SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 3, 1999
LIGHT ENERGY MANAGEMENT, INC.
(Formerly WHY NOT?, INC.)
(Exact name of registrant as specified in its charter)
Nevada 33-55254-11 87-0438458
(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification No.)
94 Rue de Lausanne CH1202 Geneva, Switzerland N/A
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 41-22-9000000
WHY NOT?, INC.
Same Address
(Former name or former address, if changed since last report)
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Item 1. Changes in Control of Registrant.
On November 3, 1999, the Company entered into a Plan or Reorganization
with Beijing Shijiyonglian Ruanjian Jishu Youxian Gongsi (Beijing Forlink
Software Technology Co. Ltd, hereinafter ABFSTC@), under the terms of which
BFSTC will gain control of the Company.
Pursuant to the Plan of Reorganization, the Company will acquire 100%
of the issued and outstanding shares of BFSTC in exchange for 20,000,000 shares
of the Company's authorized, but unissued, common stock. As described in more
detail in Item 2 herein, BFSTC is engaged in the Internet e-commerce and
Internet software development business, and the Internet vertical portal
business. The business of BFSTC will become the business of the Company.
The Plan or Reorganization provides that the 20,000,000 shares issued
as part of this transaction will be delivered to BFSTC at a closing on or before
November 21, 1999. At this point, the closing has taken place and control of the
Company will effectively be transferred to BFSTC.
BFSTC's shareholders, Zhao Xiaoxia, Che Liang, Song Wei and Zhang Jie,
also are parties to the Plan of Reorganization and they are obligated to deliver
100% of the issued and outstanding shares of BFSTC to the Company at the
Closing.
At the Closing, the Company delivered a signed consent or minutes of
its Board of Directors and a Majority Consent of its shareholders, approving and
authorizing the Plan of Reorganization. BFSTC also delivered a signed consent or
minutes of its Board of Directors approving and authorizing the Plan of
Reorganization at the Closing.
Under the terms of the Plan or Reorganization, at the Closing the
Company's Board of Directors elected three new directors, as named by the
shareholders of BFSTC, to act as the officers and directors of the Company. One
of the Company's two current directors resigned at the Closing and the other
will resign at the time an amended Form 8-K is filed reflecting the Company's
audited combined financial statements.
The Plan of Reorganization also calls for BFSTC to provide the Company
with wire transfer instruction so the Company can transfer $275,000 from it
account at the Bank of Montreal in Vancouver, BC, Canada.
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In December of 1998 the Company's name changed to Light Energy
Management, Inc. as part of a proposed transaction which was not completed.
Management changed the company's name in anticipation of that transaction. When
the transaction did not proceed, the Company's former name, Why Not?, Inc., no
longer was available and the Company was unable to change its name back to Why
Not?, Inc. For that reason, the Company's name remains Light Energy Management,
Inc. and the Plan or Reorganization refers to the Company as Light Energy
Management, Inc.
Item 2. Acquisition or Disposition of Assets.
The following is a description of the business of the corporation
acquired pursuant to the Plan or Reorganization described in Item 1 above.
Business Description
Background Information
It now is common knowledge that the Internet is changing our methods of
communication and commerce. Compared with countries such as the United States,
China's Internet market started late and is relatively small. According to
statistics from the China Internet Network Information Center (CNNIC), China
only had 670,000 Internet users by the end of 1997. But the number is growing
fast. CNNIC statistics show that the number of Chinese Internet users reached
2.1 million at the end of 1998 and 4 million on June 30, 1999. It is estimated
that the number will reach 15 million by the end of 2000.
The principals of BFSTC all have been in Chinese and/or oversea
computer businesses for over ten years, and are experienced in technology
development, marketing and management. In particular, they all have an
understanding of Internet business and technical capability. One of the
principals, Mr. Xiaoxia Zhao, participated the creation of the Yahoo!Japan site
as lead engineer. After returning to China, Mr. Zhao became one of the founders
and the Chief Technology Officer of GBS Info Tech. Co, a company owned by the
Great Wall Computer Group Co., Beijing Telecom and Beijing Ping Cheng Jia Ye
Electronic Corp. Ltd. He was in charge of planning, designing, developing and
operation of http://www.tonghua.com.cn, a well known search engine and portal
site in China. Led by Mr. Zhao, BFSTC has established a Internet technology
development team. It is the management's firm belief that, with a strong
management and technical team, the company will succeed in both Internet
E-commerce and Internet software development businesses.
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Company Business
BFSTC's business is focused in two areas: (1) Building and operating an
Internet destination site and E-commerce site, and (2) Developing Internet tools
to help other businesses to enter E-commerce business.
Internet Destination Site
An Internet destination site is different from general-purpose portal
site. A general-purpose portal site provides directories and search engines to
help users to find information on line. Most of the portal sites also provide
news and other services. A destination site, however, is focused on one sector
or even one product. After analyzing China's Internet market and the development
stage it was in, considering the fact that several large general purpose portal
sites were already in place, BFSTC chose to set up a software destination site,
Softhouse (www.softhose.com.cn), as its first destination site. BFSTC plans to
develop more destination sites later. It chose to start with the software sector
because: (1) China's software development was one step behind other developed
countries; (2) most of the Chinese Internet users were interested in gaining
access to new software; (3) none of the existing software sites in China were
advanced enough to meet users demand; (4) BFSTC's software engineers had been in
the software business for many years and know the software market well.
Softhouse hosts software information, online software sales, online
software auctions, free software downloading and software forums. Softhouse
sells over 10,000 domestic software titles, and provides detailed product
introduction and links to software vendors. The following is a detailed
description of Softhouse.
Software Information
At Softhouse, users can get timely software information from around the
world, such as sector news, software company news, new product introduction,
upcoming product introduction, etc. Users can also easily search for specific
software information, price, customer comments and suggestions, etc.
