UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: October 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period _________________to_______________
Commission File Number: 0-25002
TELEHUBLINK CORPORATION
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(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 59-3200879
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(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
24 NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MA 01803
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(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number: (781) 229-1102
N/A
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(Former Name, Former Address, and Former Fiscal Year, if Changed Since
Last Report)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: At December 17, 1999, there were
18,753,442 shares outstanding of common stock, $.01 par value per share.
Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No
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TELEHUBLINK CORPORATION.
INDEX
PART I. FINANCIAL INFORMATION PAGE
- ------- --------------------- ----
Item 1. Financial Statements (Unaudited):
Condensed Balance Sheets - January 30, 1999 and October 30, 1999........... 3
Condensed Statements of Operations for the Thirteen Weeks Ended
October 31, 1998 and October 30, 1999 and the Thirty Nine Weeks Ended
October 31, 1998 and October 30, 1999...................................... 4
Condensed Statements of Cash Flows for the Thirteen Weeks Ended
October 31, 1998 and October 30, 1999 and the Thirty Nine Weeks Ended
October 31, 1998 and October 30, 1999...................................... 5
Notes to Condensed Financial Statements................................... 6
Item 2. Management's Discussion and Analysis or Plan of Operation.......... 9
PART II. OTHER INFORMATION
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Item 2. Change in Securities and Use of Proceeds......................... 15
Item 6. Exhibits and Reports on Form 8-K ................................ 15
SIGNATURES............................................................... 16
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<TABLE>
<CAPTION>
TELEHUBLINK CORPORATION.
CONDENSED BALANCE SHEETS
JANUARY 30, OCTOBER 30,
ASSETS 1999 1999
----------- -----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 445 $ 203,195
Accounts Receivable, net -0- 346,540
Inventory -0- 10,822
Notes Receivable -0- 177,135
Prepaid expenses and other current assets 5,891 9,008
----------- -----------
Total current assets 6,336 746,700
PROPERTY AND EQUIPMENT, net 1,000 236,678
INTANGIBLE ASSETS, net -0- 988,479
OTHER ASSETS -0- 7,756
----------- -----------
Total assets $ 7,336 $ 1,979,613
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,643 $ 136,862
Accrued expenses 67,000 393,452
Notes Payable, 10% subordinated convertible debentures
maturing July 13, 2000 -0- 600,000
Other current payables -0- 78,269
Current maturities of capital lease obligations 1,981 41,363
----------- -----------
Total current liabilities 73,624 1,249,946
CAPITAL LEASE OBLIGATIONS -0- 165,561
STOCKHOLDERS' EQUITY:
Common stock 21,181 187,534
Additional paid-in capital 4,538,782 893,838
Accumulated deficit (4,626,251) (517,266)
----------- -----------
Total stockholders' equity (66,288) 564,106
----------- -----------
Total liabilities and stockholders' equity $ 7,336 $ 1,979,613
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
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<TABLE>
<CAPTION>
TELEHUBLINK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
13 WEEKS ENDED 39 WEEKS ENDED
OCTOBER 31, 1998 OCTOBER 30, 1999 OCTOBER 31, 1998 OCTOBER 30, 1999
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Sales $ -0- $ 212,043 $ -0- $ 1,023,120
Cost of Sales -0- 131,215 -0- 600,011
------------ ------------ ------------ ------------
Gross Profit -0- 80,828 -0- 423,109
------------ ------------ ------------ ------------
Selling, General and
Administrative Expenses $ 21,446 $ 320,105 $ 38,830 $ 694,537
------------ ------------ ------------ ------------
(Loss) from Operations (21,446) (239,277) (38,830) (271,428)
------------ ------------ ------------ ------------
Interest and Other Income 730 2,027 1,844 16,496
Interest Expense (101) (16,350) (211) (19,149)
------------ ------------ ------------ ------------
$ 629 $ (14,323) $ 1,633 $ (2,653)
------------ ------------ ------------ ------------
NET (LOSS) $ (20,817) $ (253,600) $ (37,197) $ (274,081)
------------ ------------ ------------ ------------
Net (loss) per weighted average
common and common equivalent share -
basic $ (.01) $ (.01) $ (.02) $ (.02)
============ ============ ============ ============
Weighted average common and common
equivalent shares outstanding - basic 2,118,125 18,295,442 2,118,125 18,156,818
Net (loss) per weighted average
common and common equivalent share -
diluted $ (.01) $ (.01) $ (.02) $ (.02)
============ ============ ============ ============
Weighted average common and common
equivalent shares outstanding - diluted 2,118,125 18,295,442 2,118,125 18,156,818
</TABLE>
The accompanying notes are an integral part of these statements.
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<TABLE>
<CAPTION>
TELEHUBLINK CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
13 WEEKS ENDED 39 WEEKS ENDED
OCTOBER 31, OCTOBER 30, OCTOBER 31, OCTOBER 30,
1998 1999 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (20,817) $ (253,600) $ (37,197) $ (274,081)
Adjustments to reconcile net loss to net cash and
cash equivalents used in operating activities:
Depreciation and amortization 375 34,318 750 61,340
(Gain) on disposal of assets -0- -0- -0- (14,406)
Changes in operating assets and liabilities-
(Increase)/Decrease in Accounts Receivable -0- 38,057 -0- (229,119)
(Increase) in Notes Receivable -0- (177,135) -0- (177,135)
(Increase) in prepaid expenses and
other current assets (528) (1,903) (1,055) (3,117)
Decrease in other assets -0- 3,965 -0- 3,302
Increase/(Decrease) in accounts payable and
accrued expenses (9,700) 267,544 (49,200) 389,248
Increase/(Decrease) in other payables -0- (7,655) -0- 83,275
----------- ----------- ----------- -----------
Net cash and cash equivalents (used in)
operating activities (30,670) (96,409) (86,702) (160,693)
INVESTING ACTIVITIES:
Purchase of Equipment -0- (20,765) -0- (85,843)
Purchase of Assets and Businesses -0- (464,290) -0- (1,021,924)
Proceeds from Sale of Equipment -0- -0- -0- 22,655
----------- ----------- ----------- -----------
Net cash provided by investing
activities -0- (485,055) -0- (1,085,112)
FINANCING ACTIVITIES:
Proceeds from stock issuance, net of expenses -0- 725,000 -0- 863,361
Proceeds from notes payable -0- -0- -0- 600,000
Payments made on capital lease obligations (375) (4,804) (741) (14,806)
----------- ----------- ----------- -----------
Net cash provided by/(used in)
financing activities (375) 720,196 (741) 1,448,555
----------- ----------- ----------- -----------
NET (DECREASE)/INCREASE IN CASH AND
CASH EQUIVALENTS (31,045) 138,732 (87,443) 202,750
CASH AND CASH EQUIVALENTS, beginning of
period 74,315 64,463 130,713 445
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 43,270 $ 203,195 $ 43,270 $ 203,195
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for interest $ 101 $ 1,350 $ 211 $ 3,149
</TABLE>
The accompanying notes are an integral part of these statements.
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TELEHUBLINK CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 30, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying unaudited condensed interim financial statements of TeleHubLink
Corporation (formerly known as What A World!, Inc.) (the "Company") have been
prepared in accordance with the instructions to Form 10-QSB and do not include
all of the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. These financial statements should be read
in conjunction with the financial statements and notes thereto for the year
ended January 30, 1999, which are included in the Company's Annual Report on
Form 10-KSB filed on May 14, 1999.
