loss
Unrealized loss
on securities
(Note F[6]) (11,250) $(11,250) (11,250)
Comprehensive loss $(3,019,126)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE -
DECEMBER 31, 1998 $(276,253) $(6,298,121) $(11,250) $0 2,500 $ (30,000) $2,281,575
====================================================================================================================================
</TABLE>
F-5
<PAGE>
GLOBALNET FINANCIAL.COM, INC. AND SUBSIDIARIES
(formerly Microcap Financial Services.Com, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED
DECEMBER 31,
---------------------------
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,007,876) $(1,001,885)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 142,576 63,486
Equity in loss of unconsolidated affiliate 65,000 121,115
and write-down of advances
Compensation to consultants and former 453,247
employee paid with stock and options
Valuation of warrants for consulting 35,417
Change in unrealized depreciation of 438,261 633,802
securities
Realized gains on securities (1,201) (184,831)
Gain on sale of unconsolidated affiliate (3,931)
Gain on debt settlement (39,804)
Compensation paid with securities 283,432
Receipt of securities in payment of fees (187,500) (1,583,141)
Loss on disposal of fixed assets 46,286
Accrued interest (9,000)
Changes in:
Due from broker 228,201 (273,131)
Prepaid expenses and other assets (462,777) (2,000)
Accounts payable and accrued expenses 428,405 128,251
Deferred revenue (69,038) 74,038
----------- -----------
Net cash used in operating activities (1,976,633) (1,707,965)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to fixed assets (128,727) (266,811)
Proceeds from sale of securities 516,015 273,132
Proceeds from sale of unconsolidated affiliate 3,931
Loans to affiliates (225,000)
Repayment of loan from affiliates 209,000 25,000
Investment in securities (64,480) (563,950)
Investment in restricted cash (2,330) (2,334)
----------- -----------
Net cash provided by (used in)
investing activities 533,409 (759,963)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock 2,903,940 924,075
and preferred stock
Proceeds from the subscription receivable 53,600
Cash acquired in recapitalization 21
Dividends paid (383,201) (575,764)
Purchase of treasury stock (30,000)
----------- -----------
Net cash provided by financing
activities 2,574,339 318,332
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,131,115 (2,149,596)
Cash and cash equivalents at beginning of period 810,659 2,960,255
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,941,774 $ 810,659
=========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH
TRANSACTIONS:
Common stock issued to settle debt $ 45,343
Dividends declared but not paid $ 572,625 $ 229,319
Common stock issued to acquire securities $ 136,000
Other comprehensive income - unrealized loss $ 11,250
See notes to financial statements
F-6
<PAGE>
GLOBALNET FINANCIAL.COM, INC. AND SUBSIDIARIES
(formerly Microcap Financial Services.Com, Inc.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE A - THE CORPORATION
GlobalNet Financial.com, Inc. (the "Company" or "GLBN") formerly Microcap
Financial Services.Com, Inc., prior to that Capital Growth Holdings, Ltd. and
prior to that Galt Financial Corporation, was incorporated in the State of
Colorado on June 15, 1987. On March 14, 1997, GLBN, an inactive company,
acquired 100% of the outstanding capital stock of International Capital Growth,
Ltd. ("ICG") (a company formed in February 1996), a Delaware corporation and
member of the National Association of Securities Dealers, Inc. The acquisition
was consummated through an exchange of shares that resulted in the former ICG
shareholders receiving control of GLBN the transaction has been treated as a
recapitalization. In connection therewith, ICG's historic capital accounts were
retroactively adjusted to reflect the equivalent number of shares issued by GLBN
in the transaction while ICG's historical accumulated deficit was carried
forward. In 1997, after the recapitalization, a Colorado corporation, was merged
into a Delaware corporation, Capital Growth Holdings, Ltd. The consolidated
financial statements include the accounts of the Company and its wholly owned
subsidiary, ICG and the wholly owned subsidiary of ICG, Microcap1000.Com Ltd.
("MCAP 1000"). All significant intercompany transactions and balances have been
eliminated.
NOTE B - NATURE OF BUSINESS
The Company and its subsidiaries have three reportable segments. The Company
operates a broker/dealer an internet web-site. The Company generates revenues
by acting as a placement agent in private financings and as a financial
consultant to various companies. Two customers accounted for approximately 33%
and 38% of the Company's consulting and private placement fees earned during the
year ended December 31, 1998. The Company's wholly owned subsidiary, MCAP 1000
provides comprehensive, internet-based electronic publishing of unique content
on the MicroCap sector, generated by analysts and money managers ("MC1000
Gurus"); internet investor access for public companies; and broadcasts over the
internet through video-streamed netcasts of various financial programs. The
Company also maintains their proprietary MicroCap1000 Index, a real-time index
following the stock performance of 1000 companies with market capitalizations of
between $25 million and $500 million. During the year ended December 31, 1998,
MCAP 1000 incurred approximately $863,000 of expenses which are included in
general and administrative expenses.
Information with respect to reportable segments follows:
DECEMBER 31, 1998
--------------------------------------------------
CORPORATE BROKER/DEALER INTERNET TOTAL
--------- ------------- -------- ----------
Revenues from external $1,683,098 $ 5,000 $1,688,098
customers
Interest revenue $ 13,444 16,865 30,309
Depreciation and 104,117 38,459 142,576
amortization
Equity in loss of
unconsolidated
affiliate, net 65,000 65,000
Segment loss (695,806) (1,453,582) (858,488) (3,007,876)
Significant noncash items:
Unrealized depreciation
of securities 11,250 438,261 449,511
Compensation paid with
stock, warrants
and options 81,247 372,000 453,247
Segment assets 2,073,139 890,863 541,008 3,505,010
Expenditures for
long-lived assets 284 128,443 128,727
F-7
<PAGE>
B. NOTE B - NATURE OF BUSINESS (CONTINUED)
DECEMBER 31, 1997
--------------------------------------------
CORPORATE BROKER/DEALER TOTAL
--------- ------------- ----------
Revenues from external customers $3,734,051 $3,734,051
Interest revenue $ 20,200 73,970 94,170
Depreciation and amortization 63,486 63,486
Equity in loss of unconsolidated 121,115 121,115
affiliate, net
Segment loss (35,913) (965,972) (1,001,885)
Significant noncash items:
Unrealized depreciation of (633,802) (633,802)
securities
Compensation paid with 283,432 283,432
securities
Segment assets 209,000 2,792,183 3,001,183
Expenditures for long-lived assets 266,811 266,811
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1] FURNITURE, FIXTURES, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Furniture, fixtures, and equipment are recorded at cost. Depreciation is
provided using the straight-line method over the estimated useful lives of
the assets which range from three to seven years. Leasehold improvements
are amortized over the lesser of the economic useful life of the
improvement or the term of the lease.
[2] 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
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
[3] FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying value of cash and cash equivalents, due from broker,
restricted cash, accounts payable and accrued expenses approximate their
fair value because of the short maturity of those instruments.
[4] NET LOSS PER COMMON SHARE:
Net loss per common share is based on the weighted average number of common
shares and Class B common shares outstanding during the year. Common stock
equivalents representing options and warrants and convertible securities
have not been included as they would be antidilutive. Net loss attributable
to common stock in 1997 was adjusted to reflect cumulative dividends on
preferred shares outstanding.
F-8
<PAGE>
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[5] COMPREHENSIVE LOSS:
The Company adopted Statement of Financial Accounting Standards
"SFAS No. 130" "Reporting Comprehensive Income" in the year ended
December 31, 1998. SFAS 130 requires presentation of comprehensive income
(net income plus all other changes in net assets from non owner sources)
and its components.
[6] VALUATION OF SECURITIES:
Securities held by GLBN are classified as available-for-sale and are
recorded at their market value. Unrealized gains and losses on securities
held by GLBN are recorded as other comprehensive income.
Unrealized gains and losses on securities held by ICG are recognized as
operating income or loss in the statement of operations. Securities owned,
which are listed on a national securities exchange, are valued at their
last reported sales price. Securities which trade over-the-counter are
valued at the "bid" price. Securities which do not have a readily
ascertainable market value are valued at their estimated fair value as
determined by the management. Management considers fair value to be cost
unless the value has deteriorated or where later investments have been
concluded by a significant outside investor, then the investment is valued
at the last per share sales price paid unless circumstances dictate a lower
valuation.
The values of securities owned by the Company can change substantially
because of volatility in the price of each security, changes in the
business prospects of the issuer of the securities, specific events
influencing the operations of the issuer of the securities, and various
other circumstances outside the security issuer's control. Accordingly,
the value of the securities could decline so that a loss would be
required to be recognized for the total carrying amount of such securities.
Included in securities owned at market value is the common stock of
Worlds, Inc. The carrying amount of the investment in Worlds, Inc.
is $427,969. Worlds, Inc. is subject to the reporting requirements
of the U.S. Securities and Exchange Commission.
Unaudited summarized financial information of Worlds, Inc.
(a development stage enterprise) is as follows:
DECEMBER 31,
1998
-----------
(UNAUDITED)
Current assets $1,693,766
Noncurrent assets 214,246
Current liabilities 1,012,887
Noncurrent liabilities 1,875,018
F-9
<PAGE>
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[6] VALUATION OF SECURITIES: (CONTINUED)
TWELVE MONTHS
ENDED
DECEMBER 31,
1998
-----------
(UNAUDITED)
Income statement data:
Net revenues $ 29,110
Gross loss (169)
Operating loss before
extraordinary item (2,821,228)
Net loss (2,648,681)
[7] INVESTMENT IN AND ADVANCES TO AN UNCONSOLIDATED AFFILIATE:
The Company had a 50% equity interest in an unconsolidated affiliate,
Capital Growth (Europe) Limited ("CGE") which the Company accounted for
using the equity method of accounting. On May 19, 1998, the investment
was sold for $3,931.
[8] CASH EQUIVALENTS:
The Company considers all liquid short-term investments with original
maturities of three months or less to be cash equivalents.
[9] REVENUE RECOGNITION:
Consulting and private placement fees are recorded when earned.
In addition, the Company earns fees in the form of securities. These
securities are valued at market on the date they are earned. Security
transactions are recorded on a trade date basis.
[10] STOCK-BASED COMPENSATION:
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS 123 encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at
fair value. The Company has elected to continue to account for its
stock-based compensation plans using the intrinsic value method prescribed
by Accounting Principles Board Opinion No. 25 whereby compensation cost
for stock options is measured as the excess, if any, of the quoted market
price of the Company's common stock at the date of grant over the amount
and employee must pay to acquire the stock.
F-10
<PAGE>
NOTE D - FURNITURE, FIXTURES, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
At December 31, 1998, fixed assets consist of the following:
Furniture and fixtures $ 89,802
Equipment 30,695
Software 108,000
Leasehold improvements
(located in Europe) 119,506
---------
348,003
Less accumulated depreciation 57,890
---------
Net $290,113
NOTE E - LICENSING AND PROMOTION AGREEMENTS
Licensing and promotion agreements are being amortized on a straight-line basis
over the 1 and 2 year term of the related agreements.
NOTE F - STOCKHOLDERS' EQUITY
[1] PREFERRED STOCK:
Preferred stock may be issued in one or more series at the discretion of
the Board of Directors. In establishing a series, the Board of Directors
shall fix the number of shares in such series, and the preferences, rights
and restrictions thereof.
On March 14, 1997, the Board of Directors designated 4,365,000 shares of
preferred stock as 5% cumulative Series A preferred stock and 1,200,000
shares of preferred stock as 5% cumulative convertible Series B preferred
stock.
The holders of Series A and B preferred stock were entitled to a
preferential cumulative dividend which began accruing on October 12, 1996
equal to 5% of the liquidation preference per annum and share equally
with the Class B common stock in any dividends declared thereon.
The Series A and B had a liquidation preference of $.14 and $.21 per share,
respectively.
On October 12, 1997, each share of the Company's 4,001,334 shares of Series
A preferred stock and 1,080,000 shares of Series B preferred stock
converted into shares of Class B common stock on a six-for-one basis, at
which time the 5% per share annual dividend that accrued thereon ceased to
accrue and became due and payable on October 24, 1997, out of funds
legally available therefor.
[2] CLASS B COMMON STOCK:
The holders of the Class B common stock were entitled to one vote per
share. The Class B common stock, which was junior in priority with respect
to dividends to the common stock, converted into common stock on a
one-for-one basis on December 31, 1998.
F-11
<PAGE>
NOTE F - STOCKHOLDERS' EQUITY (CONTINUED)
[3] DIVIDEND:
In March 1997, the Board of Directors declared an annual dividend as
modified of $1.35 per share of common stock, for the calendar years ended
1998 and 1997, accruing as of January 1, 1997, payable commencing June 30,
1997, and on a quarterly basis thereafter, to be paid after payment of
any dividends due on all classes of stock with priority over common stock
subject to any operating restrictions. In addition, the Board of Directors
determined that any dividend declared on Class B common stock will be
subject to a $1.20 per share limitation on annual dividends in 1998.
[4] PRIVATE PLACEMENT:
On December 7, 1998, the Company completed a private offering of its common
stock at $.75 per share. The Company issued a total of 3,874,734 shares of
common stock, which yielded net proceeds of approximately $2,904,000.
On March 27, 1997, the Company completed a private offering of its common
stock at $13.50 per share. The Company issued a total of 91,583 shares of
common stock which yielded net proceeds of approximately $922,000. A
placement fee of approximately $74,000 was paid to Capital Growth
International, LLC ("CGI"), an affiliate of the Company (Note I). In
connection therewith, the Company agreed to issue warrants to purchase
4,167 shares of common stock as partial compensation to certain
nonaffiliated sub-placement agents. Each warrant is exerciseable to
purchase one share at $24.00 per share (subject to adjustment) through
March 2000.
[5] TREASURY STOCK:
In March and May 1997, the Company purchased an aggregate of 2,500 shares
of common stock and 2,084 warrants from the original holders at its
approximate fair value.
[6] NONCASH TRANSACTIONS:
In October 1998, the Company issued 41,667 five-year warrants with an
exercise option of $6.00 per warrant for consulting services for a period
of two years. These warrants which vest immediately were valued at their
fair value of $2.82 per warrant using the Black-Scholes pricing model with
the following assumptions: interest rate 8.47%, dividend yield of 0%,
volatility factor of .75 and an average expected life of five years. The
unearned portion of the agreement of $96,253 is recorded as deferred
compensatory costs.
In November of 1998, the Company issued 166,667 shares of common stock for
2,500,000 shares of common stock of Atlantic Caspian Resources, a public
company in Great Britain. The Company valued the transaction at the fair
value of the shares received of $.0544 per share on the date of the
exchange. The securities are classified as available for sale and are
included in securities owned at market value. The Company has reported an
unrealized loss on the stock of Atlantic Caspian Resources in the amount of
$11,250, which is classified as other comprehensive loss in the financial
statements.
In December of 1998, the Company issued 26,667 shares of common stock for
consulting services. The shares were valued at their fair market value of
$9.00 on the date the agreement was executed. The unearned portion of the
consulting agreement is recorded as deferred compensatory costs.
In December of 1998, the Company issued 16,667 shares of common stock to a
former employee. The shares were valued at their fair market value of $7.50
on the date the shares were issued.
F-12
<PAGE>
1. NOTE G - WARRANTS
In October 1996, the Company raised $3,250,000 through the sale of units in a
private placement. Each unit was sold for $50,000 and consisted of 4,167 shares
of common stock and 4,167 redeemable warrants. At December 31, 1997, the Company
had 268,750 redeemable warrants issued and outstanding. Each redeemable warrant
entitles the registered holder to purchase one share of common stock at an
initial exercise price of $24.00 per share (subject to adjustment for stock
splits, combination and reclassifications) at any time prior to redemption from
October 1996 until October 1999.
In addition, the Company issued 4,164 redeemable warrants to sub-placement
agents in connection with the Company's March 1997 private placement (Note
F[4]). Each warrant is exerciseable into common stock at a price of $24.00 per
share at any time prior to redemption through March 2000.
In addition, the Company agreed to issue 41,667 redeemable warrants in exchange
for consulting services to be rendered on behalf of the Company. The consulting
warrants vest at the rate of 20,834 per annum on a pro rata basis based upon the
number of months that such consulting services are provided to the Company.
Consulting services were provided for a 5 month period and therefore 8,681
warrants were issued. Each consulting warrant is exercisable to purchase one
share of Class B common stock at an exercise price of $12.00 per share at any
time prior to redemption through November 3, 1999. The issuance has resulted in
a charge to operations of $35,417 in 1997 based on the fair value of the warrant
($4.08 per warrant). The fair value of these warrants was estimated using the
Black-Scholes pricing model with the following assumptions: interest rate of
5.92%, dividend yield of 0%, volatility factor of .30 and average expected life
of three years.
The above warrants may be redeemed by the Company at $.30 per redeemable warrant
subject to certain conditions and the closing bid price of the common stock
trades at least $36.00 for any 20 trading days within a period of 30 consecutive
trading days ending on the fifth trading day prior to the date of the notice of
redemption.
A summary of the Company's warrants and related information for the years ended
December 31, 1998 and 1997 are as follows:
WEIGHTED WEIGHTED
YEAR ENDED AVERAGE YEAR ENDED AVERAGE
DECEMBER 31, EXERCISE DECEMBER 31, EXERCISE
1998 PRICE 1997 PRICE
-------- -------- -------- --------
Outstanding at
beginning of period 281,595 $23.64 312,500 $22.38
Granted or exchanged 41,667 6.00 316,664 22.44
Expired or exchanged (347,570) 21.42
---------- ----------
Outstanding at
end of period 323,262 21.36 281,594 23.64
========== ==========
Exercisable at
end of period 323,262 281,594 23.64
========== ==========
Weighted average
remaining months
of contractual life
at year end 13 22
====== ======
F-13
<PAGE>
NOTE H - STOCK OPTION PLAN
On January 7, 1997, the Company adopted a stock option plan (the "1997
Plan") for granting of options to purchase up to 250,000 shares of Class B
common stock, pursuant to which employees, directors and consultants are
eligible to receive incentive and/or nonqaulified stock options. Options granted
under the 1997 Plan are exerciseable for a period of up to 10 years from date of
grant at an exercise price which is not less than the fair value on date of
grant, except that the exercise price of options granted to a stockholder owning
more than 10% of the outstanding capital stock may not be less than 110% of the
fair value of the common stock at date of grant. In connection with the exchange
of shares referred to in Note A, ICG option holders exchanged 105,834 options
for options under the 1997 Plan.
On August 15, 1998, the Company terminated the 1997 Plan.
On October 29, 1998, the Company adopted a stock option plan (the "1998
Plan") subject to stockholder approval for granting options to purchase up to
1,667,000 shares of common stock, pursuant to which employees, consultants,
independent contractors, officers and directors are eligible to receive
incentive and/or nonqualified stock options. Options granted under the 1998 Plan
are exercisable for a period of up to 10 years from date of grant at an exercise
price which is not less than the fair value on date of grant, except that the
exercise price of options granted to a stockholder owing more than 10% of the
outstanding capital stock may not be less than 110% of the fair value of the
common stock at date of grant. Options issued to employees and directors vest
20% on the date of issuance and 80% on the anniversary date of the grant.
Options issued to consultants vest immediately.
Stock option activity under the 1997 Plan and 1998 Plan is summarized as
follows:
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1998 1997
---------------------- -----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
-------- -------- -------- --------
Options outstanding at
beginning of year 105,834 $12.00 110,000 $12.00
Granted or exchanged 1,130,167 2.22 105,834 12.00
Exercised
Cancelled (105,834) 12.00 (110,000) 12.00
---------- ---------
Options outstanding
at end of year 1,130,167 2.22 105,834 12.00
========== =========
Options exercisable
at end of year 330,167 35,278
========== =========
F-14
<PAGE>
NOTE H - STOCK OPTION PLAN (CONTINUED)
The following table presents information relating to stock options
outstanding at December 31, 1998.
OPTIONS OPTIONS
OUTSTANDING EXERCISABLE
--------------------------------------------- --------------------
WEIGHTED
RANGE WEIGHTED AVERAGE WEIGHTED
OF AVERAGE REMAINING AVERAGE
EXERCISE EXERCISE LIFE IN EXERCISE
PRICE SHARES PRICE YEARS SHARES PRICE
------ --------- ----- ----- ------- -----
$1.50 129,167 $1.50 1.78 62,500 $1.50
$2.25 975,000 2.25 3.51 241,667 2.25
$4.86 26,000 4.98 2.36 26,000 4.98
--------- -------
$7.50
1,130,167 2.22 3.29 330,167 2.34
========= =======
At December 31, 1998, 536,500 options were available for grant under the
1998 Plan. In addition, the Company must issue 91,667 options to certain
consultants which vest when certain milestones are achieved.
The weighted average fair value at date of grant for options granted during
1998 was $1.02 per option. No options were granted in 1997. The fair value of
options at date of grant was estimated using the Black-Scholes option pricing
model utilizing the following assumptions:
1998
-------------
Risk-free interest rates 4.01% to 5.24%
Expected option life in years 2 to 5
Expected stock price volatility 75%
Expected dividend yield 0%
Had the Company elected to recognize compensation cost based on the fair
value of the options at the date of grant as prescribed by SFAS No. 123, net
loss in 1998 and 1997 would have been approximately $3,314,000 and $1,185,000 or
$(.78) and $(.48), respectively, per basic and diluted loss per share.
On January 4, 1999, the Company issued 170,834 stock options to certain
employees.
NOTE I - RELATED PARTY TRANSACTIONS
During the year ended December 31, 1998 the Company paid consulting fees of
$234,000 to two stockholders of the Company.
Capital Growth International LLC ("CGI"), a company owned by certain of the
ICG directors, utilizes space at the Company's offices without charge. Such
space was not considered significant for the years ended December 31, 1998 and
1997. During the year ended December 31, 1998, the Company received net
consulting fees of $23,000 from CGI.
In March 1997, an aggregate of $46,343 of notes and accrued interest due to
stockholder and former officers were exchanged for 484 shares of common stock.
The shares were valued at their fair value of $6,539 ($13.50 per share) and a
gain of $39,804 was recorded.
F-15
<PAGE>
NOTE I - RELATED PARTY TRANSACTIONS (CONTINUED)
In March 1997, the Company loaned $200,000 at an interest rate of 6% per
annum to an entity controlled by Messrs. Ronald B. Koenig and Stanley Hollander,
two of the Company's directors. The transaction was approved by the independent
members of the Board of Directors. The loan and the related interest was repaid
on April 9, 1998.
On September 15, 1997, the Company loaned $25,000 to CGI which was repaid
on October 2, 1997 without interest.
During the year ended December 31, 1997, the Company paid consulting fees
of $99,000 to a stockholder of CGH.
During the year ended December 31, 1997, the Company paid commissions of
$36,000 to CGE.
CGI assigned certain consulting and financial advisory service agreements
to the Company for no consideration. In addition, the Company purchased from CGI
warrants to acquire common stock in a public company for approximately $14,000.
(See also Note F[4].)
NOTE J - NET CAPITAL REQUIREMENTS
ICG is subject to the Securities Exchange Commission Uniform Net Capital
Rule (Rule 15c3-1), which requires the maintenance of minimum net capital and
requires that the ratio of aggregate indebtedness to net capital, both as
defined, be at least the greater of 6 2/3 percent of aggregate indebtedness or
$5,000. At December 31, 1998, ICG had net capital of $33,709 which was in
$18,657 in excess of its required net capital.
NOTE K - EXEMPTION FROM RULE 15C3-3
ICG is exempt from the reserve requirement of the Securities Exchange
Commission's Rule 15c3 -3 pursuant to Section 15c3-3(k)(2)(ii).
NOTE L - COMMITMENTS
[1] LETTER OF CREDIT:
The Company has issued a letter of credit in the amount of $100,000 to
secure future rent payments and leasehold improvements at the London
office of CGE. The letter of credit is secured by a money market account.
F-16
<PAGE>
NOTE L - COMMITMENTS (CONTINUED)
[2] LEASES:
The Company is obligated for annual minimum rentals under leases for
office space as follows:
YEAR ENDING
DECEMBER 31,
------------
1999 $ 98,000
2000 92,000
2001 24,000
---------
$ 214,000
Rent expense was approximately $250,000 and $259,000 for the years ended
December 31, 1998 and 1997, respectively.
[3] RETIREMENT PLAN:
Effective January 1, 1997, the Company has a 401(k) profit-sharing plan
covering all eligible employees as defined in the Plan. Contributions are
made at the discretion of employees. The Company contributes 50% of the
employee's contribution amount to the plan. Pension expense for the years
ended December 31, 1998 and 1997 was approximately $15,000 and $21,000,
respectively.
NOTE M - PROVISION FOR TAXES
At December 31, 1998, the Company and its subsidiary had available for
federal income tax purposes net operating loss and capital loss carryforwards of
approximately $2,791,000 and $338,000, respectively. The net operating loss
carryforwards expire from 2011 through 2018. The capital loss carryforward
expires in 2003. The difference between the net loss for financial reporting
purposes and the net operating loss for tax purposes is primarily due to
unrealized loss on marketable securities and value attributable to
warrants/options not currently deductible for tax purposes. The Company has
provided a valuation reserve against the full amount of the net operating loss
benefit of $1,116,000, capital loss benefit of $128,000 and the benefit of
$664,000 from temporary differences, since the likelihood of realization cannot
be determined.