Online Software Sales and Auction
Softhouse sells software in two ways: online supermarket and online
auction. Since BFSTC will sell to the end users directly online, no expensive
storefront rental will be paid and inventory is kept low. In fact, some orders
are shipped to customers by the software vendors directly. The low cost makes
BFSTC's prices competitive. Online sales removed space and time restrictions so
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that BFSTC can sell to customers worldwide 24 hours a day, 7 days a week. There
are over 10,000 software titles available, which include almost all titles
available in China. Customers can quickly find the software title they are
looking for via category search or multiple keyword rapid search. BFSTC believes
that these advantages over traditional sales channels make Softhouse attractive
to consumers.
Online auction is another sales model that brings customers and vendors
closer to each other. There are new titles on auction every day, with a starting
bid of 1 Yuan. The auction not only attracts customer participation, it also
provides vendors with reference on how their software should be priced in the
future.
Free Software Downloading
Free software attracts a lot of users to Softhouse. There are many
organizations and individuals providing free software downloading. We try to
collect as many titles as possible. There are over 8000 titles of free software
available on Softhouse right now and the number is increasing at about 100
titles per day. BFSTC provides category search and multiple keyword rapid search
to help users find the software title they are looking for quickly and
conveniently.
Software Forum
Software Forum is a place for users to communicate with each other,
publish suggestions, tips and information, look for help and help others. Forums
are categorized according to software category. Users can also open up new
forums according to their own interests. BFSTC's goal is to build Software Forum
as a virtual community to attract more users.
More visitors to BFSTC's site will bring more value to the site.
Software Publishing
Traditional methods of software publishing are costly and time
consuming. Publishing new products on the Internet is much faster and cheaper.
Softhouse will become China's online software publishing platform, where vendors
will be able to quickly present their new products to larger numbers of software
users with very little advertising cost.
BFSTC's strategy for Softhouse is to provide top quality service and
attract large number of visitors so revenue can be generated through both online
sales and online advertising. At appropriate times, BFSTC will start online
sales of other products.
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Internet Tools
BFSTC has developed its own Internet tool product line: a carrier scale
electronic messaging system For-Mail and an enterprise E-commerce system
For-Business. Both products have been successfully implemented by customers.
For-Mail has been deployed to provide free email service on one of the most
famous portal sites in China, www.tonghua.com.cn . Users praise the system as
fast, stable, and easy to use. For-Business has been successfully running on the
site owned by the largest Chinese computer company, Legend, and one of Japanese
giants, Toshiba: www.ltclub.legend.com.cn.
For-Mail V3.0
For-Mail is a large scale messaging system, designed for ISPs, free
email service providers and other companies which need a scalable, stable,
administrable email system. It runs on UNIX or LINUX platforms. Its design
target is:
Large scale - can handle more than one million users; High speed - mass
access capable; Stable; Administrable - has browser based administration
tools;
Scalable - system can be easily extended when demand increases;
Standard - support all RFC related to email; Open - support other email
applications.
Unlike other email systems, such as sendmail, For-Mail email has a WEB MAIL
subsystem. Email users can complete their email operation on their browser.
For-Mail Specifications:
Support POP3, IMAP4, SMTP and other email related protocols; Email users
can register online; Support Web Mail; Support Nicknames and aliases;
Mailbox storage quota; Auto reply; Auto forward; Mail filter;
Delivery Status Notification (DSN); Support personal address books;
Personal profile modified online; Support multi-domains. Spam & Denial of
Service Controls; IP filtering;
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Mail system runs as common user, not root user; Can delete messages with
specific words and email addresses; Store user's information in secure
database; Web based administration tools, Unix knowledge not needed; Open
administration interface; Administration interface security control;
System monitor tools; Save web mail log for statistics;
Distributed system design; Modular architecture based on service modules;
Open, security administration; Scalable mail data storage;
WWW, SMTP, POP3, Maildata server modules; Adjustable concurrency
processes control; Multiple SMTP queue directories; Cache between SMTP
and File server; Dynamic load balancing; System can run normally when one
machine down;
Independent user authentication database server; Configuration files stored in
the same machine; Modules of system can be running on multi servers;
Open interface, other applications can be easily developed; Template www pages,
interface can be easily designed for specific style.
RFC 821 - Simple Mail Transfer Protocol
RFC 822 - Standard For The Format Of Arpa Internet Text Messages RFC 974
- Mail Routing And The Domain System RFC 1123 - Requirements for Internet
Hosts -- Application and Support RFC 1652 - SMTP Service Extension for
8bit-MIMEtransport RFC 1869 - SMTP Service Extensions RFC 1892 - The
Multipart/Report Content Type for the Reporting of
Mail System Administrative Messages
RFC 1893 - Enhanced Mail System Status Codes
RFC 1894 - An Extensible Message Format for Delivery Status
Notifications
RFC 1939 - Post Office Protocol - Version 3
RFC 1957 - Some Observations on Implementations of the Post Office
Protocol (POP3)
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RFC 2197 - SMTP Service Extension for Command Pipelining RFC 1731 - IMAP4
Authentication Mechanisms RFC 1732 - IMAP4 Compatibility With IMAP2 And
IMAP2BIS RFC 1733 - Distributed Electronic Mail Models In IMAP4 RFC 2060
- Internet Message Access Protocol - Version 4rev1 RFC 2061 - IMAP4
Compatibility With IMAP2BIS RFC 2062 - Internet Message Access Protocol -
Obsolete Syntax RFC 2086 - IMAP4 ACL extension RFC 2087 - IMAP4 QUOTA
extension RFC 2088 - IMAP4 non-synchronizing literals RFC 2177 - IMAP4
IDLE command RFC 2180 - IMAP4 Multi-Accessed Mailbox Practice RFC 2192 -
IMAP URL Scheme RFC 2193 - IMAP4 Mailbox Referrals RFC 2195 - IMAP/POP
AUTHorize Extension for Simple
Challenge/Response
RFC 2221 - IMAP4 Login Referrals
For-Business
For-Business is a complete E-commerce system that runs on UNIX or LINUX
platforms. It is clean and requires little data transfer. It is also secure,
stable and scalable. It has a friendly user interface and supports remote
maintenance.
For-Business has the follow subsystems:
Product registry;
Product search;
Online shopping;
Order sheet inquiring online; Administration system; Supplier inquiring;
Dealer support system; Product release system; Post-sale service and
support.
