SECURITIES AND EXCHANGE COMMISSION
Washington, D.C 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934
MegaChain.com, Ltd.
...........................................
(Name of Issuer)
Delaware 11-3177042
............................... ....................
(State or other jurisdiction of (IRS employer
incorporation or organization) identification number)
34 West 8th Avenue Vancouver, BC, CANADA V5Y 1M7
.......................................... ..............
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (604) 873-3847
...............
Securities to be registered pursuant to 12(b) of the Act:
Title of each class
Name of each exchange on which
To be so registered
each class is to be registered
None None
............... ...............
None None
............... ...............
Securities to be registered pursuant to Section 12(g) of the
Act:
Common stock, Par Value $0.001
...........................................
(Title of class)
..............................................
(Title of class)
INDEX
PAGE NO.
PART I DESCRIPTION OF BUSINESS
Item 1 Description of Business 1
Item 2 Management Discussion and Analysis or Plan of Operation 4
Item 3 Description of Property 4
Item 4 Security Ownership of Certain Beneficial Owners and Management 4
Item 5 Directors, Executive Officers, Promoters And Control Persons 6
Item 6 Executive Compensation 7
Item 7 Certain Relationships and Related Transactions 8
Item 8 Legal Proceedings 8
Item 9 Market for Common Equity and Related Stockholder Matters 9
Item 10 Recent Sales of Unregistered Securities 9
Item 11 Description of Securities 9
Item 12 Indemnification of Officers and Directors 10
Item 13 Financial Statements and Exhibits 11
Item 14 Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure 11
PART II FINANCIAL INFORMATION 12
Financial Statements and Exhibits
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED BALANCE SHEETS F-2
CONSOLIDATED STATEMENTS OF OPERATIONS F-3
CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY (DEFICIT) F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7
PART III EXHIBITS 13
Exhibit SEC Ref. Title of Document Page
No. No.
1 (3)(i),(4) Certificate of Incorporation, as amended E-1
2 (3)(ii) By-Laws E-8
3 (10) Form of Options granted to Executive
Officers E-10
4 (10) Form of Options granted to Consultants E-15
5 (21) Subsidiaries E-21
SIGNATURES 14
PART I
ITEM 1. Description of Business
(a) Business Development.
MegaChain.com Ltd., ("MegaChain" or the "Company") was originally incorporated
as EC Capital Ltd. ("EC"), in the State of Delaware on September 10, 1993. In
October 1995, the Company completed a public offering of 1,100,000 shares of
common stock and received net proceeds of approximately $472,000.
In September 1996, the Company acquired Northern Lights Software, Ltd., a New
York corporation ("Northern NY"), by issuing 8,000,000 shares of its common
stock in exchange for 7,000,000 issued and outstanding shares of Northern NY,
split its outstanding shares on a two-for-one basis and changed its name to
Northern Lights Software Ltd. In the first half of 1997 Northern NY ceased
operations due to significant losses from operations. Northern NY remains
inactive to date.
In September 1997 the Company changed its name to Formquest International Ltd.
In February, 1999 the Company purchased all of the issued and outstanding
voting shares of the capital stock of 573795 BC Ltd. ("573795"), a company
organized under the laws of the Province of British Columbia,Canada by issuing
6,000,000 common shares to 573795's shareholders.
In April, 1999, the Company completed the sale of 2,000,000 shares of common
stock at a price of $0.50 per share resulting in $958,000. The Company also
changed its name to MegaChain.com Ltd.
In August, 1999, the shareholders authorized an additional 10,000,000, $0.0001
par value common shares as well as the creation of 5,000,000, $0.0001 par
value preferred shares without attributes.
MegaChain is devoting substantially all of its present efforts in securing and
establishing its business, and although its planned operations have commenced
there have been no significant revenues derived there from.
Business of the Issuer
MegaChain can provide any company with an Internet presence, a powerful, cost
effective means of advertising and selling its product or service through the
use of an innovative software suite combining multi-level marketing techniques
and the use of personalized E-mail messages offering valuable product
incentives.
E-mail received from a friend, relative or business acquaintance has a greater
likelihood of being read than does unsolicited E-mail. MegaChain's clients
have the unique advantage of having their advertisements sent by agents to a
group of individuals with whom the agent has a personal relationship and whom
the agent believes may have an interest in the content of the advertisement.
The advertiser only pays for certified referrals (an individual registering on
the advertiser's web page as a result of the MegaChain system).
Individuals who register as agents with MegaChain can earn commissions by
forwarding promotional e-mails to their friends and acquaintances. Each
recipient of the E-mail may also register as an agent with MegaChain and earn
commissions through the same process. Furthermore, companies with pre-existing
databases, such as list brokers and Internet Service Providers, can themselves
become Agents, and secure an additional revenue stream.
DETAILED BREAKDOWN OF THE MEGACHAIN SOFTWARE SUITE
The first step in creating an effective Multi-Level Marketing program is to
recruit a sales force. MegaChain refers to its sales force as "Agents".
PAGE 1
In addition to introducing their personal contacts to new products,the primary
objective of Agents is to recruit their own eChain network. To assist Agents
in achieving this objective, MegaChain provides an agent recruiting E-mail
which explains the benefits of the MegaChain Program. Agents download this
E-mail from the MegaChain web site and then forward it to their contacts.
The E-mail is uniquely coded so that when contacts respond to become Agents
they will be added to the recruiting Agent's eChain. An "eChain" is an Agent's
Multi-Level Marketing E-mail chain, which includes the contacts in their
personal database and any Agents that they have recruited. The recruiting
Agent will share in the revenues from all qualified referrals or products
purchased through the new Agent's eChain. Moreover, when Agents create their
own eChain, the initial recruiting Agent continues to share in these revenues
as explained in the commission structure section.
Consumers can be directly recruited to become MegaChain Agents via a product
response E-mail. The E-mail explaining the Agent program is automatically sent
to consumers when they respond to a MegaChain client's advertisement. If the
consumer becomes an Agent, they are automatically added to the contacting
Agent's eChain. If the consumer is not interested in becoming an Agent, they
are tagged and will not receive future solicitations.
Individuals may also sign up directly to become Agents on the MegaChain web
site. Agents recruited in this manner become part of MegaChain's eChain.
Agent Registration
The individual becomes an Agent upon completion of the agent registration
form. A software mechanism will ensure an individual can only registered once.
Upon registration Agents receive a User ID and password, which allows them to
access MegaChain's reporting module.
Management anticipates that the MegaChain system will integrate with most
major contact management software packages. This will aid Agents in creating
and managing their eChain.
MegaHit
MegaHit's function is to send qualified referrals to MegaChain's clients.
When MegaChain contracts with a client, the client's product information is
added to MegaChain's database. This database captures the product description,
the commission structure (e.g. number of levels and percentage on which
commissions are paid) and the product campaign E-mail, which has been created
to sell the product.
A campaign opportunity package, which includes details about the product, the
commission structure and the product campaign E-mail attachment, will then be
e-mailed to the MegaChain Network of Agents. Agents will also be able to
search MegaChain's inventory of advertiser campaigns by category. This will
give the Agent the ability to target a specific portion of his eChain.
If Agents are interested in participating in the product campaign, they will
only need to download and forward the E-mail attachment to their eChain. Each
product campaign that Agents E-mail is uniquely coded ensuring they will be
credited with all resulting commissions earned from their eChain.
When an individual from an Agent's eChain clicks on the product campaign E-mail
and visits the advertiser's web site they are registered as a qualified
referral. The commission from this qualified referral is credited to the
appropriate Agent's account.
PAGE 2
Agents will have access to their account information using a reporting module
accessed by a user ID and password. This module will allow them to view their
entire eChain, the various campaigns promoted and all commissions earned to
date.
Commissions
MegaChain retains a minimum of 50% of all amounts earned from either certified
referrals or, in the case of product sales campaigns, the gross commission paid
Vendors, in the case of 4 levels of Agents, distributes the remainder as Agent
commissions. For example: Agent 1 receives 25% of the Fee for each of his
eChain members who respond to an advertiser's promotional E-mail. If one of
Agent 1's eChain members becomes an Agent, "Agent 2", and forwards the
promotional E-mail to a friend who, in turn, visits the advertiser's web site,
Agent 2 would receive 25% of the Fee while Agent 1 receives 12%. To illustrate
the complete cycle, Agent 2 then signs up Agent 3 who signs up Agent 4.
Assuming one of Agent 4's eChain members responds to a promotional E-mail, 25%
of the Fee goes to Agent 4, 12% to Agent 3, 6% to Agent 2 and 3% to Agent 1.
Agents 1, 2 and 3 have earned commissions from Agent 4's efforts. In the event
that none of Agent 1's eChain members opt to become Agents, MegaChain will
retain 75% of the Fee while Agent 1 earns 25%. The MegaChain system will
record all certified referrals, calculate all commissions and provide each
agent with a record of commissions earned.
Timely and accurate payment of commissions is vital. The payment module will
facilitate payment of commissions by either: (i) sending a check, (ii)
crediting the Agent's bank account, or (iii) paying in E-cash. To make option
(iii) viable, the Company is currently considering strategic relationships
with several E-cash companies.
Intellectual Property and Proprietary Rights
The Company regards portions of the MegaChain software suite and other designs
including its web site design as proprietary and will attempt to protect them
with a combination of trade secret laws, employee and third-party nondisclosure
agreements, built-in software protections, and similar means. Although the
Company believes that its current technology and designs have been
Independently developed, there can be no assurance that the technology does
not or will not infringe on the rights of others. The Company has no patents,
trademarks or copyrights pertaining to its products, and it may be possible
for unauthorized third parties to copy certain portions of the Company's
products or to "reverse engineer" or otherwise obtain and use, to the Company's
detriment, information that the Company regards as proprietary. Moreover, the
laws of some countries do not offer the same protection to the Company's
proprietary rights, as do those of the United States and Canada. There can be
no assurance that legal protections relied upon by the Company to protect its
proprietary position will be adequate or that the Company's competitors will
not independently develop technologies that are substantially equivalent or
superior to those utilized by the Company.
Government Regulation
MegaChain's relationship marketing system may be affected by government
regulation, including, state regulation of marketing practices and federal and
state regulation of the offer and sale of business franchises, business
opportunities, and securities. Although MegaChain believes that its
relationship marketing system is in compliance with all currently applicable
regulations, there can be no assurance that it will remain in compliance in
the future as a result of new interpretations of existing regulations or
adoption of new regulations.
PAGE 3
ITEM 2. Management's Discussion and Analysis or Plan of Operation
(a) Plan of Operation
On April 6, 1999, in connection with a Rule 504 offering, the Company issued
2,000,000 shares of common stock in exchange for net proceeds of $ 958,000.
Approximately $48,000 has been spent to date on designing the web site and
developing the functionality of the software suite. The Company is devoting
substantially all of its present efforts to establishing its business, and,
although certain planned operations have commenced, there have been no
significant revenues derived there from. Efforts towards the next phase,
Sales and Marketing, have already begun. Key elements of the sales and
marketing plan are to: (i) Alert the media of the product rollout via direct
contact and press releases, (ii) Promote MegaChain on search engines and
banner advertising and in specific newsgroups, (iii) Identify and capture
those companies most likely to benefit from a Multi Level Marketing sales
force and a direct E-mail campaign, and (iv) Establish strategic alliances
with Internet Service Providers. On June 30, 1999 the Company had $713,874
cash and $17,123 of liabilities. At present the Company is expending
approximately $35,000 per month in the further development of its operations.