The difference between the statutory tax rate of 34% and the Company's
effective tax rate of 0% is due to the increase in a valuation allowance of
$1,124,000 and $394,000 in 1998 and 1997, respectively.
Section 382 of the Internal Revenue Code contains provisions which may
limit the loss carryforwards available if significant changes occur in
stockholder ownership interests. Although the Company has not performed a
detailed analysis, management believes that such limitations will apply as of
December 31, 1998 as a result of changes in stockholder ownership interests
during 1998. Accordingly, the Company would be subject to a significant annual
limitation on the utilization of its net operating losses.
F-17
<PAGE>
NOTE N - SUBSEQUENT EVENTS
On January 7, 1999, the Company issued 45,834 shares of common stock in
lieu of payment of $327,000 for services rendered by a consultant during the
year ended December 31, 1998.
On January 27, 1999, the Company entered into a content supply agreement.
Upon execution of the agreement, the Company granted 333,333 warrants to
purchase common stock at an exercise price of $6.00 per warrant for a term of
three years and paid $207,250. The Company valued these warrants at
approximately $4,007,000.
On February 9, 1999, the Company granted 140,000 warrants to purchase
common stock to a consultant. The consultant will receive an additional 140,000
warrants throughout the term of the agreement. The Company valued these warrants
at approximately $921,000.
The fair market value of common stock, options and warrants issued in
connection with the above consultant agreements will be typically recorded as
expense within twelve months of the execution of the related agreements.
The Company sold 429,234 shares of common stock in February of 1999 in a
series of private placements yielding net proceeds of approximately $2,575,400.
On March 31, 1999, the Company entered into a stock exchange agreement with
Telescan, Inc. ("TSCN"). The agreement provides for the exchange of 862,694
unregistered shares of the Company's common stock, for 520,000 unregistered
shares of TSCN's common stock. In addition, the Company entered into a stock
option agreement with TSCN. The agreement provides TSCN a one year option to
increase its ownership in the Company to 19.9% by acquiring additional shares at
a purchase price of $22.50. In consideration thereof, the Company received
25,000 shares of TSCN common stock. The option is exercisable through March 30,
2000. In the event that there is a change in control as defined, the Company is
required to redeem the option for cash in an amount equal to the number of
unexercised options multiplied by the difference between the exercise price and
consideration received by the Company's stockholders in connection with the
change in control.
Also, the Company entered into a service agreement with TSCN. TSCN will
provide information and design services to the Company's internet sites for a
term of two years. The agreement provides for the issuance of 262,916 (included
in 862,694 above) shares of the Company's common stock to TSCN for these
services as they are provided.
On April 1, 1999, a complaint was filed in which ICC was named, as a
co-defendant to a lawsuit alleging damages of $990,000 plus interest and
punitive damages, with respect to certain investments made by the plaintiffs in
a company called Waste Systems International, Inc. ("WSI"), for which ICG acted
as a financial consultant and placement agent in connection with a private
offering. The plaintiffs allege that the defendants made numerous fraudulent and
negligent misrepresentations to the plaintiffs, that the plaintiffs invested in
WSI based on those fraudulent and negligent misrepresentations to the
plaintiffs, that the plaintiffs invested in WSI based on those fraudulent and
negligent misrepresentations and that the misrepresentations were the direct and
proximate cause of injuries suffered by the plaintiffs. Management believes that
the claims against ICG are without merit and is vigorously opposing those
claims, however, the outcome is presently underminable. In the opinion of
management any potential liability with respect to this litigation will not
materially affect the Company's financial position of results of operations.
On April 13, 1999, the Company acquired all of the outstanding shares of
CGE for approximately $43,000 and 4,167 unregistered shares of the Company's
Common Stock.
NOTE O - REVERSE STOCK SPLIT
On June 17, 1999 the Company's Board of Directors authorized a one-for-six
reverse common stock split effective July 2, 1999, for all shareholders on
record as of the close of business on such date. All share and per share amounts
in the accompanying consolidated financial statement have been restated to give
effect to the reverse common stock split.
F-18
<PAGE>
<TABLE>
<CAPTION>
GLOBALNET FINANCIAL.COM, INC.
CONDENSED CONSOLIDATED
BALANCE SHEETS
A S S E T S
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
(UNAUDITED)
<S> <C> <C>
Assets:
Cash and cash equivalents ........................................ 2,555,304 1,941,774
Restricted cash .................................................. 105,111 104,664
Due from broker .................................................. 44,930 44,930
Securities owned at market value ................................. 890,774 552,719
Securities not readily marketable, at fair value ................. 9,447,343 132,492
Prepaid Expenses ................................................. 389,447 61,438
------------ -----------
TOTAL CURRENT ASSETS ............................................. 13,432,909 2,838,017
Furniture, fixtures, equipment, and leasehold improvements ....... 266,228 290,113
Licensing and promotion agreements ............................... 450,337 354,726
Other Assets ..................................................... 7,138 22,154
------------ -----------
TOTAL ASSETS ..................................................... $ 14,156,612 $ 3,505,010
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses ............................ $ 165,578 $ 607,656
Dividends payable - preferred stockholders ....................... 38,154 38,154
Dividends payable - common stockholders .......................... 572,625 572,625
Deferred revenue ................................................. 0 5,000
------------ -----------
Total Liabilities ................................................ 776,357 1,223,435
============ ===========
Stockholders' equity:
Preferred Stock - $.001 par value; 20,000,000 shares
authorized, none outstanding ................................. 0 0
Class B Common Stock - $.001 par value; 25,000,000
authorized, none outstanding ................................. 0 0
Common Stock - $.001 par value, 16,666,667 shares authorized;
8,772,410 issued; 7,389,650 issued
as of 3/31/99 and 12/31/98, respectively ..................... 8,772 7,390
Additional Paid in Capital ............................................ 29,992,322 8,889,809
Accumulated Deficit ................................................... (8,296,110) (6,298,121)
Unearned compensatory and licensing costs ............................. (8,408,729) (276,253)
Accumulated other comprehensive loss .................................. 114,000 (11,250)
Treasury Stock (2,500 Shares) ......................................... (30,000) (30,000)
------------ -----------
Total stockholders' equity ....................................... 13,380,255 2,281,575
------------ -----------
T O T A L ........................................................ $ 14,156,612 $ 3,505,010
============ ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
F-19
<PAGE>
<TABLE>
<CAPTION>
GLOBALNET FINANCIAL.COM, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED
-----------------------------------
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Consulting fees ......................................... 0 $ 51,750
Advertising and MC1000 revenue .......................... 20,017 0
Private placement fees .................................. 0 427,074
Net realized and unrealized gain(loss) on marketable
and not readily marketable securities .............. 194,531 (200,319)
Interest income ......................................... 11,418 6,241
------------ ------------
Total revenue ................................................ $ 225,966 $ 284,746
------------ ------------
Operating expenses
General and administrative .............................. 2,223,951 574,833
Write-Down of advances to unconsolidated affiliate ...... 0 20,000
------------ ------------
Total operating expenses ........................... 2,223,951 594,833
------------ ------------
Net loss ..................................................... $ (1,997,985) $ (310,087)
============ ============
Basic and diluted loss per share ............................. $ (0.26) $ (0.09)
============ ============
Weighted average common shares outstanding - basic and diluted
loss per share ............................................... 7,656,000 3,302,334
============ ============
</TABLE>
<TABLE>
<CAPTION>
GLOBALNET FINANCIAL.COM, INC.
CONDENSED STATEMENT OF
COMPREHENSIVE LOSS
(UNAUDITED)
FOR THE THREE MONTHS ENDED
-----------------------------------
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
<S> <C> <C>
Net Loss $(1,997,985) $(310,087)
Other Comprehensive Income:
Unrealized gain on available for sale securities 125,250
----------- ---------
Comprehensive Loss $(1,872,735) $(310,087)
=========== =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
F-20
<PAGE>
<TABLE>
<CAPTION>
GLOBALNET FINANCIAL.COM, INC.
CONSOLIDATED STATEMENT
OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
--------------------------------
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss .................................................................. (1,997,986) (310,087)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization ....................................... 137,385 14,929
Equity In loss of unconsolidated affiliate and write-down of advances 0 20,000
Compensation to consultants paid with stock and options ............. 736,333 0
Change in unrealized depreciation of securities ..................... (194,531) 200,319
Receipt of securities in payment of fees ............................ 0 (187,500)
Changes in:
Due from broker ................................................. 0 136,987
Prepaid expenses and other assets ............................... (522,107) 2,000
Accounts payable and accrued expenses ........................... (115,517) (47,551)
Deferred revenues ............................................... (5,000) (10,096)
---------- --------
Net cash (used in) operating activities ................... (1,961,423) (180,999)
---------- --------
Cash flows from investing activities:
Proceeds from sale of securities .......................................... 0 135,970
Investment in restricted cash ............................................. (447) (675)
---------- --------
Net cash (used in) investing activities ................... (447) (135,295)
---------- --------
Cash flows from financing activities:
Proceeds from the issuance of common stock ................................ 2,575,400
Dividends paid ............................................................ 0 (191,165)
---------- --------
Net cash provided by (used in) financing activities ....... 2,575,400 (191,165)
========== ========
Net increase (decrease) in cash and cash equivalents ........................... 613,530 (236,869)
Cash and cash equivalents at beginning of period ............................... 1,941,774 810,659
---------- --------
Cash and cash equivalents at end of period ..................................... 2,555,304 573,790
========== ========
</TABLE>
Noncash Transactions: See Note 9 with respect to settlement of certain
obligations by issuance of securities and share exchange transaction with
Telescan, Inc.
SEE NOTES TO FINANCIAL STATEMENTS
F-21
<PAGE>
GLOBALNET FINANCIAL.COM, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
(Unaudited)
(1) FINANCIAL STATEMENT PRESENTATION
The unaudited financial statements of GlobalNet Financial.com, Inc. (the
"Company" or "GLBN") have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC") and, in the opinion of
management, reflect all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the results of operations for the interim
periods presented. Certain information and footnote disclosures normally
included in financial statements, prepared in accordance with generally accepted
accounting principles, have been condensed or omitted pursuant to such rules and
regulations. However, management believes that the disclosures are adequate to
make the information presented not misleading. The results for the interim
periods are not necessarily indicative of the results of the full fiscal year.
(2) THE CORPORATION
GlobalNet Financial.com, Inc. (the "Company" or "GLBN") formerly Microcap
Financial Services.com, Inc., prior to that Capital Growth Holdings, Ltd. and
prior to that Galt Financial Corporation, was incorporated in the State of
Colorado on June 15, 1987. On March 14, 1997, GLBN, an inactive company,
acquired 100% of the outstanding capital stock of International Capital Growth,
Ltd. ("ICG") (a company formed in February 1996), a Delaware corporation and
member of the National Association of Securities Dealers, Inc. The acquisition
was consummated through an exchange of shares that resulted in the former ICG
shareholders receiving control of GLBN the transaction has been treated as a
recapitalization. In connection therewith, ICG's historic capital accounts were
retroactively adjusted to reflect the equivalent number of shares issued by GLBN
in the transaction while ICG's historical accumulated deficit was carried
forward. In 1997, after the recapitalization, a Colorado corporation, was merged
into a Delaware corporation, Capital Growth Holdings, Ltd. The consolidated
financial statements include the accounts of the Company and its wholly owned
subsidiary, ICG and the wholly owned subsidiary of ICG, Microcap1000.Com Ltd.
("MCAP 1000"). All significant intercompany transactions and balances have been
eliminated.
(3) NATURE OF BUSINESS
The Company and its subsidiaries have three reportable segments. The Company
operates a broker/dealer and an internet web-site. The Company generates
revenues by acting as a placement agent in private financings and as a financial
consultant to various companies. The Company's wholly owned subsidiary, MCAP
1000 provides comprehensive, internet-based electronic publishing of unique
content on the MicroCap sector, generated by analysts and money managers
("MC1000 Gurus"); internet investor access for public companies; and broadcasts
over the internet through video-streamed netcasts of various financial programs.
The Company also maintains their proprietary MicroCap1000 Index, a real-time
index following the stock performance of 1000 companies with market
capitalizations of between $25 million and $500 million.
F-22
<PAGE>
Information with respect to reportable segments follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
MARCH 31, 1999
- ----------------------------------------------------------------------------------------------------------------------------
CORPORATE BROKER/DEALER INTERNET TOTAL
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues from external customers 0 0 20,017 20,017
- ----------------------------------------------------------------------------------------------------------------------------
Interest revenue 10,476 942 0 11,418
- ----------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization 0 5,034 132,351 137,385
- ----------------------------------------------------------------------------------------------------------------------------
Segment (loss) income 629,448 68,878 (1,437,415) (1,997,985)
- ----------------------------------------------------------------------------------------------------------------------------
SIGNIFICANT NONCASH ITEMS:
- ----------------------------------------------------------------------------------------------------------------------------
Unrealized gain of securities 0 194,531 0 194,531
- ----------------------------------------------------------------------------------------------------------------------------
Compensation paid with securities 333,458 0 362,875 696,333
- ----------------------------------------------------------------------------------------------------------------------------
Segment assets 11,427,839 1,329,090 1,399,683 14,156,612
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
MARCH 31, 1998
- ----------------------------------------------------------------------------------------------------------
CORPORATE BROKER/DEALER TOTAL
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues from external customers 0 284,746 284,746
- ----------------------------------------------------------------------------------------------------------
Interest revenue 428 5,813 6,241
- ----------------------------------------------------------------------------------------------------------
Depreciation and amortization 0 14,929 14,929
- ----------------------------------------------------------------------------------------------------------
Segment loss (17,007) (293,080) (310,087)
- ----------------------------------------------------------------------------------------------------------
SIGNIFICANT NONCASH ITEMS:
- ----------------------------------------------------------------------------------------------------------
Unrealized gain of securities 0 (200,319) (200,319)
- ----------------------------------------------------------------------------------------------------------
Segment assets 263,601 2,178,683 2,442,284
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(3) VALUATION OF SECURITIES
Securities held by GLBN are classified as available-for-sale and are recorded at
their market value. Unrealized gains and losses on securities held by GLBN are
recorded as other comprehensive income.
Unrealized gains and losses on securities held by ICG, a registered
broker/dealer, are recognized as operating income or loss in the statement of
operations. Securities owned, which are listed on a national securities
exchange, are valued at their last reported sales price. Securities which trade
over-the-counter are valued at the "bid" price. Securities which do not have a
readily ascertainable market value are valued at their estimated fair value as
determined by the management. Management considers fair value to be cost unless
the value has deteriorated or where later investments have been concluded by a
significant outside investor, then the investment is valued at the last per
share sales price paid unless circumstances dictate a lower valuation.
The values of securities owned by the Company can change substantially because
of volatility in the price of each security, changes in the business prospects
of the issuer of the securities, specific events influencing the operations of
the issuer of the securities, and various other circumstances outside the
security issuer's control. Accordingly, the value of the securities could
decline so that a loss would be required to be recognized for the total carrying
amount of such securities.
Included in securities owned at market value is the Common Stock of Worlds, Inc.
and Telescan, Inc. The carrying amount of the investment in Worlds, Inc. at
March 31, 1999 was $622,500 and the carrying amount of the investment in
Telescan, Inc. at March 31, 1999 was $9,333,125. (See Note 9.) Both Worlds,
Inc. and Telescan, Inc. are subject to the reporting requirements of the U.S.
Securities and
F-23
<PAGE>
Exchange Commission.
Unaudited summarized financial information of Worlds, Inc. (a development stage
enterprise) is as follows:
- ---------------------------------------------------------------
MARCH 31, 1999
- ---------------------------------------------------------------
(UNAUDITED)
- ---------------------------------------------------------------
Current assets $ 957,606
- ---------------------------------------------------------------
Noncurrent assets 378,246
- ---------------------------------------------------------------
Current liabilities 1,091,465
- ---------------------------------------------------------------
Noncurrent liabilities 1,852,518
- ---------------------------------------------------------------
Income Statement:
- ---------------------------------------------------------------
MARCH 31, 1999
- ---------------------------------------------------------------
(UNAUDITED)
- ---------------------------------------------------------------
Net Revenues $ 35,177
- ---------------------------------------------------------------
Gross profits 13,713
- ---------------------------------------------------------------
Operating loss before
extraordinary item (628,238)
- ---------------------------------------------------------------
Net loss (628,238)
- ---------------------------------------------------------------
Unaudited summarized financial information of Telescan, Inc. is as follows:
MARCH 31, 1999
- ---------------------------------------------------------------
(UNAUDITED)
- ---------------------------------------------------------------
Current assets $ 26,533,000
- ---------------------------------------------------------------
Noncurrent assets 8,011,000
- ---------------------------------------------------------------
Current liabilities 7,104,000
- ---------------------------------------------------------------
Noncurrent liabilities 342,000
- ---------------------------------------------------------------
Income Statement:
- ---------------------------------------------------------------
MARCH 31, 1999
- ---------------------------------------------------------------
(UNAUDITED)
- ---------------------------------------------------------------
Net Revenues $ 3,428,000
- ---------------------------------------------------------------
Gross profits 452,000
- ---------------------------------------------------------------
Operating loss before
extraordinary item (872,000)
- ---------------------------------------------------------------
Net loss (872,000)
- ---------------------------------------------------------------
(4) DIVIDEND
In March 1997, the Board of Directors declared annual dividends of $1.35 per
share of Common Stock, for the calendar years ended 1997 and 1998, accruing as
of January 1, 1997 payable commencing June 30, 1997 and on a quarterly basis
thereafter. The dividend will be paid after payment of any dividends due on all
classes of stock with priority over Common Stock (currently Series A and B
preferred stock), subject to any operating restrictions. In addition, the Board
of Directors determined that any dividend declared on Class B Common Stock will
be subject to a $1.20 per share limitation on annual dividends in 1998. The
Company has determined not to make the $.3375 per share Common Stock dividend
payment on June 30, 1998, September 30, 1998 and December 31, 1998 dividend
payments. The Company recognizes such payments as an obligation.
The former holders of Series A and B preferred stock were entitled to a
preferential cumulative dividend equal to $38,154 in the aggregate, which
accrued from October 12, 1996 through October 21, 1997.
(5) REVENUE RECOGNITION
Consulting fees and private placement fees are recorded when earned. In
addition, the Company earns fees in the form of securities. These securities are
valued at market on the date they are earned. Security transactions are recorded
on a trade date basis.
F-24
<PAGE>
(6) NET CAPITAL REQUIREMENTS
ICG is subject to the Securities and Exchange Commission Uniform Net Capital
Rule (Rule 15c3-1), which requires the maintenance of minimum net capital and
requires that the ratio of aggregate indebtedness to net capital, both as
defined, be at least the greater of 6 2/3 of aggregate indebtedness or $5,000.
At March 31, 1999, ICG had net capital of $1,038,540 which was $1,028,756 in
excess of its required net capital.
(7) EXEMPTION FROM RULE 15C3-3
ICG is exempt from the reserve requirement of the Securities and Exchange
Commission's Rule 15c3-3 pursuant to Section 15c3-3(k)(2)(ii).
(8) COMMITMENTS
The Company has issued a letter of credit in the amount of $100,000 to secure
future rent payments and leasehold improvements at the London office of Capital
Growth Europe. The letter of credit is secured by a money market account.
(9) STOCKHOLDER EQUITY TRANSACTIONS DURING QUARTER ENDED MARCH 31, 1999
On January 7, 1999, the Company issued 45,834 shares of Common Stock in lieu of
payment of $308,000 for services rendered by a consultant during the year ended
December 31, 1998.
On January 27, 1999, the Company entered into a content supply agreement. Upon
execution of the agreement, the Company granted 333,333 warrants to purchase
Common Stock at an exercise price of $6.00 per warrant for a term of three years
and paid $207,250. The Company valued these warrants at approximately
$4,007,000.
On February 9, 1999, the Company granted 140,000 options to purchase Common
Stock to a consultant. The consultant will receive an additional 140,000 options
throughout the term of the agreement. The Company valued these warrants at
approximately $921,000.
On March 23, 1999 the Company entered into an agreement with a consultant to
provide investor and public relation services. In connection therewith, the
Company granted 25,000 shares of Common Stock which were valued at their fair
value of $8.40 per share.
The fair market value of Common Stock, options and warrants issued in connection
with the above agreements will be recorded as expense over the term of the
related agreements.
The Company sold 429,234 shares of Common Stock in February 1999 in a series of
private placements yielding net proceeds of approximately $2,575,400.
On March 29, 1999, the Company issued 120,000 shares in lieu of a discount for
certain services provided by a consultant. The transaction was recorded at
$40,000 representing the amount of the discount.
On March 31, 1999, the Company entered into a stock exchange agreement with
Telescan, Inc. ("TSCN"). The agreement provides for the exchange of 862,694
unregistered shares of the Company's Common Stock, for 520,000 unregistered
shares of TSCN's Common Stock. In addition, the Company entered into a stock
option agreement with TSCN. The agreement provides TSCN a one year option to
increase its ownership in the Company to 19.9% by acquiring additional shares at
a purchase price of $22.50. In consideration thereof, the Company received
25,000 shares of TSCN Common Stock. The option is exercisable through March 30,
2000. In the event that there is a change in control as defined, the Company is
required to redeem the option for cash in an amount equal to the number of
unexercised options multiplied by the difference between the exercise price and
consideration received by the
F-25
<PAGE>
Company's stockholders in connection with the change in control.
Also, the Company entered into a service agreement with TSCN. TSCN will provide
information and design services to the Company's internet sites for a term of
two years. The agreement provides for the issuance of 262,916 (included in
862,694 above) shares of the Company's Common Stock to TSCN for these services
as they are provided.
The Company recorded the transaction with TSCN at $17.125 per share, the fair
value of the stock received on the date of the exchange. The fair value was then
allocated to the services to be provided, the option and securities issued.
V
(10) SUBSEQUENT EVENTS
On April 13,1999, the Company acquired all of the outstanding shares of CGE for
approximately $43,000.00 and 4,167 unregistered shares of the Company's Common
Stock.
In April 1999 the Company granted 75,000 shares of Common Stock to a consultant
to provide financial and investor services for one year. The company valued
these shares at $1,237,500 representing the fair value at the date of grant
which will be charged to expense over the term of the agreement.
On May 14, 1999, the Company sold 74,750 shares of Common Stock in a private
placement resulting in net proceeds of approximately $897,500.
In April 1999 the Company raised proceeds of $5,000,000 in a private placement
of 416,667 shares.
In May 1999 the Company received $14,765,338 from Freeserve, Ltd. which
represented the purchase of 1,063,779 shares of Common Stock at $12.00 per share
and the exercise of a warrant for 333,333 shares of Common Stock at $6.00 per
share. (See Note 9). In addition, the Company granted Freeserve, Ltd. an option
to increase its ownership to 19.9% of the fully diluted number of shares of
Common Stock outstanding. The option is exercisable at 13.50 per share and
expires on October 2001.
During May and June of 1999 the Company granted 170,834 options to purchase
common stock to various consultants. The Company valued these options at
approximately $1,563,000, which will be recorded as expense within twelve months
of the execution of the related agreements.
The Company sold 41,667 shares of common stock on June 22, 1999 in a private
placement yielding net proceeds of approximately $500,000.
On June 25, 1999 the Company entered into a joint venture agreement with First
Marathon Inc. ("First Marathon"). The agreement provides for the Company and
First Marathon to form a holding Company through which they will establish a
registered securities dealer to conduct on-line trading of securities and create
and operate a website providing financial news, analysis, and other financial
products. On June 25, 1999 First Marathon acquired 208,334 shares of the
Company's common stock for $2,500,000. In addition, the company granted to First
Marathon an option to invest up to $5.0 million in the company's common stock at
the lower of the current market price of $3.50 per share through September 30,
1999 and a warrant to purchase 275,000 shares of the company's common stock at
an exercise price of $17.25 per share through December 15, 2001. If First
Marathon exercises the option the Company shall also grant to First Marathon a
30-month warrant to purchase up to 333,333 shares of the Company's common stock
at an exercise price of $30.00 per share.
On June 25, 1999 the Company entered into a license agreement for the use of
electronic trading software. The agreement provides for the payment of $1.0
million and the issuance of 166,667 shares of the Company's common stock upon
delivery of the software to the Company.
(11) LITIGATION
On April 1, 1999, ICG was served with a complaint, in which it was named as a
co-defendant to a lawsuit alleging damages of $990,000 plus interest and
punitive damages, with respect to certain investments made by the plaintiffs in
a company called Waste Systems International, Inc. ("WSI"), for which ICG acted
as a financial consultant and placement agent in connection with a private
offering. The plaintiffs allege that the defendants made numerous fraudulent and
negligent misrepresentations to the plaintiffs, that the plaintiffs invested in
WSI based on those fraudulent and negligent misrepresentations and that the
misrepresentations were the direct and proximate cause of injuries suffered by
the plaintiffs. Management believes that the claims against ICG are without
merit and is vigorously opposing those claims, however, the outcome is presently
undeterminable. In the opinion of management any potential liability with
respect to this litigation will not materially affect the Company's financial
position or results of operations.