For-Business has been adopted by large E-commerce sites such as the site owned
by the well-known companies Legend and Toshiba
(http://www.ltclub.legend.com.cn/).
For-Business Subsystems:
Product Registry System.
- -------------------------
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Product information can be registered by authorized operators.
First, operators can categorize their products and suppliers, then register
their product information in the database. Product information includes maker
information, supplier information, product description, product picture, FAQ,
installation information, product specification, purchase price, list price,
sale price, minimum price, etc. Product information can be modified by
authorized operators.
Page Design Support System.
- ----------------------------
This system has the following two subsystems:
1. Pages designed manually.
Main page and other regular page must be designed manually.
2. Pages designed by program.
Regular pages can be automatically generated by program.
Product Search System.
- -----------------------
Users can use this system to get the product information and inventory status.
It has the following sub systems:
1. Category search.
User can enter the category to find the product in which he or she is
interested.
2. Keyword search.
User can input the keyword to find the product in which he or she is
interested.
Online Shopping.
- ----------------
Users can buy products online as if they were shopping in a
supermarket. They select the products, put them into shopping carts, then go to
the counter to pay. Before paying, users can modify, add or delete items in the
shopping carts. After users booked their products, they can inquire about their
order sheet's processing status.
Administration System.
- ----------------------
The administration system includes an inventory management subsystem,
an order sheet management subsystem, and an sales management subsystem. All the
subsystems are based on the web. Administrators and authorized operators can
operate from anywhere.
After users order products, the system sends an email to operators who
update the order sheet while the order sheet status changes.
Administrators can use this system to find the sales status and
inventory status.
Supplier Inquiring System.
- --------------------------
Suppliers can inquire about the sales status, inventory status and
accounts receivable of their products.
Dealer Support System.
- -----------------------
Each dealer can inquire about purchase prices, deal structures, support
information, new product information, account payable, and send product
maintenance.
Post-Sale Service and Support System.
- -------------------------------------
After users buy products, they become members. Users can use this
system to get many services, such as discounts, special price service, deskhelp
services, new product information services, etc.
Security system.
- -----------------
Computer system and network security.
- --------------------------------------
The system uses firewall, port reorganization, and access control to
prevent unauthorized access.
Data transfer security.
- ------------------------
The system uses SSL, RSA, RES and other technology to ensure data
cannot be decoded by others.
User level security.
- ---------------------
The system uses user password, dynamic password, and one machine/one
password to protect user's security.
Market Analysis
Market Environment
The Number of Internet Users in China
The size of BFSTC's market depends on the number of users in China.
According to the China Internet Network Information Center statistics, the
number of Internet users in China was 670,000 in December 1997, the number
reached 2,100,000 by the end of 1998. In June 1999, that number surged to
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4,000,000. Although this number is still relatively small, it is increasing at
the rate of 200% per year. It is estimated that by the end of the year 2000, the
number of Internet users in China will reach 15,000,000.
Online Payment
The success of online software sales also depends on the availability
of secure, convenient, online payment services. Chinese banks are implementing
online payment systems. China Merchant Bank, Bank of China, and China
Construction Bank have started providing Internet online payment services. It is
BFSTC's understanding that by the end of 1999 or early 2000, an authorizing
center, led by the Bank of China, with the participation of 11 major Chinese
banks, will be online. The availability of online payment services will no
longer be a concern at that time.
Delivery
Presently there are several ways for delivering an order to a customer.
1) Postal service. It is cheap (usually 10 Yuan for delivering a software
CD or diskette), but it is slow (usually takes 3 to 10 days).
2) EMS and other express delivery. It is fast (usually 1 to 4 days), but it
is more expensive (usually 30 Yuan).
3) Delivery provided by BFSTC. Within the Beijing city limit, the software
can be delivered to the customer the same day for free. As more
warehouses are established in other cities, it is expected that the same
service will be available in other cities, too.
Internet Tool Market
Since the number of Internet users is growing rapidly, and since the
Chinese government is working hard to push the AGet to the Internet@ project
(which requires government agencies to get online), there will be more and more
web sites in China, including ISP, ICP, etc. There will be increasing demand for
the Internet tools. BFSTC's technical team puts it in an advantageous position
to occupy the Internet tool market. It has developed two Internet tools,
For-Mail and For-Business. Depending on the market needs, it will continue to
develop other Internet tools.
In the global market, the demand for messaging systems and E-commerce
systems is even higher. In the messaging system market, the Computer Industry
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Almanac has reported that by the year 2000, 327 million people around the world
will have Internet access. By the year 2000 there will be 25 countries where
over 10% of the population will be Internet users. Since many Internet users
have more than one email account, the number of messaging system user licenses
will even be higher than the number of total Internet users.
In the E-commerce system market, online purchases have increased
dramatically over the past three years, and now an estimated 43 million users
are clicking to web sites with credit cards in hand. A recent IDC report
predicts revenue from E-commerce will reach $51.1 billion by the year 2002. More
E-commerce business obviously means more demand on the E-commerce systems.
Due to BFSTC's low labor cost, it will be able to market it high-end
messaging system, For-Mail, and high-end E-commerce system, For-Business, at
lower price and capture some market share on the international market.
Competitive Analysis
Competition to Softhouse (www.software.com.cn)
As a software E-commerce site, Softhouse's main competitor is Lian Bang
Software Co.
Lian Bang's Advantages: It is China's largest software sales chain; It
understands the software market well and has good software sales experience; It
also has well established relations with software vendors.
Lian Bang's Disadvantages: Its online sales competes with its own
software retail chain. This conflict is hard to resolve. Even Compaq is having
trouble solving a similar problem. It also lacks Internet technical personnel
which limits its ability to further develop on the Internet.
Lian Bang's 8848.net is an E-commerce site. It not only sells software,
it also sells hardware, books and even food. On the other hand, Softhouse is a
software destination site. It focuses on the software business and tries to
establish an software online community. BFSTC's theme and direction is different
from that of Lian Bang.
