SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: March 31, 1999
CYTATION.COM INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
NEW YORK
(State or Other Jurisdiction of Incorporation)
0-5388 16-0961436
(Commission File Number) (I.R.S. Employer Identification Number)
809 Aquidneck Avenue, Middletown, RI 02842
(Address of Principal Executive Offices) (Zip Code)
(800) 275-5895
(Registrant's Telephone Number, Including Area Code)
<PAGE> 1
INFORMATION INCLUDED IN THIS REPORT
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(a) Not Applicable
(b) Beneficial Ownership.
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of the ownership of
Cytation.com Incorporated ("Cytation" and/or "Registrant") outstanding common
stock on March 31, 1999 by (i) each director and executive officer of
Cytation, (ii) all directors and executive officers of Cytation as a group,
and (iii) each shareholder who was known by the Company to be the beneficial
owner of more than five percent (5%) of the outstanding shares of Cytation:
Shares of Cytation
Common Stock to be
Beneficially Owned Percent
Name and as of the Distribution of
Address Record Date Class
Kevin J. High 1,249,330 15.05
C/O Cytation.com
809 Aquidneck Avenue
Middletown, RI 02842
Richard A. Fisher 812,243 9.78
C/O Cytation.com
809 Aquidneck Avenue
Middletown, RI 02842
Ann Marie Gleason 319,958 3.85
C/O Cytation.com
809 Aquidneck Avenue
Middletown, RI 02842
Jai N. Gupta 43,238 0.52
C/O Cytation.com
809 Aquidneck Avenue
Middletown, RI 02842
<PAGE> 2
Michael Bryant 43,238 0.52
C/O Cytation.com
809 Aquidneck Avenue
Middletown, RI 02842
Mark Rogers 144,125 1.74
C/O Cytation.com
809 Aquidneck Avenue
Middletown, RI 02842
EER Systems 1,325,345 15.96
C/O Cytation.com
809 Aquidneck Avenue
Middletown, RI 02842
William Fink 721,636 8.69
C/O Cytation.com
809 Aquidneck Avenue
Middletown, RI 02842
All Directors and 2,021,981 24.35
Officers as a Group
Management of Cytation has advised that they may acquire additional shares of
Cytation Common Stock from time to time in the open market at prices
prevailing at the time of such purchases.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) On March 5, 1999, the Registrant entered into a Plan of Merger with
Cytation Corporation, a Rhode Island corporation (hereinafter referred to as
"Disappearing Corporation"). The Disappearing Corporation's Operations,
Business Plan, Articles of Incorporation, Bylaws, Financial Statements, Board
of Directors and Officers became that of the Registrant.
(b) Pursuant to Section 615 and 904 of the Business Corporation Law of New
York and the provisions of the Rhode Island General Laws (R.I.G.L. 7-1.1-27,
7-1.1-30.3, 7-1.1-65, 7-1.1-67, 7-1.1-67, 7-1.1-68 and 7-1.1-74, et seq., as
amended) the Registrant and the Disappearing Corporation adopted Articles of
Merger.
<PAGE> 3
Cytation, a corporation organized and existing under the laws of the
State of New York, and the Disappearing Corporation, a corporation organized
and existing under the laws of the State of Rhode Island, agreed that the
Disappearing Corporation be merged into Cytation. The terms and conditions of
the merger and the mode of carrying the same into effect are as herein set
forth in said Articles of Merger at Exhibit 2.1.
Cytation has survived and continues under the name of CYTATION.COM
INCORPORATED. No amendment is made to the Articles of Incorporation of
Cytation as part of the merger. The total number of shares of stock of all
classes which Cytation has authority to issue is one hundred million
(100,000,000) shares of Common Stock (hereinafter referred to as the "Common
Stock").
The Plan of Merger set forth at Exhibit 2.2 was duly adopted by the
Boards of Directors of the respective corporations on January 25, 1999, and
approved by the Shareholders of the Disappearing Corporation on February 11,
1999, in the manner prescribed by Sections 7-1.1-27, 7-1.1-30.3, 7-1.1-65,
7-1.1-67, 7-1.1-67, 7-1.1-68 and 7-1.1-74, et seq., as amended of the General
Laws of Rhode Island. The number of shares voted for the Plan of Merger was,
with respect to each corporation, sufficient for approval as set forth below.
The number of shares of the Disappearing Corporation outstanding at the
time of such adoption was 1,231,493, and the number of Shares entitled to vote
thereon was 1,231,493. Cytation issued 7,099,577 additional, restricted
Shares to the Shareholders of the Disappearing Corporation, representing the
fully diluted ownership in Cytation by such Shareholders of the Disappearing
Corporation.
ITEMS 3 THROUGH 4, 6 THROUGH 9 NOT APPLICABLE.
ITEM 5. OTHER EVENTS.
Cytation.com Incorporated
Executive Summary of Business Plan
March 1, 1999
Table of Contents
<PAGE> 4
Summary of Business
March 1, 1999
This Summary of Business describes the overall operational plan for
Cytation.com Incorporated (together with its predecessor corporations,
"Cytation.com" or the "Company") with respect to the marketing of the
Company's proprietary Internet-delivered services.
Company Description
Cytation.com is leveraging its roots of its predecessors as a provider of
Internet services and Web content to offer as services proprietary online
enterprise learning solutions designed to capture, deploy and manage
knowledge more effectively.
Cytation.com is a provider of Internet training and related services and
competes principally in the $85 billion a year corporate training market. The
Company's principal service is RollCall, a proprietary online, browser-based,
enterprise-wide training management operating system that enables students to
enroll and take, training managers to administer, and instructors to teach,
courses over the Internet or on intranets, anywhere, anytime and at any pace.
RollCall is compatible with all principal course authoring tools, and
Cytation.com offers course development and authoring as part of its turnkey
service approach to the market.
Potential and existing customers for the Company's services include
corporations with distributed workforces, government agencies, colleges and
universities and professional trainers. 80% of the Fortune 1000 companies are
currently investigating Web-based course delivery strategies. Web-based
delivery products and services are forecast to grow at an annual compound
rate of approximately 94 percent.