ACQUISITION AND RECAPITALIZATION
On February 4, 1999, the Company (formerly known as What A World!, Inc.)
acquired all of the outstanding common stock of Tele Hub Link Corporation
("TeleHub"), a privately held company organized under the laws of the Province
of Ontario, Canada. For accounting purposes, the acquisition has been treated as
an acquisition of the Company by TeleHub and as a recapitalization of TeleHub.
As a result of the recapitalization, the financial results of the Company will
be primarily those of TeleHub. Pursuant to the February 4, 1999 transaction, the
Company acquired from the TeleHub shareholders all of the outstanding capital
stock of TeleHub and the Company issued to the TeleHub shareholders shares of
the Company's common stock at a rate of 3.9252318 shares for each share of
common stock of TeleHub. As a result, TeleHub became a wholly-owned subsidiary
of the Company. The Company's Certificate of Incorporation was also amended on
February 4, 1999 to increase to 50,000,000 the number of shares of the Company's
common stock authorized for issuance by the Company. In addition, the name of
the Company was changed from What A World!, Inc. to TeleHubLink Corporation.
INTANGIBLE ASSETS
Intangible assets consist primarily of the acquisition and recapitalization
costs related to the Company's business combinations (see above and note 2). All
intangible assets will be amortized over a three to fifteen-year period.
FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions are converted into US Dollars using the rate of
exchange in effect at the balance sheet date for monetary items in assets and
liabilities. For non-monetary items in assets and liabilities, the initial
exchange rate is used. Income statement items are converted at the average rate
in effect during the transaction month. Gains and losses on currency exchange
are reported on the statement of operations.
FISCAL YEAR
The Company's Fiscal Year ends on the Saturday closest to January 31.
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NET LOSS PER WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARE
Net loss per weighted average common and common equivalent share is computed by
dividing net loss by the weighted average number of shares of common stock
outstanding and dilutive common equivalent shares from stock options and
warrants using the treasury stock method.
2. ISSUANCES OF SECURITIES:
In February 1999, the Company consummated a financing arrangement pursuant to
which it issued 2,593,979 shares of Common Stock for an aggregate of $165,214.
Proceeds of the financing were used to fund working capital requirements of the
Company and for general corporate purposes.
In July 1999, the Company sold a total of 24 units, by means of a private
placement, for gross proceeds of $600,000 (the "July 1999 Financing"). Each unit
consisted of a 10% subordinated convertible debenture due July 13, 2000 in the
principal amount of $25,000. The Company will be required to issue up to an
aggregate of 1,200,000 shares of common stock in the event all of the debenture
holders elect to convert their debentures on the maturity date thereof. In
addition, pursuant to the terms of such offering, the Company will also be
required to issue, on the maturity date of the debentures, warrants to purchase
an aggregate of from 150,000 shares of common stock (if no debenture holders
elect to convert their debentures) to 1,200,000 shares of common stock (if all
debenture holders elect to convert their debentures). A portion of the proceeds
of such financing was used to fund certain cash costs associated with the
acquisition of Web Trafic Inc. and the payment of certain past due obligations,
and the balance was used to fund working capital and general corporate purposes.
In August 1999, the Company consummated a private placement pursuant to which it
sold 13.5 units for gross proceeds of $675,000 and, in September 1999 the
Company sold an additional unit for gross proceeds of $50,000. Each unit
consisted of 40,000 shares of the Company's common stock. In connection with
such private placement, the Company sold an aggregate of 580,000 shares of
common stock for gross proceeds of $725,000 (the "August/September 1999
Financing"). Proceeds of the financing were used for the payment of certain
obligations and to fund working capital requirements of the Company and for
general corporate purposes.
On August 2, 1999, the Registrant acquired, for $50,000 in cash, all of the
assets of Web Trafic Inc., a privately held company which has acquired the
rights to sell advertising for e-commerce on iMall, one of the leading
e-commerce websites on the Internet. In connection therewith, the Company
retained a management firm operated by the former President of Web Trafic Inc.
to assist the Company in developing its Internet division and, in consideration
therefor, issued to such management firm 100,000 shares of the Company's common
stock.
On August 20, 1999, the Registrant acquired all of the assets of Sports &
Entertainment International, Inc. ("SEMI"), a privately held company that is
engaged in the development and production of strategic marketing concepts
relating to various sports, sporting events, shows, memorabilia and products. In
consideration for such assets, the Company paid to SEMI $250,000 in cash and
issued 200,000 shares of the Company's common stock.
3. STOCK OPTION PLANS:
In November 1994, the Board of Directors adopted the 1994 Stock Option Plan (the
"Stock Option Plan"). Following approval by the Board of Directors and
Stockholders of the Company, effective May 21, 1996, the Stock Option Plan was
amended to add 300,000 shares to the previously authorized 260,000 shares that
were subject to options under the Stock Option Plan. The amendment resulted in a
total of 560,000 shares of common stock available for grant under the Stock
Option Plan. No options were granted under the Stock Option Plan during the
three-month period ended October 30, 1999. As of October 30, 1999, 520,000
options were outstanding under the Stock Option Plan.
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In November 1994, the Board of Directors also approved the 1994 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan"), pursuant to which 40,000
shares are reserved for issuance in connection with options granted or available
for grant to the Company's non-employee directors. No options were granted under
the Directors' Plan during the three-month period ended October 30, 1999. As of
October 30, 1999, 20,000 options were outstanding under the Directors' Plan.
4. ADDITIONAL OPTIONS:
In February 1999, the Company granted to Mr. Patrick Thomas, who served at such
time as the Company's Chief Operating Officer and a director of the Company,
time-based options to acquire an aggregate of 150,000 shares of Common Stock and
performance-based options to acquire an aggregate of 50,000 shares of Common
Stock, and granted to Mr. John DeLuca, who served at such time as the Company's
Vice President and director of the Company, time-based options to acquire an
aggregate of 250,000 shares of Common Stock and performance-based options to
acquire an aggregate of 50,000 shares of Common Stock. Effective May 1, 1999,
Mr. DeLuca resigned as an officer and director of the Company and is currently
serving as a consultant to the Company. In connection with Mr. DeLuca's
resignation, all of his time-based and performance-based options were cancelled;
however, the Company currently anticipates that, subject to negotiation of a
definitive agreement, the Company will issue additional options to Mr. DeLuca in
consideration for his services as a consultant. In addition, effective October
1, 1999, Mr. Thomas resigned as an officer and director of the Company and, in
connection therewith, all of his time-based and performance-based options were
cancelled.
On February 4, 1999, the Company granted to Bruce Young, the Company's President
and Chief Executive Officer, options to acquire an aggregate of 500,000 shares
at the fair market value of the common stock on the date of the grant. The
exercise price is $.8125 per share. Fifty percent of such options vested
immediately upon grant, and the balance of such options will vest on the first
anniversary of the date of grant; provided however, that in the event the
closing bid quotation of the Company's common stock equals or exceeds $5.00 for
a period of 30 consecutive trading days, the remaining unvested options will
become immediately vested and exercisable.
In February 1999, the Company also granted to a third-party consultant, in
consideration for goods and services provided by him to the Company, options to
purchase an aggregate of 90,000 shares at the fair market value of the common
stock on the date of the grant. The exercise price is $.8125 per share.
In connection with the Company's acquisition of Web Trafic Inc. on August 2,
1999, the Company retained a management firm operated by the former President of
Web Trafic Inc. to assist the Company in establishing its Internet division.