The Company currently subcontracts 6 individuals on a full time basis. The
Company's cash reserve is sufficient to finance the operating expenses
throughout the next fiscal year including approximately $100,000 to complete
the development of the entire software suite, $60,000 relating to web,
database and mail server software acquisition and set up costs, and
$24,000 for operating leases pertaining to web site related computer hardware.
In early 2000, the Company will be seeking second tier financing of
approximately $5,000,000 to launch a national marketing campaign and to
expand its operations.
ITEM 3. Description of Property
The Company presently maintains its principal place of business at 34 West
8th Avenue, Vancouver, British Columbia, Canada V5Y 1M7. The premise is
leased on a month-to-month basis, at a fair market value price of $1,000 from
the Company's President and CEO, Mr. Tom Lavin. MegaChain's offices occupy
approximately 1,000 square feet of the facility.
ITEM 4. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of August 27, 1999, the number and
percentage of the outstanding shares of common stock which, according to
the information supplied to the Company, were beneficially owned by (i) each
person who is currently a director of the Company, (ii) each executive
officer, (iii) all current directors and executive officers of the Company
as a group and (iv) each person who, to the knowledge of the Company, is the
beneficial owner of more than 5% of the outstanding common stock. The
only beneficial owners of more than 5% of the outstanding common stock of
which MegaChain is aware are also directors or officers. Except as
otherwise indicated, the persons named in the table have sole voting and
dispositive power with respect to all shares beneficially owned, subject
to community property laws where applicable.
PAGE 4
Common Options Percent of
Shares (1) Class(2)
Name and Address
Tom Lavin 3,000,000 100,000 21.4
34 West 8th Avenue
Vancouver, BC, Canada
V5Y 1M7
Bill Lavin 3,000,000 100,000 21.4
Half Moon Bay Villas, #4
P.O. Box 1386
Basseterre, St. Kitts
Mark A. Weston -0- 100,000 0.7
17- 10740 Guildford Drive
Surrey, BC, Canada
V3R 1W6
Tom Johnson -0- 75,000 0.5
12478 San Bruno Cove
San Diego, California
92130, USA
Donald Steele 10,000 100,000 0.8
6471 Madrona Crescent
West Vancouver, BC, Canada
V7W 2J7
All Executive officers and 6,010,000 470,000 43.6
Directors as a Group
(5 persons)
(1) These figures represent options that are vested or will vest within
60 days from the date as of which information is presented in the table.
(2) These figures represent the percentage of ownership of the named
individuals assuming each of them alone has exercised his or her options,
and percentage ownership of all officers and directors of a group
assuming all such purchase rights held by such individuals are exercised.
There are no agreements between or among any of the shareholders, which
would restrict the issuance of shares in a manner that would cause any
change of control of the Company. There are no voting trusts, pooling
arrangements or similar agreements in place between or among any of the
shareholders, nor do the shareholders anticipate the implementation of
such an agreement in the near term.
PAGE 5
ITEM 5. Directors, Executive Officers, Promoters and Control Persons
(a) Directors and Executive Officers
Name Age Position
_________ _____ _______________________
Tom Lavin 49 President/CEO/Director
Bill Lavin 48 VP/Director/Secretary
Mark A. Weston 37 CFO/Director
Tom Johnson 48 VP
Donald Steele 48 Director
Tom Lavin has been involved with electronics technology, telecommunications
and the advertising industry for over 20 years. He has been President of Blue
Wave Productions Ltd., one of Western Canada's largest and most successful
audio production facilities since 1980 and a Partner in Teddy Bear Productions,
a company that designs and produces national television and radio advertising
for such clients as McDonald's, B.C. Tel, Ford, Toyota, Jeep, Kawasaki and
Future Shop since 1985.
In the early 1990's Tom headed the New England Digital File Transfer Project
for the WAT Group of Companies, then founded and took Axion Internet public
in 1994. He acted as CEO for Axion, managing over 40 employees and a client
base of nearly 15,000 until May, 1997. Prior to his involvement with
MegaChain, he consulted independently on a number of high tech and telecom
projects.
Bill Lavin has been involved in technical development, management and sales
and marketing for over 20 years. He has provided management and consulting to
companies such as American Express, Chevron, Kaiser Permanente and Pacific
Bell. With American Express, he spearheaded the launch of several products
including Platinum and Gold Year End Summary, Optima MIS and a World Wide
Marketing System.
Mr. Lavin has many years of experience in directing the successful
implementation of projects using leading edge technologies and has a thorough
understanding of data processing, management, MIS and marketing applications.
Prior to his involvement in MegaChain, his most recent endeavors included
acting as Vice President of Sales and Marketing for a major consulting firm
with over 150 employees and over $US 40 million in sales, and as President of
a cutting edge Internet Development Company
Mark A. Weston is a Chartered Accountant whose background includes nine years
of public practice experience. Prior to joining the Company in June 1999, Mark
spent seven years with the international accounting firm PricewaterhouseCoopers.
His tenure included four years in Audit and Information System Risk Management
and three years as a tax consultant to a variety of top tier clients. Mark
has also consulted on accounting and taxation issues for an international MLM
company with revenues in excess of $100 MIL.
Thomas Johnson is owner and President of a successful sales and marketing
company. He has been at the forefront of sales and marketing trends for over
25 years and has extensive experience in promoting multilevel marketing plans
including Amway, Herbalife and Excel. During the last two years he has been
actively involved in the development of creative strategies and marketing
materials exclusively for Internet companies. His efforts have been
instrumental the successful launching of two Internet E-commerce ventures.
PAGE 6
Don Steele is a marketing and corporate development specialist with a
background in a variety of industries. Mr. Steele has been principally
involved in his own businesses related to the commercial diving, ship design
and movie industries.
There are no significant employees who are not described as executives above,
and there are no family relationships among directors, executive officers or
any nominees to these positions.
ITEM 6. Executive Compensation
Name and Title Year Salary
Tom Lavin, 1999 $45,000
President & CEO
Bill Lavin, 1999 45,000
Vice President, Operations
Mark Weston, CA 1999 12,500
Chief Financial Officer
Tom Johnson 1999 0
Vice President,
Sales and Marketing
Stock Options
On August 12, 1999, the Board of Directors approved various "Non Qualified"
stock option agreements. The purpose of granting the stock options is to
attract and retain the best available executive personnel, other key
employees, contract consultants and others to be responsible for the
management, growth and success of the business, and to provide an incentive
for such individuals to exert their best efforts on behalf of the Company
and its shareholders. Optionees under the agreements are those Directors,
officers, key employees, consultants and others selected by the Board of
Directors who hold positions of responsibility and whose participation in
such agreements the Board and management determines to be in the best
interests of the Company.
PAGE 7
The exercise price of the option is $ 0.75 USD per share. Options awarded
under the plan shall be exercisable at such time and shall be subject to
such restrictions and conditions, including the performance of a minimum
period of service after the grant, as the Board may impose, which need not
be uniform for all participants; provided, however, that no Option shall be
exercisable for more than 5 years after the date on which it is granted.
Name and Title Number of Options Date Granted Exercise Price
Tom Lavin,
President & CEO,
Director 100,000 August 12, 1999 $.75
Bill Lavin,
Vice President,
Director 100,000 August 12, 1999 $.75
Mark A. Weston, CA
Chief Financial Officer,
Director 100,000 August 12, 1999 $.75
Tom Johnson
Vice President 75,000 August 12, 1999 $.75
Donald Steele
Director 100,000 August 12, 1999 $.75
In addition to the above named individuals, an additional 350,000 options in
aggregate, exercisable at $0.75 were granted to various employees and
consultants on August 12, 1999. These options expire at the earliest of 5
years after the date on which they are granted or 120 days after the
optionee's service with the Company ceases for any reason.
ITEM 7. Certain Relationships and Related Transactions
The Company presently maintains its principal place of business at 34 West 8th
Avenue, Vancouver, British Columbia, Canada V5Y 1M7. The premise is leased on
a month-to-month basis, at a fair market value price of $1,000 from the
Company's President and CEO, Mr. Tom Lavin.
Management fees totaling $15,000 per month are paid to corporations owned by
Tom Lavin and Bill Lavin, both directors and controlling shareholders of
the Company. The management fee covers the cost of employees and other
resources committed by these corporations to the business of the Company.
ITEM 8. Legal Proceedings
To the best knowledge of the Officers and Directors of the Company, neither
the Company nor any of its Officers or Directors is a party to any material
legal proceeding or litigation and such persons know of no other material
legal proceeding or litigation contemplated or threatened. There are no
judgments against the Company or its Officers or Directors. None of the
Officers or Directors has been convicted of a felony or misdemeanor relating
to securities or performance in corporate office.
PAGE 8
ITEM 9. Market for Common Equity and Related Stockholder Matters
High / Low Bid
Quarter High Low
Ending Bid Bid
6/30/99 2.2188 .7500
3/31/99 1.9063 .0625
12/31/98 .1250 .0625
9/30/98 .1250 .1250
6/30/98 .1250 .1250
3/31/98 .1250 .1250
12/31/97 .1250 .1250
9/30/97 .1250 .1250
As of August 25, 1999 there were a total of 30 shareholders of record.
Dividend Policy
To date, the Company has not paid cash or other dividends on the common stock.
Holders of common stock are entitled to receive such dividends as may be
declared and paid from time to time by the Board of Directors out of funds
legally available therefore. The Company intends to retain any earnings, if
any, for the operation of its business and does not anticipate paying cash
dividends on the common stock in the foreseeable future.
ITEM 10. Recent Sales of Unregistered Securities
In February, 1999, the Company acquired all of the issued and outstanding
voting shares of the capital stock of 573795 BC Ltd. ("BCL") in exchange for
6,000,000 shares of the Company's' common stock for the purpose of effecting
the acquisition of BCL. No underwriter or broker was involved in the offering,
and no commissions were paid on the sale of the shares. The shares were
offered and sold in reliance on the exemption set forth in Section 4(2) of the
Securities Act of 1933.
In order to provide the Company with additional working capital to implement
its business plan, the Company completed on April 5, 1999, a placement of
2,000,000 shares common stock at a price of $0.50 per share in reliance on
Rule 504 of Regulation D promulgated under the Securities Act of 1933. No
underwriter or broker was involved in the offering, and no commissions were
paid on the sale of the shares. The officers and directors of the Company
sold the shares to approximately 20 investors.
ITEM 11. Description of Securities
General
The authorized capitalization of MegaChain consists of 30,000,000 shares of
common stock, par value $0.0001, and 5,000,000 shares of preferred stock, par
value $0.0001. There are 16,154,000 common shares outstanding and no shares
of preferred stock outstanding.
PAGE 9
Common Stock
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of shareholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of all
common stock outstanding entitled to vote in any election of directors may
elect all of the directors standing for election. Holders of common stock are
entitled to receive ratably such dividends, if any, as may be declared by the
board of directors out of funds legally available therefore. Upon the
liquidation, dissolution or winding up of the Company, the holders of all
shares of common stock are entitled to receive ratably the net assets of the
Company available after the payment of all debts and other liabilities.
Holders of common stock have no preemptive, subscription, redemption or
conversion rights.