The Company's has positioned RollCall as a turnkey service - hosting and
administering it on its owns servers - rather than as a product. This strategy
enables the Company to seek to capitalize on the distinct trend by
corporations to outsource training requirements; to minimize and often
eliminate the involvement of information technology departments in the sales
cycle; to seek to form strategic relationships with instructional design
firms; to customize the training Web site so that it has the customer's "look
and feel"; and to offer customers automatic, free upgrades. The Company
believes that RollCall will enable organizations to deploy and manage online
learning solutions faster and with greater ease relative to client server,
client-administered installations.
RollCall is functional and is being used by corporations in the New England
area. The Company is ramping up its sales and marketing staff and expects
sales to increase substantially in 1999.
<PAGE> 5
The principal shareholders of Cytation.com are the founders and officers of
Web Services International, Inc., a corporation which supplied Internet
services and technologies before its merger into the Company, and EER Systems
Inc., a supplier of a broad range of systems design, development and
integration capabilities specializing in aerospace flight, information and
training systems with annual revenues in excess of $100 million ("EER"). EER
is an acknowledged participant in the DoD and civilian U.S. government
training market. The Company is the successor to Stylex Homes, Inc. and was
the surviving corporation in a merger with Cytation Corporation (formerly Web
Services International, Inc.).
The Company's predecessors have raised more than $1.7 million of equity
capital and have expended more than $1,000,000 on proprietary database
development and marketing initiatives directly related to the Company's
business.
The Company has filed applications with U.S. Patent and Trademark Office for
"Cytation" and "RollCall" and has received preliminary trademark approval for
"Real Solutions in a Virtual World".
Cytation.com's executive office is at 809 Aquidneck Avenue, Suite 1-B,
Middletown, Rhode Island, 02842, tel. (401) 845-8800; fax. 401-845-8816;
www.cytation.com.
Industry
Morgan Stanley & Company, Inc.'s The Internet Report offers an extensive
analysis of the market for Internet services and products. According to this
report, "the market for Internet-related products and services appears to be
growing more rapidly than the early emerging markets for print publishing,
telephony, film, radio, recorded music, television, and personal computers."
Market Analysis
Size of Market. The overall training market in the United States was more than
$85 billion in 1997, with the corporate market accounting for nearly $59
billion, or 70%. Industry experts forecast that the U.S. market for Web-based
training will grow from $197 million in revenue in 1997 to more than $5.5
billion in the year 2002, a compound annual growth rate of almost 95 percent
during this five year period. Web-based delivery products and services are
forecast to account for approximately 30 percent of this overall market with
a compound annual growth rate of approximately 94 percent.
<PAGE> 6
RollCall is a second generation Internet application with significant
potential for growth as the online, digital revolution continues to permeate
society and the ways in which it communicates.
The market for the Company's services is expected to grow substantially over
the next several years because of near universal acceptance of the Internet
and the use of Intranets as well as the demonstrable cost savings and improved
results realized by customers which embrace online solutions. The Company's
services are expected to capitalize on these factors. RollCall takes the
course to the student, thereby reducing travel time and expense (both
out-of-pocket and opportunity costs) while effectively delivering learning
content. As a turnkey service administered by Cytation.com, the Company
believes that RollCall will save additional costs by eliminating participation
by corporate IT departments, many of which have their hands full with year
2000 problems. A recent study reveals that 80% of the Fortune 1000 companies
are currently investigating Web-based course delivery strategies.
Market Segments. The Company's target market for RollCall consists of
mid-to-large size corporations with distributed workforces, educational
institutions, professional trainers and the government.
Orders. Cytation.com introduced RollCall in July 1998 after completion of beta
testing in three target market segments: corporate, government, and colleges
and universities. During beta testing, the Company also formed a strategic
relationship with a prominent instructional design firm in order to test
RollCall in the training market segment.
The Company has entered into contracts to provide the RollCall Service with
several major corporations and a leading worldwide provider of technical
instruction and services. These are reference accounts which are expected to
generate ongoing revenues for the Company.
Competition. Typical of virtually all-emerging Internet market segments, there
are several companies which claim to offer services competitive to those
marketed by Cytation.com. Although the Company believes it has identified its
principal competitors for RollCall, none have achieved a significant market
share. The Company believes that the overall competitive environment will
allow multiple competitors to develop market share followed by a period of
consolidation beginning after the year 2000.
One Web-based training expert in October 1998 acknowledged that Cytation.com's
RollCall is the only training management system offered as a service rather
than a software or bundled product sold for installation and management by
the customer.
<PAGE> 7
Barriers to Entry. The Company has invested thousands of man-hours in the
development of proprietary database software which is suitable to the emerging
Web-based training market. Cytation.com believes that the development of
comparable database software as well the time and funding required to beta
test any such product and develop customer relationships constitute the
principal barriers to entry by competitors.
Services
RollCall is a proprietary object-oriented knowledge management system designed
to provide centralized, flexible control and administration of online learning
applications in a turnkey service solution. Together with Cytation.com's
Web-enabling and course authoring services, RollCall uses the Internet and
intranets to bring the course to the student-when he (or she) wants, where he
wants it and how he wants it-in corporate, university and government learning
environments. RollCall empowers the course administrator to manage enrollment,
obtain multiple reports, invoice, test and certify by organization or
department in a secure environment without requiring the participation of the
course provider's IT department. RollCall is compatible with all principal
course authoring tools, and Cytation.com offers (directly and through third
parties) as part of its turnkey service complete course development and
authoring when necessary.
Marketing and Sales
Marketing. The cornerstone of the Company's marketing strategy is to position
RollCall as a turnkey service - hosting and administering it on its owns
servers - rather than as a software product purchased, installed and
maintained by customers. This strategy enables the Company to seek to
capitalize on the distinct trend by corporations to outsource training
requirements; to minimize and often eliminate the involvement of information
technology departments in the sales cycle; to seek to form strategic
relationships with instructional design firms; to customize the training Web
site so that it has the customer's "look and feel"; and to offer customers
automatic, free upgrades. Management believes that RollCall will enable
organizations to deploy and manage online learning solutions significantly
faster and with greater ease relative to client server, client-administered
installations.