Pursuant to the Company's agreement with such management firm, the Company
granted to the firm options to acquire an aggregate of 250,000 shares at an
exercise price of $.50 per share. Of such options, 50,000 vested immediately
upon execution of the agreement and the remaining 200,000 options will vest and
become exercisable in increments of 50,000 options on each six-month anniversary
of the agreement, subject to completion of certain milestones.
On August 31, 1999, the Company granted to two third-party consultants to the
Company, in consideration for services rendered by them, options to purchase an
aggregate of 150,000 shares. All of such options are exercisable at a price of
$1.50 per share and vest on the first anniversary of the date of grant.
On October 20, 1999, the Company granted to Douglas Miller, the Company's Vice
President of Finance, options to purchase an aggregate of 30,000 shares of
common stock. All of such options are exercisable at a price of $.9375 per share
(the fair market value on the date of the grant) and vest in three equal annual
installments commencing one year from the date of the grant. In addition, on
October 20, 1999, the Company also granted to a third-party consultant, for
services rendered by him, options to acquire an aggregate of 25,000 shares, all
of which options are exercisable at a price of $.9375 and vest on the first
anniversary of the date of grant.
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5. SUBSEQUENT EVENTS:
On December 8, 1999, the Company entered into a letter of intent to acquire from
Lyon Investments, a Canadian holding company, all of the outstanding shares of
Platinum 2000 ("Platinum"), a Canadian company engaged in the development and
sale of group discount packages to consumers through teleservicing companies
throughout the United States and Canada. In consideration for the Platinum
shares, the Company will pay one-half of specified net profits and may also
issue up to 1,300,000 shares of its common stock depending on the satisfaction
of certain performance targets by Platinum during the one-year period following
the acquisition. The Company has also agreed to pay certain brokers fees
incurred by Platinum in connection with the acquisition, which payment shall
consist of $100,000 in cash plus 200,000 shares of the Company's common stock.
Consummation of the acquisition is subject to certain conditions, including
completion of due diligence and preparation of a definitive purchase agreement.
There can be no assurance that the parties to the acquisition will enter into a
definitive agreement or that, if a definitive agreement is entered into, the
acquisition will be completed or, if completed, that the acquisition would
generate meaningful revenues or profits for the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
TeleHubLink Corporation (formerly known as What A World!, Inc.)(the
"Company") was incorporated under the laws of the State of Delaware in July
1993. Until May 1997, the Company operated as a mall-based specialty retailer of
a wide assortment of products which targeted customers having an active interest
in nature, the environment, education, wildlife, the outdoors and science. In
May 1997, the Company sold substantially all of its assets to Natural Wonders,
Inc. for cash in the amount of $517,795 plus the assumption by Natural Wonders,
Inc. of specified liabilities (the "1997 Sale"). The completion of the 1997 Sale
terminated the Company's specialty retail operations. For the period May 1997
through February 3, 1999, the Company had no operating business and sought to
serve as a vehicle to effect an acquisition, whether by merger, exchange of
capital stock, acquisition of assets or other similar business combination. On
February 4, 1999, the Company acquired all the issued and outstanding capital
stock of Tele Hub Link Corporation ("TeleHub"), a privately-held company
organized under the laws of the Province of Ontario, Canada, that is engaged in
the business of providing teleservices. Pursuant to a Share Purchase Agreement
dated as of December 21, 1998 (as amended, the "Share Purchase Agreement")
between the Company, TeleHub and the shareholders of TeleHub (the "TeleHub
Shareholders"), the Company acquired from the TeleHub Shareholders all of the
issued and outstanding capital stock of TeleHub in exchange for an aggregate of
13,011,339 shares (the "Shares") of common stock, par value $.01 per share
("Common Stock"), of the Company (or 3.9252318 shares of the Company's Common
Stock for each share of TeleHub common stock) and, as a result thereof, TeleHub
became a wholly-owned subsidiary of the Company (the "TeleHub Transaction"). In
addition, in connection with the TeleHub Transaction, the Company amended its
Certificate of Incorporation in order to change its name from What A World!,
Inc. to TeleHubLink Corporation. As a result of the 1997 Sale and the TeleHub
Transaction, the Company currently operates as a holding company, the principal
asset of which is its 100% ownership interest in TeleHub. Accordingly, the
business of the Company is currently conducted primarily through TeleHub.
PLAN OF OPERATION
Since the consummation of the TeleHub Transaction, the Company, through its
wholly-owned subsidiary TeleHub, has been primarily engaged in the business of
providing call center teleservices, including both inbound and outbound
teleservices. The Company has not generated any meaningful
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revenues since the consummation of the TeleHub Transaction, and there can be no
assurance that the Company's operations will generate profits in the future or
that such profits, if any, would be significant.
The Company is seeking to continue the development of its multi-service
call center "HUB" concept, pursuant to which the Company would act as a central
focus for businesses to outsource typical non-core functions and capitalize on
the network to be established by the Company. In this connection, the Company
offers or proposes to offer the following services: providing call center
teleservices, including inbound and outbound call center activities in
connection with sales, marketing, customer support and product support; selling
local and long distance telecom services; and selling certain cellular and PCS
telephone services. In addition, the Company is also seeking to expand its
operations by servicing the Internet market, and is in the early stages of
establishing a structure to address the emerging Internet "e-commerce" market.
In this connection, the Company has formed a new Internet division which is
engaged in selling client advertisements to Internet malls, facilitating the
creation of web sites for its clients and providing e-commerce fulfillment
services, and is currently in discussions regarding possible acquisitions of
certain Internet-related businesses. In August 1999, the Company acquired all of
the assets of Web Trafic Inc., a privately-held company which has acquired the
rights to sell advertising for e-commerce on iMall, one of the leading
e-commerce websites on the Internet with approximately 1,600 merchants. Web
Trafic serves as an independent Canadian representative for iMall, Inc., and
intends to market its services through its business listings, classified ads,
referral web pages and portals. In consideration for the Web Trafic Inc. assets,
the Company paid $50,000 and, in connection with the acquisition, the Company
retained a management firm operated by the former President of Web Trafic Inc.
to assist the Company in developing its Internet division. There can be no
assurance that this acquisition will generate meaningful revenues or profits for
the Company. In addition, the Company will be required to obtain additional
financing in order to fund the development and operational costs of any
companies, including Web Trafic Inc., acquired by the Company. There can also be
no assurance that the Company will be successful in implementing its "HUB"
concept or developing its teleservices operations or Internet-related
businesses.
A key element of the Company's strategy involves growth through
acquisitions of other companies or assets that would complement or expand the
Company's existing business. On May 13, 1999, the Company entered into a letter
of intent to acquire wirelessEncryption.com, a development stage company which
is working on the development of a product which encrypts data at the signal
level while enhancing signal reception and voice quality. The Company presently
anticipates that it may issue up to 5,000,000 unregistered shares of its common
stock in connection with the acquisition of wirelessEncription.com and that it
may also issue up to 4,000,000 additional unregistered shares of its common
stock, depending upon the satisfaction of certain milestones and other
conditions. Consummation of the transaction is subject to completion of due
diligence and preparation of a definitive purchase agreement and related
documentation. Affiliates of Mr. Stanley Young, the former Chairman of the Board
and a former director of the Company, and members of his family own a
substantial equity interest in wirelessEncryption.com. In addition, as described
below under "Recent Developments," on December 8, 1999, the Company entered into
a letter of intent to acquire all of the outstanding shares of Platinum 2000, a
Canadian company engaged in the development and sale of group discount packages
to consumers through teleservicing companies throughout the United States and
Canada. Consummation of the acquisition is subject to certain conditions,
including completion of due diligence and preparation of a definitive purchase
agreement. There can be no assurance, with respect to either such proposed
acquisition, that the parties to the acquisition will enter into a definitive
agreement or that, if a definitive agreement is entered into, the acquisition
will be completed or, if completed, that the acquisition would generate
meaningful revenues or profits for the Company. In addition, if either or both
acquisitions are consummated, the Company will be required to obtain additional
financing to fund the development and operational costs of the acquired company
or companies.