Preferred Stock
The Board of Directors is authorized to classify any shares of its authorized
but unissued preferred stock as preferred stock in one or more series. With
respect to each series, the Board of Directors shall determine the number of
shares which shall constitute such series; the rate of dividend, if any,
payable on shares of such series; whether the shares of such series shall be
cumulative, non-cumulative or partially cumulative as to dividends, and the
dates from which any cumulative dividends are to accumulate; whether the
shares of such series may be redeemed, and, if so,the price or prices at which
and the terms and conditions on which shares of such series may be redeemed;
the amount payable upon shares of such series in the event of the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of MegaChain;
the sinking fund provisions, if any, for the redemption of shares of such
series; the voting rights, if any, of the shares of such series; the terms and
conditions, if any, on which shares of such series may be converted into shares
of capital stock of MegaChain of any other class or series; whether the shares
of such series are to be preferred over shares of capital stock of MegaChain of
any other class or series as to dividends, or upon the voluntary or involuntary
dissolution, liquidation, or winding up of the affairs of MegaChain, or
otherwise; and any other characteristics, preferences, limitations, rights,
privileges, immunities or terms not inconsistent with the provisions of the
Certificate of Incorporation. The availability of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of discouraging takeover
proposals, and the issuance of preferred stock could have the effect of
delaying or preventing a change in control of MegaChain not approved by the
Board of Directors.
ITEM 12. Indemnification of Officers and Directors
MegaChain's Certificate of Incorporation provides that, to the fullest extent
that limitations on the liability of directors and officers are permitted by
the Delaware General Corporation Law (the "DGCL"), no director or officer of
the Company shall have any liability to MegaChain or its stockholders for
monetary damages. The DGCL provides that a corporation's charter may include
a provision which restricts or limits the liability of its directors or
officers to the corporation or its stockholders for money damages except: (1)
to the extent that it is provided that the person actually received an improper
benefit or profit in money, property or services, for the amount of the benefit
or profit in money, property or services actually received, or (2) to the
extent that a judgment or other final adjudication adverse to the person is
entered in a proceeding based on a finding in the proceeding that the person's
action, or failure to act, was the result of active and deliberate dishonesty
and was material to the cause of action adjudicated in the proceeding.
MegaChain's Certificate of Incorporation and Bylaws provide that it shall
indemnify and advance expenses to its currently acting and its former directors
to the fullest extent permitted by the DGCL and that MegaChain shall indemnify
and advance expenses to its officers to the same extent as its directors
and to such further extent as is consistent with law.
PAGE 10
The Certificate of Incorporation and Bylaws provide that MegaChain will
indemnify its directors and officers and may indemnify employees or agents to
the fullest extent permitted by law against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
offices with MegaChain. However, nothing in the Certificate of Incorporation
or Bylaws of MegaChain protects or indemnifies a director, officer, employee
or agent against any liability to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office. To the extent
that a director has been successful in defense of any proceeding, the DGCL
provides that he shall be indemnified against reasonable expenses incurred in
connection therewith.
ITEM 13. Financial Statements
For the information required by this Item, refer to the Index of the Financial
Statements appearing on page F-1 of this registration.
ITEM 14. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
None
ITEM 15. Financial Statements and Exhibits
For the information required by this Item, refer to the Index to Financial
Statements appearing on page F-1 of the registration statement.
Exhibits
Copies of the following documents are included as exhibits to this report
pursuant to Item 601 of Regulation S-B.
Exhibit SEC Ref. Title of Document Page
No. No.
1 (3)(i),(4) Certificate of Incorporation, as amended E-1
2 (3)(ii) By-Laws E-8
3 (10) Form of Options granted to Executive
Officers E-10
4 (10) Form of Options granted to Consultants E-15
5 (21) Subsidiaries E-21
6 (27) Financial Data Schedules *
* The Financial Data Schedule is presented only in the electronic filing with
the Securities and Exchange Commission.
PAGE 11
PART II FINANCIAL INFORMATION
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999, 1998, 1997 AND 1996
C O N T E N T S
PAGE
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED BALANCE SHEETS F-2
CONSOLIDATED STATEMENTS OF OPERATIONS F-3
CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY (DEFICIT) F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
MegaChain.Com Ltd.
(formerly Formquest International, Ltd.;
formerly Northern Lights Software, Ltd.)
Vancouver, British Columbia, Canada
We have audited the accompanying consolidated balance sheets of
MegaChain.Com, Ltd. (formerly Formquest International, Ltd.;
formerly Northern Lights Software, Ltd.) and Subsidiaries as of
June 30, 1999, 1998, 1997 and 1996, and the related consolidated
statements of operations, stockholders' equity (deficit), and
cash flows for the years ended June 30, 1999, 1998 and 1997 and
the six months ended June 30, 1996. These financial statements
are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of MegaChain.Com, Ltd. (formerly Formquest
International, Ltd.; formerly Northern Lights Software, Ltd.) and
Subsidiaries as of June 30, 1999, 1998, 1997 and 1996, and the
results of their consolidated operations and cash flows for the
years ended June 30, 1999, 1998 and 1997 and the six months ended
June 30, 1996, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. The Company is currently developing technology and
software and has not received any revenue from operations. These
factors raise substantial doubt about the entity's ability to
continue as a going concern. Management's plans in regard to
these matters are described in Note 3. The financial statements
do not include any adjustments that might result from the outcome
of this uncertainty.
COGEN SKLAR LLP
August 12, 1999, except for Note 12,
as to which the date is August 19, 1999
Bala Cynwyd, Pennsylvania
F-1
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
CONSOLIDATED BALANCE SHEETS
JUNE 30,
---------------------------------------------------
1999 1998 1997 1996
---------- ------------ ------------- -----------
ASSETS
CURRENT ASSETS
Cash $ 713,874 $ - $ 41,591 $ 40,259
Accounts receivable - - 207,708 75,009
Miscellaneous receivables 7,970 - - -
Employee advances - - - 1,100
Prepaid expenses 18,100 - - 33,798
---------- ----------- ------------- --------
739,944 - 249,299 150,166
PROPERTY AND EQUIPMENT - Net 11,512 14,455 20,124 6,184
INTANGIBLE ASSETS, NET 277,500 - 609 -
---------- ----------- ------------- ---------
TOTAL ASSETS $1,028,956 $ 14,455 $ 270,032 $ 156,350
========== =========== ============= =========
LIABILITIES AND STOCKHOLDERS EQUITY(DEFICIT)
CURRENT LIABILITIES
Demand notes payable $ - $ - $ 175,274 $ 371,980
Account payable and
accrued expenses 17,123 33,867 77,012 65,328
Payroll taxes payable - 437,038 342,087 35,568
---------- ----------- ------------- ---------
TOTAL CURRENT LIABILITIES 17,123 470,905 594,373 472,876
--------- ----------- ------------- ---------
STOCKHOLDERS' EQUITY (DEFICIT)
PREFERRED STOCK; $0.001 par value,
100,000 shares authorized; and no
shares issued and outstanding - - - -
COMMON STOCK; $0.001 par value;
15,000,000 shares authorized; - - - 7,000
7,000,000 shares issued and
outstanding at June 30, 1996
COMMON STOCK; $0.001 par
value; 20,000,000
shares authorized;
Issued Outstanding
June 30,1997 11,654,000 8,154,000
June 30,1998 11,654,000 8,154,000
June 30,1999 19,654,000 16,154,000 19,654 11,654 11,654 -
ADDITIONAL PAID-IN CAPITAL 2,646,147 932,358 932,358 -
ACCUMULATED DEFICIT (1,653,968) (1,400,462) (1,268,353) (323,526)
LESS: TREASURY STOCK -
3,500,000 shares at cost - - - -
---------- ------------ ------------ ----------
TOTAL STOCKHOLDER'S
EQUITY (DEFICIT) 1,011,833 (456,450) (324,341) (316,526)
---------- ---------- ------------ ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' (DEFICIT) $1,028,956 $ 14,455 $ 270,032 $ 156,350
=========== ============ ============ ==========
The accompanying notes are an integral part of these consolidated
financial statements.
F-2
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended June 30, Six Months
------------------------------------- Ended
1999 1998 1997 June 30, 1996
----------- ----------- ---------- --------------
EXPENSES
Professional fees $ 33,947 - 53,587 -
Filing fees - - 3,593 -
Software development 48,250 - - -
Management fee 103,700 - - -
General and adminstrative
expenses 67,609 35,681 10,907 -
Loss on operations of
subsidiary - 96,730 897,579 247,148
----------- ----------- ---------- ----------
253,506 132,411 965,666 247,148
----------- ----------- ---------- ----------
LOSS FROM OPERATIONS (253,506) (132,411) (965,666) (247,148)
INTEREST INCOME - 302 20,839 -
----------- ---------- ---------- ----------
NET LOSS $ (253,506) $(132,109) $(944,827) $(247,148)
=========== ========== ========== ==========
BASIC AND DILUTED
LOSS PER SHARE OF
COMMON STOCK $ (0.02) $ (0.02) $ (0.09) $ (0.03)
=========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING OF COMMON STOCK 11,154,000 8,154,000 10,460,333 8,000,000
========== ========== ========== ===========
The accompanying notes are an integral part of these consolidated
financial statements.
Page F-3
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock Additional Accumulated
--------------------- Paid-In Equity Treasury
Shares Amount Capital (Deficit) Stock
---------- --------- ---------- ----------- -------
BALANCE AT
DECEMBER 31, 1995 7,000,000 $ 7,000 $ - $ (76,378) $ -
Net loss for
the six months ended
June 30, 1996 - - - (247,148) -
BALANCE AT JUNE 30, 1996 7,000,000 7,000 - (323,526) -
----------- ------- --------- ---------- ----
Recapitalization upon
reverse acquisition
Northern NY (7,000,000) (7,000) - - -
Northern NY 8,000,000 8,000 - - -
EC 800,000 800 - - -
Blank check offering,
net of offering costs
of $78,073 1,100,000 1,100 470,827 - -
Issuance of common stock 1,754,000 1,754 436,746 - -
Conversion of
stockholder debt - - 24,785 - -
Escrowed shares returned
to treasury (3,500,000) - - - -
Net loss for the year ended
June 30, 1997 - - (944,827) -
--------- -------- ---------- ----------- ----
BALANCE AT JUNE 30, 1997 8,154,000 11,654 932,358 (1,268,353) -
Net loss for the year
ended June 30, 1998 - - (132,109) -
--------- -------- ---------- ----------- -----
BALANCE AT
JUNE 30, 1998 8,154,000 11,654 932,358 (1,400,462) -
Issuance of common
stock for purchase
of BC 6,000,000 6,000 294,000 - -
Gain on disposition
of the assets of
subsidiary to an
entity controlled by
bY a principal
stockholder - - 463,593 - -
Issuance of common
stock, net of
offering costs of
$41,804 2,000,000 2,000 956,196 - -
Net loss for the
year ended
June 30, 1999 - - - (253,506) -
---------- ------- ---------- ----------- ----
BALANCE AT
JUNE 30, 1999 16,154,000 $19,654 $2,646,147 $(1,653,968) $ -
========== ======= ========== ============ ====
The accompanying notes are an integral part of these consolidated financial
statements.