A second important element of the Company's marketing strategy is to use
instructional design firms as resellers to seek to drive RollCall into the
trainer market and leverage hundreds of established third-party customer
accounts. Instructional design is a highly fragmented industry in which the
participants are trainers, not specialists in the Internet and supporting
technologies. Instructional designers are protective of their client bases and
are reluctant to sell third-party online training software offered by the
Company's competitors. As a turnkey solution sold by the instructional
designer but managed and administered offsite by Cytation.com, management
believes that RollCall is a non-threatening solution to these firms' need to
differentiate
<PAGE> 8
themselves and to offer online services to their customers in the
competitive, crowded training environment.
The Company also intends to focus on vertical markets and seek strategic
reseller relationships with other than instructional design firms.
Cytation.com also offers hosting and other Internet-related services; provides
training and technical support; and provides or arranges for course
development and authoring.
Cytation.com also believes it will benefit from its relationship with EER,
particularly as a result of EER's role as one of eight prime contractors for
a GSA $9 billion, 9-year funding vehicle ("SEAT Contract") for integrating
desktop computing as an information utility, including local and wide area
network capabilities, help desk services, maintenance and training.
Cytation.com has formally been designated a SEAT Contract subcontractor.
Unlike many Web-based training software products which sell for as much as
$100,000, RollCall is priced on a per student license or, for customers with
several thousand students, an enterprise license basis with modest set-up
fees. Upgrades are automatic and free.
Sales. The Company expects to sell its services direct and through its
strategic instructional design and other partners. A Vice President of
Business Development will commence employment in mid-March 1999 and will
focus exclusively on strategic relationships for the resale of RollCall.
Management
The directors and officers of Cytation.com are as follows:
Name Age Position
Richard A. Fisher 52 Chairman of the Board of Directors
Kevin J. High 34 President and Director
Nancy Gleason 43 Vice President of Marketing
Jai N. Gupta, Ph.D. 52 Director
Michael W. Bryant 54 Director
Mark Rogers 39 Director
Cytation.com's key personnel bring a broad range of private and public
management, corporate finance and technical skills to the Company.
The Company currently has 17 employees.
<PAGE> 9
The Company's advisory board consists of five experts in its market segments
and a former governor of Rhode Island.
(ii) Reference is made to the press release issued to the public by the
Registrant on January 27, 1999, the text of which is attached hereto as
Exhibit 99.1, for a description of the events reported pursuant to this
Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements.
- ---------------------------------
As of the date of the filing of this Current Report on Form 8-K, the
Registrant's Independent Auditor, Cayer, Prescott, Clune & Chatellier, have
completed a compilation of the six months ended December 31, 1998 for the
Disappearing Corporation. This review will accompany the thirty (30) months
of audited financial statements of the Disappearing Corporation that will
provide for the financial statements required by this Item 7(a).
In accordance with Item 7(a)(4) of Form 8 K, such financial statements are
filed herein, but in any event no later than May 15, 1999.
<PAGE>
CYTATION CORPORATION
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
Current assets:
Cash $ 200,918
Accounts receivable, net 72,821
Prepaid expenses 6,084
Total current assets 279,823
Property and equipment 311,153
Less: accumulated depreciation (156,566)
Total property and equipment 154,587
Intangible asset:
Software development, net 226,489
TOTAL ASSETS $ 660,899
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt $ 303,562
Accrued payroll 150,374
Accounts payable 119,898
Notes payable - shareholders 95,000
Accrued expenses 52,305
Total current liabilities 721,139
Long-term debt 5,688
Stockholders' deficit:
Preferred stock, $1,000 stated value,
$.001 par value, authorized 1,000
shares, issued and outstanding 0 shares 0
Common stock, $.001 par value,
authorized 1,500,000 shares, issued
and outstanding 1,228,278 shares 1,228
Additional paid-in capital 1,735,050
Accumulated deficit (1,802,206)
Total stockholders' deficit (65,928)
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 660,899
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
CYTATION CORPORATION
STATEMENT OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1998
Net revenues:
Web site hosting $ 116,432
Subscriber access 64,868
Web site origination 49,488
Online training services 47,170
Other revenue 18,092
Consulting 12,866
Commerce 9,974
Hardware sales 2,545
Sales return and allowances (22,730)
Total net revenues 298,705
Expenses:
Salaries 195,849
Utilities 55,066
Depreciation and amortization 52,976
Travel and entertainment 24,824
Legal and professional fees 22,088
Rent 20,861
Payroll taxes and employee benefits 13,713
Equipment rental 12,443
Interest expense 9,636
Commissions 7,350
Computer services 6,835
Seminars and related product supplies 6,522
Other expenses 5,582
Office supplies and services 5,112
Printing and reproduction 5,027
Postage and delivery 3,993
Insurance 3,837
Domain registration 3,795
Hardware 2,663
Advertising 1,795
Software 1,153
Bad debt (recovery) (9,079)
Total expenses 452,041
Net loss for the period $ (153,336)
Net loss per share $ (.137)
Weighted average number of shares
used in computation 1,115,293
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
CYTATION CORPORATION
STATEMENT OF CHANGES IN DEFICIT
SIX MONTHS ENDED DECEMBER 31, 1998
Accumulated Deficit at June 30, 1998 $(1,605,793)
Prior period adjustment (43,077)
Accumulated Deficit at June 30, 1998,
as restated (1,648,870)
Net loss for the six month period
ended December 31, 1998 (153,336)
Accumulated Deficit at December 31, 1998 $(1,802,206)
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
CYTATION CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
DECEMBER 31, 1998
<CAPTION>
Total
Additional Stockholders'
Preferred Shares Common Shares Paid-in Equity
Shares Amount Shares Amount Capital (Deficit) (Deficit)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 (inception)
Issuance of founder shares 342,612 $ 343 $ 20,057 $ 20,400
Issuance of shares for compensation 54,533 54 19,031 19,085
Issuance of shares with debt 8,556 9 2,817 2,826