The Company's long-term strategy is to provide comprehensive
telecommunication-based solutions to facilitate its clients' marketing, sales
and other business objectives. Through relationships with clients and strategic
alliances, and its combination of proposed teleservices activities, the Company
intends to provide its clients with a multi-service call center or "HUB" that
will link clients with their ultimate customers and other organizations across
various complementary industries. In addition, as part of this strategy, the
Company will also seek to introduce its clients to the emerging "e-commerce"
market and to thereby expand its business by providing various Internet services
to its clients.
The Company's proposed plan of operation and prospects will be largely
dependent on the Company's ability to successfully establish and equip
additional call centers on a timely and cost effective basis; hire and retain
skilled technical, marketing and other personnel; successfully expand into the
Internet market and attract and retain significant numbers of clients.
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RECENT DEVELOPMENTS
On August 20, 1999, the Company acquired all the assets (including certain
intellectual property rights, contract rights and inventory) of Sports &
Entertainment Marketing International Inc. ("SEMI"), a privately held company
that is engaged in the development and production of strategic marketing
concepts relating to various sports, sporting events, shows, memorabilia, and
products. In consideration for such assets, the Company paid to SEMI $150,000 in
cash and issued 200,000 shares of the Company's common stock. There can be no
assurance that this acquisition will generate meaningful revenues or profits for
the Company.
On December 8, 1999, the Company entered into a letter of intent to acquire
from Lyon Investments, a Canadian holding company, all of the outstanding shares
of Platinum 2000 ("Platinum"), a Canadian company engaged in the development and
sale of group discount packages to consumers through teleservicing companies
throughout the United States and Canada. In consideration for the Platinum
shares, the Company will pay one-half of specified net profits and may also
issue up to 1,300,000 shares of its common stock depending on the satisfaction
of certain performance targets by Platinum during the one-year period following
the acquisition. The Company has also agreed to pay certain brokers fees
incurred by Platinum in connection with the acquisition, which payment shall
consist of $100,000 in cash plus 200,000 shares of the Company's common stock.
Consummation of the acquisition is subject to certain conditions, including
completion of due diligence and preparation of a definitive purchase agreement.
There can be no assurance that the parties to the acquisition will enter into a
definitive agreement or that, if a definitive agreement is entered into, the
acquisition will be completed or, if completed, that the acquisition would
generate meaningful revenues or profits for the Company.
RESULTS OF OPERATIONS
THIRTEEN AND THIRTY NINE WEEKS ENDED OCTOBER 30, 1999 COMPARED TO THE THIRTEEN
AND THIRTY NINE WEEKS ENDED OCTOBER 31, 1998
Net sales for the thirteen weeks ended October 30, 1999 (the "Third Quarter
of Fiscal 1999") increased to approximately $212,000 from net sales of $0 for
the comparable thirteen weeks ended October 31, 1998 (the "Third Quarter of
Fiscal 1998"). Net sales also increased for the thirty-nine weeks ended October
30, 1999 to approximately $1,023,100 from net sales of $0 for the thirty-nine
weeks ended October 31, 1998. The increases are the result of the acquisition of
TeleHub's business in the TeleHub Transaction.
Gross profit for the Third Quarter of Fiscal 1999 was approximately $80,800
or 38.0% of sales, as compared with $0 for the Third Quarter of Fiscal 1998.
Gross profit for the first thirty-nine weeks of fiscal 1999 was approximately
$423,100 or 41.0% of sales, as compared with $0 for the first thirty-nine weeks
of fiscal 1998. The increase is the result of the acquisition of TeleHub in the
TeleHub Transaction.
Selling, general and administrative expenses ("SG&A") increased to
approximately $320,100 in the Third Quarter of Fiscal 1999 and to approximately
$694,500 in the first thirty-nine weeks of fiscal 1999 from approximately
$21,400 and $38,800 for the Third Quarter of Fiscal 1998 and the first thirty
nine weeks of fiscal 1998. The primary components of SG&A are rent, salaries
(including commissions and fringe benefits), consulting fees, depreciation,
travel and promotion, and corporate overhead expenses (including primarily
professional fees, insurance, administrative salaries (including fringe
benefits), transfer agent fees and printing fees). In the Third Quarter of
Fiscal 1999, corporate overhead expenses accounted for approximately $108,000 or
34% of the total SG&A, while corporate overhead expenses accounted for
approximately $238,000 or 34% of the total SG&A for the first thirty-nine weeks
of fiscal 1999. The increases in SG&A for the Third Quarter of Fiscal 1999 as
compared to the Third Quarter of Fiscal 1998 were primarily the result of the
Company's having acquired an operating business as a result of the TeleHub
Transaction.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary ongoing capital requirements are anticipated to be
for funding its operations and exploring any opportunities to effect future
acquisitions, whether by merger, exchange of capital stock or other business
combination. There can be no assurance that any such transactions will be
effected. In view of the limited resources of the Company, consideration may be
given to additional equity or debt placements to fund merger and acquisition
activities as well as to fund working capital for general corporate purposes
that might be required to effectuate the Company's business objective.
The Company had working capital of approximately $(503,200) and $(67,300)
at October 30, 1999 and January 30, 1999, respectively. Since the TeleHub
Transaction, the Company's primary ongoing capital requirements have been and
are anticipated to be for funding its operations and exploring and developing
opportunities in the call center teleservices industry and in expanding its
business into servicing the Internet market.
In July 1999, the Company consummated the July 1999 Private Financing,
pursuant to which it sold a total of 24 units, by means of a private placement,
for gross proceeds of $600,000. Each unit consisted of a 10% subordinated
convertible debenture due July 13, 2000 in the principal amount of $25,000. The
Company will be required to issue up to an aggregate of 1,200,000 shares of
common stock in the event all of the debenture holders elect to convert their
debentures on the maturity date thereof. In addition, pursuant to the terms of
such offering, the company will also be required to issue, on the maturity date
of the debentures, warrants to purchase an aggregate of from 150,000 shares of
common stock (if no debenture holders elect to convert their debentures) to
1,200,000 shares of common stock (if all debenture holders elect to convert
their debentures). A portion of the proceeds of such financing was used to fund
certain cash costs associated with the acquisition of Web Trafic Inc. and the
payment of certain past due obligations, and the balance was used to fund
additional future acquisitions, if any, and to fund working capital and general
corporate purposes.
In August and September 1999, the Company consummated the August/September
1999 Financing pursuant to which it issued 580,000 shares of Common Stock for an
aggregate of $725,000. Proceeds of the financing were used for the payment of
certain obligations and to fund working capital requirements of the Company and
for general corporate purposes.
As described above, the Company currently anticipates that it will continue
to seek additional financing from several sources, including private placements
of debt and/or equity securities, in order to fund its business expansion plans,
including funding acquisition opportunities which may arise, and to provide
short-term working capital. There can be no assurance that additional financing
will be available to the Company on commercially reasonable terms, or at all.