Page F-4
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, Six Months
---------------------------------- Ended
1999 1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income loss $(253,506) $(132,109)$(944,827) $(247,148)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities
Depreciation and amortization 22,500 609 2,619 1,005
Loss on disposition of property
and equipment - 5,670 - -
(Increase) decrease in assets,net of
effects from purchase and disposition
of subsidiaries
Accounts receivable - 207,708 (132,699) 34,438
Miscellaneous receivables (7,970) - - -
Prepaid expenses (18,100) - 33,798 (33,798)
Royalties receivable - - - 3,452
Employee advances - - 1,100 (1,100)
Increase(decrease)in liabilities,
net of effects from disposition of
subsidiaries
Accounts payable and accrued
expenses 12,266 (43,146) 11,684 (72,025)
Payroll taxes payable 12,000 94,951 306,519 35,568
Unearned royalty income - - - (10,172)
---------- ------- -------- --------
Net cash provided by (used in)
operating activities (232,810) 133,683 (721,806) (289,780)
---------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Organizational costs - - (1,218) -
Capital Expenditures (11,512) - (15,950) -
----------- -------- --------- --------
Net cash used in investing
activities (11,512) ` - (17,168) -
----------- -------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from (repayments
of) demand note payable - (175,274) (171,921) 331,980
Proceeds from recapitalization - - 473,727 -
Net proceeds from issuance of
common stock 958,196 - 438,500 -
Bank overdrafts - - - (1,941)
---------- --------- --------- --------
Net cash provided by (used in)
financing activities 958,196 (175,274) 740,306 330,039
---------- --------- --------- --------
NET INCREASE (DECREASE) IN CASH 713,874 (41,591) 1,332 40,259
CASH - BEGINNING OF YEAR - 41,591 40,259 -
---------- ------- --------- -------
CASH - END OF YEAR $ 713,874 $ - $ 41,591 $ 40,259
========== ======== ========= ========
The accompanying notes are an integral part of these consolidated
financial statements.
Page F-5
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended June 30, Six Months
----------------------------------- Ended
1999 1998 1997 1996
-------- --------- ---------- ---------
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
The company disposed of the assets of its
subsidiary Northern NY, to a principal
stockholder for the assumption of liabilities.
The net liabilities assumed were as follows:
Property and equipment, net $ 14,455 $ - $ - $ -
Accounts payable and accrued
expenses (29,010) - - -
Payroll taxes payable (449,037) - - -
---------- --------- -------- ---------
Gain on disposition of the
assets of subsidiary to
additional paid-in capital $(463,592) - - -
========== ========= ======== =========
Issuance of common stock for
purchase of subsidiary (BC) $ 300,000 $ - $ - $ -
========== ========= ======== =========
Conversion of stockholder's
debt to additional paid in
capital $ - $ - $24,785 $ -
========= ========= ======== =========
The accompanying notes are an integral part of these consolidated
financial statements.
Page F-6
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS
EC Capital, Ltd. ('EC') was organized under the laws of the state
of Delaware on September 10, 1993, and adopted a fiscal year
ending June 30. From inception through September 12, 1996, EC's
activities had been limited to preliminary organizational
activities and seeking business combinations. In October 1995,
EC completed a public offering of 1,100,000 shares of common
stock and received net proceeds of approximately $472,000. On
September 12, 1996, EC issued 8,000,000 shares of its common
stock in exchange for 7,000,000 issued and outstanding shares of
Northern Lights Software, Ltd. ('Northern NY'), split its
outstanding shares on a two-for-one basis and changed its name
from EC Capital, Ltd. to Northern Lights Software, Ltd.
('Northern DE'). Northern NY was formed in January 1994 to
provide training services to organizations implementing and
developing utility software for organizations implementing sybase
databases.
The acquisition of Northern NY is considered to be a capital
transaction in substance, rather than a business combination.
That is, the acquisition is equivalent to the issuance of stock
by Northern NY for the net monetary assets of EC, accompanied by
a recapitalization, and is accounted for as a change in capital
structure. Accordingly, the accounting for the acquisition is
identical to that resulting from a reverse acquisition, except
that no goodwill is recorded. Under reverse takeover accounting,
the post reverse-acquisition comparative historical financial
statements of the legal acquirer, EC, are those of the accounting
acquirer, Northern NY.
In the first half of 1997, Northern NY ceased operations due to
significant losses from operations. Northern DE remained
inactive until 1999. On September 3, 1997, Northern DE changed
its name to Formquest International, Ltd. ('Formquest'). In
February 1999, Formquest sold the assets of its subsidiary,
Northern NY, with a stockholders' deficit to an entity controlled
by a principal stockholder for the assumption of liabilities. On
February 15, 1999, Formquest purchased all of the issued and
outstanding shares of 573795 BC Ltd. ('BC'), a corporation
organized on October 26, 1998 under the laws of the Province of
British Columbia, Canada for 6,000,000 shares of common stock.
BC is a development stage company which owns proprietary software
for the enhancement of sales on the internet. BC has no prior
operations and minimal assets except the technology and software
that it will further develop. The acquisition will be accounted
for under the purchase method of accounting. The purchase price
of $300,000 was allocated to technology and is being amortized on
a straight-line basis over five years.
Formquest completed an offering under Regulation D on April 5,
1999 for 2,000,000 shares of common stock for net proceeds of
approximately $958,000.
On April 14, 1999 Formquest changed its name to MegaChain.Com,
Ltd. ('the Company').
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
- - - ---------------------------
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant
intercompany transactions have been eliminated in consolidation.
Page F-7
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Since the Company ceased its operations of Northern NY during the
year ended June 30, 1998, the operating results for the years
ended June 30, 1998 and 1997 and six months ended June 30, 1996
have been presented in a condensed format in the accompanying
financial statements. The following is a condensed summary of
operations:
Year ended June 30,
---------------------- Six Months Ended
1998 1997 June 30, 1996
---------- ----------- ----------------
Revenue $ 207,723 $ 1,417,501 $ 285,130
Operating costs (304,453) (2,315,080) (532,278)
---------- ------------ ----------
Loss from operations $ (96,730) $ (897,579) $(247,148)
========== ============ ==========
Concentration of Credit Risk Involving Cash
- - - -------------------------------------------
The Company maintains its cash balances in a bank located in
Canada. These balances are not insured.
Cash Equivalents
- - - ----------------
The Company considers all highly liquid instruments with a
maturity of three months or less to be cash equivalents.
Fair Value of Financial Instruments
- - - -----------------------------------
Financial instruments consist of cash, receivables, notes payable
and accounts payable. The carrying amount approximates fair
value because of the short maturity of these instruments.
Accounts Receivable and Bad Debts
- - - ---------------------------------
The Company considers accounts receivable to be fully
collectible; accordingly, no allowance for doubtful accounts is
required. If amounts become uncollectible, they will be charged
to operations when that determination is made. Bad debts during
the years ended June 30, 1999, 1998, 1997 and the six months
ended June 30, 1996 amounted to $ -0-, $-0-, $21,962 and $34,310.
Depreciation
- - - ------------
The cost of property and equipment is depreciated over the
estimated useful lives of the related assets. Depreciation is
computed using the straight line and accelerated methods.
Research and Development Costs
- - - ------------------------------
Research and development costs are expensed as incurred.
Intangibles
- - - -----------
Technology costs are recorded at cost and are amortized using the
straight-line method over 5 years.
Estimates
- - - ---------
The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of
estimates based on management's knowledge and experience.
Accordingly, actual results could differ from those estimates.
Income Taxes
- - - ------------
The Company accounts for its income taxes under Statement of
Financial Accounting Standards ('SFAS') No. 109, 'Accounting for
Income Taxes,' which requires an asset and liability approach to
financial accounting and reporting for income taxes. Deferred
income tax assets and liabilities are computed annually for
temporary differences between the financial statement and tax
bases of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and
rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax
payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.
Page F-8
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings (Loss) Per Share
- - - -------------------------
The Company has adopted SFAS No. 128, 'Earnings Per Share' (EPS).
This statement establishes standards for computing and presenting
EPS, replacing the presentation of currently required primary EPS
with a presentation of Basic EPS. For entities with complex
capital structures, the statement requires the dual presentation
of both basic EPS and Diluted EPS on the face of the statement of
operations. Under this new standard, Basic EPS is computed based
on weighted average shares outstanding and excludes any potential
dilution; Diluted EPS reflects potential dilution from the
exercise or conversion of securities into common stock or from
other contracts to issue common stock and is similar to the
currently required fully diluted EPS.
Basic earnings (loss) per share include the weighted average
number of shares outstanding during the year. Diluted earnings
(loss) per share include the weighted average number of shares
outstanding and dilutive potential common shares, such as
warrants. Assumed conversion of the warrants would be
antidilutive, therefore, basic and diluted earnings (loss) per
share are the same.
Comprehensive Income
- - - --------------------
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 130, 'Reporting Comprehensive Income,' beginning July
1, 1998. Comprehensive income is a more inclusive financial
reporting methodology that includes disclosure of certain
financial information that historically has not been recognized
in the calculation of net income. Since the Company has no items
of other comprehensive income, no separate statement of
comprehensive income has been presented.
Recently Issued Accounting Pronouncements
- - - -----------------------------------------
In April 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-5, Reporting on the
Costs of Start-Up Activities ("SOP 98-5") which provides guidance
on the financial reporting of start-up costs and organization
cost. Its requires costs of start-up activities and organization
costs to be expensed as incurred. SOP 98-5 is effective for all
fiscal years beginning after December 15, 1998 with initial
adoption reported as a cumulative effect of a change in
accounting principle. The Company will adopt SOP 98-5 effective
July 1, 1999. The adoption of SOP 98-5 will not result in any
cumulative effect of a change in accounting principle.
NOTE 3 - MANAGEMENT PLANS
The accompanying financial statements have been prepared on a
going concern basis which contemplates the realization of assets
and the satisfaction of liabilities and commitments in the normal
course of increases. As discussed in Note 1, the company has
developed software for the enhancement of sales on the internet
and has not received any revenues from operations. These factors
raise substantial doubt about the ability of the company to
continue as a going concern.
The Company is devoting substantially all of its present efforts
to establishing its business, and although certain planned
operations have commenced there have been no significant revenues
derived there from. The Company can provide any company having
an internet presence, a powerful, cost effective means of
advertising and selling their products through an innovative
Internet Multi Level Marketing system which combines multi-level
marketing techniques and the use of personalized, permission
based email. The Company will receive a referral fee for each
individual who registers on the advertiser's web page.
Aggressive sales and marketing efforts have begun. Key elements
of the strategy are to: (1) Alert the media of the MegaChain
system rollout via direct contact and press releases, (2) Promote
MegaChain on search engines and banner advertising and in
specific newsgroups, (3) Identify and capture those companies
most likely to benefit from a MLM sales force and a direct email
campaign, and (4) Establish strategic alliances with Internet
Service Providers.
Page F-9
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - MANAGEMENT PLANS (Continued)
At present the Company is expending approximately $34,000 per
month in the further development of its operations. The Company
currently contracts 6 individuals on a full time basis. The
company's cash reserve is sufficient to cover the operating
expenses of the Company throughout the next fiscal year including
approximately $100,000 to complete the development of its entire
software suite, $60,000 relating to web, database and mail server
software acquisition and start up costs, and $24,000 for operating
leases pertaining to web site related computer hardware.
The balance sheet does not include any adjustments relating to
the recoverability and classification of recorded assets, or the
amounts and classifications of liabilities that might be
necessary in the event the Company cannot continue in existence.