Net loss for the period $ (61,962) (61,962)
Balance at June 30, 1996 405,701 406 41,905 (61,962) (19,651)
Issuance of shares with debt 6,417 6 2,113 2,119
Issuance of shares for compensation 1,650 2 12,373 12,375
Issuance of shares to founder 73,319 73 (25,000) (24,927)
Issuance of warrants for compensation 14,931 14,931
Sale of common shares, less expenses 116,799 117 874,810 874,927
Preferred issued 105 $ 105,000 (4,945) 100,055
Net loss for the period (888,499) (888,499)
Balance at June 30, 1997 105 105,000 603,886 604 941,187 (975,461) 71,330
Preferred issued 438 437,500 437,500
Issuance of options for compensation 52,180 52,180
Net loss for the period (as restated) (673,409) (673,409)
Balance at June 30, 1998 543 542,500 603,886 604 993,367 (1,648,870) (112,399)
Preferred stock conversion (543) (542,500) 78,747 78 542,422
Issuance of shares for assets 229,896 230 2,069 2,299
Issuance of shares for compensation 250,749 251 2,257 2,508
Sale of common shares 65,000 65 194,935 195,000
Net loss for the period (153,336) (153,336)
Balance at December 31, 1998 0 0 1,228,278 $1,228 $1,735,050 $(1,802,206) $ (65,928)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
CYTATION CORPORATION
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1998
Cash flows from operating activities:
Net loss for the period $ (153,336)
Adjustments to reconcile loss to
net cash provided by operating activities:
Depreciation and amortization 52,976
Decrease in provision for doubtful accounts (20,000)
Value of stock issued as compensation 2,505
(Increase) decrease in:
Accounts receivable 19,292
Prepaid expenses 6,793
Increase (decrease) in:
Accounts payable 83,912
Accrued payroll (9,410)
Accrued expenses 667
Deferred revenue (57,126)
Net cash used by operating activities (73,727)
Cash flows from investing activities:
Capital expenditures (204,918)
Cash flows from financing activities:
Proceeds from sale of common stock 195,000
Proceeds from notes payable - stockholders 40,000
Proceeds from long-term debt 200,000
Net decrease in long-term debt (1,799)
Net cash provided by financing activities 433,201
Net increase in cash 154,556
Cash at beginning of period 46,362
Cash at end of period $ 200,918
<PAGE>
CYTATION CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Cytation Corporation (formerly Web Services International, Inc.) was
incorporated in Rhode Island in January 1996. Effective July 1, 1998, the
Corporation's principal service is RollCall; which is a proprietary
Web-based training and delivery system which enables users to take, and
administrators to administer, courses over the Internet or on an Intranet.
Potential customers for the Corporation's services include corporations with
distributed workforces, government agencies, colleges and universities, and
professional trainers.
The Corporation's books are maintained on the accrual basis of
accounting in accordance with Generally Accepted Accounting Principles.
The Corporation extends credit to customers in the normal course of
business. Bad debts are provided on the allowance method based on historical
experience and management's evaluation of outstanding accounts receivable.
Property and equipment are recorded at cost, except that property under
capital leases is recorded at the lower of the present value of future minimum
lease payments or the fair value of the property at the beginning of the lease
term. The cost and accumulated depreciation of assets sold or retired are
removed from the respective accounts and any gain or loss is recorded in
earnings. Maintenance and repairs are changed to expense when incurred.
Property and equipment is depreciated under the straight-line method over the
estimated useful lives of assets as follows:
Assets Life
Vehicles 5 years
Machinery and equipment 3 - 7 years
Furniture and fixtures 3 - 7 years
The Company currently accounts for its stock-based compensation plans
using the accounting prescribed by Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees. Since the Company is not required
to adopt the fair value based recognition provisions prescribed under
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, it has elected only to comply with the disclosure
requirements set forth in the Statement, which include disclosing pro forma
net income as if the fair value based method of accounting had been applied.
In accordance with Statement of Financial Accounting Standards No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed, initial costs are charged to operations as research prior to the
development of a detailed program design or a working model. Thereafter, the
Company capitalizes the direct costs and allocated overhead associated with
the development of software products. Costs incurred subsequent to the
product release, and research and development performed under contract are
charged to operations.
Capitalized costs are amortized over the estimated product life on the
straight-line basis. Unamortized costs are carried at the lower of book
value or net realizable value.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(CONTINUED)
<PAGE>
CYTATION CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
2. CASH
The Corporation has cash deposits at one financial institution which has
a federally insured limit of $100,000. The cash balance in this institution
may exceed the federally insured limit at various times throughout the year.
3. ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1998 consisted of the following:
Accounts Receivables $ 82,821
Less allowance for doubtful accounts 10,000
Net receivables $ 72,821
4. PROPERTY AND EQUIPMENT
Property and equipment and accumulated depreciation at December 31,
1998 consisted of the following:
Cost:
Machinery and equipment $ 181,990
Furniture and fixtures 68,542
Leasehold improvement 42,566
Vehicles 18,055
Total property and equipment 311,153
Accumulated depreciation:
Machinery and equipment 113,015
Furniture and fixtures 19,301
Leasehold equipment 17,027
Vehicles 7,223
Total accumulated depreciation 156,566
Net property and equipment $ 154,587
5. INTANGIBLE ASSETS
Software development costs have been capitalized and are being amortized
in accordance with Statement of Financial Accounting Standards No. 86. The
costs are being amortized on a straight-line basis over three years. The
cost basis and accumulated amortization as of December 31, 1998 are as follows:
Software development $ 274,869
Accumulated amortization 48,380
Net intangible assets $ 226,489
(CONTINUED)
<PAGE>
CYTATION CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
6. ACCRUED PAYROLL
Accrued payroll at December 31, 1998 includes approximately $117,000 of
payroll which has been deferred by the stockholders.