(12) REVERSE STOCK SPLIT
On June 17, 1999 the Company's Board of Directors authorized a one-for-six
reverse common stock stock split effective July 2, 1999. For all shareholders on
record as of the close of business on such date. All share and per share amounts
in the accompanying consolidated financial statement have been restated to give
effect to the common stock stock split.
F-26
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24.--INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation provides for the Company to
indemnify all persons permitted by Delaware General Corporation Law to the
maximum extent permitted thereby. In addition, the Company's Certificate of
Incorporation limits the liability of directors to the maximum extent permitted
by Delaware law. These provisions of the Certificate of Incorporation are
contained in Articles TEN and THIRTEEN, which read as follows:
TENTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided, however, that the foregoing shall not eliminate or
limit the liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
THIRTEENTH: Except as may otherwise be specifically provided in this
Certificate of Incorporation, no provision of this Certificate of Incorporation
is intended by the Corporation to be construed as limiting, prohibiting, denying
or abrogating any of the general or specific powers or rights conferred under
the General Corporation Law upon the Corporation, upon its stockholders,
bondholders and stockholders, and upon its directors, officers and other
corporate personnel, including, in particular, the power of the Corporation to
furnish indemnification to directors and officers in the capacities defined and
prescribed by the General Corporation Law and the defined and prescribed rights
of said persons to indemnification as the same are conferred under the General
Corporation Law. The Corporation shall, to the fullest extent permitted by the
laws of the State of Delaware, including, but not limited to Section 145 of the
General Corporation Law of the State of Delaware, as the same may be amended and
supplemented, indemnify any and all directors and officers of the Corporation
and may, in the discretion of the Board of Directors, indemnify any and all
other persons whom it shall have power to indemnify under said Section or
otherwise under Delaware law, from and against any and all of the expenses,
liabilities or other matters referred to or covered by said Section. The
indemnification provisions contained in the Delaware General Corporation Law
shall not be deemed exclusive of any other rights to which those indemnified may
be entitled under any ByLaw, agreement, resolution of stockholders or
disinterested directors, or otherwise, and shall continue as to a person who has
ceased to be a director, officer, employee or agent, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall inure to the benefit of the heirs, executors and
administrators of such person.
In addition, the Company has taken out a professional indemnity policy
with a limit of liability of $5,000,000. The policy is a claims made and
reported policy. Subject to certain exclusions and qualifications, the policy
protects directors, officers, and employees from a claim made for an actual or
alleged error, omission, negligent act, libel or slander in rendering
professional services.
II-1
<PAGE>
ITEM 25.--OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Company estimates that expenses in connection with the offering
described in this Registration Statement will be as follows:
Securities and Exchange Commission registration fee $42,836
Legal fees and expenses $16,664
Accounting fees and expenses $50,000
Miscellaneous $15,500
--------
Total $125,000
========
All amounts except the Securities and Exchange Commission registration
fee are estimated. $27,426.51 for the Securities and Exchange Commission
registration fee was previously sent to the Securities and Exchange Commission.
ITEM 26.--RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the following shares were sold by the Company
without registration under the Securities Act: (a) On March 14, 1997, the
Company acquired 100% of the outstanding capital stock of International Capital
Growth, Ltd., a Delaware corporation and member of the NASD in a reverse
acquisition consummated through a share exchange transaction (the "Share
Exchange") pursuant to Regulation D ("Regulation D") and Regulation S
("Regulation S"), each as promulgated under the Securities Act, to "accredited
investors" as that term is defined in Regulation D and to non-"U.S. persons" in
an "offshore transaction" as such terms are defined in Regulation S,
respectively. In accordance with the terms and conditions of the Share Exchange,
the Company issued 3,163,818 shares of its capital stock and 312,500 redeemable
warrants (the "Exchange Warrants") to the former stockholders of ICG, who are
"accredited investors" as that term is defined in Regulation D, or non-"U.S.
persons" participating in an "offshore transaction" as such terms are defined in
Regulation S, in exchange for outstanding securities of ICG, in each case of the
same type, term and denomination. The 16,856,318 shares of capital stock of the
Company that were issued in the Share exchange consisted of (i) 425,318 shares
of common stock, par value $.001 per share, (ii) 11,347,666 shares of
newly-authorized Class B common stock, par value $.001 per share, (iii)
4,001,334 shares of newly-designated 5% Cumulative Convertible Series A
Preferred Stock, par value $.001 per share, and (iv) 1,080,000 shares of
newly-designated 5% Cumulative Convertible Series B Preferred Stock, par value
$.001 per share. The Exchange Warrants consist of 270,834 redeemable shares
common stock purchase warrants, each exercisable to purchase one share common
stock, which shares of common stock are being registered hereby, at $24.00 per
share (subject to adjustment under certain circumstances) at any time until
October 1999 or March 2000, as the case may be, and 41,667 redeemable Class B
common stock purchase warrants, each exercisable to purchase one share of Class
B common stock at $12.00 per share (subject to adjustment under certain
circumstances) at any time, subject to an vesting schedule, until November 1999.
(b) On March 27, 1997, the Company completed a private offering (the
"March Private Offering") of shares of its common stock at $13.50 per share,
pursuant to Regulation D and Regulation S, to "accredited investors" as that
term is defined in Regulation D and to non-"U.S. persons" in an "offshore
transaction" as such terms are defined in Regulation S, respectively. The
Company issued 91,583 shares of common stock in the March Private Offering,
which yielded aggregate gross proceeds of $1,236,366. The Company also issued a
total of 4,164 Warrants as partial compensation to certain sub-placement agents
in the March Private Offering. Each Warrant is exercisable to purchase one share
II-2
<PAGE>
of common stock at $24.00 per share (subject to adjustment) at any time prior to
redemption thereof until March 2000. The placement agent in the March Private
Offering is an affiliate of the Company.
In the fourth quarter of 1998 the Company completed a private offering
(the "1998 Offering") of shares of its common stock at $.75 per share pursuant
to Regulation D to "accredited investors" as that term is defined in Regulation
D. The Company issued 3,874,734 shares in the 1998 private offering which
yielded aggregate gross proceeds of $2,906,050. No placement agent was utilized.
On February 10, 1999 the Company completed a private offering (the
"1998 Offering") of shares of its common stock at $6.00 per share pursuant to
Regulation D to "accredited investors" as that term is defined in Regulation D.
The Company issued 387,567 shares in a February 1999 private offering which
yielded aggregate gross proceeds of $2,325,400. No placement agent was utilized.
The Company did not pay any commissions in connection with the sale of
securities.
In March 1999, we entered into various agreements with Telescan, Inc.
("TSCN"). As a result of these agreements TSCN currently owns 9.9% of GlobalNet.
Under the terms of the agreements, TSCN issued to GlobalNet 520,000 shares of
its common stock, which at the time of the transaction were valued at $10.3
million in exchange for 862,694 of our shares. In addition, TSCN purchased a one
year option from us for 25,000 shares of TSCN's common stock to purchase such
number of shares necessary to increase TSCN's position to 19.9% of the then
current shares outstanding.
The Company issued 416,667 shares in a April 1999 private offering
which yielded aggregate gross proceeds of $5,000,000.
The Company gross proceeds of $14,765,337 in a private transaction with
FreeServe, Ltd. which included the exercise of Freeserve's Warrant to purchase
333,334 shares of Common Stock of GLBN at $6.00 per share.
In June, 1999 we entered into an agreement with First Marathon, Inc.
("First Marathon"). Under the terms of the agreement, GlobalNet issued First
Marathon a 30-month warrant to purchase 275,000 shares of GlobalNet's common
stock at $17.25 per share, and exercisable through September 23, 1999 to
purchase up to $5.0 million of GlobalNet common stock at the market price at the
time the option is exercised or $21.00, whichever is lower. In the event First
Marathon exercises the option, GlobalNet will grant First Marathon an additional
30-month warrant to purchase an additional 333,334 shares at $30.00 per share.
ITEM 27.--EXHIBITS
(a) The following is a list of Exhibits filed herewith as part of the
Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
NO.
<S> <C>
2.1 Agreement Concerning the Exchange of Securities of International Capital Growth,
Ltd. for Securities of Galt Financial Corporation Dated January 7, 1997(1)
2.2 Agreement and Plan of Merger by and between Capital Growth Holdings, Ltd., a Colorado
corporation, and Capital Growth Holdings, Ltd., a Delaware corporation, dated June 10, 1997(1)
3.1 Certificate of Incorporation of the Company, as amended(1)
3.2 By-Laws of the Company(1)
4.1 Form of common stock certificate(2)
4.2 Form of Redeemable common stock Purchase Warrant(2)
4.3 Form of Redeemable Class B common stock Purchase Warrant(2)
5.1 Opinion of Broad and Cassel(2)
5.3 Stock Option Agreement between Telescan, Inc. and
GlobalNet Financial.com, Inc.
5.4 License Agreement between Telescan, Inc. and GlobalNet
Financial.com, Inc.
5.5 Services Agreement between Telescan, Inc. and GlobalNet
Financial.com, Inc.
5.6 Stock Exchange Agreement between Telescan, Inc. and
GlobalNet Financial.com, Inc.
5.7 Content Supply Agreement between Freesone Limited and
GlobalNet Financial.com, Inc.(2)
10.1 Intentionally Deleted
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
10.2 Intentionally Deleted
10.3 Intentionally Deleted
10.4 Lease Agreement, as amended, regarding 2425 Olympic Boulevard, Santa Monica, CA dated October
21, 1997(2)
10.5 Lease Agreement regarding 7280 W. Palmetto Park Road, Suite 202, Boca Raton, Florida(3)
10.6 1998 Stock Option Plan(3)
10.7 Lease Agreement regarding 16150 N. Arrowhead Fountain Center Drive, Peoria, Arizona(3)
23.1 Subsidiaries of the Company(1)
23.2 Consent of Richard A. Eisner & Company, LLP(2)
27.2 Financial Data Schedule(1)
</TABLE>
(1) Filed herewith as an exhibit of the same number to the Company's Form
8-K dated March 14, 1997 and incorporated herein by reference.
(2) Filed as an exhibit of the same number to the Company's Registration
Statement on Form SB-2 (SEC File No. 333-37879) and incorporated herein
by reference.
(3) Filed as an exhibit of the same number to the Company's Registration
Statement on Form SB-2 (SEC File No. 333-72385)
ITEM 28.--UNDERTAKINGS
The undersigned registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any Prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the Prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
Prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement.
(iii) Include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new Registration Statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
II-4
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling p-erson in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, treat the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of Prospectus as a new
Registration Statement for the securities offered in the Registration Statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement on Form SB-2 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boca Raton, State of Florida, on the 13th day of July, 1999.
By: /s/ RONALD B. KOENIG
--------------------------------------
Ronald B. Koenig
Chairman of the Board of Directors
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Ronald B. Koenig his true and
lawful attorneys-in-fact, each acting alone, with full powers of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments, including any post-effective
amendments, to this Registration Statement, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorneys-in-fact or their substitutes, each acting alone, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
II-5
<PAGE>
<TABLE>
<S> <C> <C>
/s/ RONALD B. KOENIG Chairman of the Board of Directors July 13, 1999
- ------------------------------------------
Ronald B. Koenig
/s/ STANLEY HOLLANDER President and Chief Executive July 13, 1999
- ------------------------------------------ Officer
Stanley Hollander
/s/ MICHAEL S. JACOBS Chief Operating Officer, Secretary July 13, 1999
- ------------------------------------------ and Treasurer
Michael S. Jacobs
/s/ ALAN L. JACOBS Executive Vice President and July 13, 1999
- ------------------------------------------ Director
Alan L. Jacobs
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
5.3 Stock Option Agreement between Telescan, Inc. and
GlobalNet Financial.com, Inc.
5.4 License Agreement between Telescan, Inc. and GlobalNet
Financial.com, Inc.
5.5 Services Agreement between Telescan, Inc. and GlobalNet
Financial.com, Inc.
5.6 Stock Exchange Agreement between Telescan, Inc. and
GlobalNet Financial.com, Inc.
EXHIBIT 5.3
STOCK OPTION AGREEMENT
This Stock Option Agreement (this "AGREEMENT") is entered into as of
March 31, 1999, by and between Telescan, Inc., a Delaware corporation
("TELESCAN"), and MicroCap Financial Services.com, Inc., a Delaware corporation
("MICROCAP"),
WHEREAS, contemporaneously with the execution of this Agreement, the
parties are entering into a Stock Exchange Agreement dated as of the date hereof
("EXCHANGE AGREEMENT"), whereby (i) Telescan shall issue and deliver to MicroCap
shares of its common stock, par value $0.01 per share ("TELESCAN COMMON STOCK"),
and (ii) MicroCap shall issue and deliver to Telescan shares of its common
stock, par value $0.001 per share ("MICROCAP COMMON STOCK"); and
WHEREAS, in connection with the transactions contemplated in the
Exchange Agreement, Telescan desires to acquire a non-assignable option (the
"OPTION") to purchase shares of MicroCap Common Stock such that, after giving
effect to the 5,176,161 shares of MicroCap acquired by Telescan in connection
with the Stock Exchange Agreement, Telescan would upon exercise of the Option
then own not more than 19.9% of the then outstanding MicroCap Common Stock (the
"OPTION SHARES"), and;
WHEREAS, MicroCap desires to issue the Option to Telescan, subject to
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. ISSUANCE OF THE OPTION. By execution hereof, MicroCap hereby
grants the Option to Telescan. The exercise price of this Option will be $3.75
per share (the "Exercise Price"). The number of Option Shares and the Exercise
Price per Option Share under this Option are subject to adjustment as provided
in Section 5 hereof and shall in the aggregate upon exercise cause Telescan to
own no more than 19.99% ofthe then outstanding shares of common stock of
MicroCap.
Section 2. CONSIDERATION. As consideration for the Option, Telescan
shall issue and deliver on the date hereof, 25,000 unregistered shares of
Telescan Common Stock to MicroCap. Such shares of Telescan Common Stock shall be
fully paid and nonassessable upon issuance hereunder.
Section 3. EXERCISE OF THE OPTION. The Option may be exercised, in
whole or in part, by the Telescan by written notice to MicroCap at the address
set forth in the Exchange Agreement (specifying the number of Option Shares
being purchased), at any time within the period beginning on the date hereof and
expiring at 5:00 p.m. Houston, Texas time, on March 30, 2000 ("EXERCISE
PERIOD"), and by payment to MicroCap by certified check or bank draft in an
amount equal to the Exercise Price multiplied by the number of shares of
MicroCap Common Stock so purchased.
MicroCap 1000 Stock Option Agreement
Page 1 of 4
<PAGE>
MicroCap agrees that the shares of MicroCap Common Stock so purchased shall be
deemed to be issued to Telescan as the record owner thereof as of the close of
business on the date on which payment is made for such shares of MicroCap Common
Stock. Certificates representing the shares of MicroCap Common Stock so
purchased, together with any cash for fractional shares of MicroCap Common Stock
paid pursuant to Section 5(c) hereof, shall be delivered to Telescan promptly.
Section 4. MICROCAP COVENANTS. MicroCap covenants and agrees (a) that
all shares of MicroCap Common Stock which may be issued upon the exercise of the
Option represented by this Agreement, upon issuance and when fully paid for,
will be validly issued, fully paid and nonassessable and free of all taxes,
liens, charges, encumbrances and security interests, (b) that during the
Exercise Period, MicroCap will at all times have authorized, and reserved for
the purpose of issue or transfer upon exercise of the Option evidenced by this
Agreement, sufficient shares of MicroCap Common Stock to provide for the
exercise of the Option represented by this Agreement, and (c) that MicroCap will
take all such action as may be necessary to ensure that the shares of MicroCap
Common Stock issuable upon the exercise of the Option may be so issued without
violation of any applicable law or regulation, or any requirement of any
securities exchange upon which any capital stock of MicroCap may be listed.
Section 5. ADJUSTMENTS.
(a) ADJUSTMENTS. The number of Option Shares and the Exercise
Price per Option Share hereunder are subject to adjustment as follows:
(1) ADJUSTMENT OF EXERCISE PRICE. If at any time
following the issuance of the Option, MicroCap shall issue any MicroCap Common
Stock or any security or evidence of indebtedness which is convertible into or
exchangeable for MicroCap Common Stock, or any warrant, option or other right to
subscribe for or purchase MicroCap Common Stock, or any evidence of indebtedness
which is convertible into or exchangeable for MicroCap Common Stock or which
represents an equivalent claim on assets of MicroCap as does the MicroCap Common
Stock (hereinafter "EQUITY STOCK"), other than Excluded Stock (as hereinafter
defined) for a consideration per share which is less than the Exercise Price
then in effect, then the Exercise Price shall immediately be reduced to equal
the lesser price paid for the Equity Stock. In the case of cash consideration,
the consideration per share received by MicroCap shall be before deduction of
any commissions, fees or expenses. In the case of Equity Stock in the form of
options, warrants, exchangeable or convertible securities or rights thereto,
cash consideration shall be deemed to include the consideration, if any, to be
received by MicroCap upon the exercise, conversion or exchange of same. In the
case of consideration other than cash, the consideration shall be deemed to be
the fair value thereof as determined in good faith by the Board of Directors of
MicroCap. Excluded Stock shall mean (i) all stock issued or reserved for
issuance by MicroCap for stock dividends, (ii) stock issued or reserved for
employee stock options, so long as the total of such options does not exceed 15%
of the MicroCap Common Stock then outstanding, (iii) shares of MicroCap Common
Stock issued in connection with a Change in Control (as provided in Section 6
below), (iv) shares issued, issuable or reserved for issuance upon the operation
of the anti-dilution provisions of any securities of MicroCap, and (v) shares
issued, issuable or reserved for issuance upon exercise of currently outstanding
options, warrants or other rights to purchase securities of MicroCap.
MicroCap 1000 Stock Option Agreement
Page 2 of 4
<PAGE>
(2) DE MINIMIS ADJUSTMENTS. No adjustments
in the Exercise Price and number of shares of MicroCap Common Stock purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least $0.10 in the Exercise Price; provided, however, that any
adjustments which by reason of this Section 5(a)(2) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest full share.
(b) NOTICE OF ADJUSTMENT. Whenever the number of Option Shares
purchasable upon the exercise of the Option or the Exercise Price is adjusted,
as herein provided, MicroCap shall promptly notify Telescan in writing (such
writing referred to as an "ADJUSTMENT NOTICE") of such adjustment or adjustments
and shall deliver to Telescan a statement setting forth the number of Option
Shares purchasable upon the exercise of the Option and the Exercise Price after
such adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
(c) FRACTIONAL INTEREST. MicroCap shall not be required to
issue fractional shares of MicroCap Common Stock on the exercise of the Option.
The number of full shares of Common Stock which shall be issuable upon an
exercise shall be computed on the basis of the aggregate number of the whole
shares of MicroCap Common Stock purchasable on such exercise. If any fraction of
a share of MicroCap Common Stock would, except for the provisions of this
Section 5(cj be issuable on the exercise of the Option (or specified portion
thereof), MicroCap shall pay an amount in cash equal to the closing price of one
share of MicroCap Common Stock on the date of exercise multiplied by such
fraction, computed to the nearest whole cent.
Section 6. CHANGE IN CONTROL.
(a) OPTIONAL REDEMPTION. In the event there is a Change in
Control (as defined below) of MicroCap, Telescan shall have the right, but not
the obligation, to demand that MicroCap redeem the Option for cash ("REDEMPTION
RIGHT"), in an amount equal to the number of Option Shares remaining thereunder,
multiplied by the difference between the Exercise Price and the consideration
per share to be received by MicroCap stockholders in connection with such Change
in Control ("REDEMPTION CONSIDERATION"). If MicroCap stockholders are to receive
non-cash consideration in connection with a Change of Control, the per share
value thereof shall be determined in good faith by the Board of Directors of
MicroCap.
(b) PROCEDURE. No less than thirty (30) days prior to the
effective date of a transaction constituting a Change in Control, MicroCap shall
give written notice thereof to Telescan, which notice shall contain a reasonable
description of such transaction, including (i) the identity of the parties, (ii)
the consideration to be received by the MicroCap stockholders in connection
therewith, and (iii) any other material terms and conditions. Telescan must then
exercise this Redemption Right by written notice received by MicroCap at least
(5) days prior to the effective date for the transaction constituting a Change
in Control. Telescan may condition the exercise of this Redemption Right upon
the effectiveness of the Change in Control transaction.
MicroCap 1000 Stock Option Agreement
Page 3 of 4
<PAGE>
If Telescau exercises its Redemption Right, MicroCap shall be obligated to
deliver the Redemption Consideration to Telescan immediately available funds
upon the consummation of the Change in Control. The failure by Telescan to
exercise its redemption rights under this Section 6 shall not have affect the
Option.
(c) DEFINITION OF CHANGE IN CONTROL. For purposes of this
Section 6, the term "Change in Control" shall mean (i) a transaction or series
of transactions in which MicroCap sells all or substantially all of its assets
or (ii) any merger, share, exchange, consolidation, reorganization,
recapitalization or other business combination pursuant to which shares of
MicroCap Common Stock would be converted into cash, stock securities or other
property of another corporation.
Section 7. NO VOTING RIGHTS. Prior to exercise, this Option shall not
entitle Telescan to any voting rights or other rights as a stockholder of
MicroCap with respect to the Option Shares.
Section 8. CLOSING OF BOOKS. MicroCap will at no time close its
transfer books against the transfer of the Options or of any shares of MicroCap
Common Stock or other securities issuable upon the exercise of the Option in any
manner which interferes with the timely exercise of the Option.
Section 9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the federal laws of the United States and the laws
of the State of Texas, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws of the State of Texas.
Section 10. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 11. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed be be an original, but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
AGREED AND ACCEPTED BY:
Company: Telescan, Inc. Company: MicroCap Financial Services.com, Inc.
---------------------- -------------------------------------
Signature: /s/ Roger C. Wadsworth /s/ Jay Matulich
---------------------- -------------------------------------
Name: Roger C. Wadsworth Name: Jay Matulich
---------------------- -------------------------------------
Title: Senior Vice President Title: Sr. V.P.
---------------------- -------------------------------------
Date: 3/31/99 Date: 3/31/99
---------------------- -------------------------------------
MicroCap 1000 Stock Option Agreement
Page 3 of 4
EXHIBIT 5.4
LICENSE AGREEMENT
This License Agreement (the "AGREEMENT"! is entered into by and between
Telescan, Inc. ("Telescan") and MicroCap Financial Services.com, Inc. ("MFSI"!
effective as of ____________________ , 1999 (the "EFFECTIVE DATE").
RECITALS
Telescan is in the business of providing online systems operations
services comprised generally of loading, storing and retrieving investment data
and making the stored data available through the system providing access to
numerous computer networks known as the "Internet" to end users. MFSI is in the
business of providing investment data to viewers and end users through two
Internet sites. MFSI's UK-iNvest.com Internet site (the "UK-INVEST SITE") is
based in the United Kingdom and provides investment data services to users in
the United Kingdom and certain other European countries. MFSI's MicroCaplO00.com
Internet site (the "MICROCAP SITE") is based in the United States and provides
investment data on MicroCap companies to end users. MFSI is knowledgeable of
Telescan's business and services and desires to obtain a license to receive and
use Telescan's content and data services on a nonexclusive basis on the terms
and conditions provided herein. Telescan and MFSI have this day also entered
into a Services Agreement (the "SERVICES AGREEMENT") pursuant to which Telescan
will provide certain system operation services. Capitalized terms not otherwise
defined herein shall have the meaning ascribed to such terms in the Services
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, and other good and valuable consideration, the parties hereto
agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms shall have the meaning ascribed to them elsewhere in
this Agreement and as follows:
1.1 "AFFILIATE" means, as to any person or entity, any person or entity
controlled by, controlling or under common control with that person
or entity.
1.2 "CONTENT" means the MFSI Content and the Telescan Content,
collectively.
1.3 "LOOK AND FEEL" means the look and feel of the Service, including,
without limitation, graphics, artwork, color schemes, layout,
navigation, organization and HTML developed by Telescan
specifically for MFSI to the extent protected by applicable
copyright laws.
MicroCap 1000 License Agreement
Page 1 of 20
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1.4 "MFSI CONTENT" means the data, text and other content provided by
MFSI for inclusion within the Service and made available through
the Service as described on ATTACHMENT 1 and such other data, text
and content as Telescan and MFSI may agree that MFSI will provide
to the Service from time to time.
1.5 "MFSI SITES" means, collectively, the UK-iNvest Site and the
MicroCap Site.
1.6 "OPTION COUNTRIES" means France, Germany and Italy.
1.7 "TELESCAN CONTENT" means the data, text and other content provided
by Telescan for inclusion within the Service and made available
through the Service, all as more specifically described on
ATTACHMENT 2. and such other data, text and content as Telescan and
MFSI may agree that Telescan will provide to the Service from time
to time and which shall automatically be deemed added to such
ATTACHMENT 2.