Any inability to obtain additional financing could have a materially adverse
effect on the Company, including possibly requiring the Company to significantly
curtail, and possibly causing the Company to cease, its operations. In addition,
any equity financing may involve substantial dilution to the interests of the
Company's then existing stockholders. Further, there can be no assurance that
the Company will achieve profitability or positive cash flow.
During the first thirty-nine weeks of fiscal 1999, cash increased by
approximately $202,800 to approximately $203,200. The overall increase in cash
resulted primarily from the cash received from the Company's July 1999 Financing
arrangement and August/September 1999 Financing arrangement. The Company repaid
approximately $14,800 in indebtedness during the period.
During the first thirty-nine weeks of fiscal 1998, cash decreased by
approximately $87,400 to approximately $43,300. The overall decrease in cash
resulted primarily from the Company's paying ongoing general and administrative
costs, repayment of debt, and the loss of the Company's main source of cash flow
as a result of the Company's discontinuing its retail operations. The Company
repaid approximately $700 in indebtedness during the period.
During the first thirty-nine weeks of fiscal 1998, the Company did not
maintain any lines of credit or cash borrowings to finance its reduced capital
requirements.
12
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements in the foregoing discussion of financial condition and
the results of operations, or elsewhere in this document, represent
"forward-looking" statements as defined in the Private Securities Litigation
Reform Act of 1996. Such statements involve matters that are subject to risks
and uncertainties, as a result of which actual future results or events may
differ materially depending on a variety of factors.
The Company's future operations are subject to various risk factors,
including the following: the limited funds currently available to the Company
may not be adequate for the Company to pursue its business objectives, and there
is no assurance funds will be available from any source and, if not available,
the Company will be required to limit its operations to those that can be
financed from existing funds; TeleHub has a limited operating history and there
can be no assurance that any of its future activities will be profitable; as a
holding company, the Company's success will depend on the operations, financial
condition and management of TeleHub and any other companies which the Company
may acquire, and in the event the Company does not have the resources or is
otherwise unable to diversify its operation into a number of areas, the Company
may become subject to economic fluctuations within a particular business or
industry and thereby increase the risks associated with its operations; the
Company may be unable to successfully complete acquisitions of assets or
complementary companies which are necessary to expand its business, and may be
unable to integrate into its operations any such businesses or assets acquired
by it; TeleHub is a start-up company and, as such, may become subject to the
problems, expenses, difficulties, complications and delays that are frequently
encountered by a company establishing a new business; TeleHub may be unable to
secure teleservices contracts with clients or generate revenues under any such
contracts it does secure; TeleHub may be unable to successfully develop and
utilize its acquired infrastructure and develop databases to perform
teleservices for its clients and may be unable to successfully implement
marketing and sales methods for its services or expand into new areas, including
Internet and "e-commerce" related businesses; TeleHub may be unable to acquire
and implement quality telecommunications and computer technology and end user
database and software products necessary for its operations; TeleHub may be
unable to respond to changing technological developments and acquire and
implement new equipment and systems to meet changing customer needs on a timely
and cost-effective basis; TeleHub may be unable to adequately ensure that its
operations will not be adversely impacted by the Year 2000 Issue; TeleHub's
inability to obtain adequate local or long distance telephone service, or any
interruption in such service or rate increases relating thereto, could
materially adversely affect TeleHub's business, results of operations and
financial condition; TeleHub may not be able to procure, hire and train on a
timely basis a sufficient labor force of qualified employees or independent
contractors in connection with an increase, if any, in the volume of its
teleservices business; TeleHub's failure to retain the service of its key
employees or its failure to retain additional qualified management personnel to
support its planned growth could have a material adverse effect on TeleHub; the
teleservices industry is highly competitive and is characterized by low barriers
to entry and rapid growth, and TeleHub may not be able to compete effectively
against its current competitors or future competitors, many of whom may be
substantially larger and better capitalized than TeleHub; and any changes to
existing Canadian or U.S. federal, provincial or state laws or regulations
governing TeleHub's business, or any additional laws or regulations, could limit
TeleHub's current or future activities or could significantly increase TeleHub's
cost of compliance.
YEAR 2000 COMPLIANCE
The Year 2000 issue results from computer programs written using two
digits rather than four to define the applicable year. Any computer programs
that have date-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities.
The Company has made an assessment with regard to whether its own internal
information systems are Year 2000 compliant. Since February 1999, in addition to
updating employee computers and workstations, the Company has upgraded various
accounting, telecommunications, customer care systems and transaction systems at
an aggregate cost of approximately $150,000, with systems that are warranted by
the
13
<PAGE>
vendors to be Year 2000 compliant. To the extent the Company purchases
additional systems, it will require that such systems are warranted by the
vendors to be Year 2000 compliant. The Company's existing vendors have assured
the Company that such systems are warranted to be Year 2000 compliant. The
Company employs a Director of Operations who oversees information systems and
whose responsibilities include oversight of Year 2000 compliance. The Company
does not separately track the internal costs incurred for Year 2000 projects,
which are principally the related payroll costs for its information systems
personnel. Although the Company does not believe that any additional Year 2000
compliance-related costs will be significant, there can be no assurance that
costs incurred to address unanticipated issues would not have a material adverse
effect on the Company's business, operating results and financial conditions.
Any failure of third-party equipment or software comprising any part of the
Company's systems to operate properly with regard to Year 2000 and thereafter
could require the Company to incur unanticipated expenses to address associated
problems, which could have a material adverse effect on the Company's business,
operating results and financial condition.
The Company believes, based on an internal assessment, that the Company's
telecommunications hardware and current versions of its software products are
Year 2000 compliant. The Company has no plan to ascertain whether the internal
systems and products of its potential future customers are Year 2000 compliant.
The Company may in the future be subject to claims based on Year 2000 problems
in others' products or issues arising from the integration of multiple products
within an overall system. Although the Company has not been involved in any
litigation or proceeding to date involving its services related to Year 2000
issues, there can be no assurance that it will not in the future be required to
defend its services or to negotiate resolutions of claims based on Year 2000
issues. The costs of defending and resolving Year 2000-related disputes, and any
of our liabilities for Year 2000-related damages, including consequential
damages, could have a material adverse effect on the Company's business,
operating results and financial condition.
The Company does not have any specific contingency plans if any Year 2000
problems develop with respect to its systems or systems acquired from vendors.
Contingency plans will be developed if the Company identifies instances of
noncompliance and such noncompliance is expected to have a material adverse
impact on our operations. The cost of developing and implementing such plans may
itself be material. However, the Company does not currently believe that such
contingency plans will be required due to its use of alternative technology
systems at the Company's call center.
Year 2000 issues may affect the purchasing patterns of customers and
potential customers in a variety of ways. Many companies are expending
significant resources to replace or remedy their current hardware and software
systems for Year 2000 compliance. These expenditures may result in reduced funds
available to purchase services such as those offered by the Company. The Company
does not believe that there is any practical way to ascertain the extent of, and
has no plan to address problems associated with, such a reduction in purchasing
resources of its customers. Any such reduction could, however, result in a
material adverse effect on the Company's business, operating results and
financial condition. The Year 2000 problem is pervasive and complex, as
virtually every computer operation will be affected in some way. Consequently,
Year 2000 compliance might not be achieved without significant additional costs
to the Company.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
On August 16, 1999, the Registrant consummated a private placement pursuant
to which it sold 13.5 units for gross proceeds of $675,000 and, on September 15,
1999 sold an additional unit for gross proceeds of $50,000. Each unit consisted
of 40,000 shares of the Registrant's common stock. In connection with such
private placement, the Registrant sold an aggregate of 580,000 shares of common
stock for gross proceeds of $725,000. Proceeds of the financing were used for
the payment of certain obligations and to fund working capital requirements of
the Registrant and for general corporate purposes. The Registrant relied upon
the exception provided by Section 4(2) of the Securities Act of 1933, as amended
(the "Act"), in connection with the issuance and sale of such shares.