7. NOTES PAYABLE - STOCKHOLDERS
Notes payable - stockholders at December 31, 1998 consist of the
following obligations which are due on demand:
Promissory note dated November 2, 1998
payable to a stockholder with interest at 6% $ 20,000
Promissory note dated October 8, 1998
payable to a stockholder without interest 20,000
Note payable dated December 18, 1996
payable to a stockholder without interest 45,000
Promissory note dated July 25, 1996
payable to a stockholder without interest 10,000
Total $ 95,000
8. LONG-TERM DEBT AND LINE-OF-CREDIT
Long-term debt at December 31, 1998 consisted of the following:
Note payable to shareholder (EER Systems, Inc.),
unsecured due August 1, 1999
including interest at 6% $ 300,000
Note payable to finance company,
secured by vehicle, $393 due monthly
including interest at 10.90% to November 2001. 9,250
Less: amount due within one year (303,562)
Long-term debt, net $ 5,688
Maturities of long-term debt for each of the years succeeding December
31, 1998 are as follows:
1999 $ 3,935
2000 1,753
Total $ 5,688
(CONTINUED)
<PAGE>
CYTATION CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
9. OPERATING LEASES
On October 1, 1996, the Corporation entered into a five-year lease
agreement for office space that expires September 30, 2001. The terms of the
agreement are such that the lease has been classified as an operating lease.
In addition to the monthly rental change, the Corporation must also pay 25%
of the operating expenses of the common areas. Lease expenses for the six
months ended December 31, 1998 was $20,861.
The following is a schedule, by years, of future minimum lease payments
to be made under the lease agreement:
1999 $ 35,400
2000 29,250
2001 0
10. CAPITAL TRANSACTIONS
On July 1, 1998, the Board of Directors of the Corporation voted to amend
its articles of incorporation to increase the aggregate number of shares the
Corporation has authority to issue from 1,001,000 to 1,501,000. The shares
consist of 1,500,000 of common stock, $.001 par value and 1,000 shares of
preferred, $1,000 stated value, $.001 par value.
On September 1, 1998, the Corporation converted the 543 shares of
outstanding preferred stock to 78,747 shares of common stock. In addition to
the shares of common stock, each preferred shareholder received stock warrants
for additional common stock. At December 31, 1998, there were 78,747 stock
warrants outstanding relating to the preferred stock conversion. Also, on
September 1, 1997 the Corporation issued 32,000 warrants which were not
exercised as of December 31, 1998. At December 31, 1998, the Corporation had
110,747 warrants outstanding at an exercise price of $7.50 per share.
During the period ended December 31, 1998, the Corporation issued stock
to employees which has been recorded as compensatory stock options in
accordance with APB Opinion No. 25. Approximately 251,000 shares were issued
through the employee stock options, and compensation has been recorded in the
financial statements for approximately $2,500.
During 1998, the Corporation issued stock options to employees which had
not been exercised as of December 31, 1998. The total number of shares of
common stock subject to employee options outstanding at December 31, 1998 was
37,500. The Corporation records stock options in accordance with APB Opinion
No. 25 and accordingly, no amounts have been recorded in the financial
statements. If the Corporation had used the fair value based method of
accounting for the options, as prescribed by Statement of Financial Accounting
Standards No. 123, compensation expense would have been recorded for
approximately $112,500. Accordingly, the Corporation's pro forma net loss and
loss per share would have been approximately $266,000 and $.238 for the six
months ended December 31, 1998.
(CONTINUED)
<PAGE>
CYTATION CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
11. INCOME TAXES
The Corporation accounts for income taxes in accordance with SFAS #109,
"Accounting for Income Taxes." In accordance with SFAS #109, income taxes
are provided for the tax effects of transactions reported in the financial
statements and consist of taxes currently due plus deferred taxes. Deferred
taxes are recognized for differences between the basis of assets and
liabilities for financial statement and income tax purposes. The differences
relate primarily to depreciable assets (use of different depreciation methods
and lives for financial statement and income tax purposes), and allowance for
doubtful receivables (deductible for financial statement purposes but not for
income tax purposes). The deferred tax assets and liabilities represent the
future tax return consequences of those differences, which will either be
deductible or taxable when the assets and liabilities are recovered or
settled. Deferred taxes also are recognized for operating losses and tax
credits that are available to offset future taxable income.
The Corporation's deferred tax assets consisted of the following at
December 31, 1998:
Deferred tax assets $ 1,635,500
Deferred tax liabilities (21,500)
Net deferred tax assets 1,614,000
Valuation allowance (1,614,000)
Net deferred tax assets recognized
on the accompanying balance sheet $ -0-
The deferred tax assets noted above includes a net operating loss
carryforward from 1997 of approximately $1,202,000.
The estimated net operating loss available for 1999 is approximately
$1,500,000.
The current income tax provision for the six months ended December 31,
1998 has been estimated at $0 due to the loss for the period then ended.
12. SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest for the six months ended December 31, 1998
was $562.
13. RELATED PARTIES
At December 31, 1998, the Corporation owned 50% of the shares of Cytation
Corporation - Delaware. The Delaware Corporation was incorporated in
December, 1997 as a joint venture between Cytation Corporation (formerly Web
Services International, Inc.) and EER Systems, Inc. The primary activity of
Cytation Corporation - Delaware was the development of the proprietary online,
browser-based enterprise-wide training management operating system which was
subsequently acquired by the Corporation.
(CONTINUED)
<PAGE>
CYTATION CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
14. RESTATEMENT
The prior period adjustment reflects a restatement of the deficit at
June 30, 1998, in the amount of $43,077. The June 30, 1998 deficit has been
restated as follows:
Increase (decrease)
in deficit
Loan proceeds recorded as revenue
rather than long-term debt $ (100,000)
Reduction of accrued payroll 56,923
Total prior period adjustment $ (43,077)
15. SUBSEQUENT EVENTS
On February 11, 1999, the shareholders of the Corporation voted to merge
with Cytation.com Incorporated (formerly Stylex Homes, Inc). Each share of
the Corporation was converted to 5.25 shares of Cytation.com Incorporated
common stock, on a fully diluted basis.
Subsequent to December 31, 1998 the Corporation repaid certain notes payable
to stockholders in the aggregate amount of $40,000.
<PAGE>
INDEX TO WEB SERVICES INTERNATIONAL, INC.