1.8 "USAGE TERMS AND CONDITIONS" means the form of agreement to be
acknowledged by each visitor to either MFSI Site as a condition to
its receipt of the Service in the standard form required by
Telescan, as the same may be modified by Telescan from time to
time.
1.9 "WALL STREET CITY" means Telescan's Wall Street City Internet site,
located at the universal resource locator www.wallstreetcity.com,
or any successor thereto ("WSC").
1.10 "WSC CONTENT" means the data, text and content made generally
available at Wall Street City.
ARTICLE 2
LICENSES
2.1 LICENSE TO TELESCAN. MFSI hereby grants to Telescan a worldwide,
non- exclusive, non-transferable license to use the MFSI Content (as existing as
of the Effective Date, and as expanded from time to time following the Effective
Date) solely in connection with the System for providing the Service in an
online environment in accordance with the terms and conditions of this
Agreement. Telescan will not use, nor permit its Affiliates to use the MFSI
Content for any purpose other than that expressly authorized under this
Agreement. The term of this license to Telescan shall expire upon any
termination of this Agreement.
MicroCap 1000 License Agreement
Page 2 of 20
<PAGE>
2.2 LICENSE TO MFSI.
(a) System License. Telescan hereby grants to MFSI a worldwide,
nontransferable, non-exclusive license to receive the Data Services and Telescan
Content through the System solely in connection with providing the Service on
the MFSI Sites in accordance with the terms and conditions of this Agreement.
MFSI will not use, nor permit its Affiliates to use, the Data Services, the
System or the Telescan Content for any purpose other than that expressly
authorized under this Agreement. The term of this license to MFSI shall expire
upon any termination of this Agreement. This license does not relate to the
licensing by Telescan of its software or other technology ("TELESCAN'S
TECHNOLOGY") for use or access by MFSI or any third party other than as a right
to access the Data Services through the System as part of the Service.
(b) Telescan Content. Attached hereto as ATTACHMENT 2 is a list of
the specific features to be included within the Service as Telescan Content as
of the Effective Date. In accordance with the terms and conditions Telescan will
also incorporate into the Service all updates, upgrades and revisions for such
Telescan Content features which Telescan incorporates into the equivalent
content comprising WSC Content which Telescan makes generally available at no
additional charge to its other private label customers receiving the Telescan
Content and features with such updates, upgrades and revisions automatically
becoming subject to the terms and conditions of this Agreement and the Services
Agreement.
ARTICLE 3
NONREFUNDABLE LICENSE FEES; OPTION
3.1 NONREFUNDABLE LICENSE FEES. In consideration of Telescan's
execution of this Agreement and the licenses granted to MFSI hereunder,
contemporaneously with the execution of this Agreement, MFSI shall pay Telescan
the following non-refundable license fees (collectively, the "LICENSE FEES"):
(a) Five Hundred Seventy-Eight Thousand Four Hundred Forty
USDollars ($578,440) payable in 385,627 shares of common stock of MFSI for the
license to use the System to receive the Telescan Content and Data Services on
the MicroCap Site.
(b) Five Hundred Forty-Six Thousand Five Hundred Sixty US Dollars
($546,560) payable in 364,373 shares of common stock of MFSI for the license to
use the System to receive the Telescan Content and Data Services on the UK
iNvest Site. A description for the calculation of the UK iNvest Site License Fee
is attached hereto as ATTACHMENT 3.
The License Fees are an independent obligation of MFSI and are not dependent
upon or otherwise related to the amount of revenue received by or services
provided by either party under this Agreement. This obligation accrues upon the
Effective Date.
MicroCap 1000 License Agreement
Page 3 of 20
<PAGE>
3.2 OPTION TO ADD COUNTRY SITES. Contemporaneously with the execution
of this Agreement, MFSI shall pay Telescan a non-refundable option fee (the
"OPTION FEE") of $25O,000 US Dollars payable in 133,333 shares of common stock
of MFSI. In consideration of the Option Fee, Telescan hereby grants MFSI an
option to obtain a license to use the System to receive the Telescan Content and
the Data Services for use on up to three Internet Sites, each of which would
cover one of the Option Countries and be the substantial equivalent of the UK
iNvest Site for the United Kingdom for each respective Option Country. In order
to exercise the option, MFSI must provide written notice to Telescan within
twelve months after the Effective Date (the "OPTION PERIOD") of MFSI's decision
to exercise its option as to one or more of the Option Countries. MFSI may
exercise its option as each Option Country separately at different times
provided that MFSI must provide notice to Telescan of exercise as to each
applicable Option Country for which it elects to exercise its option prior to
the expiration of the Option Period. As to each Option Country for which MFSI
exercises its option, MFSI must pay to Telescan a separate License Fee, Services
Fee, Incremental Costs and other fees and charges equal to the License Fee,
Services Fees, Incremental Costs and other fees and charges applicable to the UK
iNvest Site. In addition, the other terms and conditions of this Agreement and
the Services Agreement shall apply to the Internet site for the Option Country
to the same extent they apply to the UK iNvest Site, including the payment to
Telescan of mutually agreed upon development effort charges to the extent more
than minimal development time and effort is required of Telescan to implement
the applicable Option Country services.. Within thirty (30) days after receipt
by Telescan of a notice of exercise from MFSI as to any Option Country, the
parties will enter into a written amendment to this Agreement and the Services
Agreement confirming the terms and conditions of this Section 3.2 and setting
forth the schedule for the preparation of the Design Specifications and Detailed
Description of Work.
ARTICLE 4
INDEMNIFICATION; DISCLAIMERS; LIMITATIONS OF LIABILITY
4.1 TELESCAN REPRESENTATIONS. Telescan represents and warrants that:
(i) Telescan has the right to enter into this Agreement and to furnish the
Telescan Content and the Data Services and all other materials provided by
Telescan hereunder in accordance with the terms and conditions of this Agreement
and free of all liens, claims, or encumbrances and conflicts with any other
obligation of Telescan and (ii) MFSI's use thereof does not infringe any
Intellectual Property Right (defined below) of any third party provided that
such representation or warranty shall not apply to the extent any of the
foregoing are modified by anyone other than Telescan or any of the foregoing is
used in ways not contemplated by this Agreement
4.2 MFSI REPRESENTATIONS. MFSI represents and warrants that: (i) MFSI
has the right to enter into this Agreement and to furnish the MFSI Content and
all other materials provided by MFSI hereunder in accordance with the terms and
conditions of this Agreement and free of all liens, claims, or encumbrances and
conflicts with any other obligation of MFSI and (ii) the foregoing and
Telescan's use thereof does not infringe any Intellectual Property Right of any
third party provided that such representation or warranty shall not apply to the
extent any of the foregoing are modified
MicroCap 1000 License Agreement
Page 4 of 20
<PAGE>
by anyone other than MFSI or used in ways not contemplated by this Agreement.
4.3 INDEMNIFICATION. MFSI shall indemnify Telescan from and against any
and all claims, losses, damages or expenses proximately resulting from or
relating to any claim or allegation that the MFSI Content or any other materials
developed or designed by MFSI infringes the Intellectual Property Rights of any
third party. Telescan shall indemnify MFSI from and against any and all claims,
losses, damages or expenses proximately resulting from or relating to from any
claim or allegation that the Telescan Content or any other materials developed
or designed by Telescan or Telescan's use of thereof Services infringes the
Intellectual Property Rights of any third party.
4.4 DISCLAIMER EXCEPT AS EXPRESSLY PROVIDED HEREIN, TELESCAN MAKES NO
WARRANTY OR REPRESENTATION TO MFSI OR TO ANY THIRD PARTY AS TO THE PERFORMANCE
OR OPERATION OF THE SYSTEM, THE CONTENT, THE SERVICE, THE SYSTEM OPERATIONS
SERVICES OR RELATED PRODUCTS OR SERVICES. ANY IMPLIED WARRANTIES (INCLUDING
WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND GOOD AND WORKMANLIKE MANNER) ARE HEREBY EXCLUDED. BOTH
PARTIES AGREE THAT TELESCAN'S LIABILITY (UNDER BREACH OF CONTRACT, NEGLIGENCE,
STRICT LIABILITY OR OTHERWISE), IF ANY, FOR ANY DAMAGES RELATING TO ANY SUCH
PRODUCT, SERVICE (OR THE MALFUNCTION THEREOF) OR THIS AGREEMENT SHALL BE LIMITED
TO THE LESSER OF (AT TELESCAN'S SOLE DISCRETION) (a) THE ACTUAL AMOUNTS RECEIVED
BY TELESCAN UNDER THIS AGREEMENT FOR SUCH PRODUCT OR SERVICE DURING THE
THREE-MONTH PERIOD PRECEDING THE EVENT CAUSING SUCH DAMAGES, OR (b) THE COST OF
REPAIR, AND WILL IN NO EVENT INCLUDE CONSEQUENTIAL, INCIDENTAL, INDIRECT,
SPECIAL OR OTHER DAMAGES OF ANY KIND INCLUDING LOSS OF PROFITS, EVEN IF TELESCAN
HAS BEEN ADVISED OF THE LIKELIHOOD OF THE OCCURRENCE OF SUCH DAMAGES. IN NO
EVENT SHALL TELESCAN BE LIABLE TO MFSI, USERS OF THE SERVICE OR ANY THIRD PARTY
FOR ANY DAMAGES RESULTING FROM THE CONTENT OR NATURE OF THE INFORMATION AND DATA
CONTAINED ON THE SYSTEM, OR THE RESULTS OF ANY SEARCH THEREFOR TELESCAN, AT ITS
SOLE DISCRETION, MAY CAUSE TO BE PLACED ON THE SYSTEM ANY DISCLAIMERS OF
WARRANTIES AND LIABILITIES IT DEEMS REASONABLE FOR ITS OR MFSI'S PROTECTION.
THERE ARE NO THIRD PARTY BENEFICIARIES TO THIS AGREEMENT.
MicroCap 1000 License Agreement
Page 5 of 20
<PAGE>
ARTICLE 5
PROPRIETARY RIGHTS OF THE PARTIES
5.1 CONFIDENTIAL INFORMATION. Except to the extent specifically
exempted or authorized by the disclosing party in writing, each party expressly
undertakes to retain in confidence and to require its employees and consultants
to retain in confidence, all information and know-how transmitted to it by the
other party which the other party has identified in writing as confidential or
which by the nature of the circumstance surrounding the disclosure ought in good
faith to require the information to be treated as confidential ("CONFIDENTIAL
INFORMATION") and will make no use of such Confidential Information except under
and in accord with the terms of this Agreement. Further, each party expressly
represents that it will implement reasonable procedures to protect and maintain
the confidential nature of the Confidential Information. Both parties also agree
to maintain the confidentiality of the Confidential Information of any Customer
Bank. The parties further agree that these confidentiality and use provisions
shall not apply to any information that appears in issued patents or which is
publicly available.
5.2 TRADEMARK. Advertising and Press Releases. Neither party shall
acquire a right to use, and shall not use without the other party's prior
written consent as to each use, the names, characters, artwork, designs,
tradenames, trademarks or service marks of the other party in any advertising,
publicity, public announcement, press release or promotion and shall maintain
all copyright, trademark, service mark or other proprietary notice on such
party's products or services and otherwise comply with such party's reasonable
quality control requirements. MFSI acknowledges that Telescan, as a publicly
traded company, has certain restrictions and procedures which must be complied
with when releasing to the public material information regarding Telescan and
its business. Accordingly, Telescan's consent to any proposed public release of
information relating to Telescan or this Agreement may be withheld by Telescan
at its sole discretion or conditioned upon compliance with Telescan's procedures
or restrictions. Subject to the foregoing, each party will provide a copy of any
press releases and public announcements to the other party prior to their public
release.
5.3 OWNERSHIP OF TELESCAN PROPERTY.
(a) MFSI acknowledges that Telescan owns all right, title and
interest in and to all data, content, software and other technology, including,
without limitation, source codes, object codes, operating instructions,
writings, data, formulas, algorithms, models, drawings, photographs, and design
concepts, and all other documentation developed for or relating to the Telescan
Content, the Data Services, Telescan's Technology and other materials provided
by Telescan, including any additions, and all other information of any kind,
together with all modifications, revisions, changes, copies, partial copies,
translations, compilations, and derivative works of any other foregoing which
shall all constitute the "TELESCAN PROPERTY". Unless otherwise expressly
provided for in this Agreement, MFSI shall not sell, transfer, publish,
disclose, display, license or otherwise make available to others ably part of
the Telescan Property or copies thereof. All Intellectual Property Rights and
all other property rights
MicroCap 1000 License Agreement
Page 6 of 20
<PAGE>
of any nature in the Telescan Property are, shall be' and shall remain in
Telescan. Telescan shall have all authorship rights in the Telescan Property.
The Telescan Property is and shall remain the sole and exclusive property of
Telescan, with Telescan having the right to obtain and to hold in its own name,
patents, copyright registrations or trademark or service mark registrations or
such other protection as may be appropriate to the subject matter, and any
extensions and renewals thereof. MFSI agrees, at Telescan's expense, to execute
such further documents, and perform such other acts, as Telescan may deem
necessary, useful or convenient to evidence or perfect the rights of Telescan
defined and acknowledged in this SECTION 5.3.
(b) "INTELLECTUAL PROPERTY RIGHTS" means, with respect to any data,
device, or other asset of any kind, any object code or source code, all
copyright, patent, trade secret, moral, termination, authorship and/or other
proprietary rights relating to any such data, device, object code, source code
or other asset including, without limitation, all rights necessary for the
worldwide development, manufacture, modification, enhancement, sale, licensing,
use, reproduction, publishing and display of such data, device, object code,
source code or other asset.
(c) Telescan acknowledges that MFSI owns all right, title and
interest in and to the MFSI Content and the Look and Feel of the Service,
including any additions, and all other information of any kind, together with
all modifications, revisions, changes, copies, partial copies, translations,
compilations, and derivative works of any other foregoing which shall all
constitute the "MFSI PROPERTY". Unless otherwise expressly provided for in this
Agreement, Telescan shall not sell, transfer, publish, disclose, display,
license or otherwise make available to others any part of the MFSI Property or
copies thereof. All Intellectual Property Rights and all other property rights
of any nature in the MFSI Property are, shall be and shall remain in MFSI. MFSI
shall have all authorship rights in the MFSI Property. The MFSI Property is and
shall remain the sole and exclusive property of MFSI, with MFSI having the right
to obtain and to hold in its own name, patents, copyright registrations or
trademark or service mark registrations or such other protection as may be
appropriate to the subject matter, and any extensions and renewals thereof.
Telescan agrees, at MFSI's expense, to execute such further documents, and
perform such other acts, as MFSI may deem necessary, useful or convenient to
evidence or perfect the rights of MFSI defined and acknowledged in this
SECTION 5.3.
5.4 RIGHT OF INJUNCTION. The parties acknowledge that a breach by
either party of this Article 5 will give rise to irreparable injury to the
other, inadequately compensable in damages. Accordingly, the parties hereby
consent to the obtaining by the other party of injunctive relief against the
breach or threatened breach of the undertakings of the parties contained in this
ARTICLE 5. The parties further agree that such an order so enjoining a party may
be issued pending final determination thereof without the requirement to post
bond. The obligation of the parties under this ARTICLE 5 shall survive the
termination of this Agreement.
MicroCap 1000 License Agreement
Page 7 of 20
<PAGE>
ARTICLE 6
TERMINATION
6.1 TERMINATION. Either party may terminate this Agreement for the
following reasons:
(a) if the other party materially fails to perform or comply with
this Agreement or any provision hereof or the Services Agreement;
(b) if the other party fails to strictly comply with the provisions
of Article 5 or makes an assignment in violation of SECTION 7.8;
Termination under this SECTION 6.1 shall be effective thirty (30) days after
notice of termination to the defaulting party if the defaults have not been
cured within such thirty (30) day period. The rights and remedies of the parties
provided herein shall not be exclusive and are in addition to any other rights
and remedies provided by law or this Agreement.
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 RELATIONSHIP OF THE PARTIES. Nothing in this Agreement shall be
construed to create any franchise, joint venture, trust or commercial
partnership or any other partnership relationship for any purpose whatsoever.
MFSI occupies the status of an independent contractor and Telescan shall have no
right to control the details of the MFSI's marketing activities.
7.2 SURVIVAL OF CERTAIN REPRESENTATIONS, COVENANTS AND WARRANTIES. Any
and all covenants, representations, or warranties made or given by any of the
parties hereto under the terms hereof shall survive the execution of this
Agreement and shall be binding upon and enforceable against the appropriate
party or parties hereto for such period of time as specified by the applicable
statute of limitations.
7.3 NOTICES. Except as otherwise expressly provided herein, any notice
request, consent, demand or other communication required or permitted to be
given by this Agreement shall be in writing and shall be personally served or
sent by telecopy (with a copy by prepaid registered or certified mail sent on
that same day), commercial courier service or prepaid registered or certified
mail. Any written notice delivered by telecopy shall be deemed to have been
given on the day telecopied to the other party. Any written notice given by
commercial courier service or registered or certified mail shall be deemed
communicated as of actual receipt.
MicroCap 1000 License Agreement
Page 8 of 20
<PAGE>
For purposes of this Agreement, the addresses of the parties, until notice of
a change thereof, shall be as follows:
IF TO TELESCAN: WITH A COPY (NOT CONSTITUTING NOT:TCE) TO:
Mr. Roger C. Wadsworth Mr. David F. Taylor
Telescan, Inc. Locke Liddell & Sapp LLP
5959 Corporate Dr. 3400 Chase Tower
Suite 2000 600 Travis Street
Houston, TX 77036 Houston, Texas 77002
Telecopy No.: 281588-9843 Teleconv No: {713) 223-3717
IF TO MICROCAP: WITH A COPY (NOT CONSTITUTING NOTICE) TO.
Mr. Stanley Hollander Mr. Aaron A. Grunfeld
Mr. Jay Matulich Resch, Polster, Alpert & Berger LLP
MicroCap Financial Services.com, Inc.10390 Santa Monica Boulevard
2425 Olympic Boulevard - Suite 660 E 4th Floor
Santa Monica, California 90404 Los Angeles, California 90025
Telecopy No.: (310) 828-7218 Telecopy No (310) 552-3209
Mr. Michael Jacobs
MicroCap Financial Services.com, Inc.
7280 West Palmetto Park Road
Suite 200
Boca Raton, FL 33433
Telecopy No.: (561) 417-8054
7.4 CHOICE OF LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas (without regard to Texas'
principles of conflicts of laws) and of the United States of America.
7.5 MANDATORY MEDIATION.
(a) Except as expressly provided in this SECTION 7.5, prior to the
institution of any legal action by one party against the other arising out of or
relating to any dispute between the parties over this Agreement and/or any
breach thereof, such dispute shall be submitted to a disinterested mediator
having substantial experience and recognized expertise in the field or fields of
the matter(s) in dispute. A party shall initiate mediation proceedings by
notifying the other party in writing that it is requiring that a dispute be
mediated in accordance with this Agreement. The mediator shall be agreeable to
both parties. In the absence of agreement, the American Arbitration Association
will appoint a mediator. The mediation shall be conducted in accordance with the
Commercial Mediation Rules of the American Arbitration Association. The fee
charged by the mediator shall be borne equally by the parties. If the mediation
is initiated by Telescan, the mediation shall be conducted in Boca Raton,
Florida. If the mediation is initiated by MFSI, the mediation shall be conducted
in Houston, Texas. The fact that mediation is or may be allowed will not impair
the exercise of any termination rights under this Agreement. Any mediation and
the enforcement of any settlement entered into by the parties pursuant to such
mediation shall be governed by and construed in accordance with the laws of the
State of Texas (without regard to Texas' principles of conflicts of laws) and of
the United States of America. All parties to the dispute and their counsel (or
their duly authorized legal representative with decision-making authority)
MicroCap 1000 License Agreement
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<PAGE>
shall attend the mediation and will remain throughout the mediation process
until such time as the parties reach agreement or the mediator determines that
further negotiation efforts will not be productive. Each party must be
represented by a person with the authority to negotiate a binding settlement. In
the event a party to this Agreement files a lawsuit prior to conclusion of
mediation, the other party may take any and all legal or equitable action to
compel mediation and dismissal of the lawsuit. In such event, the party seeking
the mediation shall be entitled to its expenses and attorneys fees' associated
with, or incurred as a result of, having to file the legal or equitable action
to compel mediation or dismissal.
(b) No provision of, nor the exercise of any rights under this
SECTION 7.5 shall limit the right of any party to obtain injunctive relief
pursuant to Section 5.4 before, during, or after the pendency of any mediation,
and any such action shall not be deemed an election of remedies. Such injunctive
rights can be exercised at any time except to the extent such action is contrary
to a final settlement entered into by the parties pursuant to a mediation
proceeding. The institution and maintenance of an action for judicial injunctive
relief shall not constitute a waiver of the right of any party, including
without limitation the plaintiff, to submit any dispute to mediation nor render
inapplicable the compulsory mediation provisions of this SECTION 7.5.
(c) Any attorney-client privilege and other protection against
disclosure of confidential information, including without limitation any
protection afforded the work-product of any attorney, that could otherwise be
claimed by any party shall be available to and may be claimed by any such party
in any mediation proceeding. No party waives any attorney-client privilege or
any other protection against disclosure of confidential information by reason of
anything contained in or done pursuant to or in connection with this SECTION
7.5. Each party agrees to keep all disputes and mediation proceedings strictly
confidential, except for disclosures of information to the parties' legal
counsel or auditors or those required by applicable law. The parties agree to
treat all mediation proceedings as settlement negotiations and agree that such
settlement discussions shall be inadmissible in a court of law. The mediator
shall be bound to maintain the confidentiality of all matters made known to the
mediator, as well as notes or writings prepared by the mediator. The parties
agree not to subpoena or otherwise require the mediator to testify or to produce
records, notes or work product in any further proceedings. Only persons having a
direct interest in the mediation are entitled to attend.
(d) The parties agree to cooperate with each other and with the
mediator in a good faith effort to negotiate a prompt a reasonable resolution of
the dispute.
(e) The mediator is to serve as an impartial third party in
assisting the parties toward settlement of their dispute but may not compel or
coerce the parties to enter into a settlement agreement. The mediator will not
render any decision on the merits of the dispute.
MicroCap 1000 License Agreement
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7.6 ATTORNEYS' FEES. The prevailing party in any legal proceedings
brought by the other party to enforce any provision of this Agreement shall be
entitled to recover against the non-prevailing party the reasonable attorneys'
fees, court costs and other expenses incurred by the prevailing party, including
all costs and expenses, and also including attorneys' fees of the prevailing
party associated with, or incurred as a result of, the mediation of the dispute.
7.7 SEVERABILITY. If any term, provision or part of this Agreement is
to any extent held invalid, void or unenforceable by a court of competent
jurisdiction, the remainder of this Agreement shall not be impaired or affected
thereby, and each term, provision and part shall continue in full force and
effect, and shall be valid and enforceable to the fullest extent permitted by
law.
7.8 ASSIGNMENT. Neither party may assign any of its rights or duties
under this Agreement without the prior written consent of the other party, such
consent not to be unreasonably withheld, except that either party may assign to
a successor entity in the event of its dissolutions, acquisition, merger or
other change in legal status. This Agreement shall inure to the benefit of and
be binding upon the parties to this Agreement and their respective successors
and permitted assigns.
7.9 WAIVER. The forbearance or failure of one of the parties hereto to
insist upon strict compliance by the other with any provisions of this
Agreement, whether continuing or not, shall not be construed as a waiver of any
rights or privileges hereunder. No waiver of any right or privilege of a party
arising from any default or failure hereunder shall affect such party's rights
or privileges in the event of a further default or failure of performance.
7.10 FORCE MAJEURE. Neither party hereto shall be liable to the other
for failure to perform any of its obligations hereunder to the extent
performance is prevented due to force majeure. For the purposes of this
Agreement, "FORCE MAJEURE" shall mean causes that are beyond the reasonable
control of the party claiming force majeure and that could not have been avoided
or prevented by reasonable foresight, planning or implementation of the party
claiming force majeure. Such causes shall include, but are not limited to, acts
of God, war (declared or undeclared), insurrections, hostilities, strikes or
lockouts (other than strikes by or lockouts of such party's employees, which
strikes or lockouts shall be deemed not to be force majeure events), riots,
fire, storm and interference or hindrance by any governmental authority.
7.11 LIMITATIONS. No action, regardless of form, arising out of the
transactions under this Agreement may be brought by one party against the other
more than two (2) years after the facts creating the cause of action became
known, or reasonably should have been known, to the party bringing the action.