Major Chinese portal sites such as Sohu, Sina.com and Netease.com may
compete with Softhouse for advertising clients. But since Softhouse will be
mainly targeting a specific group of advertising clients, namely clients in the
software sector, BFSTC does not expect too much competition from these portal
sites.
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Competition in the Internet Tool Market
Carrier Scale Electronic Messaging (E-mail) System
There are two Chinese companies that have the similar products: Netease
and Asiainfo.
Netease is the first one in China that developed a large scale email
server system and currently has the largest market share in China. But Netease's
email server has problems in its system design that make it hard for that system
to handle more than 300,000 users. Our For-Mail system can easily handle over
one million users. Also, Netease has started to provide free email service and
will no longer put a lot of effort into the email system development.
Asiainfo's email server is based on a very expensive hardware system,
while For-Mail can run on a wide range of machines, from PC servers to high end
servers.
The main competitor in the US market would be software.com. BFSTC's
For-Mail is comparable to software.com's products, yet BFSTC's management
believes For-Mail's price can be set at less than half of software.com's prices.
E-commerce system
Right now there is no well known E-commerce system in the Chinese
market. There are many E-commerce solution providers in the US and international
market. Those easy to use, wizard-driven catalog builders for small business
sell for as low as $399. The more sophisticated ones (those that are comparable
to For-Business in features), designed for the large enterprise and for more
serious e-commerce applications, sell for more than $3000 for single storefront
license and over $6000 for multiple storefront (one IP) license. Again, with
BFSTC's low labor cost, For-Business can be marketed at a price that is much
lower than the price of comparable products.
Risk Analysis
The Internet market is growing rapidly. BFSTC's believes that its has
technical expertise and successful experience in building destination sites and
developing Internet tools. Its management team is strong. However, one of the
the risks BFSTC is facing is a lack of funding.
New management of the Company is:
Management Team
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Xiaoxia Zhao, Master's Degree in Computer Science
- ------------
Oct. 1998 - present: Founder, Chairman of the Board and Chief
Technical Officer of
Jan. 1998 - Oct. 1998: Vice President and Chief Technical Officer of
GBS InfoTech. Co.
Designed and supervised the creation of
Tonghua search engine and portal site:
www.tonghua.com.cn. It became one of the most
faous sites in China within half a year. Was
in charge of Beijing Telecom 8188 ISP
project. The site (www.cj).net.cn) has been
in operation since August, 1998 and has
become an ISP with 100 million Yuan monthly
revenue. Cooperating with the Great Wall
Computer Group Co., led the development of
the China National Commodity Exchange
(www.ccec.com.cn). The system is based on IBM
RISC/6000, AIX and NetCommerce and has been
in operation since August, 1998. Cooperating
with Legend PDA network software.
Aug. 1997 - Jan. 1998: Chief Engineer, Beijing Long Ma Software
Development Co. Ltd. In charge of technology
management. In charge of system integration
department. Obtained the contract to develop
the first phase of the Tonghua project.
1996 - 1997: Yahoo!Japan leading engineer In charge of
Yahoo!Japan operation and support. Cooperated
with Panasoniac to develop specialized search
enging. Worked with Lotus on category and
search system development. Worked with
Reuters and Daily News on news page
development.
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1991 - 1996: System Engineer, Japan Itochu Group CRC
Research Institute. Developed Itochu
automobile export system. Itochu financial
system. In charge of Great Wall Unix
operating system technical support.
1989 - 1991: Project Manager, China Great Wall Computer
Group Co. Participated Great Wall Unix
Chinese system development. Was in charge of
Sco Xenix 2.21 - Sco Unix 3.2 Chinese system
development. In charge of Great Wall Unix
operating system technical support.
Liang Che, Master's Degree in Computer Science
- ----------
1998 - Present: Founder, President of Forlink Software
Technology Co, Ltd.
1996 - 1998: President, Shenzen Shen Pu Computer Co. Ltd.
Developed Shanghai railway ticketing system,
the largest ticketing system in China.
1992 - 1996 : Middle China/South West China District
general manager, Legend Advanced Systems Co.,
Ltd.
Co-founded the Legend Advanced Systems Co.,
Ltd. in 1992. In 1996, the company became the
largest system integrator in China wilth
revenue exceeding $5million a year.
1989 - 1992: Computer sales, Shenzen She Ge Computer Co.
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Jie Zhang, Master's Degree in Computer Science
- ---------
1998 - Present: Founder, Vice President, Manager of
Technology Development Department.
1989 - 1998: Senior Engineer, South China Computer Co. 10
In Charge of CEDGA monitor card In charge of
iron temperature control ASIC chip
development. In charge of network design for
networks composed of SUN, SGI, CISCO
equipments. In Feb. 1995 - Aug. 1996, was
sent to Japan to research international
banking software system on Fujitsu M series
super computer.
1988 - 1989 While in school, participated in the
development of the Chinese version of the
Chinese version of the Hua Sheng Operating
System Shell. Also participated in the
development of the Chinese version of Unix
system, which is a government funded national
project.
Chongxiu Liu, Bachelor's Degree in Finance, Beijing
Business College
Apr. 1999 - Present: Manager of Information Systems
1996 - 1999: China Workers Insurance Association
Eventually, management of BFSTC will become the management of the
Company.
Item 3. Not Applicable.
Note 4. Not Applicable.
Item 5. Not Applicable.
Item 6. Not Applicable.
Item 7. Financial Statements and Exhibits.
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The financial statements and pro forma financial information required
to be submitted with this Form 8-K will be filed by amendment within 60 days of
the date that this form is filed.
File herewith as Exhibit No. (2) is the Plan of Reorganization.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LIGHT ENERGY MANAGEMENT, INC.
\s\ Michael A.J. Harrop
- ---------------------------------
Michael A.J. Harrop/President
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PLAN OF REORGANIZATION
THIS AGREEMENT is effective the 3rd day of November, 1999, and is made by and
among Light Energy Management Inc., a corporation organized under the laws of
the State of Nevada, United States of America, hereinafter called "YNOT",
Beijing Shijiyonglian Ruanjian Jishu Youxian Gongsi (Beijing Forlink Software
Technology Co., Ltd.), a company organized under the laws of China, hereinafter
called "BFSTC", Zhao Xiaoxia, Che Liang, Song Wei and Zhang Jie, hereinafter
called "SHAREHOLDERS", Harper & Harper Management Limited represented by C.