FINANCIAL STATEMENTS
Independent Auditor's Report 2
Balance Sheet 3
Statement of Operations 4
Statement of Shareholders' Equity 5
Statement of Cash Flows 6
Notes to Financial Statements 7
<PAGE>
INDEPENDENT AUDITOR'S REPORT
August 14, 1998
Shareholders and Directors
Web Services International, Inc.
Middletown, RI 02842
We have audited the accompanying balance sheet of Web Services
International, Inc. as of June 30, 1998, and the related statements of
operations and stockholders' deficit and cash flows for the year ended
June 30, 1998. 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 audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the 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 by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Web Services
International, Inc. as of June 30, 1998, and the results of operations,
and its cash flows for the year ended June 30, 1998 in conformity with
generally accepted accounting principles.
/s/ Radin, Glass & Co., LLP
Certified Public Accountants
<PAGE>
WEB SERVICES INTERNATIONAL, INC.
REPORT ON AUDIT OF FINANCIAL STATEMENTS
THE YEAR ENDED JUNE 30, 1998
Balance Sheet
CURRENT ASSETS
Cash $ 46,362
Accounts receivable,
net of allowance for doubtful
accounts of $ 30,000 72,113
Prepaid expenses and other assets 9,877
TOTAL CURRENT ASSETS 128,353
FURNITURE AND EQUIPMENT,
net of accumulated depreciation 190,553
SOFTWARE DEVELOPMENT,
net of accumulated amortization of $ 36,287 36,283
OTHER ASSETS 3,000
$ 358,189
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 35,988
Accrued payroll-officers 216,709
Accrued expenses 48,567
Note payable shareholder 45,000
Shareholder advances payable 13,071
Unearned Web design revenue 57,126
Current portion of capital lease obligation 1,469
TOTAL CURRENT LIABILITIES 417,930
CAPITAL LEASE OBLIGATION 9,580
SHAREHOLDERS' DEFICIT:
Preferred shares, $1,000 stated value,
$.001 par value, 542,500
authorized 1000 shares, issued and
outstanding 543 shares Common shares,
$.001 par value, authorized 1,000,000 shares, 607
issued and outstanding 607,087 shares 993,365
(Deficit) (1,605,793)
TOTAL SHAREHOLDERS' DEFICIT (69,321)
$ 358,189
<PAGE>
WEB SERVICES INTERNATIONAL, INC.
REPORT ON AUDIT OF FINANCIAL STATEMENTS
THE YEAR ENDED JUNE 30, 1998
Statement of Operations
June 30, 1998 1997
NET REVENUES:
Roll Call development $ 500,000 $ -
Web site origination 358,545 109,883
Web site hosting 210,700 82,971
Subscriber access 31,853 163,939
Agent enrollment fees - 25,994
Sale of "dial-up" access service - 65,773
Consulting 66,266 7,650
E-commerce income 28,038 -
Hardware sales, net 17,262 480
Other revenues 4,219 3,035
1,243,883 459,725
EXPENSES:
Payroll 918,619 535,514
Benefits and taxes 100,167 53,842
Telephone utilities 128,087 128,656
Depreciation and amortization 93,554 66,949
Professional fees 127,044 71,797
Rent 64,143 34,520
Commissions 125,565 46,359
Domain registrations 38,555 22,300
Insurance 31,027 35,521
Advertising 13,268 127,155
Software 11,285 35,429
Printing and reproduction 9,245 26,830
Agent seminars and product supplies - 40,146
Electric and gas utilities 13,986 7,670
Travel and entertainment 35,364 9,471
Office supplies and services 50,469 36,278
Interest expense 7,579 5,786
Other expenses 106,258 64,001
1,874,215 1,348,224
NET LOSS $ (630,332) $ (888,499)
NET LOSS PER SHARE $ (1.08) $ (1.69)
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN COMPUTATION 583,768 526,112
<PAGE>
WEB SERVICES INTERNATIONAL, INC.
REPORT ON AUDIT OF FINANCIAL STATEMENTS
THE YEAR ENDED JUNE 30, 1997
Statement of Changes in Shareholders' Equity (Deficit)
<TABLE>
CYTATION CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
JUNE 30, 1998
<CAPTION>
Total
Additional Stockholders'
Preferred Shares Common Shares Paid-in Equity
Shares Amount Shares Amount Capital (Deficit) (Deficit)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 (inception)
Issuance of founder shares 342,612 $ 343 $ 20,057 $ 20,400
Issuance of shares for compensation 54,533 55 19,031 19,086
Issuance of shares with debt 8,556 9 2,817 2,826
Net loss for the period $ (61,962) (61,962)
Balance at June 30, 1996 405,701 406 41,905 (61,962) (19,651)
Issuance of shares with debt 6,417 6 2,113 2,119
Issuance of shares for compensation 1,650 2 12,373 12,375
Issuance of shares to founder 73,319 73 (25,000) (24,927)
Issuance of warrants for compensation 14,931 14,931
Sale of common shares, less expenses 120,000 120 874,807 874,927
Preferred issued 105 $ 105,000 (4,945) 100,055
Net loss for the period (888,499) (888,499)
Balance at June 30, 1997 105 105,000 607,087 607 941,185 (975,461) 71,331
Preferred issued 438 437,500 437,500
Issuance of options for compensation 52,180 52,180
Net loss for the period (as restated) (630,332) (630,332)
Balance at June 30, 1998 543 542,500 607,087 604 993,365 (1,605,793) (69,321)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
WEB SERVICES INTERNATIONAL, INC.