MicroCap 1000 License Agreement
Page 11 of 20
<PAGE>
7.12 COMPLIANCE WITH LAWS. Each party hereto agrees to comply with all
federal, state and local laws, rules and regulations in effect in the United
States of America, the United Kingdom and the OPTION COUNTRIES in respect of
their activities contemplated by this Agreement, including without limitation
(i) the Bureau of Export Administration Regulations of the United States
Department of Commerce ("BXA Regulations"), (ii) the antiboycott provisions of
the BXA Regulations and of Section 999 of the United States Internal Revenue
Code and any regulations promulgated thereunder, and (iii) the United States
Foreign Corrupt Practices Act; provided, that each party shall comply with such
laws, rules and regulations to the extent (1) such laws, rules and regulations
are applicable to such party, or (2) such party's noncompliance would cause the
other party hereto to be in violation of such laws, rules and regulations.
Telescan makes no representation or warranty with respect to the ability of
MFSI, under the laws of the United Kingdom, any Option Country or of the United
States, to market or sell the Services in the United Kingdom or the Option
Countries. MFSI shall be responsible for obtaining or making, and shall use its
best efforts to obtain, any and all authorizations from any U.S. or foreign
governmental authority that are required for it to perform its obligations under
this Agreement, and if applicable, shall be responsible for filing or
registering this Agreement with appropriate governmental authorities. MFSI shall
provide proof of compliance with such required governmental authorizations to
Telescan upon request. Telescan shall not be liable to MFSI if any required
governmental authorization is delayed, denied, revoked, restricted or not
renewed, or if MFSI is otherwise prohibited from marketing or selling the
Services in any country. In addition, when this Agreement expires or is
terminated pursuant to the terms of this Agreement, Telescan or its designee
shall be exclusively entitled to any rights MFSI may have acquired in or as a
result of governmental approvals, authorizations or permits relating to the sale
or distribution of Telescan's products and services, and MFSI, upon Telescan's
request, shall to the extent permitted by applicable law, promptly transfer to
Telescan, or to any third party so identified by Telescan, all such rights, all
without any compensation to MFSI.
7.13 The following Attachments are hereby incorporated into and made a
part of this Agreement:
Attachment 1 - "MFSI Content"
Attachment 2 - "Telescan Content"
Attachment 3 - "UK-iNvest Site License Fee Calculation"
MicroCap 1000 License Agreement
Page 12 of 20
<PAGE>
7.14 ENTIRE AGREEMENT. TOGETHER WITH THE STOCK EXCHANGE AGREEMENT, THE
STOCK OPTION AGREEMENT AND THE SERVICES AGREEMENT, THIS AGREEMENT CONSTITUTES
THE ENTIRE AGREEMENT AND UNDERSTANDING OF THE PARTIES HERETO IN RESPECT OF THE
SUBJECT MATTER CONTAINED HEREIN AND SUPERSEDES ALL PRIOR AGREEMENTS, CONSENTS
AND UNDERSTANDINGS RELATING TO SUCH SUBJECT MATTER. THE PARTIES AGREE THAT THERE
IS NO ORAL OR OTHER AGREEMENT BETWEEN THE PARTIES WHICH HAS NOT BEEN
INCORPORATED INTO THIS AGREEMENT AND THAT NO RELIANCE IS BEING MADE UPON SAME.
This Agreement may be modified or amended only by a duly authorized written
instrument executed by the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
AGREED AND ACCEPTED BY:
Company: Telescan, Inc. Company: MicroCap Financial
Services.com, Inc.
------------------- --------------------------
Signature: /s/ Roger C. Wadsorth Signature: /s/ Jay Matulich
------------------- --------------------------
Name: Roger C. Wadsworth Name: Jay Matulich
------------------- --------------------------
Title: Senior Vice President Title: SR. V.P.
--------------------- --------------------------
Date: 3/31/99 Date: 3/31/99
--------------------- --------------------------
MicroCaplOOO License Agreement
Page 13 of 20
<PAGE>
ATTACHMENTS AND EXHIBITS TO THE LICENSE AGREEMENT
BETWEEN
TELESCAN, INC.
AND
MICROCAP FINANCIAL SERVICES.COM, INC.
The following Attachments have hereby incorporated into and made a part
of this Agreement:
Attachment 1 - "MFSI Content"
Attachment 2 - "Telescan Content"
Attachment 3 - "UK-iNvest Site License Fee Calculation"
MicroCap 1000 License Agreement
Page 14 of 20
<PAGE>
ATTACHMENT 1
MFSI CONTENT
TO BE PROVIDED
To be mutually agreed upon by the parties within five days after the
Effective Date, accepted in writing (by their signatures below) and attached to
this Agreement. Each party agrees not to unreasonably withold its approval of
the MFSI Content.
AGREED AND ACCEPTED BY:
Company: Telescan, Inc. Company: MicroCap Financial
Services.com, Inc.
------------------- --------------------------
Signature: Signature:
------------------- --------------------------
Name: Roger C. Wadsworth Name:
------------------- --------------------------
Title: Senior Vice President Title:
--------------------- --------------------------
Date: Date:
--------------------- --------------------------
MicroCap 1000 License Agreement
Page 15 of 20
<PAGE>
ATTACHMENT 2
Telescan Content
<TABLE>
<CAPTION>
Telescan Content
- -----------------------------------------------------------------------------------------------------
Corporate Snapshot - 20 year max, time period
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
* Standard Graph * Historial Quotes * Stocks In Industry Grouop
* Company Snapshot * Comtex News * Zacks Earnings Estimates 1
* MarketGuide Company Profile * Industry Group Analysis * MarketGuide Quick Facts
* Financial Statements * Listed Options * MacroWorld Price Forecasts
- -----------------------------------------------------------------------------------------------------
20 Year Graph - w/technical analysis
- -----------------------------------------------------------------------------------------------------
* Commodity Channel Index * Insider Trading * Stochastics
* MACD * Momentum * Wilder RSI
* Moving Average * Negative Volume Index
* On Balance Volume
- -----------------------------------------------------------------------------------------------------
Comparison Graph - compare up to 20 years of
- -----------------------------------------------------------------------------------------------------
Quotes - Get a current quote - 15 min. delay
- -----------------------------------------------------------------------------------------------------
Quotes - Get a current quote - RTQ
- -----------------------------------------------------------------------------------------------------
Market Snapshot - Up to theminute quotes on all
- -----------------------------------------------------------------------------------------------------
Portfolio Quotes
- -----------------------------------------------------------------------------------------------------
Symbol Lookup
- -----------------------------------------------------------------------------------------------------
Industry Group Analysis
- -----------------------------------------------------------------------------------------------------
Stocks In Industry Groups
- -----------------------------------------------------------------------------------------------------
Industry Group Symbols
- -----------------------------------------------------------------------------------------------------
General Best & Worst - Stocks
- -----------------------------------------------------------------------------------------------------
* 6 Week High Relative Strength * Largest % Galner * Highest P/E
* 26 Week High Relative Strength * Largest % Loser * Lowest P/E
* 18 Week High Relative Strength * Largest % Price Change
* Largest Volume/30 Day Average * Most Active
- -----------------------------------------------------------------------------------------------------
Listed Options
- -----------------------------------------------------------------------------------------------------
Weekly Financial Events Due Out This Week
- -----------------------------------------------------------------------------------------------------
Quick Search
- -----------------------------------------------------------------------------------------------------
General Search
- -----------------------------------------------------------------------------------------------------
Find Winning Mutual Funds
- -----------------------------------------------------------------------------------------------------
* This Weeks Mutual Fund Recap * Telecom Prospector * Complete Indicate List
* What Indicative Are Working Best * What Indicators Are Working Best
- -----------------------------------------------------------------------------------------------------
Mutual Funds Search
- -----------------------------------------------------------------------------------------------------
Best & Worst - Mutual Funds
- -----------------------------------------------------------------------------------------------------
* Best Yield * 6 Month Best Relative Perf. * 5 Year Best Relative Perf.
* 1 Week Best Relative Performance * 6 Months Worst Relative Perf. * 5 Year Worst Relative Perf.
* 1 Week Worst Relative Performance * 1 Year Best Relative Perf. * 10 Year Best Relative Perf.
* 6 Week Best Relative Perf. * 1 Year Worst Relative Perf. * 10 Year Worst Relative Perf.
* 6 Week Worst Relative Perf. * 3 Year Worst Relative Perf. * 15 Year Best Relative Perf.
* 3 Year Best Relative Perf. * 15 Year Worst Relative Perf.
- -----------------------------------------------------------------------------------------------------
</TABLE>
MicroCap 1000 License Agreement
Page 16 of 20
<PAGE>
<TABLE>
<CAPTION>
ATTACHMENT 2 - CONTINUED -
- -----------------------------------------------------------------------------------------------------
IPO Maven News
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
* IPI Industry Selective News * IPO Performance * IPO Research
* Market Summary * IPOs Latest Filings * IPO Calendars
- -----------------------------------------------------------------------------------------------------
Techniques
- -----------------------------------------------------------------------------------------------------
* Relative Strengths as an *Trading Band Theory * Stochastics: A Crystal Ball
Analytical Tool
* Wilder Relative Strength Index
- -----------------------------------------------------------------------------------------------------
News Watch - Autoflag - monitor up to 5 days
- -----------------------------------------------------------------------------------------------------
E-mail Price and News Alerts
- -----------------------------------------------------------------------------------------------------
Full Story - Ticker Selectable - Comtex Company
- -----------------------------------------------------------------------------------------------------
Current News Stories - Generic
- -----------------------------------------------------------------------------------------------------
* Financial News * Commodity New * International News
* Market News
- -----------------------------------------------------------------------------------------------------
Additional Market Commentaries - Major Markets
- -----------------------------------------------------------------------------------------------------
Telescan Ranking Chart
- -----------------------------------------------------------------------------------------------------
Scan My Portfolio
- -----------------------------------------------------------------------------------------------------
Quarterly Earnings
- -----------------------------------------------------------------------------------------------------
Quick Facts - Market Guide
- -----------------------------------------------------------------------------------------------------
Technical Data
- -----------------------------------------------------------------------------------------------------
Best & Worst Lists Using PS Indicators
- -----------------------------------------------------------------------------------------------------
* Analyst Rankings * Insider Trading * High Low Price Range
* Basing Pattern Breakouts * MACD * Quarterly Earnings
* Chalkin * Momentum * Value Momentum
* Price Range * Moving Averages * Fundamentals
* Dividends * Options * Macro World Projections
* Earnings * Price * Earnings Estimates
- -----------------------------------------------------------------------------------------------------
Best & Worst Lists Using PS Indicators
- -----------------------------------------------------------------------------------------------------
* Stochastics * Volume * Wilder
* Telescan Rankings
- -----------------------------------------------------------------------------------------------------
Vickers Insider Trading
Keyword Searchable Databases - Comtex News
New Price Highs and Lows
- -----------------------------------------------------------------------------------------------------
* Stocks Making New 52 Week High * Stocks Making New 13 Week High * Stocks Making New 4 Week Highs
* Stocks Making New 52 Week Lows * Stocks Making New 13 Week Lows * Stocks Making New 4 Week Lows
* Stocks Making New 26 Week Highs * Stocks Making New 6 Week Highs
* Stocks Making New 26 Week Lows * Stocks Making New 6 Week Lows
- -----------------------------------------------------------------------------------------------------
Category Search Engines
- -----------------------------------------------------------------------------------------------------
* Analyst Ranking Search * Dividend Search * Volume Search
* Basing Pattern Breakout Search * Earnings Search * Wilder RSI Search
* Chalkia Search * MACD Search * Value Momentum Search
* Daily Price Range Search * Momentum Search * Moving Average Search
* High/Low Price Range Search * Earnings Estimates (ESearch) * Quarterly Earnings Search
* Fundamental Search * Ranking Search * Macro World Search
* Industry Group Search * Stochastic Search * Price Growth Search
* Insider Trading Search
- -----------------------------------------------------------------------------------------------------
</TABLE>
MicroCap 1000 License Agreement
Page 17 of 20
<PAGE>
<TABLE>
<CAPTION>
ATTACHMENT 2 - CONTINUED -
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Favorite Analyst Stocks
- -----------------------------------------------------------------------------------------------------------------------------------
Favorite Insiders Stocks
- -----------------------------------------------------------------------------------------------------------------------------------
Favorite Institutional Stocks
- -----------------------------------------------------------------------------------------------------------------------------------
Corporate Profile Report - Market Guide
- -----------------------------------------------------------------------------------------------------------------------------------
Find Winning Stocks - A
- -----------------------------------------------------------------------------------------------------------------------------------
* What Investment Styles Are Doing Best * What Industry Groups Are Working Best
- -----------------------------------------------------------------------------------------------------------------------------------
Find Winning Stocks - B
- -----------------------------------------------------------------------------------------------------------------------------------
* What Searches Are Working Best * Current Investment Outlook * Performance Of Investment Style By Market Cap
* What Market Caps Are Doing Best * Telescan Prospector * Performance By Time Period
* Searches, Stocks and Stuff * Complete Search List
- -----------------------------------------------------------------------------------------------------------------------------------
ProSearch - MicroCap 1000 Only
- -----------------------------------------------------------------------------------------------------------------------------------
ProSearch - Full
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings Search
- -----------------------------------------------------------------------------------------------------------------------------------
Options Search
- -----------------------------------------------------------------------------------------------------------------------------------
Backtested Search Strategies - A
- -----------------------------------------------------------------------------------------------------------------------------------
* Strongest Stocks in the Last 6 Weeks * High Insider Buying * Undervalued Stocks
- -----------------------------------------------------------------------------------------------------------------------------------
* Impressive Analyst Rank and Recent * High Volume Strong Stocks with
Short-term Strength Earnings Upgrades
- -----------------------------------------------------------------------------------------------------------------------------------
* Stocks with Very Poor Buy, Hold, Sell * Stocks with Great Earnings, Sales, and
Mean Ratings Cash Flow Growth
- -----------------------------------------------------------------------------------------------------------------------------------
Backtested Search Strategies - B
- -----------------------------------------------------------------------------------------------------------------------------------
* Potential Intermediate Term Reversals * Technical Breakouts * Undervalued by Low Price Book Ratio
* Potential Long Term Reversals * Stocks with Attractive Composite Ranks * Undervalued by Low Price/ Capital
Spending Ratio
* Highest 5 Week Price Projections * High Earnings Velocity * Overvalued by High Price/Sales Ratio
* Undervalued by Price/ "X" Ratio * Stocks with Surging Insider Trading * Projected Growth Stocks With Reversal
Potential
* Highest 4 Month Price Projection * High Short Interest Ratio * Stocks that have Broken Out of a 5
Percent Basing Pattern
* Stocks with Strong Chalkia's Money * Lowest Price Earnings Ratio * Potential Reversals With High Earnings
Flow Growth 1
* Stocks with Strong Long-term Growth * Weakest Stocks in the Last 3 Weeks * Stocks trading off their 52-week Highs
Rank with Strong Momentum Rank
* Stocks with Strong Short-term Growth * Weakest Stocks in the Last 6 Weeks * Overvalued by High Price/Book Value
Rank Ratio
* Strong Stocks with Good Fundamentals * Potential Reversals With High Earnings * Stocks with 150 Day Moving Average
Growth Breakout
* Stocks Strong in Multiple Time Periods * 30/15 Stockastics Weekly Breakout for * Stocks with Excellent Free Cash
High Cap Stocks Flow/Share
* Weak Stocks Which are Recently Strong * Unattractive Fundamentals and * Stocks with Excellent Free Cash
Technical Flow/Share and Good Earnings Growth
* Strong Stocks which are Recently Weak * Highest Positive Revision in Projected * Stocks with a High Number of
Earnings Consecutive Up Days and at 52-week
* Undervalued Growth Stock Strategy 1 * Weak Stocks that are showing signs of * High Sales Growth and Return on Sales
Recovery with Strong Earnings Growth
* Undervalued Growth Stock Strategy 2 * Strong Groups that are showing signs of * Attractive Gross Margin Stocks with
Weakening Great Revenue and Earnings Growth
* Unattractive Fundamentals and * High Sales Growth and Return on Sales * Stocks with a High Number of
Performance Consecutive Down Days and at 52-Week
* Stocks Owned By The Fewest * Stocks with Very Positive Sales/Cash * Strong Short-term and Long-term
Institutions Flow Ratios Growth plus Short-term Technical
* Lowest Projected Price Earnings Ratio * Stocks with Excellent Cash Flow Growth * Great Earnings Stability and Attractive
Value Ranks
* Small Cap with Weak Fundamentals * Projected Earnings Low Compared to * Extended Stocks with Weak Ranks and
this Year High P/E Ratios
</TABLE>
MicroCap 1000 License Agreement
Page 18 of 20
<PAGE>
<TABLE>
<CAPTION>
ATTACHMENT 2 - CONTINUED -
- -----------------------------------------------------------------------------------------------------
Basing Pattern Breakouts
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
* 3 Week Positive BP Breakout * 3 Week Negative BP Breakout * All Positive BP Breakouts
* 6 Week Positive BP Breakout * 6 Week Negative BP Breakout * All Negative BP Breakouts
* 13 Week Positive BP Breakout * 13 Week Negative BP Breakout
* 26 Week Positive BP Breakout * 26 Week Negative BP Breakout
- -----------------------------------------------------------------------------------------------------
Technical Breakouts
- -----------------------------------------------------------------------------------------------------
* Short Term Positive Breakouts * Inter. Term Positive Breakouts * Long Term Positive Breakouts
* Short Term Negative Breakouts * Inter. Term Negative Breakouts * Long Term Negative Breakouts
- -----------------------------------------------------------------------------------------------------
ProSearch Criteria Report
- -----------------------------------------------------------------------------------------------------
ProSearch Valuation Data Report
- -----------------------------------------------------------------------------------------------------
Macro World Price Forecast
- -----------------------------------------------------------------------------------------------------
J & J Mutual Fund Reports
- -----------------------------------------------------------------------------------------------------
*** END OF TELESCAN CONTENT ***
</TABLE>
MicroCap 1000 License Agreement
Page 19 of 20
<PAGE>
ATTACHMENT 3
UK-iNvest Site License Fee Calculation
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Standard SLP Adjusted
UK-iNvest Site Annual License Fee Calculation List For Service Start Date
Price And Multi Site
- ----------------------------------------------------------------------------------------
(SLP) Discounts
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Host System Software and Technology License: $19,500
Base Internet Technology License: $17,500
Technical Charting License: $27,500
What's Working Now License: $27,500
ProSearch License: $87,500
Host Site Technology Maintenance Fees: $210,000
Base Telescan Technology Licenses - Sub-total: $370,000 $256,560
eCast Technology License $100,000 $65,000
Telescan BOTS Technology License: $225,000 $225,000
Site Management Fees $144,000 $139,300
North American Securities - Telescan Content Fees: $960,000 $618,811
</TABLE>
MicroCap 1000 License Agreement
Page 20 of 20
EXHIBIT 5.5
SERVICES AGREEMENT
This Services Agreement (the "Services Agreement") is entered into by
and between Telescan, Inc. ("TELESCAN") and MicroCap Financial Services.com,
Inc. ("MFSI") effective as of ______________, 1999 (the "EFFECTIVE DATE").
RECITALS
Telescan is in the business of providing online systems operations
services comprised generally of loading, storing and retrieving investment data
and making the stored data available through the system providing access to
numerous computer networks known as the "Internet" to end users. MFSI is in the
business of providing investment data to viewers and end users through two
Internet sites. MFSI's UK-iNvest.com Internet site is based in the United
Kingdom and provides investment data services to users in the United Kingdom and
certain other European countries. MFSI's MicroCaplO00.com Internet site is based
in the United States and provides investment data on microcap companies to end
users. The parties wish to enter into this Services Agreement whereby Telescan
will provide certain services for both of MFSI's Internet sites. Telescan and
MFSI have this day also entered into a License Agreement (the "LICENSE
AGREEMENT") pursuant to which Telescan granted MFSI certain licenses for the
content and services provided therein. Capitalized terms not otherwise defined
herein shall have the meaning ascribed to such terms in the License Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, and other good and valuable consideration, the parties hereto
agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms shall have the meaning ascribed to them elsewhere in
this Agreement, the License Agreement, and as follows:
1.1 "DATE SERVICES" means the online information services to be
provided by Telescan under this Agreement which include loading, storing and
retrieving data and making the stored data available on the System through the
Internet to end users as described in the Design Specifications and Detailed
Description of Work.
1.2 "DESIGN SPECIFICATIONS" - means the look and feel and site
navigation of the Service to be provided under this Agreement and attached
hereto as EXHIBIT 1.
1.3 "FEATURE MODIFICATIONS" means those modifications to existing
features for the Service to be developed by Telescan in accordance with the
Detailed Description of Work as defined below.
MicroCaplOOO Services Agreement
Page 1 of 23
<PAGE>
1.4 "MFSI CONTENT SPECIFICATIONS" means Telescan's required
specifications with respect to receiving the MFSI Content, including the
required medium and format and other technical requirements as specified on
ANNEX A attached hereto and made a part hereof.
1.5 "SERVICE" means the totality of the System and the Content.
1.6 "SYSTEM" means Telescan's computer and related hardware, hardware
configurations, operations systems and related firmware, proprietary and other
software algorithms, Internet connectivity from such hardware to peering points
with other Internet Protocol ("IP") backbone carriers, and other data and
facilities required to enable users of the Service to obtain online interactive
access through the Internet, or through dedicated access lines, to the System as
described in the Design Specifications and Detailed Description of Work,
together with any Feature Modifications.
1.7 "SYSTEM OPERATIONS SERVICES" means the online information services
to be provided by Telescan under this Agreement which includes loading, storing
and retrieving data and making the stored data available from the System through
the Internet to online users as described in the Design Specifications.
ARTICLE 2
SERVICE MATTERS
2.1 SYSTEM DESIGN; DEVELOPMENT.
(a) The functional specifications for the Service are set forth in
Attachment 2 to the License Agreement. The functional specifications set forth
in Attachment 2 to the License Agreement are the standard functionality features
(the "STANDARD FEATURES") for the Service as described therein. The Standard
Features for the UK-iNvest.com site shall be referred to individually as the "UK
STANDARD FEATURES." The Standard Features for the MicroCaplOOO.com site shall be
referred to individually as the "MICROCAP STANDARD FEATURES." Telescan agrees to
make the Standard Features and the Feature Modifications available (which shall
then be included in the Standard Features) as such functions are made available
in accordance with the Detailed Description of Work and attached hereto as
EXHIBIT 3.. To the extent that the Feature Modifications require minimal
programming and development time and effort, Telescan will provide the Feature
Modifications at no additional charge. If more than minimal time and effort is
required, then MFSI shall pay Telescan for such development work at mutually
agreed upon charges. Such charges shall be reasonable, determined in good faith
and shall be in accordance with commercially reasonable rates and upon
commercially reasonable terms ("COMMERCIALLY REASONABLE RATES AND TERMS").
Telescan will from time to time incorporate into the Service upgrades and
revisions to features provided hereunder that Telescan makes generally available
at no additional charge to Wall Street City and its other "Wall Street City
private label partners" (i.e, third-parties to whom Telescan provides features
from Wall Street City which are then offered by those third parties under their
brand names), with such upgrades and revisions being automatically covered by
the terms and conditions of the License Agreement and this Agreement.
MicroCaplOOO Services Agreement
Page 2 of 23
<PAGE>
Except for the Standard Features and generally available upgrades and revisions
as expressly provided above, Telescan and MFSI must mutually agree in writing
upon the addition of other features or modifications and the terms and
conditions which shall be at Commercially Reasonable Rates and Terms.
(b) Subject to the reasonable approval of Telescan, MFSI shall be
responsible for the design specifications (the "DESIGN SPECIFICATIONS") for the
Service and Telescan will collaborate with and assist MFSI in establishing the
Design Specifications as contemplated therein. MFSI will deliver the Design
Specifications to Telescan within five (5) business days after the Effective
Date. Once approved by Telescan, the Design Specifications will be attached to
the this Agreement as EXHIBIT 1 and incorporated herein for all purposes.
(c) Within ten (10) business days after Telescan's receipt of the
Design Specifications, Telescan shall prepare and deliver to MFSI a proposed
final written description of the work ("DETAILED DESCRIPTION OF WORK") required
to implement the Design Specifications that will set forth a description of, and
timetable of deadlines for provision to MFSI by Telescan of, the Standard
Features and the Feature Modifications.
(d) The proposed fmal Detailed Description of Work is subject to MFSI's
approval, which approval shall not be unreasonably withheld, within ten business
days after its delivery to MFSI. Once MFSI approves the Detailed Description of
Work, Telescan shall perform the work in accordance with the Detailed
Description of Work and this Agreement.
2.2 HARDWARE. Telescan shall make available, configure, maintain and
act as host system operator for the computer systems hardware for the System
Operation Services.
2.3 LOADING OF CONTENT. Telescan shall from time to time, but not more
or less frequently or less timely than the frequency with which it loads data
for Wall Street City, load appropriate Content into the System for use on the
Service. The availability of Telescan Content is conditioned upon receipt from
Telescan's data suppliers. Telescan may substitute reasonably equivalent data
from time to time to the same extent it does so for Wall Street City if Telescan
is unable to obtain data from an existing data supplier.
2.4 SYSTEM AVAILABILITY. The System shall be available to users of the
MFSI Sites to the same extent that Wall Street City is available to its users
2.5 USAGE AGREEMENT; INTEMET ACCESS. Each user of the Service will be
subject to the terms and conditions of the Site Usage Agreement and attached as
EXHIBIT 2. Each user of the Service is responsible for obtaining its own
connection to the Internet either through MFSI or a third-party Internet service
provider.