Harper and Harrop & Co. represented by M. Harrop, hereinafter called "YNOT
SHAREHOLDERS".
RECITALS:
WHEREAS, YNOT desires to acquire 100% of the issued and outstanding
shares of the common stock of BFSTC, in exchange for 20,000,000 authorized but
unissued shares of the $.001 par value common stock of YNOT, pursuant to a plan
of reorganization within the meaning of IRC (1986), Section 368(a)(1)(B), as
amended; and
WHEREAS, SHAREHOLDERS, whose consent is evidenced in Exhibit 1.02
desire to exchange 100% of the issued and outstanding shares of the common stock
of BFSTC (the "BFSTC Shares"), currently owned by SHAREHOLDERS, in exchange for
said 20,000,000 shares of YNOT (the "YNOT Shares").
NOW THEREFORE, in consideration of the mutual promises, covenants and
representations contained herein, and to consummate the foregoing plan of
reorganization, the parties hereby adopt said plan of organization and agree as
follows:
ARTICLE I
EXCHANGE OF SECURITIES
1.01 Issuance of YNOT Shares. Subject to all of the terms and
conditions of this Agreement, YNOT agrees to issue to SHAREHOLDERS as
individuals 20,000,000 fully paid and nonassessable unregistered shares of YNOT
common stock in exchange for 100% of the outstanding BFSTC common stock, all of
which is currently owned by SHAREHOLDERS.
1.02 Transfer of BFSTC Shares. In exchange for YNOT's stock being
issued to SHAREHOLDERS as above described, SHAREHOLDERS shall deliver to YNOT
100% of the outstanding common stock of BFSTC.
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ARTICLE II
REPRESENTATIONS, AGREEMENTS AND WARRANTIES OF
SHAREHOLDERS AND BFSTC AS OF NOVEMBER 3RD 1999
2.01 Organization. BFSTC is a corporation duly organized, validly
existing, and in good standing under the laws of China, has all necessary
corporate powers to own its properties and to carry on its business as now owned
and operated by it, is duly qualified to do business and is in good standings in
any jurisdiction its business requires qualification.
2.02 Capital. The BFSTC Shares consist of 100% of the shares of common
stock, of Beijing Shijiyonglian Ruanjian Jishu Youxian Gongsi (Beijing Forlink
Software Technology Co., Ltd.) currently issued and outstanding. All of the
issued and outstanding shares are validly issued, fully paid and nonassessable.
2.03 Subsidiaries. BFSTC does not have any subsidiaries.
2.04 Directors and Officers. Exhibit 2.04 to this Agreement contains
the names and titles of all directors and officers of BFSTC as of the date of
this Agreement.
2.05 Financial Statements. Exhibit 2.05 to this Agreement includes the
unaudited pro forma financial statements of BFSTC as of September 30th 1999.
2.06 Absence of Changes. Since the date of BFSTC's most recent
financial statements included in Exhibit 2.05 there have been no changes in its
financial condition or operations, except for changes in the ordinary course of
business.
2.07 Absence of Undisclosed Liabilities. As of the date of BFSTC's
most recent balance sheet included in Exhibit 2.05 it did not have any material
debt, liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, as required by GAAP
or other appropriate standards, that is not reflected in such balance sheet.
2.08 Tax Returns. Within the times and in the manner prescribed by
law, BFSTC has filed all federal, state and local tax returns required by law,
has paid all taxes, assessments and penalties due and payable and has made
adequate provision on its most recent balance sheet for any unpaid taxes. There
are no present disputes as to taxes of any nature payable by BFSTC.
2.09 Investigation of Financial Condition. Without in any manner
reducing or otherwise mitigating the representations contained herein, YNOT
and/or its attorneys shall have the opportunity to meet with accountants and
attorneys to discuss the financial condition of BFSTC. BFSTC shall make
available to YNOT and/or its attorneys all books and records of BFSTC. If the
transaction contemplated hereby is not completed, all documents received by YNOT
and/or its attorneys shall be returned to BFSTC and all information so received
shall be treated as confidential.
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2.10 Patents Trade Names and Rights. BFSTC owns or holds all necessary
patents, trademarks, service marks, trade names, copyrights and other rights
necessary to the conduct or proposed conduct of its business.
2.11 Compliance with Laws. As of November 3rd 1999, BFSTC has complied
with, and is not in violation of, applicable federal, state or local statutes,
laws and regulations affecting its properties or the operation of its business.
2.12 Litigation. BFSTC is not a party to, nor to the best of its
knowledge is there pending or threatened, any suit, action, arbitration or
legal, administrative or other proceeding, or governmental investigation
concerning its business, assets or financial condition. BFSTC is not in default
with respect to any order, writ, injunction or decree of any federal , state,
local or foreign court or agency, nor is it engaged in any lawsuits to recover
monies due to it.
2.13 Authority. The Board of Directors of BFSTC authorized the
execution of this Agreement and the consummation of the transactions
contemplated herein and has full power and authority to execute, deliver and
perform this agreement.
2.14 Ability to Carry Out Obligations. The execution and delivery of
this Agreement by BFSTC and the performance of its obligations hereunder in the
time and manner contemplated will not cause, constitute or conflict with or
result in (i) any breach of the provisions of any license, indenture, mortgage,
charter , instrument, certificate of incorporation, bylaw or other agreement or
instrument to which it is a party or by which it may be bound, nor will any
consents or authorizations of any party other than those hereto be required,
(ii) an event that would permit any party to any agreement or instrument to
terminate it or to accelerate the maturity of any indebtedness or other
obligation, or (iii) an event that would result in the creation or imposition of
any lien, charge or encumbrance on any asset.
2.15 Full Disclosure. None of the representations and warranties made
by SHAREHOLDERS or BFSTC herein or in any exhibit, certificate or memorandum
furnished or to be furnished by SHARE- HOLDERS or BFSTC, or on either's behalf,
contains or will contain any untrue statement of material fact, or omits any
material fact, the omission of which would be misleading.