REPORT ON AUDIT OF FINANCIAL STATEMENTS
THE YEAR ENDED JUNE 30, 1998
Statements of Cash Flows
June 30, 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (630,332) $ (888,499)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 93,554 66,949
Net loss on equipment disposal 8,061 3,033
Issuance of shares and warrants as compensation 52,180 27,106
Changes in assets and liabilities:
Increase in accounts receivable (34,121) (37,992)
Decrease (increase) in due from sale of
"dial-up" access service 69,810 (68,810)
(Increase) decrease in prepaid expenses
and other assets (6,190) 13,518
Increase in other assets - (3,000)
(Decrease) increase in accounts payable (15,874) 49,863
Increase in wages payable 131,941 84,768
Increase in accrued expenses 23,615 24,952
Increase in unearned Web design revenue 30,180 26,946
NET CASH USED IN OPERATING ACTIVITIES (277,177) (702,166)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment (80,216) (216,795)
Proceeds from equipment disposals 1,665 29,155
Capitalization of software development costs - (72,570)
NET CASH USED IN INVESTING ACTIVITIES (78,551) (260,210)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligations (2,865) (2,141)
Net payments/borrowings under
short-term debt arrangements (34,973) 114,306
Issuance of shares to founder - (25,000)
Proceeds from issuance of common shares - 874,500
Proceeds from issuance of preferred shares 437,500 -
NET CASH PROVIDED BY FINANCING ACTIVITIES 399,662 961,665
NET DECREASE IN CASH 43,934 (711)
CASH AT BEGINNING OF PERIOD 2,428 3,139
CASH AT END OF PERIOD $ 46,362 $ 2,428
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 7,579 $ 5,786
<PAGE>
WEB SERVICES INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1998
1. BUSINESS
Web Services International, Inc. (the "Company") was incorporated in
Rhode Island in January 1996 to market and host various forms of content on
the World Wide Web. In December 1997, the Company entered into a joint venture
and related contract for the development of online training systems. Through
June 30, 1997, the Company marketed to small and medium sized businesses
the design, origination and hosting of Web sites on the Internet and various
consulting, training, reselling and other services relating to the Internet.
On July 1, 1998 the Company ceased that business (other than Web site hosting)
and is now engaged in the business of providing online training and event
administration services through proprietary Web delivery and database
software systems.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make significant estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.
b. Furniture and Equipment:
Furniture and equipment are stated at cost and depreciated using the
straight-line method over the estimated useful lives of the assets ranging
from three to seven years for equipment, auto and furniture.
Leasehold improvements are amortized over the term of the lease or the
estimated life of the improvement, whichever is shorter. Whenever assets are
sold or retired, their cost and related accumulated depreciation are removed
from the appropriate accounts. Any gains and losses on dispositions are
recorded in current operations.
c. Software Development Costs :
The Company has capitalized software development costs which totaled $36,283
net of accumulated amortization, at June 30, 1998. The capitalization of
such costs and the related amortization is in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 86.
d. Fair Value of Financial Instruments:
The carrying amounts reported in the
<PAGE>
balance sheet for cash, trade receivables,
accounts payable and accrued expenses approximate fair value based on the
short-term maturity of these instruments as set forth in SFAS 107.
e. Income Taxes:
The Company utilizes the liability method of accounting for income taxes as
set forth in SFAS 109, "Accounting for Income Taxes." Under the liability
method, deferred taxes are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted
tax rates in effect in the years in which the differences are expected to
reverse.
f. Revenue Recognition:
Revenues from Web design services are recognized as such services
are performed. Revenues from Web site hosting are recognized on a monthly
basis.
g. Employee Stock Options and Shares Issued for Services:
The Company accounts for employee stock transactions in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees." The Company has
adopted the proforma disclosure requirements of SFAS 123, "Accounting for
Stock-Based Compensation." Accordingly, any excess of fair market value of
stock issued to employees over exercise prices has been recorded as
compensation expense and additional paid in capital.
Shares issued for services of non-employees are recorded at estimated fair
market value.
h. Loss Per Share:
Loss per share is computed on the basis of weighted average number of
common shares outstanding during the respective periods.
3. JOINT VENTURE AGREEMENT
In December 1997, the Company entered into a joint venture agreement
with EER Systems Inc., a supplier of systems design, development and
integration capabilities specializing in flight, information and training
systems to form Cytation Corporation. Simultaneously, the Company entered
into a development agreement with Cytation Corporation, receiving $500,000
to develop certain software.
<PAGE>
4. FURNITURE AND EQUIPMENT
Furniture and equipment consist of the following at June 30, 1998:
Estimated
useful lives
Computer and office equipment 3 $ 177,072
Furniture and fixtures 7 68,542
Leasehold improvements 5 42,566
Auto under capital lease obligation 5 18,055
306,235
Less accumulated depreciation 115,682
$ 190,553
5. SHORT-TERM BORROWINGS
Short term debt due consists of the following at June 30, 1998:
Shareholder advances payable due on demand
and non-interest bearing. $ 13,071
Note payable to Richard A. Fisher, due on
demand and non-interest bearing. 45,000
$ 58,071
6. EQUITY PLACEMENTS AND OTHER FINANCING
a. During the years ended June 30, 1997 and 1996, the Company issued
$18,750 and $50,000 of debt with 6,417 and 8,556 shares, respectively. The
amounts allocated to the shares have been recorded as debt discount and are
being amortized.
b. In February 1997, the Company completed a sale of 120,000 of its common
shares at $7.50 per share. A portion of these shares were sold over the
Internet.
c. During the year ended June 30, 1997, the Company issued $105,000 of
debt units
<PAGE>
consisting of promissory notes and stock purchase warrants ("Units").
The promissory notes are automatically convertible to shares of Series A 10%
convertible preferred shares to be issued, $.001 par value with a stated value
of $1,000 ("CPS") at such time as the Company's articles of incorporation is
amended to authorize the issuance of the CPS. Each share of CPS is subject
to mandatory and automatic conversion into the Company's common shares upon
the effective date of an initial public offering of the Company's common
shares or September 1, 1998, whichever occurs first.
d. In July through November 1997, the Company issued approximately
$438,000 of Units.
e. In October 1997, the Company amended its articles of incorporation to
change the aggregate number of shares the Company has authority to issue
from 1,000,000 to 1,001,000 consisting of 1,000,000 shares of common stock,
$.001 par value per share, and 1,000 shares of preferred stock. Thereafter,
the board of directors of the Company authorized the issuance of the CPS,
which was issued to the holders of the Units in cancellation of their
promissory notes.
f. Cumulative dividends of $100 per convertible preferred share are
payable quarterly, if declared. The Company has not declared any dividends
at June 30, 1998.
g. For disclosure purposes in accordance with SFAS No. 123, the fair
value of each stock option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for stock options granted during the year ended June 30,
1998, respectively: annual dividends of $0.00, expected volitility of 20.0%,
risk-free interest rate of 5.7% and expected life of five years for all
grants. The weighted-average fair value of the stock options granted during
the year ended June 30, 1998 was $0.77.