NOTE 4 - ACQUISITIONS AND DISPOSITION
Northern NY
On September 12, 1996, the Company completed the acquisition of
Northern NY by issuing 8,000,000 shares of its common stock in
exchange for 7,000,000 issued and outstanding shares of Northern
NY. For accounting purposes, the acquisition was recorded as a
recapitalization of Northern NY with Northern NY as the
accounting acquiror. The agreement also provides that the
shareholders of Northern NY will place 3,500,000 shares in escrow
to be released to said shareholders only if certain earnings
levels are achieved. 1,750,000 of the shares in escrow will be
released to such shareholders only if in the two year period
ending December 31, 1997 Northern achieves cumulative pre-tax
income of $500,000. The remaining 1,750,000 shares will be
released to such shareholders if Northern achieves cumulative pre-
tax income of $1,500,000 over the four year period ending
December 31, 1999.
Since the earnings levels were not achieved and management
decided to cease operations in the first half of 1997, the
3,500,000 shares have been reflected as treasury shares as of
June 30, 1997.
In February 1999, the Company sold the assets of its subsidiary,
Northern NY to an entity controlled by a principal stockholder
for the assumption of liabilities resulting in a gain on
disposition of $463,593. Since the disposition involved a
principal stockholder the gain on disposition is reflected as an
increase to additional paid-in capital. A condensed balance
sheet at date of sale was as follows;
Assets $ 14,455
Liabilities (478,048)
----------
Net liabilities $(463,593)
==========
573795 BC Ltd.
On February 15, 1999, the Company purchased all of the issued and
outstanding shares of BC for 6,000,000 shares of common stock.
BC is a development stage company which owns proprietary software
and technology for the enhancement of sales on the internet. BC
has no prior operations and minimal assets except the technology
and software that it will further develop. The acquisition will
be accounted for under the purchase method of accounting. The
purchase price of $300,000, determined based on the fair value of
the common shares issued, was allocated to technology and is
being amortized on a straight-line basis over five years.
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
June 30,
------------------------------------
1999 1998 1997 1996
------- ------- ------- -------
Machinery and equipment $11,512 $17,734 $19,579 $10,049
Furniture and fixtures - 2,596 6,420 -
------- ------- ------- -------
11,512 20,330 25,999 10,049
Less: accumulated depreciation - 5,875 5,875 3,865
------- ------- ------- -------
$11,512 $14,455 $20,124 $ 6,184
======= ======= ======= =======
Page F-10
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - INTANGIBLE ASSETS
Intangible assets consist of the following:
June 30,
------------------------------------------
1999 1998 1997 1996
------- -------- -------- -------
Technology $ 300,000 $ - $ - $ -
Incorporation costs - 1,218 1,218 -
---------- -------- -------- ------
$ 300,000 $ 1,218 $ 1,218 $ -
Less: accumulated amortization 22,500 1,218 609 -
---------- -------- -------- ------
$ 277,500 $ - $ 609 $ -
========== ======== ======== ======
NOTE 7 - DEMAND NOTES PAYABLE
The demand notes payable were due to an entity whose principal
stockholder was a former principal stockholder of the Company.
There were no specific repayment terms.
NOTE 8 - PAYROLL TAXES PAYABLE
The payroll taxes payable were liabilities of the Company's
subsidiary (Northern NY). These liabilities were assumed by a
stockholder as part of the disposition of the assets of this
subsidiary in February 1999.
NOTE 9 - STOCKHOLDERS' EQUITY
Common Stock
On September 12, 1996, the Board of Directors increased the
authorized shares from 2,500,000 to 20,000,000.
In October 1995, the Company completed a blank check offering of
1,100,000 shares of common stock and received net proceeds of
approximately $472,000 which was placed in escrow until the
Northern NY acquisition was consummated. Upon confirmation by
the original purchasers the funds were released from escrow in
September 1996.
In January 1997, the Company completed an offering under
Regulation D for 1,754,000 shares of common stock for $.25 per
above and received approximately $438,500.
On April 5, 1999, the Company completed an offering under
Regulation D for 2,000,000 shares of common stock for $.50 per
share and received net proceeds of approximately $958,000.
Warrants
In conjunction with the blank check offering in October 1995, the
Company issued 110,000 warrants to the underwriter at a price of
$.001 per warrant. Each warrant entitles the holder to purchase
one share of common stock at a price of $.60 per share for a four
year period commencing one year from the effective date of the
offering.
Page F-11
MEGACHAIN.COM. LTD. AND SUBSIDIARIES
(FORMERLY FORMQUEST INTERNATIONAL, LTD;
FORMERLY NORTHERN LIGHTS SOFTWARE, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - INCOME TAXES
There is no income tax expense (benefit) for the years ended June 30,
1999, 1998, 1997 and six months ended June 30, 1996 due to the following:
Current Tax Expense (Benefit)
For years in which losses were incurred, the operating losses cannot be
carried back to earlier years. For the year ended June 30, 1999 taxable
income, resulting from the gain on disposition of the assets of a
subsidiary (Northern NY), was offset by utilizing carryforward losses.
Deferred Tax Expense (Benefit)
The deferred tax assets, consisting mainly of net operating loss
carryforwards, were offset by a valuation allowance. Management believes
that a valuation allowance is considered necessary since it is more
likely than not that the deferred tax asset will not be realized through
future taxable income.
The use of net operating loss carryforwards is limited when there has
been a substantial change in ownership (as defined) during a three year
period. Because of the recent and contemplated changes in common stock,
options and warrants, such a change may occur in the future. In this
event, the use of net operating losses each year would be restricted to
the value of the Company on the date of such change multiplied by the
federal long term rate ('annual limitation'); unused annual limitations
may then be carried forward without this limitation. Also, in the event
the business enterprise of the loss corporation is not continued for the
two year period commencing on the change date, the net operating loss
carryforwards may no longer be available.
At June 30, 1999, the Company had net operating loss carryforwards of
approximately $662,000 for U. S. income tax purposes, which if not used
will expire during the years 2012 and 2014. At June 30, 1999, the
Company had net operating loss carryforwards of approximately $260,000
for Canadian income tax purposes, which if not used will expire in 2006.
NOTE 11 - RELATED PARTY TRANSACTIONS
The management fee is paid to a corporation whose principal stockholders
are also stockholders of the company.
During 1999 the Company leased its office space and office equipment from
a stockholder for approximately $2,000 per month.
NOTE 12 - CONTINGENCY
At the time of the disposition of Northern NY, there were unpaid payroll
taxes including interest and penalties amounting to approximately $445,000
which were assumed by an entity controlled by a principal stockholder and
the Company was indemified against this obligation. Although the Company
does not believe it is liable for this obligation, there can be no
assurance there can be no assurance that a claim could not be brought
against the Company. If a cliam is asserted, the company intends to defend
itself vigorously against the claim.
NOTE 13 - SUBSEQUENT EVENTS
On August 19, 1999, the Board of Directors of the Company approved a
resolution that increased the authorized shares of common stock to
30,000,000 shares and changed the par value from $0.001 to $0.0001 per
share. Additionally, the company is authorized to issue 5,000,000 shares
of preferred stock with a par value of $0.0001 per share.
PAGE F-12
PART III EXHIBITS
Exhibit SEC Ref. Title of Document Page
No. No.
1 (3)(i),(4) Certificate of Incorporation, as amended E-1
2 (3)(ii) By-Laws E-8
3 (10) Form of Options granted to Executive
Officers E-10
4 (10) Form of Options granted to Consultants E-15
5 (21) Subsidiaries E-21
PAGE 13
EXHIBIT 1
State of Delaware
PAGE 1
Office of the Secretary of State
_________________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY OF THE CERTIFICATE OF AMENDMENT OF "EC CAPITAL, LTD.",
CHANGING ITS NAME FROM "EC CAPITAL, LTD." TO "NORTHERN LIGHTS
SOFTWARE, LTD.", FILED IN THIS OFFICE ON THE TWELTH DAY OF
SEPTEMBER, A.D. 1996, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED
TO THE KENT COUNTY RECORDER OF DEEDS FOR RECORDING.
/S/ Edward J. Freel
__________________________________
Edward J. Freel, Secretary of State
2350527 8100 AUTHENTICATION: 8102807
960264720 DATE: 09-13-96
PAGE E-2
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 09/12/1996
960264720 - 2360527
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EC CAPITAL, LTD.
The undersigned corporation, in order to amend its Certificate of
incorporation, hereby certifies as follows:
FIRST: The name of the Corporation is:
EC CAPITAL, LTD.
SECOND: The corporation hereby amends its Certificate of
incorporation as follows:
A. Article First of the Certificate of Incorporation, relating to the name
of the corporation, is hereby amended to read as follows by adding the new
Article First.
"FIRST: The name of the Corporation is:
NORTHERN LIGHTS SOFTWARE, LTD."
B. Article Fourth of the Certificate of Incorporation, as amended,
relating to the shares of the Corporation, is hereby amended to read as
follows by adding the following new Article Fourth.
"FOURTH: The total number of shares of stock which the
corporation is authorized to issue is 20,000,000 and the
par value of each of such shares is $.001.
The corporation hereby reclassifies its Common
Shares pursuant to Section 242 of the General Corporation
Law of the State of Delaware in order to effect a two (2)
for one (1) split of its Common Shares, $.001 par value, so
that one (1) of the outstanding Common Shares are equal to
two (2) of the new Common Share of $.001 par value."
PAGE E-3
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 09/03/1997
971293841 - 2350527
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NORTHERN LIGHTS SOFTWARE, LTD.
The undersigned corporation, in order to amend its Certificate of
Incorporation, hereby certifies as follows:
FIRST: The name of the Corporation is:
NORTHERN LIGHTS SOFTWARE, LTD.
SECOND: The corporation hereby amends its Certificate of
Incorporation as follows:
A. Article First of the Certificate in incorporation, relating to
the name of the corporation, is hereby amended to read as follows by adding the
new Article First.
"FIRST: The name of the Corporation is:
FORMQUEST INTERNATIONAL, LTD.
THIRD: The amendment effected herein was authorized by the
consent in writing, setting forth the action so taken, signed by the holders of
more than a majority the outstanding shares entitled to vote thereon pursuant to
Section 228 and 242 of the General Corporation Law of the State of Delaware and
written notice has been given to all shareholders who have not consented in
writing to the action.
IN WHITNESS WHEREOF, we hereunto sign our names and affirm that
the statements made herein are true under penalties of perjury this 29th day
of August, 1997.
/s/ John Formicola
____________________________
John Formicola, Chairman
ATTEST:
/S/ Gerald A. Kaufman
_____________________________
Gerald A. Kaufman, Secretary
PAGE E-4
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
FORMQUEST INTERNATIONAL, LTD.
The undersigned corporation, in order to amend Its Certificate of
Incorporation, hereby certifies as follows:
FIRST: The name of the Corporation is:
FORMQUEST INTERNATIONAL, LTD.
SECOND: The corporation hereby amends its Certificate of
Incorporation as follows:
A. Article First of the Certiciate of Incorporation, relating to
the name of the corporation, is hereby amended to read as follows by adding
the new Article First.
"FIRST: The name of the Corporation is:
MEGACHAIN.COM, LTD.
THIRD: The amendment affected herein was authorized by the
Consent in writing, setting forth the action so taken, signed by the holders of
more than a majority the outstanding shares entitled to vote thereon pursuant to
Sections 228 and 242 of the General Corporation Law of the State of Delaware and
that written notice has been given to all shareholders who have not consented in
writing to the action.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the
the statements made herein are true under penalties of perjury this 8th day of
April, 1999.
/s/ Tom Lavin
___________________________
Tom Lavin, Chairman
ATTEST:
/s/ Bill Lavin
________________________
Bill Lavin, Secretary
PAGE E-5
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION OF
MEGACHAIN.COM, LTD.