MicroCaplOOO Services Agreement
Page 3 of 23
<PAGE>
2.6 MSFI CONTENT. MFSI shall furnish to Telescan by way of continuing
data insertions all text and other data to be included within the MFSI Content
in the format(s) described in the MFSI Content Specifications. In the event MFSI
furnishes text, data or graphics in formats other than as provided in the MFSI
Content Specifications, then Telescan may charge MFSI for the effort required to
incorporate such text or data into the Service in accordance with Commercially
Reasonable Rates and Terms. MFSI shall be responsible for all information and
data submitted by MFSI hereunder, and Telescan shall have no responsibility
therefor.
2.7 MARKETING. The Service will be publicized and marketed in all
respects as private labeled service offered by MFSI with such reasonable and
customary attribution and acknowledgement of Telescan as Telescan requires. MFSI
shall throughout the term hereof use its commercially reasonable efforts to
promote and advertise the Service.
2.8 PREMIUM SERVICES. Telescan and MFSI may agree from time to time to
include Telescan services ("PREMIUM SERVICES") for which a specific fee or other
charge is imposed. In such event, the parties will also agree how the revenue
and/or expenses from each Premium Service will be shared and who will process
orders and collections for the Premium Services.
2.9 CUSTOMER SUPPORT. Upon request from MFSI and the mutual agreement
of the parties as to the terms and conditions for provision of customer support,
Telescan will provide such customer support services as the parties may agree
upon in writing.
ARTICLE 3
SERVICE FEES
3.1 CURRENCY. All references to money in this Agreement are to United
States dollars. All payments due to either party shall be made in United States
dollars. To the extent that payments are received by a Party with respect to the
Service in amounts that are not denominated or converted in U.S. dollars, such
Party shall convert the payment to U.S. dollars at the exchange rate customarily
used by such Party (e.g., the exchange rate offered by the Party's usual bank)
at the specific rate applicable on the due date of the payment.
3.2 SERVICES FEES. In consideration of Telescan's execution of this
Agreement and the services provided by Telescan hereunder, contemporaneously
with the execution of this Agreement, MFSI shall pay Telescan (i) a services fee
(the "MICROCAP SERVICES FEE") equal to $850,014 US Dollars payable in 566,676
shares of common stock of MFSI for the services relating to the MicroCap Site
and (ii) a services fee (the "UK INVEST SERVICES FEE") equal to $1,516,223 US
Dollars payable in 1,010,815 shares of common stock of MFSI for the services
relating to the MicroCap Site.
MicroCaplOOO Services Agreement
Page 4 of 23
<PAGE>
3.3 MICROCAP SITE REVENUE SHARE. Telescan shall receive 15% of all
subscription fees or other charges for services that use the Telescan Content or
the Data Services ("MicroCap Site Revenues") under this Agreement. Neither party
shall subtract from Revenues it may receive in respect of the MicroCap Site any
fees, costs or expenses (including without limitation any overhead or other
internal costs, salary and benefits from such party's employees) other than
direct, documented, out-of-pocket expenses paid to a third party. Each month,
MFSI shall pay to Telescan Telescan's share of MicroCap Site Revenues received
during the preceding month.
3.4 INCREMENTAL UK INVEST SITE COSTS. MFSI shall reimburse Telescan for
all additional or increased costs and expenses (the "INCREMENTAL UK INVEST SITE
COSTS") attributable to the services provided by Telescan to the UK iNvest Site
within 30 days of receipt of invoice. The Incremental UK iNvest Site Costs shall
include, without limitation the following: taxes or similar assessments;
merchant fees, royalties, license fees or similar charges; hardware, software,
or other systems costs; data costs; fully-burdened employee costs to the extent
they provide services directly attributable to the UK iNvest Site. Telescan
shall provide MFSI with a detailed invoice of Incremental UK iNvest Site Costs
on a monthly basis.
3.5 PAYMENTS AND REPORTS. Each party shall keep accurate records in
sufficient detail to enable the payments due to each party hereunder to be
determined and shall, by the end of each calendar month during the term of this
Agreement, submit to the other a report for the preceding month, together with
any payments due to the other party through the reporting period covered in such
report. All references herein to "month" shall mean "calendar month".
3.6 AUDIT AND EXAMINATION. Either party shall have the right, upon
thirty (30) days prior written notice, to review the other party's records with
respect to the Service. In addition, once each calendar year, each party shall
have the right, at its expense, to have the records or reports rendered by the
other party hereunder during the previous 12 months audited by independent
certified public accountants (an "AUDIT") and each party agrees to cooperate
with such accountants in conducting such Audit. All out-of-pocket costs and
expenses incurred by the audited party, such as photocopying, etc., in
connection with the Audit shall be reimbursed by the party conducting the audit.
Notwithstanding the foregoing, if as the result of any Audit, it is determined
that the auditing party's portion of revenues or expenses hereunder during the
period covered by the Audit exceeds by five percent (5%) or more the amount of
such portion of revenues or expenses actually reported and paid during such
period, then the audited party shall (i) immediately pay to the auditing party
the amount of such deficiency and (ii) reimburse the auditing party for all
reasonable out-of-pocket costs and expenses incurred by it in connection with
such Audit provided that such out-of-pocket costs and expenses shall not exceed
$5,000.
MicroCaplOOO Services Agreement
Page 5 of 23
<PAGE>
ARTICLE 4
DISCLAIMERS; LIMITATIONS OF LIABILITY
4.1 DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED HEREIN, TELESCAN MAKES NO
WARRANTY OR REPRESENTATION TO MFSI OR TO ANY THIRD PARTY AS TO THE PERFORMANCE
OR OPERATION OF THE SYSTEM, THE SERVICE, THE SYSTEM OPERATIONS SERVICES OR
RELATED PRODUCTS OR SERVICES. ANY IMPLIED WARRANTIES (INCLUDING WITHOUT
LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE AND GOOD AND WORKMANLIKE MANNER) ARE HEREBY EXCLUDED. BOTH PARTIES AGREE
THAT TELESCAN'S LIABILITY (UNDER BREACH OF CONTRACT, NEGLIGENCE, STRICT
LIABILITY OR OTHERWISE), IF ANY, FOR ANY DAMAGES RELATING TO ANY SUCH PRODUCT,
SERVICE (OR THE MALFUNCTION THEREOF) OR THIS AGREEMENT SHALL BE LIMITED TO THE
LESSER OF (AT TELESCAN'S SOLE DISCRETION) (A) THE ACTUAL AMOUNTS RECEIVED BY
TELESCAN UNDER THIS AGREEMENT FOR SUCH PRODUCT OR SERVICE DURING THE THREE-MONTH
PERIOD PRECEDING THE EVENT CAUSING SUCH DAMAGES, OR (B) THE COST OF REPAIR, AND
WILL IN NO EVENT INCLUDE CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL OR OTHER
DAMAGES OF ANY KIND INCLUDING LOSS OF PROFITS, EVEN IF TELESCAN HAS BEEN ADVISED
OF THE LIKELIHOOD OF THE OCCURRENCE OF SUCH DAMAGES. IN NO EVENT SHALL TELESCAN
BE LIABLE TO MFSI, USERS OF THE SERVICE OR ANY THIRD PARTY FOR ANY DAMAGES
RESULTING FROM THE CONTENT OR NATURE OF THE INFORMATION AND DATA CONTAINED ON
THE SYSTEM, OR THE RESULTS OF ANY SEARCH THEREFOR TELESCAN, AT ITS SOLE
DISCRETION, MAY CAUSE TO BE PLACED ON THE SYSTEM ANY DISCLAIMERS OF WARRANTIES
AND LIABILITIES IT DEEMS REASONABLE FOR ITS OR MFSI'S PROTECTION. THERE ARE NO
THIRD PARTY BENEFICIARIES TO THIS AGREEMENT.
ARTICLE 5
PROPRIETARY RIGHTS OF THE PARTIES
5.1 CONFIDENTIAL INFORMATION. Except to the extent specifically
exempted or authorized by the disclosing party in writing, each party expressly
undertakes to retain in confidence and to require its employees and consultants
to retain in confidence, all information and know-how transmitted to it by the
other party which the other party has identified in writing as confidential or
which by the nature of the circumstance surrounding the disclosure ought in good
faith to require the information to be treated as confidential ("CONFIDENTIAL
INFORMATION") and will make no use of such Confidential Information except under
and in accord with the terms of this Agreement. Further, each party expressly
represents that it will implement reasonable procedures to protect and maintain
the confidential nature of the Confidential Information. Both parties also agree
to maintain the confidentiality of the Confidential Information of any Customer
Bank. The parties further agree that these confidentiality and use provisions
shall not apply to any infonnation that appears in issued patents or which is
publicly available.
MicroCaplOOO Services Agreement
Page 6 of 23
<PAGE>
5.2 TRADEMARK. ADVERTISING AND PRESS RELEASES. Neither party shall
acquire a right to use, and shall not use without the other party's prior
written consent as to each use, the names, characters, artwork, designs,
tradenames, trademarks or service marks of the other party in any advertising,
publicity, public announcement, press release or promotion and shall maintain
all copyright, trademark, service mark or other proprietary notice on such
party's products or services and otherwise comply with such party's reasonable
quality control requirements. Each party acknowledges that the other, as a
publicly traded company, has certain restrictions and procedures which must be
complied with when releasing to the public material information regarding a
party and its business. Accordingly, each party's consent to any proposed public
release of information relating to the other or this Agreement may be withheld
by a party at its sole discretion or conditioned upon compliance with the
other's procedures or restrictions. Subject to the foregoing, each party will
provide a copy of any press releases and public announcements to the other party
prior to their public release.
5.3 OWNERSHIP OF TELESCAN PROPERTY.
(a) MFSI acknowledges that Telescan owns all right, title and
interest in and to all software, content and other technology, including,
without limitation, source codes, object codes, operating instructions,
writings, data, formulas, algorithms, models, drawings, photographs, and design
concepts, and all other documentation developed for or relating to the System,
the Service, the Feature Modifications and other materials provided by Telescan,
including any additions, and all other information of any kind, together with
all modifications, revisions, changes, copies, partial copies, translations,
compilations, and derivative works of any other foregoing which shall all
constitute the "TELESCAN PROPERTY". Unless otherwise expressly provided for in
this Agreement, MFSI shall not sell, transfer, publish, disclose, display,
license or otherwise make available to others any part of the Telescan Property
or copies thereof. All Intellectual Property Rights and all other property
rights of any nature in the Telescan Property are, shall be and shall remain in
Telescan. Telescan shall have all authorship rights in the Telescan Property.
The Telescan Property is and shall remain the sole and exclusive property of
Telescan, with Telescan having the right to obtain and to hold in its own name,
patents, copyright registrations or trademark or service mark registrations or
such other protection as may be appropriate to the subject matter, and any
extensions and renewals thereof. MFSI agrees, at Telescan's expense, to execute
such further documents, and perform such other acts, as Telescan may deem
necessary, useful or convenient to evidence or perfect the rights of Telescan
defined and acknowledged in this Section 5.3.
(b) "INTELLECTUAL PROPERTY RIGHTS" means, with respect to any
data, device, or other asset of any kind, any object code or source code, all
copyright, patent, trade secret, moral, termination, authorship and/or other
proprietary rights relating to any such data, device, object code, source code
or other asset including, without limitation, all rights necessary for the
worldwide development, manufacture, modification, enhancement, sale, licensing,
use, reproduction, publishing and display of such data, device, object code,
source code or other asset.
MicroCaplOOO Services Agreement
Page 7 of 23
<PAGE>
5.4 TRADEMARKS FOR THE SERVICE. To the extent that the parties develop
any distinctive names or graphic symbols for the Service, MFSI shall use its
commercially reasonable efforts to secure trademark and/or service mark
protection therefor, and any such trademarks or service marks shall belong to
MFSI; PROVIDED, HOWEVER, that MFSI shall not be entitled to use the name or mark
"Telescan" except pursuant to this Agreement.
5.5 RIGHT OF INJUNCTION. The parties acknowledge that a breach by
either party of this ARTICLE 5 will give rise to irreparable injury to the
other, inadequately compensable in damages. Accordingly, the parties hereby
consent to the obtaining by the other party of injunctive relief against the
breach or threatened breach of the undertakings of the parties contained in this
Article 5. The parties further agree that such an order so enjoining a party may
be issued pending final determination thereof without the requirement to post
bond. The obligation of the parties under this Article 5 shall survive the
termination of this Agreement.
ARTICLE 6
TERM AND TERMINATION
6.1 TERM. The initial term (the "Initial Term") of this Agreement shall
be two (2) years commencing on the Effective Date, unless sooner terminated as
provided herein, and shall continue for successive two-year renewal periods
(each a "RENEWAL PERIOD"), until terminated in accordance with the terms hereof
The Initial Term and any Renewal Periods are referred to generally in this
Agreement as the "term." Either party may terminate this Agreement at the end of
the then-current term by providing the other party written notice at least
ninety (90) days (but not more than two years) prior to the expiration of such
term.
6.2 TERMINATION. Either party may terminate this Agreement prior to the
end of the term set forth in Section 6.1 by written notice to the other for the
following reasons:
(a) if the other party materially fails to perform or comply
with this Agreement or any provision hereof;
(b) if the other party fails to strictly comply with the
provisions of ARTICLE 5 or makes an assignment in violation of SECTION 7.8;
Termination under this SECTION 6.2 shall be effective thirty (30) days after
notice of termination to the defaulting party if the defaults have not been
cured within such thirty (30) day period. The rights and remedies of the parties
provided herein shall not be exclusive and are in addition to any other rights
and remedies provided by law or this Agreement.
6.3 TERMINATION OF SERVICES AGREEMENT. This Agreement shall terminate
automatically upon any termination of the License Agreement.
MicroCaplOOO Services Agreement
Page 8 of 23
<PAGE>
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 RELATIONSHIP OF THE PARTIES. Nothing in this Agreement shall be
construed to create any franchise, joint venture, trust or commercial
partnership or any other partnership relationship for any purpose whatsoever.
MFSI occupies the status of an independent contractor and Telescan shall have no
right to control the details of the MFSI's marketing activities.
7.2 SURVIVAL OF CERTAIN REPRESENTATIONS, COVENANTS AND WARRANTIES. Any
and all covenants, representations, or warranties made or given by any of the
parties hereto under the terms hereof shall survive the execution of this
Agreement and shall be binding upon and enforceable against the appropriate
party or parties hereto for such period of time as specified by the applicable
statute of limitations.
7.3 NOTICES. Except as otherwise expressly provided herein, any notice
request, consent, demand or other communication required or permitted to be
given by this Agreement shall be in writing and shall be personally served or
sent by telecopy (with a copy by prepaid registered or certified mail sent on
that same day), commercial courier service or prepaid registered or certified
mail. Any written notice delivered by telecopy shall be deemed to have been
given on the day telecopied to the other party. Any written notice given by
commercial courier service or registered or certified mail shall be deemed
communicated as of actual receipt. For purposes of this Agreement, the addresses
of the parties, until notice of a change thereof, shall be as follows:
<TABLE>
<S> <C>
IF TO TELESCAN: WITH A COPY (NOT CONSTITUTING NOTICE) TO:
Mr. Roger C. Wadsworth MR. DAVID F. TAYLOR
Telescan, Inc. LOCKE LIDDELL & SAPP LLP
5959 Corporate Dr. 3400 CHASE TOWER
Suite 2000 600 TRAVIS STREET
Houston, TX 77036 HOUSTON, TEXAS 77002
IF TO MICROCAP: WITH A COPY (NOT CONSTITUTING NOTICE) TO:
Mr. Stanley Hollander MR. AARON A. GRUNFELD
Mr. Jay Matulich RESCH, POLSTER, ALPERT & BERGER LLP
MicroCap Financial Services.com, Inc. 10390 SANTA MONICA BOULEVARD
2425 Olympic Boulevard - Suite 660 E 4TH FLOOR
Santa Monica, California 90404 LOS ANGELES, CALIFORNIA 90025
Telecopy No.: (310) 828-7218 TELECOPY NO.: (310) 552-3209
Mr. Michael Jacobs
MicroCap Financial Services.cor4 Inc.
7280 West Palmetto Park Road
Suite 200
Boca Raton, FL 33433
Telecopy No.: (5610 417-8054
</TABLE>
MicroCaplOOO Services Agreement
Page 9 of 23
<PAGE>
7.4 CHOICE OF LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas (without regard to Texas'
principles of conflicts of laws) and of the United States of America.
7.5 MANDATORY MEDIATION.
(a) Except as expressly provided in this SECTION 7.5, prior to
the institution of any legal action by one party against the other arising out
of or relating to any dispute between the parties over this Agreement and/or any
breach thereof, such dispute shall be submitted to a disinterested mediator
having substantial experience and recognized expertise in the field or fields of
the matter(s) in dispute. A party shall initiate mediation proceedings by
notifying the other party in writing that it is requiring that a dispute be
mediated in accordance with this Agreement. The mediator shall be agreeable to
both parties. In the absence of agreement, the American Arbitration Association
will appoint a mediator. The mediation shall be conducted in accordance with the
Commercial Mediation Rules of the American Arbitration Association. The fee
charged by the mediator shall be borne equally by the parties. If the mediation
is initiated by Telescan, the mediation shall be conducted in Boca Raton,
Florida. If the mediation is initiated by MFSI, the mediation shall be conducted
in Houston, Texas. The fact that mediation is or may be allowed will not impair
the exercise of any termination rights under this Agreement. Any mediation and
the enforcement of any settlement entered into by the parties pursuant to such
mediation shall be governed by and construed in accordance with the laws of the
State of Texas (without regard to Texas' principles of conflicts of laws) and of
the United States of America. All parties to the dispute and their counsel (or
their duly authorized legal representative with decision-making authority) shall
attend the mediation and will remain throughout the mediation process until such
time as the parties reach agreement or the mediator determines that further
negotiation efforts will not be productive. Each party must be represented by a
person with the authority to negotiate a binding settlement. In the event a
party to this Agreement files a lawsuit prior to conclusion of mediation, the
other party may take any and all legal or equitable action to compel mediation
and dismissal of the lawsuit. In such event, the party seeking the mediation
shall be entitled to its expenses and attorneys fees' associated with, or
incurred as a result of, having to file the legal or equitable action to compel
mediation or dismissal.
(b) No provision of, nor the exercise of any rights under this
SECTION 7.5 shall limit the right of any party to obtain injunctive relief
pursuant to SECTION 5.5 before, during, or after the pendency of any mediation,
and any such action shall not be deemed an election of remedies. Such injunctive
rights can be exercised at any time except to the extent such action is contrary
to a final settlement entered into by the parties pursuant to a mediation
proceeding. The institution and maintenance of an action for judicial injunctive
relief shall not constitute a waiver of the right of any party, including
without limitation the plaintiff, to submit any dispute to mediation nor render
inapplicable the compulsory mediation provisions of this SECTION 7.5.
MicroCaplOOO Services Agreement
Page 10 of 23
<PAGE>
(c) Any attorney-client privilege and other protection against
disclosure of confidential information, including without limitation any
protection afforded the work-product of any attorney, that could otherwise be
claimed by any party shall be available to and may be claimed by any such party
in any mediation proceeding. No party waives any attorney-client privilege or
any other protection against disclosure of confidential information by reason of
anything contained in or done pursuant to or in connection with this SECTION
7.5. Each party agrees to keep all disputes and mediation proceedings strictly
confidential, except for disclosures of information to the parties' legal
counsel or auditors or those required by applicable law. The parties agree to
treat all mediation proceedings as settlement negotiations and agree that such
settlement discussions shall be inadmissible in a court of law. The mediator
shall be bound to maintain the confidentiality of all matters made known to the
mediator, as well as notes or writings prepared by the mediator. The parties
agree not to subpoena or otherwise require the mediator to testify or to produce
records, notes or work product in any further proceedings. Only persons having a
direct interest in the mediation are entitled to attend.
(d) The parties agree to cooperate with each other and with
the mediator in a good faith effort to negotiate a prompt a reasonable
resolution of the dispute.
(e) The mediator is to serve as an impartial third party in
assisting the parties toward settlement of their dispute but may not compel or
coerce the parties to enter into a settlement agreement. The mediator will not
render any decision on the merits of the dispute.
7.6 ATTORNEYS' FEES. The prevailing party in any legal proceedings
brought by the other party to enforce any provision of this Agreement shall be
entitled to recover against the non-prevailing party the reasonable attorneys'
fees, court costs and other expenses incurred by the prevailing party, including
all costs and expenses, and also including attorneys' fees of the prevailing
party associated with, or incurred as a result of, the mediation of the dispute.
7.7 SEVERABILITY. If any term, provision or part of this Agreement is
to any extent held invalid, void or unenforceable by a court of competent
jurisdiction, the remainder of this Agreement shall not be impaired or affected
thereby, and each term, provision and part shall continue in full force and
effect, and shall be valid and enforceable to the fullest extent permitted by
law.
7.8 ASSIGNMENT. Neither party may assign any of its rights or duties
under this Agreement without the prior written consent of the other party, such
consent not to be unreasonably withheld, except that either party may assign to
a successor entity in the event of its dissolution, acquisition, merger or other
change in legal status. This Agreement shall inure to the benefit of arid be
binding upon the parties to this Agreement and their respective successors and
permitted assigns.
MicroCaplOOO Services Agreement
Page 11 of 23
<PAGE>
7.9 WAIVER. The forbearance or failure of one of the parties hereto to
insist upon strict compliance by the other with any provisions of this
Agreement, whether continuing or not, shall not be construed as a waiver of any
rights or privileges hereunder. No waiver of any right or privilege of a party
arising from any default or failure hereunder shall affect such party's rights
or privileges in the event of a further default or failure of performance.
7.10 FORCE MAJEURE. Neither party hereto shall be liable to the other
for failure to perform any of its obligations hereunder to the extent
performance is prevented due to force majeure. For the purposes of this
Agreement, "FORCE MAJEURE" shall mean causes that are beyond the reasonable
control of the party claiming force majeure and that could not have been avoided
or prevented by reasonable foresight, planning or implementation of the party
claiming force majeure. Such causes shall include, but are not limited to, acts
of God, war (declared or undeclared), insurrections, hostilities, strikes or
lockouts (other than strikes by or lockouts of such party's employees, which
strikes or lockouts shall be deemed not to be force majeure events), riots,
fire, storm and interference or hindrance by any governmental authority.
7.11 LIMITATIONS. No action, regardless of form, arising out of the
transactions under this Agreement may be brought by one party against the other
more than two (2) years after the facts creating the cause of action became
known, or reasonably should have been known, to the party bringing the action.
7.12 COMPLIANCE WITH LAWS. Each party hereto agrees to comply with all
federal, state and local laws, rules and regulations in effect in the United
States of America and the Foreign Territories in respect of their activities
contemplated by this Agreement, including without limitation (i) the Bureau of
Export Administration Regulations of the United States Department of Commerce
("BXA Regulations"), (ii) the antiboycott provisions of the BXA Regulations and
of Section 999 of the United States Internal Revenue Code and any regulations
promulgated thereunder, and (iii) the United States Foreign Corrupt Practices
Act; provided, that each party shall comply with such laws, rules and
regulations to the extent (1) such laws, rules and regulations are applicable to
such party, or (2) such party's noncompliance would cause the other party hereto
to be in violation of such laws, rules and regulations. Telescan makes no
representation or warranty with respect to the ability of MFSI, under the laws
of any Foreign Territory or of the United States, to market or sell the Service
in the Foreign Territories. MFSI shall be responsible for obtaining or making,
and shall use its best efforts to obtain, any and all authorizations from any
U.S. or foreign governmental authority that are required for it to perform its
obligations under this Agreement, and if applicable, shall be responsible for
filing or registering this Agreement with appropriate governmental authorities.
MFSI shall provide proof of compliance with such required governmental
authorizations to Telescan upon request. Telescan shall not be liable to MFSI if
any required governmental authorization is delayed, denied, revoked, restricted
or not renewed, or if MFSI is otherwise prohibited from marketing or selling the
Services in any country. In addition, when this Agreement expires or is
terminated pursuant to the terms of this Agreement, Telescan or its designee
shall be exclusively entitled to any rights MFSI may have acquired in or as a
result of governmental approvals, authorizations or permits relating to the sale
or distribution of Telescan's products and services, and MFSI, upon Telescan's
request, shall to the extent permitted by applicable law, promptly transfer to
Telescan, or to any third party so identified by Telescan, all such rights, all
without any compensation to MFSI.
MicroCaplOOO Services Agreement
Page 12 of 23
<PAGE>
7.13 The parties will have the right, but not the obligation, to
prevent the Service, including any interactive communications (E.G., bulletin
boards or forums if applicable to the Service), from being used for any purpose
which is unlawful, obscene, defamatory, which contains injurious advice or
recommendations, which reasonably appears to violate the proprietary rights
(trademark rights, patent rights, copyrights, right of privacy, rights of
publicity, etc.) of any person or entity, which is reasonably calculated to
promote hatred, discrimination or incivility, or which is likely to be injurious
to the good names or reputations of Telescan or MFSI. The parties agree that the
Service, including any interactive communications, are not intended to create a
"public forum". If applicable to the System, the source of all source-generated
data or vendor product information (not Telescan or MFSI) generated from any
interactive communications shall be solely responsible for the accuracy or
appropriateness of such data.