On August 2, 1999, the Registrant acquired all of the assets of Web Trafic
Inc., a privately held company. In connection therewith, the Registrant retained
a management firm operated by the former President of Web Trafic Inc. to assist
the Registrant in developing its Internet division and, in consideration
therefor, issued to such management firm 100,000 shares of the Registrant's
common stock. The Registrant relied upon the exception provided by Section 4(2)
of the Act in connection with the issuance and sale of such shares.
On August 20, 1999, the Registrant acquired all of the assets of Sports &
Entertainment Marketing International, Inc. ("SEMI"), a privately held company,
and, in consideration for such assets, issued to SEMI 200,000 shares of the
Registrant's common stock. The Registrant relied upon the exception provided by
Section 4(2) of the Act in connection with the issuance and sale of such shares.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11 Statement re Computation of Per Share Earnings (not
required because the relevant computations can be
clearly determined from material contained in the
financial statements included herein).
27 Financial Data Schedule (For SEC Use Only)
99.1 Purchase Agreement between the Company and Sports &
Entertainment Marketing International, Inc.
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during
the thirteen weeks ended October 30, 1999.
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TeleHubLink Corporation
Date: DECEMBER 17, 1999 By: /s/ BRUCE W. YOUNG
----------------------------------
Bruce W. Young
President
Date: DECEMBER 17, 1999 By: /s/ DOUG MILLER
----------------------------------
Doug Miller
Vice President of Finance
(Principal Financial and Accounting
Officer)
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> OCT-30-1999
<CASH> 203,195
<SECURITIES> 0
<RECEIVABLES> 512,524
<ALLOWANCES> (28,329)
<INVENTORY> 10,822
<CURRENT-ASSETS> 746,700
<PP&E> 298,547
<DEPRECIATION> (61,869)
<TOTAL-ASSETS> 1,979,613
<CURRENT-LIABILITIES> 1,249,946
<BONDS> 0
0
0
<COMMON> 187,534
<OTHER-SE> 376,572
<TOTAL-LIABILITY-AND-EQUITY> 1,979,613
<SALES> 1,023,120
<TOTAL-REVENUES> 1,023,120
<CGS> 600,011
<TOTAL-COSTS> 1,278,052
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,149
<INCOME-PRETAX> (274,081)
<INCOME-TAX> 0
<INCOME-CONTINUING> (274,081)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (274,081)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
EXHIBIT 99.1
ASSETS SALE AGREEMENT
ENTERED INTO THIS AUGUST 20TH, 1999
BETWEEN: TELEHUBLINK CORPORATION, a duly constituted
corporation, having its head office located at New
England Executive Park, in the city and district
of Burlington, State of Massachussets, represented
by BRUCE YOUNG being duly authorized to enter its
President, into this Agreement,
(hereinafter referred to as "the Buyer");
AND: SPORTS AND ENTERTAINMENT MARKETING INTERNATIONAL
INC. (SEMI INC), A corporation duly constituted
under Federal laws, and having its head office at
290 Elgar, Suite 111, in the city of Verdun,
herein represented by its directors, Serge Trudeau
and Roger Neron, duly authorized to enter into
this agreement.
(hereinafter referred to as "the Vendor");
BEFORE ENTERING INTO THE PRESENT AGREEMENT, THE PARTIES DECLARE AS FOLLOWS:
WHEREAS the Vendor is engaged in the development and production of strategic
marketing concepts as they relate to various sports, sporting events, shows,
memorabilia and products.(hereinafter the "business");
WHEREAS the Vendor has developed various sports and marketing concepts and
entertainment productions relating to hockey, golf, baseball, basketball and
sports in general; More specifically, Once Upon Hockey concept, format and
marketing rights, including rights from a Copyright and Trademark application
relating to the Once Upon Hockey concept, which application and registrar
responses are appended hereto and referred to as ANNEX A; a television
production contract with Productions Coscient Inc. relating to the Once Upon
Hockey Concept which contract is hereto appended and referred to as ANNEX B;
Once Upon Hockey merchandising rights including inventory; the Pro Collegiate
Tour concept and event marketing rights; A confidential information exchange and
non-disclosure agreement with Jack Hopson has already been executed and which
agreement is hereto appended and referred to as ANNEX C. The V.I.P. Golf
<PAGE>
2
Tour concept and marketing rights; the Baseball Golf Tour concept and marketing
rights; the Audio Promotion Card marketing licence with Microsound; and the
Audio Calling Card concept to be marketed with Teleglobe Canada, and assorted
inventory, itemized and prepared by Giroux, Menard et associes, accountants as
an inventory schedule to the sale contemplated herein under ANNEX D, and
appended hereto.
WHEREAS the Vendor desires to sell the said assets and all related rights;
WHEREAS the Buyer has expressed an interest in acquiring the asset and all
related rights;
NOW THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. DEFINITIONS
For the purpose of the present agreement, and of any other document related to
it or which makes reference to it, unless the context opposes it, the following
words, terms or expressions will have the meaning given to them hereafter:
1.1. ASSETS: means the inventory as defined hereafter, and any and all rights,
contracts, concepts, trade marks, trade names which the vendor may have
in its sports marketing and entertainment related businesses and the
goodwill attached to such businesses, including but without limiting the
generality of the foregoing all intellectual property and the rights and
benefits pertaining to the assets, concepts, rights mentioned in the
preamble of this agreement;
1.2. CLOSING: means the fulfilling and the complete execution, in accordance
with the conditions laid out in the present agreement, of the sale of the
assets by the Vendor to the Buyer and of all other related transactions
between the parties made necessary by the present agreement and which
will happen, on or before August 20th, 1999 in the province of Quebec;
1.3. EFFECTIVE CLOSING DATE: means August 20th , 1999;
1.4. BUSINESS: means the sports marketing and entertainment business presently
exploited by the Vendor under the name `'Sports and Entertainment
Marketing International Inc.;(SEMI)
1.5 ESCROW AGENT: means the law firm of Mannella & Associates, located at
3055, De l'Assomption, in Montreal, province of Quebec;
<PAGE>
3
1.7. INVENTORY: means all existing sports related merchandise, and other
inventory being the sole property of the vendor as it has so declared
1.8. MANAGEMENT: means the officers, directors, key employees identified by
the Buyer as being part of the management of the Vendor, namely Serge
Trudeau and Roger Neron
1.09. TAXES: means federal and provincial income taxes, federal, provincial or
municipal taxes of any type such as goods and services taxes, capital
taxes, sales or use taxes, property taxes, business taxes, any liability
relating to Worker's Compensation or Employers' Health Tax and any
withholding requirements relating to Employment Insurance, the Canada
Pension Plan or Employment Standards, the Quebec Pension Plan and any
other governmental charges or assessments.
2. PREAMBLE
2.1. The preamble hereto shall form a part hereof as if hereinafter recited at
length.