MEGACHAIN.COM, LTD., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation") does
hereby certify that:
The amendment to the Corporation's Certificate of Incorporation set forth
Below was duly adopted by resolutions approved by the Corporation's Board of
Directors and stockholders in accordance with the provisions of Section 242 of
the General Corporation Law of the State of Delaware:
Amendment. The Certificate of Incorporation of the corporation is amended
by striking Article FOURTH in its entirety and replacing therefor:
FOURTH: The authorized capital of the corporation is as follows:
1. Shares, Classes and Series Authorized.
The total number of shares of all classes of capital stock that the
Corporation shall have authority to issue is 35,000,000 shares. stockholders
shall not have any preemptive rights, nor shall stockholders have the right
to cumulative voting in the election of directors or for any other purpose.
The classes and the aggregate number of shares of stock of each class that
the Corporation shall have authority to issue are as follows:
(a) 30,000,000 shares of Common Stock, $0.0001 par value
("Common Stock")
(b) 5,000,000 shares of Preferred Stock, $0.0001 par value
("Preferred Stock").
2. Powers and Rights of the Preferred Stock.
The Preferred Stock may be issued from time to time in one or more
series, with such distinctive serial designations as may be stated or
expressed in the resolution or resolutions providing for the issue of
such stock adopted from time to time by the Board of Directors, and in
such resolution or resolutions providing for the issuance of shares of
each particular series, the Board of Directors is also expressly
authorized to fix the right to vote, if any, the consideration for which
the shares of such series are to be issued, the number of shares
constituting such series, which number may be increased (except as
otherwise fixed by the Board of Directors) or decreased (but not below
the number of shares thereof then outstanding) from time to time by action
of the Board of Directors, the rate of dividends upon which and the times
at which dividends on shares of such series shall be payable and the
preference, if any, which such dividends shall have relative to dividends
on shares of any other class or classes or any other series of stock of
the Corporation, whether such dividends shall be cumulative or non
cumulative, and if cumulative, the date or dates from which dividends on
shares of such series shall be cumulative, the rights, if any, which the
holders of shares of such series shall have in the event of any voluntary
or involuntary liquidation, merger, consolidation, distribution or sale of
assets, dissolution or winding up of the affairs of the Corporation, the
rights, if any, which the holders of shares of such series shall have to
convert such shares into or exchange such shares for shares of any other
class or classes or any other series of stock of the Corporation or for
any debt securities of the Corporation and the terms and conditions
including price and rate of exchange, of such conversion or exchange,
whether shares of such series shall be subject to redemption, and the
redemption price or prices and other terms of redemption, if any, for
shares of such series including, without limitation, a redemption price or
prices payable in shares of Common Stock, the terms and amounts of any
sinking fund for the purchase or redemption of shares of such series, and
any and all other designations, preferences, and relative, participating,
optional or other special rights, qualifications, limitations or
restrictions thereof pertaining to shares of such series' permitted by law.
PAGE E-6
3. Issuance of the Common Stock and the Preferred Stock.
The Board of Directors of the Corporation may from time to time
authorize by resolution the issuance of any or all shares of the Common
Stock and the Preferred Stock herein authorized in accordance with the
terms and conditions set forth in this Certificate of Incorporation for
such purposes, in such amounts, to such persons, corporations or entities,
for such consideration, and in the case of the Preferred Stock, in one or
more series, all as the Board of Directors in its discretion may determine
and without any vote or other action by the stockholders, except as
otherwise required by law. The capital stock, after the amount of the
subscription price or par value has been paid in, shall not be subject to
assessment to pay the debts of the Corporation.
IN WITNESS WHEREOF, MEGACHAIN.COM, LTD., has caused this Certificate to be
signed by its duly authorized officer this 19th day of August, 1999.
MEGACHAIN.COM, LTD.
By /s/ Tom Lavin
_____________________
Tom Lavin, President
Signatures
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned thereunto duly authorized.
MEGACHAIN.COM, LTD.
Date: August ____, 1999 By: ____________________
Tom Lavin, President
PAGE E-7
EXHIBIT 2
BY LAWS
MEGACHAIN.COM, LTD.
ARTICLE I - OFFICES
___________________
The principal office of the Corporation shall be located in the City, County
and State so provided in the Certificate of Incorporation. The Corporation
may also maintain offices at such other places within or without the State
of Delaware as the Board of Directors may, from time to time, determine and
the business may require.
ARTICLE II - SHAREHOLDERS
_________________________
1. Place of Meetings.
_________________
Meetings of shareholders shall be held at the principal office of the
Corporation, or at such other places within or without the State of Delaware
as the Board shall authorize.
2. Annual Meetings.
_______________
The annual meeting of the shareholders of the Corporation shall be held at
2:00 PM on the last Tuesday of the third month in each year after the close
of the fiscal year of the Corporation, if such date is not a legal holiday
and if a legal holiday, then on the next business day following at the same
hour, at which time the shareholders shall elect a Board of Directors, and
transact such other business as may properly come before the meeting.
3. Special Meetings.
________________
Special meetings of the shareholders may be called at any time by the Board
or by the President, and shall be called by the President or the Secretary at
the written request of the holders of ten (10) per cent of the outstanding
shares entitled to vote thereat, or as otherwise required by law.
4. Notice of Meetings.
__________________
Written notice of each meeting of shareholders, whether annual or special,
stating the time when and place where it is to be held, shall be served either
personally or by mail. Such notice shall be served not less than ten (10) nor
more than sixty (60) days before the meeting, upon each shareholder of record
entitled to vote at such meeting, and to any other shareholder to whom the
giving of notice may be required by law. Notice of a special meeting shall
also state the purpose or purposes for which the meeting is called, and shall
indicate that it is being issued by the person calling the meeting. If at any
meeting, action is proposed to be taken that would, if taken, entitle
shareholders to receive payment for their shares, the notice of such meeting
shall include a statement of that purpose and to that effect. If mailed, such
B. notice shall be directed to each such shareholder at his address, as it
appears on the records of the shareholders of the Corporation, unless he shall
have previously filed with the Secretary of the Corporation a written request
that notices intended for him be mailed to some other address, in which event,
it shall be mailed to the address designated in such request.
5. Waiver.
______
Notice of any meeting need not be given to any shareholder who submits a
signed waiver of notice either before or after a meeting. The attendance of
any shareholder at a meeting, in person or by proxy, shall constitute a
waiver of notice by such shareholder.
PAGE E-8
6. Fixing Record Date.
__________________
For the purpose of determining the shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or to express
consent to or dissent from any proposal without a meeting, or for the purpose
of determining shareholders entitled to receive payment of any dividend or
the allotment of any rights, or for the purpose of any other action, the
Board shall fix, in advance, a date as the record date for any such
determination of shareholders. Such date shall not be more than sixty (60)
nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. If no record date is fixed, it
shall be determined in accordance with the provisions of law.
7. QUORUM
______
(a) Except as otherwise provided by the Certificate of Incorporation, at all
meetings of shareholders of the Corporation, the presence at the commencement
of such meetings, in person or by proxy, of shareholders holding a majority
of the total number of shares of the Corporation then issued and outstanding
on the records of the Corporation and entitled to vote, shall be necessary
and sufficient to constitute a quorum for the transaction of any business. If
a specified item of business is required to be voted on by a class or classes,
the holder of a majority of the shares of such class or classes shall
constitute a quorum for the transaction of such specified item of business.The
withdrawal of any shareholder after the commencement of a meeting shall have
no effect on the existence of a quorum, after a quorum has been established
at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
shareholders, the shareholders, by a majority of the votes cast by the holders
of shares entitled to vote thereon, may adjourn the meeting.
8. Voting.
______
(a) Except as otherwise provided by statute or by the Certificate of
Incorporation,
(1) directors shall be elected by a plurality of the votes
cast; and
(2) all other corporate action to be taken by vote of the
shareholders, shall be authorized by a majority of
votes cast;
at a meeting of shareholders by the holders of shares entitled to vote thereon.
(b) Except as otherwise provided by statute or by the Certificate of
Incorporation, at each meeting of shareholders, each holder of record of shares
of the Corporation entitled to vote, shall be entitled to one vote for each
share of stock registered in his name on the books of the Corporation.
(c) Each shareholder entitled to vote or to express consent or dissent
without a meeting, may do so by proxy; provided, however, that the instrument
authorizing such proxy to act shall have been executed in writing by the
shareholder himself, or by his attorney-in-fact duly authorized in writing. No
proxy shall be voted or acted upon after three(3) years, unless the proxy shall
specify the length of time it is to continue in force. The proxy shall be
delivered to the Secretary at the meeting and shall be filed with the records
of the Corporation. Every proxy shall be revocable at the pleasure of the
shareholder executing it, unless the proxy states that it is irrevocable, except
as otherwise provided by law.
PAGE E-9
EHIBIT 3
MEGACHAIN.COM, LTD.
Option for the Purchase of __________
Shares of Common Stock
Par Value $0.0001
STOCK OPTION AGREEMENT
THE HOLDER OF THIS OPTION, BY ACCEPTANCE HEREOF,BOTH WITH RESPECT TO THE OPTION
AND COMMON STOCK ISSUABLE UPON EXERCISE OF THE OPTION, AGREES AND ACKNOWLEDGES
THAT THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER
THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE TRANSFERRED OR SOLD IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR OTHER COMPLIANCE UNDER THE SECURITIES ACT OR THE LAWS
OF THE APPLICABLE STATE OR A "NO ACTION" OR INTERPRETIVE LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER, AND ITS COUNSEL, TO THE EFFECT THAT THE SALE OR
TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND SUCH STATE
STATUTES.
This is to certify that, for value received,_______________________ (the
"Optionee")is entitled to purchase from MEGACHAIN.COM, LTD. (the "Company"), on
the terms and conditions hereinafter set forth, all or any part of ____________
shares ("Option Shares") of the Company's common stock, par value $0.0001 (the
"Common Stock"),at the purchase price of $0.75 per share ("Option Price"). Upon
exercise of this option in whole or in part, a certificate for the Option Shares
so purchased shall be issued and delivered to the Optionee. If less than the
total option is exercised, a new option of similar tenor shall be issued for the
unexercised portion of the options represented by this Agreement.
This option is granted subject to the following further terms and
conditions:
1. This option shall vest and be exercisable immediately, and shall
expire at 5:00 p.m. Pacific time on August 12, 2004. In order to exercise this
option with respect to all or any part of the Option Shares for which this
option is at the time exercisable, Optionee (or in the case of exercise
after Optionee's death, Optionee's executor, administrator, heir or legatee, as
the case may be) must take the following actions:
(a) Deliver to the Corporate Secretary of the Company an executed
notice of exercise in substantially the form of attached to this Agreement (the
"Exercise Notice") in which there is specified the number of Option Shares
which are to be purchased under the exercised option.
(b) Pay the aggregate Option Price for the purchased shares through
one or more of the following alternatives:
(i) full payment in cash or by check made payable to the
Company's order;
(ii) full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the
Company's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date (as such
term is defined below);
(iii) full payment through a combination of shares of Common
Stock held for the requisite period necessary to avoid a
charge to the Company's earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise
Date and cash or check payable to the Company's order;
PAGE E-10
(iv) full payment effected through a broker-dealer sale and
remittance procedure pursuant to which Optionee shall
provide concurrent irrevocable written instructions (i)
purchased shares and remit to the Company, out of the
sale proceeds available on the settlement date,sufficient
funds to cover the aggregate Option Price payable for the
purchased shares plus all applicable Federal, state and
in connection with such purchase and (ii) to the Company
to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the
sale transaction; or
(v) full payment through conversion of the option to purchase
Option Shares into the number of fully paid and
nonassessable Option Shares calculated pursuant to the
following formula:
X = Y (A-B)
-------
A
where: X = the number of Option Shares to be issued
to the Optionee;
the conversion right is being exercised;
A = the Fair Market Value per share as of
the date of exercise of such conversion
right; and
B = the Option Price with respect to such
Option Shares.