7.14 The following Exhibits are hereby incorporated into and made a
part of this Agreement:
Annex A - "MFSI Content Specifications"
Exhibit 1 - "Design Specifications"
Exhibit 2 - "Site Usage Agreement"
Exhibit 3 - "Detailed Description Of Work"
7.15 ENTIRE AGREEMENT. TOGETHER WITH THE STOCK EXCHANGE AGREEMENT, THE
STOCK OPTION AGREEMENT AND THE LICENSE AGREEMENT, THIS AGREEMENT CONSTITUTES THE
ENTIRE AGREEMENT AND UNDERSTANDING OF THE PARTIES HERETO IN RESPECT OF THE
SUBJECT MATTER CONTAINED HEREIN AND SUPERSEDES ALL PRIOR AGREEMENTS, CONSENTS
AND UNDERSTANDINGS RELATING TO SUCH SUBJECT MATTER. THE PARTIES AGREE THAT THERE
IS NO ORGAL OR OTHER AGREEMENT BETWEEN THE PARTIES WHICH HAS NOT BEEN
INCORPORATED INTO THIS AGREEMENT AND THAT NO RELIANCE IS BEING MADE UPON SAME.
This Agreement may be modified or amended only by a duly authorized written
instrument executed by the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
AGREED AND ACCEPTED BY:
Company: Telescan, Inc. Company: MicroCap Financial Services.com, Inc.
---------------------- -------------------------------------
Signature: /s/ Roger C. Wadsworth /s/ Jay Matulich
---------------------- -------------------------------------
Name: Roger C. Wadsworth Name: Jay Matulich
---------------------- -------------------------------------
Title: Senior Vice President Title: Sr. V.P.
---------------------- -------------------------------------
Date: 3/31/99 Date: 3/31/99
---------------------- -------------------------------------
MicroCap1000 Stock Services Agreement
Page 13 of 23
<PAGE>
ATTACHMENTS AND EXHIBITS TO THE SERVICES AGREEMENT
BETWEEN
TELESCAN, INC.
AND
MICROCAP FINANCIAL SERVICES.COM, INC.
The following Exhibits have hereby incorporated into and made a part of
this Agreement:
Annex A - "MFSI Content Specifications"
Exhibit 1 - "Design Specifications"
Exhibit 2 - "Site Usage Agreement"
Exhibit 3 - "Detailed Description Of Work"
MicroCaplOOO Services Agreement
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<PAGE>
ANNEX A
MFSI Content Specifications
Data may be submitted electronically in accordance with the procedures
established as part of the design of the System. Otherwise, data must be
submitted in accordance with the requirements set forth below:
Delivery Media: 8mm Cassette Tape
FTP
9-Track Tape
Dedicated Line1
Satellite2
Diskette
CD-ROM
Data Format: Microsoft Access
Text (Delimited)
Text (Fixed Width)
Microsoft Excel
Lotus (wks, wkl, wk3)
Paradox 3.x
Btrieve
FoxPro 2.5 or 3.0
abase III or IV
HTML
Graphics Format: .GIF
.JPEG
- ------------
1 Licensee To Provide Communications Equipment For Both Ends Of The Transaction
2 Licensee To Provide Communications Equipment For Both Ends Of The Transaction
MicroCapl000 Services Agreement
Page 15 of 23
<PAGE>
EXHIBIT 1
Design Specifications
To be mutually agreed upon, accepted in writing (by their signatures
below) and attached hereto within five (5) business days of the signing of this
Agreement.
AGREED AND ACCEPTED BY:
Company: Telescan, Inc. Company: MicroCap Financial
Services.com, Inc.
------------------- --------------------------
Signature: Signature:
------------------- --------------------------
Name: Roger C. Wadsworth Name: Jay Matulich
------------------- --------------------------
Title: Senior Vice President Title: Chairman
--------------------- --------------------------
Date: Date:
--------------------- --------------------------
MicroCaplOOO Services Agreement
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<PAGE>
EXHIBIT 2
SITE USAGE AGREEMENT
This Agreement sets forth the terms and conditions which apply to your use of
the [INSERT THE ".com " NAME OF THE SITE] web site (the "Service") which is
offered to you by [INSERT THE NAME OF THE TELESCAN MANAGED SERVICES ALLIANCE
PARTNER] ("TMSAP") and Telescan, Inc. ("Service Provider"). BY USING THIS SITE,
YOU AGREE TO THE TERMS OF THIS USAGE AGREEMENT JUST AS IF YOU HAD SIGNED THE
USAGE AGREEMENT. If you do not agree to be bound by this Agreement, please
discontinue your use of the Service.
1. OWNERSHIP AND LICENSE. This Service is owned and operated by TMSAP and its
affiliated companies and contains material and information which is derived in
whole or in part from material supplied and owned by TMSAP, Service Provider and
other sources, and is protected by copyright, trademark, and other applicable
laws. You may not modify, copy, reproduce, republish, upload, post, transmit,
publicly display, prepare derivative works based on, or distribute in any way
any material or information from this Service including code and software
("Material"), except as expressly provided herein. You may download Material
from this Service for your personal, non-commercial use only, provided you keep
intact all copyright and other proprietary notices. In the event that you
download Material from the Service, such Material is licensed to you for your
personal, non-commercial use by TMSAP, Service Provider or their licensers, and
neither TMSAP nor Service Provider, nor their licensers, transfer any title to
any such Material to you. All rights not expressly granted to you hereunder are
reserved.
2. SERVICE USAGE RESTRICTIONS.
(a) GENERAL. Violation of the terms of this Agreement may result in the
termination of your right to use the Service or the suspension, in whole or in
part, of your access to it.
(b) RULES. It is a condition of your use of this Service that you do
not: (i) restrict or inhibit any other user from using and enjoying the Service;
(ii) post or transmit any unlawful, threatening, abusive, libelous, defamatory,
obscene, vulgar, pornographic, profane or indecent information of any kind,
including without limitation any transmissions constituting or encouraging
conduct that would constitute a criminal offense, give rise to civil liability
or otherwise violate any local, state, national or international law; (iii) post
or transmit any information, software or other material which violates or
infringes the rights of others, including material which is an invasion of
privacy or publicity rights or which is protected by copyright, trademark or
other proprietary right, or derivative works with respect thereto, without first
obtaining permission from the owner or right holder; (iv) post or transmit any
information, software or other material which contains a virus or other harmful
component; (v) post, or transmit or in any way exploit any information, software
or other material for commercial purposes or which contains advertising; (vi)
solicit other users to join, become members of, or contribute money to any
online service or other organization; (vii) impersonate any person or entity or
falsely state or otherwise misrepresent your professional or other affiliation
with any person or entity; (viii) resell, redistribute, broadcast or transfer
the information made available to you through the Service or use such
information in a searchable, machine-readable database; or (viii) use the
Service to collect personally identifying information about users of the Service
in violation of our Privacy Policy. You agree that you will not use the Service,
including the information provided therein and all related equipment, networks
and network devices (specifically including Internet access) for any unlawful
purpose. TMSAP, at its sole and absolute discretion, shall determine whether any
information transmitted or received violates this provision.
MicroCaplOOO Services Agreement
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<PAGE>
(c) MONITORING. You understand that TMSAP has no obligation to monitor
any information transmitted through use of the Service. However, TMSAP reserves
the right at all times to disclose any information as necessary to satisfy any
law, regulation or governmental request, or to refuse to post or to remove any
information or materials, in whole or in part, that in TMSAP's sole and absolute
discretion are objectionable or in violation of this Agreement. You acknowledge
that TMSAP and/or Service Provider reserve the right to, and may from time to
time, monitor any and all information transmitted or received through the
Service, for operational and other purposes. During monitoring, information may
be examined, recorded, copied, and used in accordance with our Privacy Policy or
for other authorized purposes. Your use of the Service constitutes consent to
such monitoring.
(d) LICENSE. Except as set forth in the Privacy Policy, by posting
messages, uploading files, inputting data, or engaging in any other form of
communication (a "Communication") through the Service, you are granting TMSAP a
royalty free, irrevocable, perpetual, non-exclusive, unrestricted, worldwide
license to (i) use, copy, sublicense, adapt, transmit, publicly perform,
display, or prepare derivative works based on any such Communication, and (ii)
sublicense to third parties the unrestricted right to exercise any of the
foregoing rights granted with respect to such Communication. No Communication
shall be subject to any obligation of confidence on the part of TMSAP or Service
Provider. The foregoing grants shall include the right to exploit any
proprietary rights in such Communication, including but not limited to rights
under copyright, trademark, service mark, or patent laws in any relevant
jurisdiction.
3.SUBMISSIONS.. TMSAP is pleased to hear from users and welcomes your comments
regarding TMSAP's programs and services, including TMSAP.com. Unfortunately,
TMSAP's longstanding company policy does not allow it to accept or to consider
creative ideas, suggestions, or materials other than those it has specifically
requested. We hope that you will understand that the intent of this policy is to
avoid the possibility of future misunderstandings when projects developed by
TMSAP's employees and agents might seem to be similar to creative works
submitted by users. Accordingly, while we value your feedback on our programs
and services, we must ask that you not send us original creative materials, such
as stories, ideas for programs, program segments or products. If, at our
request, you send certain specific submissions, or without a request from us you
send creative suggestions, ideas, notes or concepts or other materials, they
shall be deemed, and shall remain, the property of TMSAP, and shall otherwise be
subject to the provisions of Section 2(d), above.
4. TRADING WITH ONLINE BROKERAGE AND MUTUAL FUND FIRMS. The Service provides
links to online trading services for your convenience only. These online trading
services are provided by registered broker dealers and mutual fund companies,
and such broker dealers and mutual fund companies are solely responsible for any
services provided to you. Neither TMSAP nor Service Provider is a registered
broker dealer or mutual fund company, and neither TMSAP nor Service Provider
endorses or recommends the services of any particular broker dealer or mutual
fund company.
5. DISCLAIMER OF WARRANTIES. TMSAP HAS PROVIDED LINKS AND POINTERS TO INTERNET
SITES MAINTAINED BY THIRD PARTIES ("THIRD PARTY SITES") AND MAY FROM TIME TO
TIME PROVIDE THIRD PARTY MATERIALS ON THIS SERVICE. NEITHER TMSAP, SERVICE
PROVIDER, THEIR PARENT OR SUBSIDIARY COMPANIES NOR THEIR AFFILIATES OR SUPPLIERS
OPERATE OR CONTROL IN ANY RESPECT ANY INFORMATION, PRODUCTS OR SERVICES ON THESE
THIRD PARTY SITES. THE MATERIALS IN THIS SERVICE AND THE THIRD PARTY SITES ARE
PROVIDED "AS IS" AND WITHOUT WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED.
TO THE FULLEST EXTENT PERMISSIBLE PURSUANT TO APPLICABLE LAW, TMSAP AND SERVICE
PROVIDER DISCLAIM ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED
TO, IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT. NEITHER TMSAP NOR SERVICE PROVIDER WARRANT THAT THE FUNCTIONS
CONTAINED IN THE MATERIALS AND PRODUCTS WILL BE UNINTERRUPTED OR ERROR-FREE,
THAT DEFECTS WILL BE CORRECTED, OR THAT THIS SERVICE OR THE SERVER THAT MAKES
THEM AVAILABLE, ARE FREE OF VIRUSES OR OTHER HARMFUL COMPONENTS. NEITHER TMSAP
NOR SERVICE PROVIDER WARRANT OR MAKE ANY REPRESENTATIONS REGARDING THE USE OR
THE RESULTS OF THE USE OF THE MATERIAL IN THIS SERVICE OR IN THIRD PARTY SITES
IN TERMS OF THEIR CORRECTNESS, ACCURACY, TIMELINESS, RELIABILITY
MicroCaplOOO Services Agreement
Page 18 of 23
<PAGE>
OR OTHERWISE. YOU ASSUME ALL RISK OF ERRORS AND/OR OMISSIONS IN THE SERVICE
INCLUDING THE TRANSMISSION OR TRANSLATION OF INFORMATION. YOU ASSUME FULL
RESPONSIBILITY FOR IMPLEMENTING SUFFICIENT PROCEDURES AND CHECKS TO SATISFY YOUR
REQUIREMENTS FOR THE ACCURACY AND SUITABILITY OF THE SERVICE, INCLUDING ANY
INFORMATION PROVIDED THROUGH THE SERVICE, AND FOR MAINTAINING ANY MEANS WHICH
YOU MAY REQUIRE FOR THE RECONSTRUCTION OF LOST DATA OR SUBSEQUENT MANIPULATIONS
OR ANALYSES OF THE INFORMATION PROVIDED HEREUNDER. YOU (AND NOT TMSAP OR SERVICE
PROVIDER) ASSUME THE ENTIRE COST OF ALL NECESSARY MAINTENANCE, REPAIR OR
CORRECTION. SOME STATES DO NOT ALLOW LIMITATIONS ON HOW LONG AN IMPLIED WARRANTY
LASTS, SO THE ABOVE LIMITATION MAY NOT APPLY TO YOU. THIS WARRANTY GIVES YOU
SPECIFIC LEGAL RIGHTS, AND YOU MAY ALSO HAVE OTHER RIGHTS WHICH VARY FROM STATE
TO STATE.
6. LIMITATION OF LIABILITY.
IN NO EVENT SHALL TMSAP, SERVICE PROVIDER, THEIR PARENT OR SUBSIDIARY COMPANIES
NOR THEIR AFFILIATES OR SUPPLIERS BE LIABLE FOR ANY DIRECT, INDIRECT, PUNITIVE,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THE USE OF THIS SERVICE OR WITH THE DELAY OR INABILITY TO USE
THIS SERVICE, OR FOR ANY INFORMATION, SOFTWARE, PRODUCTS AND/OR SERVICES
OBTAINED THROUGH THIS SERVICE, OR OTHERWISE ARISING OUT OF YOUR USE OF THIS
SERVICE, WHETHER BASED ON CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE, EVEN IF
TMSAP, SERVICE PROVIDER OR ANY OF THEIR AFFILIATES OR SUPPLIERS HAS BEEN ADVISED
OF THE POSSIBILITY OF DAMAGES. YOU SPECIFICALLY ACKNOWLEDGE AND AGREE THAT
NEITHER TMSAP, SERVICE PROVIDER, THEIR PARENT OR SUBSIDIARY COMPANIES NOR THEIR
AFFILIATES OR SUPPLIERS SHALL BE LIABLE FOR ANY DEFAMATORY, OFFENSIVE OR ILLEGAL
CONDUCT OF ANY USER OF THIS SERVICE. SOME STATES DO NOT ALLOW THE EXCLUSION OR
LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE ABOVE LIMITATION OR
EXCLUSION MAY NOT APPLY TO YOU.
7. INDEMNIFICATION. You agree to defend, indemnify and hold harmless TMSAP,
Service Provider, their affiliates their respective directors, officers,
employees and agents from and against any and all claims, actions, suits or
proceedings, as well as any and all losses, liabilities, damages, costs and
expenses (including reasonable attorneys fees) arising out of or accruing from
(a) any material posted or otherwise provided by you that infringes any
copyright, trademark, trade secret, trade dress, patent, moral, or other
intellectual property right of any person, (b) any misrepresentation made by you
in connection with your use of the Service; (c) any non-compliance by you with
the terms and conditions of this Agreement; and (d) claims brought by persons or
entities other than the parties to this Usage Agreement arising from or related
to your access and use of the Service, including the infommation obtained
through the Service.
8. TERMINATION. This Agreement and the license rights granted hereunder shall
remain in full force and effect unless terminated, suspended, or canceled for
any of the following reasons: (a) upon thirty (30) days written notice by any
party of its intent to terminate this Agreement; (b) immediately by TMSAP or
Service Provider for any unauthorized access or use by you, including, without
limitation (i) concurrent access of the Service with identical user
identification numbers, (ii) permitting another person or entity to use your
user identification number to access the Service, or (iii) any other access or
use of the Service except as expressly provided in this Agreement; or (c)
immediately, if you violate the terms and conditions of this Agreement or the
rules and regulations relating to the use of, or tamper with or alter any of the
software and/or data files contained in, or accessed through, the Service.
Termination, suspension, or cancellation of this Agreement or your access rights
shall not affect any right or relief to which TMSAP or Service Provider may be
entitled, at law or in equity. Upon termination of this Agreement, all rights
granted to you will terminate and revert to TMSAP and its licensers.
MicroCaplOOO Services Agreement
Page 19 of 23
<PAGE>
9. TRADEMARKS. [INSERT APPROPRIATE TMSAP REGISTERED TRADEMARKS] are registered
trademarks of the [INSERT THE NAME OF THE TELESCAN MANAGED SERVICES ALLIANCE
PARTNER], and all trademarks, service marks and trade names used on the Service
are the property of the [INSERT THE NAME OF THE TELESCAN MANAGED SERVICES
ALLIANCE PARTNER] or their respective owners, and may not be copied, downloaded
or otherwise exploited without the permission of TMSAP or the owner of such
trademark, service mark or trade name.
10. MINORS. If you have agreed to allow your minor chlid,or a child for whom you
are legal guardian (a "Minor"), to register as a member of the Service, you
agree that you shall be solely responsible for: (a) the online conduct of such
Minor; (b) monitoring such Minor's access to and use of the Service; and (c) the
consequences of any use of the Service by such Minor.
11. CHILD ONLINE PROTECTION ACT NOTIFICATION. Pursuant to 47 U.S.C. Section
230(d) as amended, TMSAP hereby notifies you that parental control protections
(such as computer hardware, software, or filtering services) are commercially
available that may assist you in limiting access to material that is harmful to
minors. information identifying current providers of such protections is
available at the Electronic Frontier Foundation website,
http://www.eff.org/pub/Censorship/Ratings_filters_labelling/, and at the America
Links Up website, http://www.netparents.org/parentstips/browsers.html.
12. INFRINGEMENT POLICY. TMSAP, on behalf of itself and Service Provider,
pursuant to 17 U.S.C. Section 512 as amended by Title II of the Digital
Millennium Copyright Act (the "Act"), reserves the right, but not the
obligation, to terminate your license to use the Service if it determines in its
sole and absolute discretion that you are involved in infringing activity,
including alleged acts of first-time or repeat infringement, regardless of
whether the material or activity is ultimately determined to be infringing.
TMSAP and Service Provider accommodate and do not interfere with standard
technical measures used by copyright owners to protect their materials. In
addition, pursuant to 17 U.S.C. Section 512(c), TMSAP, on behalf of itself and
Service Provider, has implemented procedures for receiving written notification
of claimed infringements and for processing such claims in accordance with the
Act. Our designated agent to receive notification of claimed infringement is:
[INSERT NAME]
[INSERT ADDRESS]
[INSERT PHONE NUMBER]
[INSERT EMAIL ADDRESS]
In addition, any written notice regarding any defamatory or infringing activity,
whether of a copyright, patent, trademark or other proprietary right, should be
sent to our designated agent, listed above, and must include the following
information:
A. A physical or electronic signature of a person authorized to act on behalf of
(1) the owner of an exclusive right that is allegedly infringed or (2) the
person defamed.
B. Identification of the copyrighted work claimed to have been infringed, or, if
multiple copyrighted works at a single online site are covered by a single
notification, a representative list of such works at that site. Similarly, for
other types of infringing materials, a list of such materials.
C. Identification of the material that is claimed to be infringing, to be the
subject of infringing activity, or that is claimed to be defamatory and that you
are requesting be removed or disabled, and information reasonably sufficient to
permit us to locate the material.
D. Infommation reasonably sufficient to permit us to contact you, such as your
address, telephone number, and/or electronic mail address.
E. A statement that you have a good faith belief that use of the material in the
manner complained of is not authorized by the copyright or other proprietary
right owner, its agent, or the law.
MicroCaplOOO Services Agreement
Page 20 of 23
<PAGE>
F. A statement that the information in the notification is accurate, and under
penalty of perjury, that you are authorized to act on behalf of the owner of an
exclusive right that is allegedly infringed or on behalf of the person defamed.
13. MODIFICATION. TMSAP reserves the right to amend this Agreement, and to
modify, add or discontinue any aspect, content, or feature of the Service. Such
amendments, modifications, additions or deletions shall become effective upon
notice thereof, which may be provided to you by posting on the Service, via
e-mail or any other reasonable means. Continued use of the Service by you shall
be deemed to indicate your acceptance of any such amendments, modifications,
additions or deletions.
14. JURISDICTION. Unless otherwise specified, the materials on this Service are
presented solely for the purpose of promoting TMSAP's [INSERT THE APPROPRIATE
TMSAP BUSINESS NAME(S)] and other products available in the United States, its
territories, possessions and protectorates. This Service is controlled and
operated by TMSAP from its offices within the state(s) of [INSERT APPROPRIATE
STATE NAMES], and by Service Provider from its offices within the State of
Texas, United States of America. TMSAP and Service Provider make no
representation that materials on this Service are appropriate or available for
use outside the United States. Those who choose to access this Service from
outside the United States do so on their own initiative and are responsible for
compliance with local laws, if and to the extent that local laws are applicable.
Software and technical data from this Service is further subject to United
States export laws and regulations (the "U.S. Export Laws"). No software or
technical data from this Service may be downloaded or otherwise exported or
re-exported in violation of the U.S. Export Laws. By using the Service, you
represent and warrant that you are not located in, under the control of, or a
national or resident of any country to which it is illegal to export the
Materials and that you are not on the U.S. Treasury Department's list of
Specially Designated Nationals (see www. treas.gov/ofac/) or the U.S. Commerce
Department's Denial Orders or Entity lists (see www.bxa.doc.gov).
15. MISCELLANEOUS. This agreement shall be governed by and construed in
accordance with the laws of the State of Texas without giving effect to any
principles of conflicts of law. You may not assign any of your rights,
obligations or privileges hereunder without the prior written consent of TMSAP.
Any assignment other than as provided for in this Section shall be null and
void, ab initio. If any provision of this agreement shall be unlawful, void, or
for any reason unenforceable, then that provision shall be deemed severable from
this agreement and shall not affect the validity and enforceability of any
remaining provisions. This Agreement and any posted operating rules constitute
the entire agreement of the parties with respect to the subject matter hereof,
and supersede all prior or contemporaneous communications and proposals, whether
oral or written, between the parties with respect to such subject matter. No
waiver by either party of any breach or default hereunder shall be deemed a
waiver of any subsequent breach or default. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
MicroCaplOOO Services Agreement
Page 21 of 23
<PAGE>
EXHIBIT 3
DETAILED DESCRIPTION OF WORK
To be mutually agreed upon, accepted in writing (by their signatures below) and
attached hereto within ten (10) business days of Telescan's receipt of the
Design Specifications.
AGREED AND ACCEPTED BY:
Company: Telescan, Inc. Company: MicroCap Financial
Services.com, Inc.
------------------- --------------------------
Signature: Signature:
------------------- --------------------------
Name: Roger C. Wadsworth Name: Jay Matulich
------------------- --------------------------
Title: Senior Vice President Title: Chairman
--------------------- --------------------------
Date: Date:
--------------------- --------------------------
MicroCaplOOO Services Agreement
Page 22 of 23
EXHIBIT 5.6
STOCK EXCHANGE AGREEMENT
This Stock Exchange Agreement (this "Agreement") is entered into as of
March 31, 1999, by and between Telescan, Inc., a Delaware corporation
("Telescan"), and MicroCap Financial Services.com, Inc., a Delaware corporation
(the "MicroCap"),
WHEREAS, the parties believe that a strategic alliance between them is
mutually beneficial, and in furtherance thereof, they have agreed (i) to
exchange shares of common stock and (ii) to have Telescan provide to MicroCap
certain content and other services as more particularly described herein; and
WHEREAS, Telescan and the MicroCap desire to enter into this Agreement
pursuant to which MicroCap will exchange an aggregate of 5,176,161 unregistered
shares of its common stock, par value $0.001 per share (the "MicroCap Common
Stock"), for (i) an aggregate of 520,000 unregistered shares of Telescan common
stock, par value $0.01 per share (the "Telescan Common Stock"), and (ii) the
content and other services more particularly described herein, all upon the
terms and conditions set forth herein,
NOW, THEREFORE, in consideration of the respective representations,
warranties and covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
STOCK EXCHANGE
Section I.1 The Stock Exchange
(a) On the date hereof, Telescan shall issue and deliver to MicroCap an
aggregate of 520,000 unregistered shares of Telescan Common Stock. Telescan
shall also execute and deliver a License Agreement and a Services Agreement with
MicroCap substantially in the form of Exhibit _ and Exhibit B attached hereto,
respectively.
(b) On the date hereof, MicroCap shall issue and deliver to Telescan an
aggregate of 5,176,161 unregistered shares of MicroCap Common Stock. MicroCap
shall also execute and deliver a License Agreement and a Services Agreement with
Telescan substantially in the form of Exhibit A and Exhibit B attached hereto,
respectively.