3. AGREEMENT
3.1. The Vendor hereby sells and the Buyer hereby purchases all the assets of
the Vendor described in Paragraph 1.1.
4. SALE PRICE OF THE ENTERPRISE
4.1. The parties have agreed that the sale price of the assets shall be ONE
HUNDRED AND FIFTY THOUSAND DOLLARS (150,000.00 USD $) which the Vendor
herein declares having received and for which said Vendor gives complete
quit and discharge thereof to the Buyer, and 200,000 common shares, of
the buyer `'Telehublink Corporation", pursuant to the (Securities and
Exchange Commission (S.E.C.)) restrictions and regulations, governing
publically traded securities, to be issued to the vendor or any other
person or entity which the vendor may so designate;
4.2 It is agreed that the buyer shall undertake to register the shares
contemplated in section 4.1 with the S.E.C., simultaneously with any
registration of any Telehublink shares or a new share issue of
Telehublink pursuant to the regulations of the S.E.C.
5. VENDOR'S REPRESENTATIONS AND WARRANTIES
<PAGE>
4
5.1. The Vendor represents and warrants to the Buyer, that, at the signing of
the present agreement, that each of the following representations and
warrantees constitute for the Buyer a condition without which the Buyer
would not have entered into the present Agreement.
5.2. The Vendor represents and warrants to the Buyer that it is a duly
constituted corporation and is in good standing with respect to the laws
pertaining to its existence and its activities; that it will have the
capacity and the right to own assets and to dispose of them, to carry out
its business and, notwithstanding the approval of the present Agreement
by its board of directors, to fulfill its obligations under the present
Agreement;
5.3. The Vendor represents and warrants that all returns, filings, elections
and information reports required to be filed by it have been or will be
filed on or before the date of closing and that such returns are true,
complete and correct and properly reflect the liability of the Vendor for
taxes.
5.4. The Vendor has furnished the Buyer with an audited inventory schedule, as
of August 18, 1999, attached hereto and referred to as ANNEX D. The
Vendor represents and warrants that such statement, is true and correct
and fairly presents the inventory of the Vendor at the date thereof.
5.5 The Vendor represents and warrants that it has made timely payment of all
taxes, installments and all assessments, reassessments, charges,
penalties, interest and fines related thereto which were or are due and
payable by it.
The Vendor also represents and warrants that it is not subject to taxes
in any jurisdiction other than Canada and the province of Quebec and that
at the date of closing, there are no liabilities whatsoever or any to
creditors government or administrative organisations;
5.6. The Vendor represents and warrants that, where applicable, it has
withheld from each payment made to any of its officers, directors, former
directors, and employees the amount of all taxes and other deductions
required to be withheld therefrom and has paid the same on a timely basis
to the proper governmental authority.
5.7. The Vendor represents and warrants that all accounts, books, ledgers and
other records material to the business of whatsoever kind have been
fully, properly and accurately kept and completed in all material
respects, and there are no material inaccuracies or discrepancies of any
kind contained or reflected therein, and they give and reflect a true and
fair view of the business;
<PAGE>
5
5.8 The Vendor represents and warrants that the Vendor is not a party to any
material contract, but not limited to, (a) any employment, compensation,
pension plan or shareholders agreement, (b) any loan agreement, (c) any
guarantee, (d) any maintenance or service agreement, (e) any agreement,
contract or commitment limiting the ability of the Vendor to engage in
any line of business or to compete with any other person, (f) any lease
for real (immoveable) or personal (moveable) property, (g) any agreement
with any officer or director of the Vendor, (h) any contract with
clients, and (i) any agreement, contract or commitment which might
reasonably be expected to have a negative material impact on the business
or operations of the Vendor or on the present agreement;
5.9 The Vendor represents and warrants that it is the sole proprietor of all
the assets sold under the present Agreement and that those assets are
free of any charges, liens or encumbrances of any sort;
5.10 That its has authority to conclude and execute the present agreement and
that it has not concluded any contract with a third party, whether
natural or corporate, that may in any hinder the rights of the Buyer
conferred by the present agreement;
5.11 That it has no action, suit proceedings, or written threat of action,
affecting the assets;
5.12 The use of these inherent rights does not violate in any way, third party
intellectual property rights and does not constitue an act of
infringement or an act of unfair competition;
5.13 The Vendor represents and warrants that there has not been, and to its
best knowledge, information and belief do not anticipate, any adverse
change in relations with Clients as a result of the transactions
contemplated by this Agreement or otherwise;
5.14. The Vendor represents and warrants that all of the assets sold and all of
the inventory on the Premises are insured;
5.15. The Vendor represents and warrants that it has no unpaid creditors as per
the affidavit annexed to the present agreement;
7. BUYER'S OBLIGATIONS, REPRESENTATIONS AND WARRANTEES
7.1. The Buyer represents and warrants to the Vendor the following and
acknowledges that each of the following representations and warrantees
constitute for the Vendor a condition without which the Vendor would not
have entered into the present Agreement;
<PAGE>
6
7.2. The Buyer represents and warrants to the Vendor that it will be, at the
date of closing, a duly constituted corporation and will be in good
standing with respect to the laws pertaining to its existence and its
activities; that it will have the capacity and the right to own assets,
to carry out its business and, notwithstanding the approval of the
present Agreement by its board of directors, to fulfill its obligations
under the present Agreement;
8. NON-COMPETITION AND NON-SOLICITATION
8.1. The Management and the Vendor acknowledge that the goodwill acquired as
part of the present business purchase represents its most important
element and that the Management of the Vendor entering into a business
competitive to that of the business would cause serious and irreparable
damage to the Buyer;
8.2. Consequently, the Management and the Vendor both undertake, for a period
of twenty-four (24) months following the signing of the present
agreement, not to, alone or in association with others, directly or
indirectly, whether as employee, shareholder, director, agent, officer,
lender, guarantor, mandatory or otherwise:
(a) enter into any business that would be competitive in any way with
the business of the Buyer within the province of Quebec;
8.3. Also, the Management and the Vendor both undertake to NEVER, alone or in
association with others, directly or indirectly, whether as employee,
shareholder, director, agent, officer, lender, guarantor, mandatory or
otherwise:
(b) solicit a client of SEMI or the Buyer, past, present or future; and
(c) solicit an employee of the SEMI or the buyer, past, present or
future, to work into any business that would be competitive with
that of SEMI or the Buyer;
8.4. Any contravention to the non-competition obligations contained in
provision 8.2 or the non-solicitation obligations contained in provision
8.3 from a member of the Management or the Vendor will generate against
the contravening party, without prejudice to any of the other rights and
recourses offered to the Buyer, a fixed penalty of TEN THOUSAND DOLLARS
($10,000) for each and every day any such contravention shall occur or
continue;
8.5. The Management and the Vendor both recognize that the non-competition
obligations and penalties contained in provisions 8.2, 8.3 and 8.4 are
reasonable in the circumstances and are necessary for the protection of
the Buyer;
<PAGE>
7
8.6. In the event that any of the obligations contained in provisions 8.2, 8.3
or 8.4 is found to be abusive by a court or an arbitrator for any reason,
the court or arbitrator can reduce the obligation to a reasonable level;
9. ESCROW AGENT
9.01 The parties hereto name and appoint Mannella and Associates as Escrow
agents in this transaction.