(c) Furnish to the Company appropriate documentation that the
person or persons exercising the option (if other than Optionee) have the
right to exercise this option.
(d) For purposes of this Agreement, the Exercise Date shall be the
date on which the executed Exercise Notice shall have been delivered to
the company. Except to the extent the sale and remittance procedure
specified above is utilized in connection with the option exercise,
payment of the Option Price for the purchased shares must accompany such
Exercise Notice.
(e) For all valuation purposes under this Agreement, the Fair
Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:
(i) If the Common Stock is not at the time listed or admitted to
trading on any national securities exchange but is traded
on the Nasdaq National Market, the Fair Market Value shall
be the mean between the highest "bid" and lowest "offered"
quotations of a share of Common Stock on such date (or if
none, on the most recent date on which there were bid and
offered quotations of a share of Common Stock), as reported
by the Nasdaq National Market or any successor system.
(ii) If the Common Stock is at the time listed or admitted to
trading on any national securities exchange, then the Fair
Market Value shall be the closing selling price per Share on
the date in question on the securities exchange, as such
price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale
of Common Stock on such exchange on the date in question,
then the Fair Market Value shall be the closing selling
price on the exchange on the last preceding date for which
such quotation exists.
PAGE E-11
(iii) If the Common Stock is not listed on such date on any
national securities exchange nor included in the Nasdaq
National Market, but is traded in the over-the-counter
market, the highest "bid" quotation of a share of Common
Stock on such date (or if none, on the most recent Date on
which there were bid quotations of a share of Common Stock),
as reported on the Nasdaq Smallcap Market or the NASD OTC
Bulletin Board, as applicable.
(f) Upon such exercise, the Company shall issue and cause to be
delivered with all reasonable dispatch (and in any event within three
business days of such exercise) to or upon the written order of the Optionee
at its address, and in the name of the Optionee, a certificate or
certificates for the number of full Option Shares issuable upon the exercise
together with such other property (including cash) and securities as may
then be deliverable upon such exercise. Such certificate or certificates
shall be deemed to have been issued and the Optionee shall be deemed to have
become a holder of record of such Option Shares as of the Exercise Date.
2. The Optionee acknowledges that the shares subject to this option have not
and will not be registered as of the date of exercise of this option under the
Securities Act or the securities laws of any state. The Optionee
acknowledges that this option and the shares issuable on exercise of the option,
when and if issued, are and will be "restricted securities" as defined in Rule
144 promulgated by the Securities and Exchange Commission and must be held
indefinitely unless subsequently registered under the Securities Act and any
other applicable state registration requirements. The Company is under no
obligation to register the securities under the Securities Act or under
applicable state statutes. In the absence of such a registration or an
available exemption from registration, sale of the Option Shares may be
practicably impossible. The Optionee shall confirm to the Company the
representations set forth above in connection with the exercise of all or any
portion of this option.
3. The Company, during the term of this Agreement, will obtain from the
appropriate regulatory agencies any requisite authorization in order to issue
and sell such number of shares of its Common Stock as shall be sufficient to
satisfy the requirements of the Agreement.
4. The number of Option Shares purchasable upon the exercise of this option
and the Option Price per share shall be subject to adjustment from time to time
subject to the following terms. If the outstanding shares of Common Stock of
the Company are increased, decreased, changed into or exchanged for a different
number or kind of shares of the Company through reorganization,
recapitalization, reclassification, stock dividend, stock split or reverse
stock split, the Company or its successors and assigns shall make an
appropriate and proportionate adjustment in the number or kind of shares, and
the per-share Option Price thereof, which may be issued to the Optionee under
this Agreement upon exercise of the options granted under this Agreement. The
purchase rights represented by this option shall not be exercisable with
respect to a fraction of a share of Common Stock. Any fractional shares of
Common Stock arising from the dilution or other adjustment in the number of
shares subject to this option shall rounded up to the nearest whole share.
5. The Company covenants and agrees that all Option Shares which may be
delivered upon the exercise of this option will, upon delivery, be free from
all taxes, liens, and charges with respect to the purchase thereof; provided,
that the Company shall have no obligation with respect to any income tax
liability of the Optionee and the Company may,in its discretion, withhold such
amount or require the Optionee to make such provision of funds or other
consideration as the Company deems necessary to satisfy any income tax
withholding obligation under applicable law.
PAGE E-12
6. The Company agrees at all times to reserve or hold available a sufficient
number of shares of Common Stock to cover the number of Option Shares issuable
upon the exercise of this and all other options of like tenor then outstanding.
7. This option shall not entitle the holder hereof to any voting rights or
other rights as a shareholder of the Company, or to any other rights whatsoever,
except the rights herein expressed, and no dividends shall be payable or
accrue in respect of this option or the interest represented hereby or the
Option Shares purchasable hereunder until or unless, and except to the extent
that, this option shall be exercised.
8. The Company may deem and treat the registered owner of this option as the
absolute owner hereof for all purposes and shall not be affected by any notice
to the contrary.
9. In the event that any provision of this Agreement is found to be invalid
or otherwise unenforceable under any applicable law, such invalidity or
unenforceability shall not be construed as rendering any other provisions
contained herein invalid or unenforceable, and all such other provisions shall
be given full force and effect to the same extent as though the invalid or
unenforceable provision were not contained herein.
10. This Agreement shall be governed by and construed in accordance with the
internal laws of the state of Delaware, without regard to the principles of
conflicts of law thereof.
11. The holder of this option, by acceptance hereof, acknowledges and agrees
that this option is not transferable by the Optionee except by will or the laws
of descent or distribution. Except as otherwise provided herein, this Agreement
shall be binding on and inure to the benefit of the Company and the person to
whom an option is granted hereunder, and such person's heirs, executors,
administrators, legatees, personal representatives, assignees, and transferees.
IN WITNESS WHEREOF, the Company has caused this option to be executed by the
signature of its duly authorized officer, effective this 18th day of
August, 1999.
MEGACHAIN.COM, LTD.
By____________________________________
Duly Authorized Officer
The undersigned Optionee hereby acknowledges receipt of a copy of the
foregoing option and acknowledges and agrees to the terms and conditions set
forth in the option.
_______________________________________
Exercise Notice
(to be signed only upon exercise of Option)
TO: MEGACHAIN.COM, LTD.
The Optionee, holder of the attached option, hereby irrevocable elects to
exercise the purchase rights represented by the option for, and to purchase
thereunder, ____________________ shares of common stock of MEGACHAIN.COM, LTD.,
and herewith makes payment therefor, and requests that the certificate(s) for
such shares be delivered to the Optionee at:
PAGE E-13
____________________________________________
____________________________________________
____________________________________________
If purchase is to be effected by conversion of the option to Common Stock,
the Optionee hereby converts option rights with respect to ________________
Option Shares represented by the option.
If acquired without registration under the Securities Act of 1933, as
amended ("Securities Act"), the Optionee represents that the Common Stock is
being acquired without a view to, or for, resale in connection with any
distribution thereof without registration or other compliance under the
Securities Act and applicable state statutes, and that the Optionee has no
direct or indirect participation in any such undertaking or in the
underwriting of such an undertaking. The Optionee understands that the Common
Stock has not been registered, but is being acquired by reason of a specific
exemption under the Securities Act as well as under certain state statutes for
transactions by an issuer not involving any public offering and that any
disposition of the Common Stock may, under certain circumstances, be
inconsistent with these exemptions. The Optionee acknowledges that the
Common Stock must be held and may not be sold, transferred, or otherwise
disposed of for value unless subsequently registered under the Securities Act
or an exemption from such registration is available. The Company is under no
obligation to register the Common Stock under the Securities Act, except as
provided in the Agreement for the option. The certificates representing the
Common Stock will bear a legend restricting transfer, except in compliance with
applicable federal and state securities statutes.
The Optionee agrees and acknowledges that this purported exercise of the
option is conditioned on, and subject to, any compliance with requirements of
applicable federal and state securities laws deemed necessary by the Company.
DATED this ________ day of ________________________________, __________.
_______________________________________
Signature
PAGE E-14
EXHIBIT 4
MEGACHAIN.COM, LTD.
Option for the Purchase of __________
Shares of Common Stock
Par Value $0.0001
STOCK OPTION AGREEMENT
THE HOLDER OF THIS OPTION, BY ACCEPTANCE HEREOF, BOTH WITH RESPECT
TO THE OPTION AND COMMON STOCK ISSUABLE UPON EXERCISE OF THE
OPTION, AGREES AND ACKNOWLEDGES THAT THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE TRANSFERRED OR SOLD IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT OR OTHER COMPLIANCE UNDER THE
SECURITIES ACT OR THE LAWS OF THE APPLICABLE STATE OR A "NO ACTION"
OR INTERPRETIVE LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER, AND
ITS COUNSEL, TO THE EFFECT THAT THE SALE OR TRANSFER IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND SUCH STATE STATUTES.
This is to certify that, for value received,
____________________ (the "Optionee") is entitled to purchase from
MEGACHAIN.COM, LTD. (the "Company"), on the terms and conditions
hereinafter set forth, all or any part of _________________________
shares ("Option Shares") of the Company's common stock, par value
$0.0001 (the "Common Stock"), at the purchase price of $0.75 per
share ("Option Price"). Upon exercise of this option in whole or
in part, a certificate for the Option Shares so purchased shall be
issued and delivered to the Optionee. If less than the total
option is exercised, a new option of similar tenor shall be issued
for the unexercised portion of the options represented by this
Agreement.
This option is granted subject to the following further terms
and conditions:
1. This option shall vest and be exercisable immediately, and
shall expire at 5:00 p.m. Pacific time on the first to occur of the
date which is 120 days following the date on which the Optionee's
employment with the Company terminates for any reason, the date
which is 120 days following the date of a Change in Control of the
Company (as defined below), or August 12, 2004.
(a) In order to exercise this option with respect to all
or any part of the Option Shares for which this option is at
the time exercisable, Optionee (or in the case of exercise
after Optionee's death, Optionee's executor, administrator,
heir or legatee, as the case may be) must take the following
actions:
(i) Deliver to the Corporate Secretary of the
Company an executed notice of exercise in substantially
the form of attached to this Agreement (the "Exercise
Notice") in which there is specified the number of Option
Shares which are to be purchased under the exercised
option.