2.16 Assets. BFSTC has good and marketable title to all of its
property free and clear of any and all liens, claims or encumbrances except as
may be indicated in Exhibit 2.05.
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2.17 Indemnification. SHAREHOLDERS and BFSTC agree to defend and hold
YNOT and its officers and directors harmless against and in respect of any and
all claims, demands, losses, costs, expenses, obligations, liabilities or
damages, including interest, penalties and reasonable attorney's fees, that it
shall incur or suffer, which arise out of, result from or relate to any breach
of this Agreement or failure by SHAREHOLDERS or BFSTC to perform with respect to
any of its representations, warranties or covenants contained in this Agreement
or in any exhibit or other instrument furnished or to be furnished under this
Agreement.
2.18 Authority to Exchange. As of the date of this Agreement,
SHAREHOLDERS holds 100% of the shares of BFSTC common stock. Such shares are
owned of record and beneficially by SHARE- HOLDERS and such shares are not
subject to any lien, encumbrance or pledge. SHAREHOLDERS holds authority to
exchange such shares pursuant to this Agreement.
2.19 Investment Intent. SHAREHOLDERS understands and acknowledges that
the shares of YNOT common stock offered for exchange or sale pursuant to this
Agreement are being offered in reliance upon the exemption from registration
requirements of the Securities Act of 1993, as amended (the "Act"), pursuant to
Section 4(2) of the Act and the rules and regulations promulgated thereunder,
for nonpublic offerings and makes the following representations, agreements and
warranties with the intent that the same may be relied upon in determining the
suitability of SHAREHOLDERS as a purchaser of YNOT common stock:
(a) The shares of YNOT common stock are being acquired solely for the
account of SHAREHOLDERS for investment purposes only, and not with a view to, or
for sale in connection with, any distribution thereof, and with no present
intention of distributing or reselling any part of the YNOT common stock
acquired;
(b) SHAREHOLDERS agrees not to dispose of its YNOT common stock or any
portion thereof unless and until counsel for YNOT shall have determined that the
intended disposition is permissible and does not violate the Act or any
applicable Federal or state securities laws, or the rules and regulations
thereunder.
(c) SHAREHOLDERS agrees that the certificates evidencing the YNOT
common stock acquired pursuant to this Agreement will have a legend placed
thereon stating that they have not been registered under the Act or any state
securities laws and setting forth or referring to the restrictions on
transferability and sale of the YNOT common stock, and that stop transfer
instructions shall be placed with the transfer agent for said certificate.
(d) SHAREHOLDERS acknowledges that YNOT has made all records and
documentation pertaining to YNOT common stock available to them and to their
qualified representatives, if any, and has offered such person or persons an
opportunity to ask questions and further discuss the proposed acquisitions of
YNOT common stock, and any available information pertaining thereto, with the
officers and directors of YNOT, and that all such questions and information
requested have been answered by YNOT and its officers and directors to
SHAREHOLDERS's satisfaction.
(e) SHAREHOLDERS has carefully evaluated its financial resources and
investment position and the risks associated with this transaction and is able
to bear the economic risks of this transaction; and it has substantial knowledge
and experience in financial, business and investment matters and is qualified as
a sophisticated investor, and is capable of evaluating the merits and risks of
this transaction; and desires to acquire the YNOT common stock on the terms and
conditions set forth;
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(f) SHAREHOLDERS is able to bear the economic risk of an investment in
the YNOT common stock; and
(g) SHAREHOLDERS understands that an investment in the YNOT common
stock is illiquid and SHAREHOLDERS has no need for liquidity in this investment.
2.20 Receipt of Relevant Information. SHAREHOLDERS and BFSTC have
received from YNOT all financial and other information concerning YNOT and its
promoters, officers and directors, including, but not limited to Prospectus
dated June 30th 1993, Annual Report on Form 10-K for the year ended December
31st 1998, Forms 10-Q for the quarters ended March 30th 1999, June 30th 1999,
and September 30th 1999, and Forms 8-K dated April 17th and April 22nd 1997, as
filed with the Securities and Exchange Commission, and all other documents and
information they have requested.
2.21 Public "Shell" Corporation. BFSTC and SHAREHOLDERS are aware that
YNOT has public shareholders and is a "shell" corporation without significant
assets or liabilities, further that public companies are subject to extensive
and complex state, federal and other regulations. Among other requirements,
SHAREHOLDERS and BFSTC are aware that a form 8-K must be filed with the United
States Securities and Exchange Commission within fifteen days after closing,
which filing requires that audited financial statements be filed within sixty
days after the filing of the 8-K, and they agree that such filings shall be the
responsibility of the officers and directors of YNOT. SHAREHOLDERS and BFSTC are
aware of the legal requirements and obligations of public companies, understand
that regulatory efforts regarding public shell transactions similar to the
transaction contemplated herein has been and is currently being exerted by some
states, the U.S. Securities and Exchanges Commission and the National
Association of Securities Dealers, Inc. (NASD), and are fully aware of their
responsibilities, following closing, to fully comply will all securities laws
and regulations, and agree to do so.
2.22 No Assurances or Warranties. SHAREHOLDERS and BFSTC acknowledge
that there can be no assurance regarding the tax consequences of this
transaction, nor can there be any assurance that the Internal Revenue Code or
the regulations promulgated thereunder will not be amended in such manner as to
deprive them of any tax benefit that might otherwise be received. SHAREHOLDERS
and BFSTC are relying upon the advice of their own tax advisors with respect to
the tax aspects of this transaction. No representations or warranties have been
made by YNOT or its officers, directors, affiliates or agents, as to the
benefits to be derived by SHAREHOLDERS or BFSTC in completing this transaction,
nor have any of them made any warranty or agreement, expressed of implied, as to
the tax or securities consequences of the transactions contemplated by this
Agreement or the tax or securities consequences of any action pursuant to or
growing out of this Agreement.