9.02 The Escrow Agent shall keep the present agreement and all other related
documents in escrow until the sale price mentioned in paragraph 4.1 has
been received by the vendor;
9.02 The escrow agent shall not be required to give security nor shall he be
responsible for the acts, omissions, faults, errors, fraud, failure or
misconduct of any agent whom he may reasonably employ in the exercise of
the powers conferred upon him hereunder, nor for loss occasioned by his
own acts, omissions or defaults, unless such acts, omissions or defaults
constitute a breach of trust knowingly and intentionally committed by him
;
9.03 The escrow agent shall not be required to institute, defend, or intervene
in any legal action to enforce the terms and conditions of the present
Agreement until the escrow agent has been indemnified against all
expenses and liabilities incurred and to be incurred by the escrow agent,
including his own reasonable compensation as escrow agent ;
9.04 The escrow agent may, at any time, consult with and retain the advice of
such counsel it deems appropriate, and the escrow agent shall incur no
liability whatsoever for any action taken by the escrow agent pursuant to
this Agreement, whether or not with advice of such counsel, unless the
escrow agent knowingly and intentionally commits a breach of trust ;
9.05 The escrow agent shall not be bound to pay any premiums nor to ensure
that any policies of insurance are kept in force ;
10. INTERVENTION CLAUSE
10.1 Mr. Serge Trudeau and Mr. Roger Neron hereby intervene to the present
agreement and declare themselves to be bound jointly and severally with
all the representations, warranties and obligations hereby made, given or
assumed by
<PAGE>
8
the Vendor and hereby renounce to their benefits of this discussion and
division if applicable. More specifically, but without limiting the
generality of the foregoing they declare themselves bound by the
obligations contained in clause 8.
11. FINAL DISPOSITIONS
11.1. The present Agreement shall be governed by and construed in accordance
with the laws of the Province of Quebec.
11.2. Within context, the singular form shall also include the plural form and
the masculine gender includes the feminine gender.
11.3 All the parties herein hereby undertake to sign any and all documents in
order to give full effect to the present agreement;
11.4 The present Agreement constitutes the entire agreement between the
parties and any and all previous agreement, written or oral, express or
implied between the parties or on their behalf during the course of the
negotiation of the present agreement are hereby terminated and cancelled;
11.5. The parties hereto confirm that they have each required that the present
Agreement and all accessory documents and notices be drawn up in the
English language. Les parties a la presente confirment qu'elles ont exige
que cette convention ainsi que tout autre document ou avis soient rediges
dans la langue anglaise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in Montreal,
Quebec, this 20th day of August 1999.
THE BUYER:
<PAGE>
9
TELEHUBLINK CORPORATION
per: /s/ BRUCE YOUNG
---------------
Bruce Young
THE VENDOR:
SPORTS AND ENTERTAINMENT MARKETING
INTERNATIONAL INC. (SEMI INC.)
Per: /s/ SERGE TRUDEAU
-----------------
Serge Trudeau
Per: /s/ ROGER NERON
---------------
Roger Neron
/s/ SERGE TRUDEAU
- -----------------
SERGE TRUDEAU
/s/ ROGER NERON
- ---------------
ROGER NERON
<PAGE>
10
ASSIGNMENT AGREEMENT
ENTERED INTO THIS 20TH DAY OF AUGUST, 1999:
BETWEEN: SPORTS AND ENTERTAINMENT MARKETING INTERNATIONAL INC.
(SEMI INC.), a corporation duly constituted under
Federal laws, and having its head office at 290 Elgar,
Suite 111, in the city of Verdun; Herein represented by
Mr. Serge Trudeau and Roger Neron duly authorised as
they so delare;
(hereby referred to as SEMI)
AND: SERGE TRUDEAU, operating a business under the name
SERGE TRUDEAU RESOURCES residing and domiciled at 290
Elgar Street, Suite 111, in the City of Verdun;
(hereinafter referred to as `'Trudeau")
WHEREAS Serge Trudeau's Resources has entered into a confidential information
exchange and non-disclosure agreement dated August 7th, 1999 with Mr. Jack
Hopson
(herein referred to as the Agreement);
WHEREAS Serge Trudeau's Resources desires to assign all its rights it may have
under said agreement to SEMI;
WHEREAS SEMI has accepted such assignment;
IN VIEW OF THE FOREGOING the parties agree as follows:
1- The preambule is an integral part of the present agreement;
2- Trudeau hereby assigns, transfers, sells to SEMI which accepts any and
all rights it may have with regards to the Agreement for the amount of
ONE DOLLAR ($1,00) and other good and valuable considerations which
Trudeau declares having received and for which he gives complete quit and
discharge to SEMI;
<PAGE>
11
3- The parties hereto confirm that they have each required that the present
Agreement and all accessory documents and notices be drawn up in the
English language. Les parties a la presente confirment qu'elles ont exige
que cette convention ainsi que tout autre document ou avis soient rediges
dans la langue anglaise.
IN WITNESS WHEREOF, the parties have executed this agreement in Montreal,
Quebec, this 20th day of August 1999;
SEMI
_________________________ ________________________
BY: ROGER NERON BY: SERGE TRUDEAU
_________________________
BY: SERGE TRUDEAU
<PAGE>
12
ASSIGNMENT AGREEMENT
ENTERED INTO THIS 20TH DAY OF AUGUST, 1999
BETWEEN: SERGE TRUDEAU, residing and domiciled at
AND: ROGER NERON, residing and domiciled at
(hereinafter collectively designed as the `'Assignor)
AND: SPORTS AND ENTERTAINMENT MARKETING INTERNATIONAL INC.
(SEMI INC), A corporation duly constitued under Federal
Laws, and having its head office at 290 Elgar, Suite
111, in the City of Verdun, herein represented by Mr.
Roger Neron and Serge Trudeau duly authroized as they
so declare;
(hereby referred to as `'SEMI");
WHEREAS the assignor having been implicated in the management and the operations
of SEMI;
WHEREAS, in that regard they have developed intellectual property for the
benefit of SEMI;
WHEREAS a Sale of Enterprise Agreement is to be entered into between Telehublink
Corporation and SEMI for the sale of said intellectual property;
WHEREAS in order to transfer a clear title to Telehublink, it is agreed upon
that the Assignor should clarify the title of SEMI to said intellectual
property;
IN VIEW OF THE FOREGOING, the parties hereby adknowlege the following:
<PAGE>
13
1- The preamble is an integral part of the present agreement;
2- The Assignor hereby assigns, sales, transfers any and all intellectual
property right that they might have to SEMI and SEMI hereby accepts, with
regards to the following products and/or concepts;
a) Once upon a time Hockey concept;
b) The Pro Collegiate Tour Concept;
c) The VIP Golf Tour Concept;
d) The Baseball Golf Tour Concept;
e) The Audio Promotion Card Marketing license with micorsound;
f) Audio Calling Card Concept;
3. The consideration for the present agreement is the amount of ONE DOLLAR ($
1,00) plus other good and valuable considerations which the Assignor
declares having received for which the Assignor gives complete quit and
discharge to SEMI;
4. The parties hereto confirm that they have each required that the present
Agreement and all accessory documents and notices be drawn up in the
English language. Les parties a la presente confirment qu'elles ont exige
que cette convention ainsi que tout autre document ou avis soient rediges
dans la langue anglaise.
SIGNED IN MONTREAL on the 20th day of August 1999.
SEMI INC.
_______________________
SERGE TRUDEAU
_______________________ _____________________
ROGER NERON BY: SERGE TRUDEAU
_____________________
BY: ROGER NERON