(ii) Pay the aggregate Option Price for the
purchased shares through one or more of the following
alternatives:
(A) full payment in cash or by check made
payable to the Company's order;
(B) full payment in shares of Common Stock
held for the requisite period necessary to
avoid a charge to the Company's earnings for
financial reporting purposes and valued at Fair
Market Value on the Exercise Date (as such term
is defined below);
PAGE E-15
(C) full payment through a combination of
shares of Common Stock held for the requisite
period necessary to avoid a charge to the
Company's earnings for financial reporting
purposes and valued at Fair Market Value on the
Exercise Date and cash or check payable to the
Company's order;
(D) full payment effected through a broker-
dealer sale and remittance procedure pursuant
to which Optionee shall provide concurrent
irrevocable written instructions (i) to a
brokerage firm to effect the immediate sale of
the purchased shares and remit to the Company,
out of the sale proceeds available on the
settlement date, sufficient funds to cover the
aggregate Option Price payable for the purchased
shares plus all applicable Federal, state and
local income and employment taxes required to be
withheld in connection with such purchase and
(ii) to the Company to deliver the certificates
for the purchased shares directly to such
brokerage firm in order to complete the sale
transaction; or
(E) full payment through conversion of the
option to purchase Option Shares into the number
of fully paid and nonassessable Option Shares
calculated pursuant to the following formula:
X = Y (A-B)
---------
A
where: X = the number of Option Shares to
be issued to the Optionee;
Y = the number of Option Shares for
which the conversion right is
being exercised;
A = the Fair Market Value per share
as of the date of exercise of
such conversion right;
and
B = the Option Price with respect
to such Option Shares.
(iii) Furnish to the Company appropriate documentation
that the person or persons exercising the option (if
other than Optionee) have the right to exercise this
option.
(iv) For purposes of this Agreement, the Exercise Date
shall be the date on which the executed Exercise Notice
shall have been delivered to the Company. Except to the
extent the sale and remittance procedure specified
above is utilized in connection with the option
exercise, payment of the Option Price for the purchased
shares must accompany such Exercise Notice.
(v) For all valuation purposes under this Agreement,
the Fair Market Value per share of Common Stock on
any relevant date shall be determined in accordance
with the following provisions:
PAGE E-16
(A) If the Common Stock is not at the time
listed or admitted to trading on any national
securities exchange but is traded on the Nasdaq
National Market, the Fair Market Value shall be
the mean between the highest "bid" and lowest
"offered" quotations of a share of Common Stock
on such date (or if none, on the most recent
date on which there were bid and offered
quotations of a share of Common Stock), as
reported by the Nasdaq National Market or any
successor system.
(B) If the Common Stock is at the time listed
or admitted to trading on any national
securities exchange, then the Fair Market Value
shall be the closing selling price per share on
the date in question on the securities
exchange, as such price is officially quoted in
the composite tape of transactions on such
exchange. If there is no reported sale of
Common Stock on such exchange on the date in
question, then the Fair Market Value shall be
the closing selling price on the exchange on
the last preceding date for which such
quotation exists.
(C) If the Common Stock is not listed on such
date on any national securities exchange nor
included in the Nasdaq National Market, but is
traded in the over-the-counter market, the
highest "bid" quotation of a share of Common
Stock on such date (or if none, on the most
recent date on which there were bid quotations
of a share of Common Stock), as reported on the
Nasdaq Smallcap Market or the NASD OTC Bulletin
Board, as applicable.
(vi) Upon such exercise, the Company shall issue and
cause to be delivered with all reasonable dispatch (and in
any event within three business days of such exercise) to or
upon the written order of the Optionee at its address, and
in the name of the Optionee, a certificate or certificates
for the number of full Option Shares issuable upon the
exercise together with such other property (including cash)
and securities as may then be deliverable upon such exercise.
Such certificate or certificates shall be deemed to have
been issued and the Optionee shall be deemed to have become
a holder of record of such Option Shares as of the Exercise
Date.
(b) For purposes of this Agreement, a "Change in Control" means
the occurrence of any one or more of the following:
(i) Any "person", as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), (other than the Company, a
majority-owned subsidiary of the Company, an affiliate of
the Company within the meaning of the Exchange Act, or a
Company employee benefit plan, including any trustee of such
plan acting as trustee), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company (or a
successor to the Company) representing 50% or more of the
combined voting power of the then outstanding securities
of the Company or such successor;
PAGE E-17
(ii) At any time that the Company has shares registered
under the Exchange Act at least 50% of the directors of the
Company constitute persons who were not at the time of their
first election to the board of directors of the Company,
candidates proposed by a majority of such board of directors
in office prior to the time of such first election; or
(iii) (A) the dissolution of the Company or
liquidation of more than 50% in value of the Company or a
sale of assets involving 50% or more in value of the assets
of the Company, (B) any merger or reorganization of the
Company whether or not another entity is the survivor,
pursuant to which the holders, as a group, of all of the
shares of the Company outstanding prior to the transaction
hold, as a group, less than 50% of the combined voting
power of the Company or any successor company outstanding
after the transaction, (C) a transaction or related set of
transactions (including without limitation a merger or
tender offer together with a related purchase of shares by
the tender offeror in the market) pursuant to which the
holders, as a group, of all of the shares of the Company
outstanding prior to the transaction hold, as a group, less
than 50% of the combined voting power of the Company or any
successor company outstanding after the transaction, or (iv)
any other event which the board of directors of the Company
determines, in its discretion, would materially alter the
structure of the Company or its ownership.
2. The Optionee acknowledges that the shares subject to this
option have not and will not be registered as of the date of exercise
of this option under the Securities Act or the securities laws of any
state. The Optionee acknowledges that this option and the shares
issuable on exercise of the option, when and if issued, are and will
be "restricted securities" as defined in Rule 144 promulgated by the
Securities and Exchange Commission and must be held indefinitely
unless subsequently registered under the Securities Act and any other
applicable state registration requirements. The Company is under no
obligation to register the securities under the Securities Act or
under applicable state statutes. In the absence of such a registration
or an available exemption from registration, sale of the Option Shares
may be practicably impossible. The Optionee shall confirm to the
Company the representations set forth above in connection with the
Exercise of all or any portion of this option.
3. The Company, during the term of this Agreement, will obtain
from the appropriate regulatory agencies any requisite authorization
in order to issue and sell such number of shares of its Common Stock
as shall be sufficient to satisfy the requirements of the Agreement.
4. The number of Option Shares purchasable upon the exercise of
this option and the Option Price per share shall be subject to
adjustment from time to time subject to the following terms. If the
outstanding shares of Common Stock of the Company are increased,
decreased, changed into or exchanged for a different number or kind
of shares of the Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split,
the Company or its successors and assigns shall make an appropriate
and proportionate adjustment in the number or kind of shares, and the
per-share Option Price thereof, which may be issued to the Optionee
under this Agreement upon exercise of the options granted under this
Agreement. The purchase rights represented by this option shall not be
exercisable with respect to a fraction of a share of Common Stock. Any
fractional shares of Common Stock arising from the dilution or
other adjustment in the number of shares subject to this option shall
rounded up to the nearest whole share.
PAGE E-18
5. The Company covenants and agrees that all Option Shares
which may be delivered upon the exercise of this option will, upon
delivery, be free from all taxes, liens, and charges with respect to
the purchase thereof; provided, that the Company shall have no
obligation with respect to any income tax liability of the Optionee
and the Company may, in its discretion, withhold such amount or
require the Optionee to make such provision of funds or other
consideration as the Company deems necessary to satisfy any income tax
withholding obligation under applicable law.
6. The Company agrees at all times to reserve or hold
available a sufficient number of shares of Common Stock to cover the
number of Option Shares issuable upon the exercise of this and all
other options of like tenor then outstanding.
7. This option shall not entitle the holder hereof to any
voting rights or other rights as a shareholder of the Company, or to
any other rights whatsoever, except the rights herein expressed, and
no dividends shall be payable or accrue in respect of this option or
the interest represented hereby or the Option Shares purchasable
hereunder until or unless, and except to the extent that, this option
shall be exercised..
8. The Company may deem and treat the registered owner of
this option as the absolute owner hereof for all purposes and shall
not be affected by any notice to the contrary.
9. In the event that any provision of this Agreement is found to
be invalid or otherwise unenforceable under any applicable law, such
invalidity or unenforceability shall not be construed as rendering
any other provisions contained herein invalid or unenforceable, and
all such other provisions shall be given full force and effect to the
same extent as though the invalid or unenforceable provision were not
contained herein.
10. This Agreement shall be governed by and construed in
accordance with the internal laws of the state of Delaware, without
regard to the principles of conflicts of law thereof.
11. The holder of this option, by acceptance hereof, acknowledges
and agrees that this option is not transferable by the Optionee except
by will or the laws of descent or distribution. Except as otherwise
provided herein, this Agreement shall be binding on and inure to the
benefit of the Company and the person to whom an option is granted
hereunder, and such person's heirs, executors, administrators, legatees,
personal representatives, assignees, and transferees.
IN WITNESS WHEREOF, the Company has caused this option to be
executed by the signature of its duly authorized officer, effective
this 18th day of August, 1999.
MEGACHAIN.COM, LTD.
By____________________________________
Duly Authorized Officer
PAGE E-19
The undersigned Optionee hereby acknowledges receipt of a copy of
the foregoing option and acknowledges and agrees to the terms and
conditions set forth in the option.
_______________________________________
Exercise Notice
(to be signed only upon exercise of Option)
TO: MEGACHAIN.COM, LTD.
The Optionee, holder of the attached option, hereby irrevocable
elects to exercise the purchase rights represented by the option for,
and to purchase thereunder, _________________________________ shares
of common stock of MEGACHAIN.COM, LTD., and herewith makes payment
therefor, and requests that the certificate(s) for such shares be
delivered to the Optionee at:
___________________________________________________________
___________________________________________________________
___________________________________________________________
If purchase is to be effected by conversion of the option to
Common Stock, the Optionee hereby converts option rights with respect
to __________________________________ Option Shares represented by
the option.
If acquired without registration under the Securities Act of
1933, as amended ("Securities Act"), the Optionee represents that the
Common Stock is being acquired without a view to, or for, resale in
connection with any distribution thereof without registration or
other compliance under the Securities Act and applicable state
statutes, and that the Optionee has no direct or indirect participation
in any such undertaking or in the underwriting of such an undertaking.
The Optionee understands that the Common Stock has not been registered,
but is being acquired by reason of a specific exemption under the
Securities Act as well as under certain state statutes for
transactions by an issuer not involving any public offering and that
any disposition of the Common Stock may, under certain circumstances,
be inconsistent with these exemptions. The Optionee acknowledges that
the Common Stock must be held and may not be sold, transferred, or
otherwise disposed of for value unless subsequently registered under
the Securities Act or an exemption from such registration is available.
The Company is under no obligation to register the Common Stock under
the Securities Act, except as provided in the Agreement for the
option. The certificates representing the Common Stock will bear a
legend restricting transfer, except in compliance with applicable
federal and state securities statutes.
The Optionee agrees and acknowledges that this purported exercise
of the option is conditioned on, and subject to, any compliance with
requirements of applicable federal and state securities laws deemed
necessary by the Company.
DATED this ________ day of _________________, __________.
_______________________________________
Signature
PAGE E-20
EXHIBIT 5
SUBSIDERARIES
573796 BC., LTD. is a wholly owned subsidary registered in British
Columbia.
PAGE E-21
Signatures
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf
by the undersigned thereunto duly authorized.
MEGACHAIN.COM, LTD.
Date: August ____, 1999 By: ____________________
Tom Lavin, President
In accordance with the Exchange Act, this registration statement has been signed
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Dated: August ___, 1999 _____________________________________
Tom Lavin, Chief Executive Officer
and Director
Dated: August ___, 1999 ______________________________________
Mark A. Weston, CA, Chief Financial Officer
And Director
Dated: August ___, 1999 ______________________________________
Bill Lavin, Director
Dated: August ___, 1999 ______________________________________
Donald Steele, Director
PAGE 14