(c) Neither party will, as a result of the stock exchange, become
liable for the liabilities or obligations of the other party except as otherwise
provided herein.
MicroCap 1000 Stock Exchange Agreement
Page 1 of 18
<PAGE>
Section I.2 Option Agreement. In connection with the transactions
contemplated by this Agreement, the parties shall enter into the Stock Option
Agreement substantially in the form of Exhibit C hereto ("Option Agreement").
Pursuant to the Option Agreement, Telescan shall have the option to purchase
shares of MicroCap Common Stock such that Telescan, after giving effect to the
5,176,161 shares referenced in I. l(b) above, would, following exercise of the
option, then own 19.9% of the outstanding MicroCap Common Stock, at an exercise
price of $3.75 per share subject to the terms and conditions set forth therein.
As consideration for such option, Telescan shall issue and deliver to MicroCap
on the date hereof, 25,000 unregistered shares of Telescan Common Stock, which
shall be in addition to the other Telescan shares being delivered to MFSI
pursuant to this Agreement.
Section I.3 Taking of Necessary Action; Further Action. Each of
Telescan and MicroCap will take all such reasonable and lawful action as may be
necessary or appropriate in order to effectuate the stock exchange and execute
and deliver the License Agreement and the Services Agreement and the Option
Agreement. If, after the date hereof, any further action is necessary or
desirable to carry out the purposes of this Agreement, the License Agreement and
the Services Agreement or the Option Agreement, each of Telescan and MicroCap
shall promptly take all such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF MICROCAP
MicroCap hereby makes representations and warranties set forth in this
Article II to Telescan. MicroCap has delivered to Telescan the Schedules to this
Agreement referred to in this Article II on the date hereof.
Section II. 1 Organization and Qualification. MicroCap is a Delaware
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. MicroCap has all requisite corporate power and
authority to carry on its business as now being conducted and to own, lease and
operate its properties and assets as now owned, leased or operated. Except as
set forth on Schedule 2.1, or in its filings with the Securities and Exchange
Commission ("SEC"), MicroCap does not own or control any Affiliate (as defined
in Section 4.14) or Subsidiary (as defined in Section 4.14!. True and correct
copies of the Certificate of Incorporation and Bylaws of MicroCap, with all
amendments thereto through the date of this Agreement, have been delivered by
MicroCap to Telescan. MicroCap is duly qualified to do business and is in good
standing in each jurisdiction where such qualification is necessary and material
to the business and operations of MicroCap.
Section II.2 Company Capitalization. As of the date hereof, the
authorized capital stock of MicroCap consists solely of (a) 100,000,000 shares
of MicroCap Common Stock, of which 47,108,296 shares are issued and outstanding,
and of which 15,000 are held in treasury, (b) 25,000,000 shares of Class B
common stock, par value $0.001 per share (the 'MicroCap Class B Common Stock"),
of which 0 shares are issued and outstanding, and none of which are held in
treasury, and (c) 20,000,000 shares of preferred stock, par value $0.001 per
share, (the "MicroCap Preferred Stock"), of which 0 shares are issued and
outstanding, and none of which are held in treasury. The MicroCap Common Stock,
the MicroCap Class B Common Stock and the MicroCap
MicroCap 1000 Stock Exchange Agreement
Page 2 of 18
<PAGE>
Preferred Stock shall be hereinafter collectively referred to as the "MicroCap
Capital Stock". Except as set forth on Schedule 2.2, there are no outstanding
subscriptions, options, convertible securities, rights, warrants, calls, or
other agreements or commitments of any kind issued or granted by, or binding
upon, MicroCap to purchase or otherwise acquire any security of or equity
interest in MicroCap. Except as set forth on Schedule 2.2, there are no
outstanding subscriptions, options, rights, warrants, calls, convertible
securities or other agreements or commitments obligating MicroCap to issue any
shares of MicroCap Capital Stock, irrevocable proxies, or any agreements
restricting the transfer of or otherwise relating to shares of MicroCap Capital
Stock. All of the shares of MicroCap Capital Stock have been duly authorized,
validly issued and are fully paid and non-assessable, and are free of preemptive
rights.
Section II.3 Authority Relative to the Agreement. MicroCap has full
corporate power and authority, and no further proceedings, corporate or
otherwise, on the part of MicroCap are necessary, to execute, deliver and
perform this Agreement or to consummate the transactions contemplated hereby,
all of which have been duly and validly authorized by its Board of Directors.
This Agreement has been duly executed and delivered by MicroCap and is a duly
authorized, valid, legally binding and enforceable obligation of MicroCap,
subject to the effect of bankruptcy, insolvency, reorganization, moratorium, or
other similar laws relating to creditors' rights generally and general equitable
principles. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with, or
result in any violation or breach of or default under the Certificate of
Incorporation or Bylaws of MicroCap or any agreement, document or instrument by
which MicroCap is obligated or bound.
Section II.4 No Violation. Neither the execution, delivery nor
performance of this Agreement in its entirety, nor the consummation of the
transactions contemplated hereby, will (i) violate (with or without the giving
of notice or the passage of time), any law, order, writ, judgment, injunction,
award, decree, rule, statute, ordinance or regulation applicable to MicroCap or
(ii) be in conflict with, result in a breach or termination of any provision of,
cause the acceleration of the maturity of any debt or obligation pursuant to,
constitute a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any security interest, lien,
charge or other encumbrance upon any property or assets of MicroCap pursuant to,
any terms, conditions or provisions of any note, license, instrument, indenture,
mortgage, deed of trust or other agreement or understanding or any other
restriction of any kind or character, to which MicroCap is a party or by which
any of its assets or properties are subject or bound. Except as set forth on
Schedule 2.4, there are no claims, suits, actions or proceedings pending or, to
the knowledge of MicroCap, threatened, against or involving MicroCap, the
MicroCap Capital Stock, at law or in equity or before or by any foreign,
federal, state, municipal or other governmental court, department, commission,
board, bureau, agency, instrumentality or other person which may result in
liability to Telescan upon the consummation of the transactions contemplated
hereby or which would prevent or delay such consummation. Except as set forth on
Schedule 2.4 or as contemplated hereby, the corporate existence, business
organization, assets, licenses, permits, authorizations and contracts of
MicroCap will not be terminated or impaired by reason of the execution, delivery
or performance by MicroCap of this Agreement or consummation by MicroCap of the
transactions contemplated hereby.
Section II.5 Consents and Approvals. No prior consent, approval or
authorization of, or declaration, filing or registration with any person,
domestic or foreign, is required of MicroCap
MicroCap 1000 Stock Exchange Agreement
Page 3 of 18
<PAGE>
in connection with the execution, delivery and performance by MicroCap of this
Agreement and the transactions contemplated hereby.
Section II.6 Reports and Financial Statements. Since March 14, 1997,
MicroCap has filed with the SEC all material forms, statements, reports and
documents (including all exhibits, amendments and supplements thereto) required
to be filed by it under each of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and the respective rules and
regulations thereunder (collectively, the "MicroCap SEC Reports"), all of which
complied in all material respects with all applicable requirements of the
appropriate act and the rules and regulations thereunder. MicroCap has
previously made available or delivered to Telescan all of such MicroCap SEC
Reports.
As of their respective dates, and to the knowledge of MicroCap, the
MicroCap SEC Reports did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
The audited consolidated financial statements and unaudited interim
consolidated financial statements of MicroCap included in such MicroCap SEC
Reports have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein or
in the notes thereto) and fairly present in all material respects the
consolidated financial position of MicroCap and its Subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended, subject, in the case of the unaudited interim financial
statements, to normal year-end and audit adjustments and any other adjustments
described therein.
Section II.7 Absence of Certain Changes. Except as and to the extent
set forth on Schedule 2.7, since September 30, 1998 MicroCap has not:
(a) made any amendment to its Certificate of Incorporation or Bylaws or
changed the character of its business in any material manner;
(b) suffered any Material Adverse Effect (as defined in Section 4.14!;
or
(c) issued, reserved for issuance, granted, sold or authorized the
issuance of any shares of MicroCap Capital Stock or subscriptions, options,
warrants, calls, rights or commitments of any kind relating to the issuance or
sale of or conversion into shares of MicroCap Capital Stock.
MicroCap 1000 Stock Exchange Agreement
Page 4 of 18
<PAGE>
Section II.8 Compliance with Laws. Except as set forth on Schedule 2.8,
MicroCap is not in default with respect to or is in violation of any judgment,
order, writ, injunction or decree of any court or any statute, law, ordinance,
rule, order or regulation of any governmental department, commission, board,
bureau, agency or instrumentality, federal, state or local, and the consummation
of the transactions contemplated by this Agreement will not constitute such a
default or violation as to MicroCap, except such as in the aggregate do not now
have and will not have in the future have a material adverse effect upon the
operations, business and assets of MicroCap.
Section II.9 Investment Intent. MicroCap is acquiring the shares of
Telescan Common Stock hereunder and in consideration for the Option Agreement
for its own account for investment, and not with a view to, or for the sale in
connection with, any distribution of such shares, except in compliance with
applicable federal and state securities laws. MicroCap and its representatives
have been provided, to their satisfaction, the opportunity to discuss the
transactions contemplated hereby with Telescan and its representatives, and has
had the opportunity to obtain such information pertaining to Telescan as has
been requested. MicroCap has such knowledge and experience in business and
financial matters that it is (i) capable of evaluating the merits and risks of
an investment in the Telescan Common Stock, (ii) capable of bearing the economic
risks of such investment and (iii) able to bear a complete loss of its
investment in the Telescan Common Stock. MicroCap acknowledges that the Telescan
Common Stock issued hereunder and in consideration for the Option Agreement has
not been registered under the Securities Act of 1933, as amended ("Securities
Act"), and understands that such Telescan Common Stock must be held indefinitely
unless it is subsequently registered under the Securities Act or such sale is
permitted pursuant to an available exemption from such registration requirement.
Section II.10 Representations Not Misleading. To MicroCap's knowledge,
no representation or warranty by MicroCap in this Agreement, nor any statement,
summary, exhibit or schedule furnished to Telescan by MicroCap under and
pursuant to, or in anticipation of this Agreement, contains or will contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements contained herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TELESCAN
Telescan hereby makes the representations and warranties set forth in
this Article III to MicroCap. Telescan has delivered to MicroCap the Schedules
to this Agreement referred to in this Article III on the date hereof
Section III. 1 Organization and Qualification. Telescan is a Delaware
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Telescan has all requisite corporate power and
authority to carry on its business as now being conducted and to own, lease and
operate its properties and assets as now owned, leased or operated. Except as
set forth on Schedule 3.1 or in its filings with the SEC, Telescan does not own
or control any Affiliate (as defined in Section 4.14) or Subsidiary (as defined
in Section 4.14!. True and correct copies of the Certificate of Incorporation
and Bylaws of Telescan, with all amendments thereto through the date of this
Agreement, have been delivered by Telescan to MicroCap. Telescan is duly
qualified to
MicroCap 1000 Stock Exchange Agreement
Page 5 of 18
<PAGE>
do business and is in good standing in each jurisdiction where such
qualification is necessary and material to the business and operations of
Telescan.
Section III.2 Company Capitalization. As of the date hereof, the
authorized capital stock of Telescan consists solely of (a) 15,000,000 shares of
Telescan Common Stock, of which 12,476,406 shares are issued and outstanding,
and none of which are held in treasury, and (b) 10,000,000 shares of preferred
stock, par value $0.01 per share, (the "Telescan Preferred Stock"), of which
120,000 shares are issued and outstanding, and none of which are held in
treasury. The Telescan Common Stock and the Telescan Preferred Stock shall be
hereinafter collectively referred to as the "Telescan Capital Stock". Except as
set forth on Schedule 3.2, there are no outstanding subscriptions, options,
convertible securities, rights, warrants, calls, or other agreements or
commitments of any kind issued or granted by, or binding upon, Telescan to
purchase or otherwise acquire any security of or equity interest in Telescan.
Except as set forth on Schedule 3.2, there are no outstanding subscriptions,
options, rights, warrants, calls, convertible securities or other agreements or
commitments obligating Telescan to issue any shares of Telescan Capital Stock,
irrevocable proxies, or any agreements restricting the transfer of or otherwise
relating to shares of Telescan Capital Stock. All of the shares of Telescan
Capital Stock have been duly authorized, validly issued and are fully paid and
non-assessable, and are free of preemptive rights.
Section III.3 Authority Relative to the Agreement. Telescan has full
corporate power and authority, and no further proceedings, corporate or
otherwise, on the part of Telescan are necessary, to execute, deliver and
perform this Agreement or to consummate the transactions contemplated hereby,
all of which have been duly and validly authorized by its Board of Directors.
This Agreement has been duly executed and delivered by Telescan and is a duly
authorized, valid, legally binding and enforceable obligation of Telescan,
subject to the effect of bankruptcy, insolvency, reorganization, moratorium, or
other similar laws relating to creditors' rights generally and general equitable
principles. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with, or
result in any violation or breach of or default under the Certificate of
Incorporation or Bylaws of Telescan or any agreement, document or instrument by
which Telescan is obligated or bound.
Section III.4 No Violation. Neither the execution, delivery nor
performance of this Agreement in its entirety, nor the consummation of the
transactions contemplated hereby, will (i) violate (with or without the giving
of notice or the passage of time), any law, order, writ, judgment, injunction,
award, decree, rule, statute, ordinance or regulation applicable to any Telescan
or (ii) be in conflict with, result in a breach or termination of any provision
of, cause the acceleration of the maturity of any debt or obligation pursuant
to, constitute a default (or give rise to any right of termination, cancellation
or acceleration) under, or result in the creation of any security interest,
lien, charge or other encumbrance upon any property or assets of Telescan
pursuant to, any terms, conditions or provisions of any note, license,
instrument, indenture, mortgage, deed of Oust or other agreement or
understanding or any other restriction of any kind or character, to which
Telescan is a party or by which any of its assets or properties are subject or
bound. Except as set forth on Schedule 3.4, there are no claims, suits, actions
or proceedings pending or, to the knowledge of Telescan, threatened, against or
involving Telescan, the Telescan Capital Stock, at law or in equity or before or
by any foreign, federal, state, municipal or other governmental court,
department, commission, board, bureau, agency, instrumentality or other person
which may result in liability to Telescan upon the consummation of the
transactions contemplated hereby or which would prevent
MicroCap 1000 Stock Exchange Agreement
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or delay such consummation. Except as set forth on Schedule 3.4, or as
contemplated hereby, the corporate existence, business organization, assets,
licenses, permits, authorizations and contracts of Telescan will not be
terminated or impaired by reason of the execution, delivery or performance by
Telescan of this Agreement or consummation by Telescan of the transactions
contemplated hereby.
Section III.5 Consents and Approvals. No prior consent, approval or
authorization of, or declaration, filing or registration with any person,
domestic or foreign, is required of Telescan in connection with the execution,
delivery and performance by Telescan of this Agreement and the transactions
contemplated hereby.
Section III.6 Reports and Financial Statements. Since January 1, 1996,
Telescan has filed with the SEC all material forms, statements, reports and
documents (including all exhibits, amendments and supplements thereto) required
to be filed by it under each of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and the respective rules and
regulations thereunder (collectively, the "Telescan SEC Reports"), all of which
complied in all material respects with all applicable requirements of the
appropriate act and the rules and regulations thereunder. Telescan has
previously made available or delivered to MicroCap all of such Telescan SEC
Reports.
As of their respective dates, and to the knowledge of Telescan, the
Telescan SEC Reports, did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
The audited consolidated financial statements and unaudited interim
consolidated financial statements of Telescan included in such Telescan SEC
Reports have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein or
in the notes thereto) and fairly present in all material respects the
consolidated financial position of Telescan and its Subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended, subject, in the case of the unaudited interim financial
statements, to normal year-end and audit adjustments and any other adjustments
described therein.
Section III.7 Absence of Certain Changes. Except as and to the extent
set forth on Schedule 3.7, since September 30, 1998 Telescan has not:
(a) made any amendment to its Certificate of Incorporation or Bylaws or
changed the character of its business in any material manner;
(b) suffered any Material Adverse Effect (as defined in Section 4.14!;
or
(c) issued, reserved for issuance, granted, sold or authorized the
issuance of any shares of Telescan Capital Stock or subscriptions, options,
warrants, calls, rights or commitments of any kind relating to the issuance or
sale of or conversion into shares of Telescan Capital Stock.
Section III.8 Compliance with Laws. Except as set forth on Schedule
3.8, Telescan is not in default with respect to or is in violation of any
judgment, order, writ, injunction or decree of
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any court or any statute, law, ordinance, rule, order or regulation of any
governmental department, commission, board, bureau, agency or instrumentality,
federal, state or local, and the consummation of the transactions contemplated
by this Agreement will not constitute such a default or violation as to
Telescan, except such as in the aggregate do not now have and will not in the
future have a material adverse effect upon the operations, business and assets
of Telescan.
Section III.9 Investment Intent. Telescan is acquiring the shares of
MicroCap Common Stock hereunder for its own account for investment, and not with
a view to, or for the sale in connection with, any distribution of such shares,
except in compliance with applicable federal and state securities laws. Telescan
and its representatives have been provided, to their satisfaction, the
opportunity to discuss the transactions contemplated hereby with MicroCap and
its representatives, and has had the opportunity to obtain such information
pertaining to MicroCap as has been requested. Telescan has such knowledge and
experience in business and financial matters that it is (i) capable of
evaluating the merits and risks of an investment in the MicroCap Common Stock,
(ii) capable of bearing the economic risks of such investment and (iii) able to
bear a complete loss of its investment in the MicroCap Common Stock. Telescan
acknowledges that the MicroCap Common Stock issued hereunder has not been
registered under the Securities Act, and understands that such MicroCap Common
Stock must be held indefinitely unless it is subsequently registered under the
Securities Act or such sale is permitted pursuant to an available exemption from
such registration requirement.
Section III.9 Investment Intent. Telescan is acquiring the shares of
MicroCap Common Stock hereunder for its own account for investment, and not with
a view to, or for the sale in connection with, any distribution of such shares,
except in compliance with applicable federal and state securities laws. Telescan
and its representatives have been provided, to their satisfaction, the
opportunity to discuss the transactions contemplated hereby with MicroCap and
its representatives, and has had the opportunity to obtain such information
pertaining to MicroCap as has been requested. Telescan has such knowledge and
experience in business and financial matters that it is (i) capable of
evaluating the merits and risks of an investment in the MicroCap Common Stock,
(ii) capable of bearing the economic risks of such investment and (iii) able to
bear a complete loss of its investment in the MicroCap Common Stock. Telescan
acknowledges that the MicroCap Common Stock issued hereunder has not been
registered under the Securities Act, and understands that such MicroCap Common
Stock must be held indefinitely unless it is subsequently registered under the
Securities Act or such sale is permitted pursuant to an available exemption from
such registration requirement
Section III.10 Representations Not Misleading. To Telescan's knowledge,
no representation or warranty by Telescan in this Agreement, nor any statement,
summary, exhibit or schedule furnished to Telescan by Telescan under and
pursuant to, or in anticipation of this Agreement, contains or will contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements contained herein or therein not misleading.
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ARTICLE IV
MISCELLANEOUS
Section IV.1 Public Announcement. Subject to written advice of counsel
with respect to legal requirements relating to public disclosure of matters
related to the subject matter of this Agreement, the timing and content of any
announcements, press releases or other public statements concerning the
transactions contemplated hereby will occur upon, and be determined by, the
mutual consent of MicroCap and Telescan.
Section IV.2 Expenses. All costs and expenses incurred in connection
with the transactions contemplated by this Agreement shall be paid by Telescan,
on the one hand, or MicroCap, on the other hand, depending on who incurs such
costs and expenses.
Section IV.3 Survival of Representations and Warranties. The parties
hereto agree that all of their respective representations and warranties
contained in this Agreement shall survive the consummation of the transactions
contemplated hereby.
Section IV.4 Brokers and Finders. All negotiations on behalf of
Telescan and MicroCap relating to this Agreement and the transactions
contemplated hereby have been carried on by the parties hereto and their
respective agents directly without the intervention of any other person in such
manner as to give rise to any claim against Telescan or MicroCap for financial
advisory fees, brokerage or commission fees, finder's fees or other like payment
in connection with the consummation of the transactions contemplated hereby.
Section IV.5 Entire Agreement; Assignment. This Agreement, the License
Agreement, the Services Agreement and the Option Agreement (a) constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among the parties or any of them with respect to the subject matter hereof, and
(b) shall not be assigned by operation of law or otherwise.
Section IV.6 Enforcement of the Agreement. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
Section IV.7 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
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Section IV.8 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by telecopy, or by registered or certified
mail (postage prepaid, return receipt requested) to the respective parties as
follows:
<TABLE>
<S> <C>
If to Telescan: with a copy (not constituting notice) to:
Mr. Roger C. Wadswort Mr. David F. Taylor
Telescan, Inc. Locke Liddell & Sapp LLP
5959 Corporate Dr. 3400 Chase Tower
Suite 2000 600 Travis Street
Houston, TX 7703 Houston, Texas 77002
Telecopy No.: (281) 588-9843 Teleconv No. (713) 223-3717
If to MicroCap: with a copy (not constituting notice) to:
Mr. Stanley Hollander Mr. Aaron A. Grunfeld
Mr. Jay Matulich Resch, Polster, Alpert & Berger LLP
MicroCap Financial Services.com, Inc. 10390 Santa Monica Boulevard
2425 Olympic Boulevard - Suite 660 E 4th Floor
Santa Monica, California 90404 Los Angeles, California 90025
Telecopy No.: (310) 828-7218 Telecopy No.: (310) 552-3209
Mr. Michael Jacobs
MicroCap Financial Services.com, Inc.
7280 West Palmetto Park Road
Suite 200
BocaRaton,FL 33433
Telecopy No.: (561) 417-8054
</TABLE>
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
Section IV.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the federal laws of the United States and the laws
of the State of Texas, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws of the State of Texas.
Section IV.10 Descriptive Headings. The descriptive headings are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
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Section IV.11 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
Section IV.12 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section IV.13 Incorporation by Reference. Any and all schedules,
exhibits, annexes, statements, reports, certificates or other documents or
instruments attached hereto are incorporated herein by reference hereto as
though fully set forth at the point referred to in the Agreement.
Section IV.14 Certain Definitions.
(a) "Subsidiary" shall mean, when used with reference to an entity, any
corporation, a majority of the outstanding voting securities of which are owned
directly or indirectly by such entity or any partnership, joint venture or other
enterprise in which any entity has, directly or indirectly' any equity interest.
(b) "Material Adverse Effect" shall mean any material adverse change
from that represented in this Agreement (without regard to the knowledge or lack
of knowledge of MicroCap or Telescan) in the financial condition, assets,
liabilities (absolute, accrued, contingent or otherwise), reserves, business or
results of operations of MicroCap and Telescan taken as a whole.
(c) "knowledge" or "known" -- An individual shall be deemed to have
"knowledge" of or to have "known" a particular fact or other matter if (i) such
individual is actually aware of such fact or other matter, or (ii) a prudent
person serving in the same capacity as such individual would be expected to
discover or otherwise become aware of such fact or other matter in the course of
performing the official duties of such individual. A corporation shall be deemed
to have "knowledge" of or to have "known" a particular fact or other matter if
any individual serving as a director or executive officer (or in any similar
capacity) of the corporation, has had knowledge of such fact or other matter.
(d) "Affiliate" shall mean, with respect to any person, any person or
entity that, directly or indirectly, controls, is controlled by, or is under
common control with the person or entity in question.
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Section IV.15 Exhibits. The following exhibits are hereby incorporated
into and made a part of this Agreement:
Exhibit A - "License Agreement"
Exhibit B - "Services Agreement"
Exhibit 3 - "Stock Option Agreement"
Schedule 2.1 - "MFSI Ownership"
Schedule 2.2 - "Outstanding MFSI Options Chart"
Schedule 2.7 - "MFSI Options Issued Since September 30, 1998"
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
Agreed and Accepted By:
<TABLE>
<S> <C>
Company: Telescan, Inc. Company: MicroCap Financial Services.com, Inc.
Signature: /s/ ROGER C. WADSWORTH Signature: /s/ JAY MATULICH
Name: Roger C. Wadsworth Name: Jay Matulich
Title: Senior Vice President Title: Sr. V.P.
Date: 3/31/99 Date: 3/31/99
</TABLE>
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<PAGE>
EXHIBIT A
LICENSE AGREEMENT
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EXHIBIT B
SERVICES AGREEMENT
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EXHIBIT C
STOCK OPTION AGREEMENT
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SCHEDULE 2.1
MFSI OWNERSHIP
[ILLEGIBLE]
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SCHEDULE 2.2
OUTSTANDING MFSI OPTIONS CHART
[ILLEGIBLE]
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SCHEDULE 2.7
OPTIONS ISSUED SINCE SEPTEMBER 30, 1998
[ILLEGIBLE]
MicroCap 1000 Stock Exchange Agreement
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