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ARTICLE III
REPRESENTATIONS, AGREEMENTS AND WARRANTIES OF YNOT
AS OF NOVEMBER 3RD 1999
YNOT represents, agrees and warrants that:
3.01 Organization. YNOT is a corporation duly organized, validity
existing, and in good standing under the laws of Nevada, has all necessary
corporate powers to own properties and carry on its business as now owned and
operated by it, is duly qualified to do business and is in good standing in each
of the jurisdictions where its business requires qualification.
3.02 Capital. The authorized capital stock of YNOT consists of
100,000,000 shares of $.001 par value common stock of which 5,000,000 shares are
currently issued and outstanding and held by over 500 shareholders. All of the
issued and outstanding shares are validly issued, fully paid and nonassessable.
All currently outstanding shares of YNOT Common Stock have been issued in
compliance with applicable federal and state securities laws. Subsequent to the
closing of this transaction no present YNOT shareholders beneficially hold 5% or
more of YNOT Common Stock.
3.03 Subsidiaries. YNOT has no subsidiaries and does not own any
interest in any other enterprise, whether not such enterprise is a corporation.
3.04 Directors and Officers. Exhibit 3.04 to this Agreement contains
the names and titles of all officers and directors of YNOT as of the date of
this Agreement.
3.05 Financial Statements. Exhibit 3.05 to this Agreement includes
YNOT's financial statements as of December 31st 1998. The financial statements
have been prepared in accordance with generally accepted accounting principles
and practices consistently followed throughout the period indicated and fairly
present the financial position of YNOT as of the dates of the balance sheets
included in the financial statements and the results of operations for the
periods indicated.
3.06 Absence of Changes. Since the date of YNOT's most recent
financial statements, Form 10-Q for the quarter up until September 30th 1999,
there has not been any change in its financial condition or operations except
for changes in the ordinary course of business.
3.07 Absence of Undisclosed Liabilities. As of the date of YNOT's most
recent balance sheet, included in Exhibit 3.05, it did not have any material
debt, liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, that is not reflected
in such balance sheet.
3.08 Tax Returns. Within the times and in the manner prescribed by
law, YNOT has filed all federal, state or local tax returns required by law, has
paid all taxes, assessments and penalties due and payable and has made adequate
provision on its most recent balance sheet for any unpaid taxes. There are no
present disputes as to taxes of any nature payable by YNOT.
3.09 Investigation of Financial Condition. Without in any manner
reducing or otherwise mitigating the representations contained herein, BFSTC and
SHAREHOLDERS shall have the opportunity to meet with YNOT's accountants and
attorneys to discuss the financial condition of YNOT. YNOT shall make available
to BFSTC and SHAREHOLDERS all books and records of YNOT.
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3.10 Patents, Trade Names and Rights. YNOT does not use any patents,
trade marks, service marks, trade names or copyrights in its business.
3.11 Compliance with Laws. YNOT has complied with, and is not in
violation of, applicable federal, state or local statues, laws and regulations
affecting its properties, securities or the operation of its business.
3.12 Litigation. YNOT is not a party to, nor to the best of its
knowledge is there pending or threatened, any suit, action, arbitration or
legal, administrative or other proceedings, or governmental investigation
concerning its business, assets or financial condition. YNOT is not in default
with respect to any order, writ, injunction or decree of any federal, state
local or foreign court or agency, nor is it engaged in, nor does it anticipate
it will be necessary to engage in, any lawsuits to recover money or real or
personal property.
3.13 Authority. The Board of Directors of YNOT has authorized the
execution of this Agreement and the transactions contemplated herein (exhibit
5.01c), and it has full power and authority to execute, deliver and perform this
Agreement. A Majority Consent of YNOT shareholders has been obtained in approval
of this Agreement (exhibit 3.13).
3.14 Ability to Carry Out Obligations. The execution and delivery of
this Agreement by YNOT and the performance of its obligations hereunder will not
cause, constitute, conflict with or result in (i) any breach of the provisions
of any license, indenture, mortgage, charter, instrument, certificate of
incorporation, bylaw or other agreement or instrument to which it is a party or
by which it may be bound, nor will any consents or authorizations of any party
other than those hereto be required, (ii) an event that would permit any party
to any agreement or instrument to terminate it or to accelerate the maturity of
any indebtedness or other obligation, or (iii) an event that would result in a
creation or imposition of any lien, charge or encumbrance on any asset.
3.15 Full Disclosure. None of the representations and warranties made
by YNOT herein, or in any exhibit, certificate of memorandum furnished or to be
furnished by it or on its behalf, contains or will contain any untrue statement
of a material fact, or omits any material fact the omission of which would be
misleading.
3.16 Assets. YNOT has good and marketable title to all of its property
free and clear of any and all liens, claims and encumbrances, except as may be
indicated in Exhibit 3.05.
3.17 Indemnification. YNOT agrees to indemnify, defend and hold
harmless BFSTC against and in respect to any and all claims, demands, losses,
cost, expenses, obligations, liabilities or damages, including interest,
penalties and reasonable attorney's fees, incurred or suffered, which arise out
of, result from or relate to any breach of, or failure by YNOT to perform, any
of its representations, warranties or covenants in this Agreement or in any
exhibit or other instrument furnished or to be furnished under this Agreement.
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3.18 Validity of YNOT Shares. The shares of YNOT $.001 par value
common stock to be issued pursuant to this Agreement will be duly authorized,
validly issued, fully paid and nonassessable under Nevada law.
3.19 No Assurances or Warranties. YNOT acknowledges that there can be
no assurance regarding the tax consequences of this transaction, nor can there
be any assurance that the Internal Revenue Code or the regulations promulgated
thereunder will not be amended in such manner as to deprive it of any tax
benefit that might otherwise be received. YNOT is relying upon the advice of its
own tax advisors with respect to the tax aspects of this transaction. No
representations or warranties have been made by SHAREHOLDERS or BFSTC or their
officers, directors, affiliates or agents, as to the benefits to be derived by
YNOT in completing this transaction, nor have any of them made any warranty or
agreement, expressed or implied, as to the tax or securities consequences of the
transactions contemplated by this Agreement or the tax or securities
consequences of any action pursuant to or growing out of this Agreement.
ARTICLE IV
ACTIONS PRIOR TO CLOSING
4.01 Investigative Rights. Prior to the Closing Date each party shall
provide to the other parties, including the parties' counsel, accountants and
other authorized representatives, full access during normal business hours (upon
reasonable advance written notice) to such parties' books and records.
4.02 Conduct of Business. Prior to the Closing Date, each party shall
conduct its business in the normal course and shall not sell, pledge or assign
any assets, without the prior written approval of the other parties. No party
shall amend its certificate of incorporation or bylaws, declare dividends,
redeem or sell stock or other securities, incur additional liabilities, acquire
or dispose of fixed assets, change employment terms, enter into any material or
long-term contract, guarantee obligations of any third party, settle or
discharge any balance sheet receivable for less than its stated amount, pay more
on any liability than its stated amount or enter into any other transaction
other than in the regular course of business.
4.03 Status of SEC Filings. Prior to the Closing Date, YNOT, and its
officers and directors shall prepare and file all required filings and reports
including the 8-K required by this transaction, but subject to the filing of an
amendment reflecting the audited consolidated balance sheets of the merged
Companies.
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ARTICLE V
CLOSING
5.01 Closing. The closing (the "Closing") of this transaction shall be
held at the offices of YNOT, or such other place as shall be mutually agreed
upon, on or before November 21, 1999 (the "Closing Date"):
(a) YNOT shall deliver 20,000,000 shares of its $.001 par value common
stock issued pursuant to this Agreement in a certificate or certificates
representing such shares;
(b) SHAREHOLDERS shall deliver the certificates representing 100% of
the shares of BFSTC common stock (the "BFSTC shares");
(c) YNOT shall deliver a signed consent or minutes of its Board of
Directors. and a Majority Consent of its shareholders, approving this Agreement
and authorizing the matters set forth herein;
(d) BFSTC shall deliver a signed consent or minutes of its Board of
Directors approving this Agreement and authorizing the matters set forth herein;
(e) YNOT's existing Board of Directors will (i) elect three new
directors, as named by SHAREHOLDERS to act as officers and directors of YNOT in
the capacities set forth in Exhibit 5.01(e) and (ii) one of the two current
directors will resign their positions with YNOT effective the Closing Date. The
remaining existing director shall resign at such time as the amended 8-K
reflecting the Company's audited combined financial statements is filed with the
SEC.
(f) BFSTC shall provide bank-transfer instructions to YNOT for the
transfer by the latter of US$ 275,000.- from Bank of Montreal, Main Branch,
Vancouver BC, Canada.
ARTICLE VI
MISCELLANEOUS
6.01 Captions and Headings. The article and paragraph headings
throughout this Agreement are for convenience and reference only and shall not
be deemed to define, limit or add to the meaning of any provision of this
Agreement.
6.02 No Oral Change. This Agreement may not be changed or modified
except in writing signed by the party against whom enforcement of any change or
modification is sought.
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6.03 Non-Waiver. Except as otherwise expressly provided herein, no
waiver of a covenant, condition or provision of this Agreement shall be deemed
to have been made unless executed in writing and signed by the party against
whom such waiver is charged. The failure of any party to insist in any one or
more cases upon the performance of any covenant, condition or provision of this
Agreement shall not be construed as a waiver or relinquishment for the future of
any such covenant, condition or provision. No waiver by any party of one breach
by the other shall be construed as a waiver with respect to a subsequent breach.
6.04 Time of Essence. Time is of the essence of this Agreement and of
each and every provision hereof.
6.05 Entire Agreement. This Agreement contains the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings.
6.06 Choice of Law/ Arbitration. This Agreement and its application,
shall be governed under the laws of the State of Nevada. Any and all disputes
and controversies of every kind and nature between the parties hereto arising
out of or relating to this Agreement relating to the existence, construction,
validity, interpretation or meaning, performance, non-performance enforcement,
operation, breach, continuance of termination thereof shall be subject to an
arbitration mutually agreeable to the parties or, in the absence of such mutual
agreement, then subject to arbitration in accordance with International
Arbitration Rules. It is the intent of the parties hereto and the purpose of
this provision to make the submission to arbitration of any dispute or
controversy arising hereunder an express condition precedent to any legal or
equitable action or proceeding of any nature whatsoever.
6.07 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which when
taken together shall constitute one and the same instrument.
6.08 Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been given
on the date of service if served personally on the party to whom notice is to be
given, or on the third day after mailing if mailed to the party to whom notice
is to be given, by first class mail, registered or certified, postage prepaid,
and properly addressed as follows:
Light Energy Management Inc. BFSTC and SHAREHOLDERS
2000 -1066 West Hastings St. Beijing Shijiyonglian
Gongsi Ruanjian Jishu Youxian Gongsi
Vancouver, BC V6E 3X2 1st Floor, Block B11,
Canada Ji Men Li, Hai Dian District,
Beijing 100088, China
6.09 Expenses. The parties will pay their own legal, accounting and
other expenses incurred in connection with this Agreement.
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6.10 Survival of Representations and Warranties. The representations,
warranties and covenants set forth in this Agreement or in any instrument,
certificate, opinion or other writing provided for in it, shall survive the
Closing Date.
6.11 Further Documents. The parties agree to execute any and all other
documents and to take such other action or corporate proceedings as may be
necessary or desirable to carry out the terms hereof.
6.12 Legal Counsel. This agreement shall be subject to approval by
legal counsel of both BFSTC and YNOT.
6.13 Signatures. This Agreement and its Exhibits when duly signed,
shall be deemed executed by facsimile. Immediate delivery of originals shall
follow any facsimile transmission.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date stated
above.
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Light Energy Management Inc.
/S/
President
Beijng Shijiyonglian Ruanjian Jishu Youxian Gongsi
(Beijing Forlink Software Technology Co., Ltd.)
/S/ /S/
President Chief Executive Officer
/S/ /S/
Vice Chief Executive Officer Shareholder
Harper & Harper Management Limited
represented by C. Harper
/S/C. Harper
------------
C. Harper
Harrop & Co.
represented by M. Harrop
/S/M. Harrop
-----------
M. Harrop