If the Company recognized compensation cost for the employee stock
option plan in accordance with SFAS No. 123, the Company's pro forma net loss
and loss per share would have been approximately, $652,000 and $1.12 in year
ended June 30, 1998.
7. COMMITMENTS/CONTINGENCIES
a. In December 1996, the Company issued to Richard A. Fisher, a founder of
the Company, 73,319 shares of stock and a note for $45,000 for the receipt of
certain assets at an estimated fair value of $20,000. The assets received
have been recorded at fair value; the excess of the note issued over the
assets received has been recorded as a distribution. Simultaneously with
this agreement, Mr. Fisher entered into a three year employment contract.
<PAGE>
The remaining note payable balance at June 30, 1998, was $45,000.
b. The Company entered into a five year rental lease beginning October 1,
1996 and ending September 30, 2001. The future minimum rental payments to be
made under noncancellable operating leases as of June 30, 1998 are as
follows:
1998-1999 $ 36,960
1999-2000 40,560
2000-2001 12,510
2001 690
c. The Company has received a letter from a shareholder requesting that the
Company repurchase his shres of common stock. The Company does not believe
it has any obligation to repurchase any shares of its common stock.
8. SALE OF "DIAL-UP" ACCESS SERVICE
In April 1997, the Company sold its business of providing "dial-up" access
service to Internet users. The sales price was $30,000, fixed and contingent
future revenues based on the number of the Company's former "dial-up" customers
and future radio advertising credits to be provided by the buyer. In May 1998,
the Company began receiving the contingent monthly revenue payments and will
continue to receive such payments through May 4, 1999. At June 30, 1998, no
amount has ben allocated to the contingent revenue estimated at approximately,
$4,000 per month.
9. INCOME TAXES
The Company accounts for income taxes under SFAS 109, "Accounting for Income
Taxes" which requires the recognition of deferred tax assets and liabilities
for both the expected impact of differences between the financial statements
and tax basis of assets and liabilities, and for the expected future tax
benefit to be derived from tax loss and tax credit carryforwards. SFAS 109
additionally requires the establishment of a valuation allowance to reflect
the likelihood of realization of deferred tax assets. At June 30, 1997, a
valuation allowance was provided against the tax asset.
The following table illustrates the source and status of the Company's
deferred tax assets and (liabilities):
Net operating loss carryforward $ 420,000
Temporary differences 120,000
Valuation allowance (540,000)
<PAGE>
The provision for income taxes differs from the amount computed applying
the statutory federal income tax rate to income before taxes as follows at
June 30:
1998 1997
Income tax benefit computed at statutory rate $ (194,000) $ (333,043)
Tax benefit not recognized 194,000 333,043
Provision for income taxes --------- ---------
$ - $ -
10. SUBSEQUENT EVENT
The Company has agreed to acquire all the assets of Cytation Corporation,
of which it is a fifty percent owner, in exchange for equity. The combined
enterprises will operate as Cytation Corporation.
<PAGE>
WEB SERVICES INTERNATIONAL, INC.
REPORT ON AUDIT OF FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1997 AND
SIX MONTHS ENDED JUNE 30, 1996
INDEX TO WEB SERVICES INTERNATIONAL, INC.
FINANCIAL STATEMENTS
Independent Auditor's Report 2
Balance Sheet 3
Statement of Operations 4
Statement of Shareholders' Equity (Deficit) 5
Statement of Cash Flows 6
Notes to Financial Statements 7
<PAGE>
INDEPENDENT AUDITOR'S REPORT
August 29, 1997
Shareholders and Directors
Web Services International, Inc.
Middletown, RI 02842
We have audited the accompanying balance sheet of Web Services
International, Inc. as of June 30, 1997, and the related statements of
operations and stockholders' deficit and cash flows for the year ended
June 30, 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 audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the 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 by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Web Services
International, Inc. as of June 30, 1997, and the results of operations, and
its cash flows for the year ended June 30, 1997 and the six months ended
June 30, 1996 in conformity with generally accepted accounting principles.
/s/ Feldman Radin &Co., P.C.
Certified Public Accountants
<PAGE>
WEB SERVICES INTERNATIONAL, INC.
REPORT ON AUDIT OF FINANCIAL STATEMENTS
THE YEAR ENDED JUNE 30, 1997 AND
THE SIX MONTHS ENDED JUNE 30, 1996
Balance Sheet
CURRENT ASSETS
Cash $ 2,428
Accounts receivable,
net of allowance for doubtful
accounts of $4,200 37,992
Due from sale of "dial-up" access service 69,810
Prepaid expenses and other assets 3,687
TOTAL CURRENT ASSETS 113,917
FURNITURE AND EQUIPMENT,
net of accumulated depreciation 189,426
SOFTWARE DEVELOPMENT 60,475
OTHER ASSETS 3,000
$ 366,818
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 49,863
Wages payable 84,768
Accrued expenses 24,952
Note payable shareholder 45,000
Shareholder advances payable 48,044
Unearned Web design revenue 29,946
Current portion of capital lease obligation 2,828
TOTAL CURRENT LIABILITIES 282,402
CAPITAL LEASE OBLIGATION 13,086
SHAREHOLDERS' EQUITY:
Preferred shares, $1,000 par value, none
authorized, issued, or outstanding (see note) 105,000
Common shares, $.001 par value, authorized
1,000,000 shares, issued and outstanding
607,087 shares 607
Additional paid-in capital 941,185
(Deficit) (975,461)
TOTAL SHAREHOLDERS' EQUITY 71,331
$ 366,818
<PAGE>
WEB SERVICES INTERNATIONAL, INC.
REPORT ON AUDIT OF FINANCIAL STATEMENTS
THE YEAR ENDED JUNE 30, 1997 AND
THE SIX MONTHS ENDED JUNE 30, 1996
Statement of Operations
Year ended Six months
June 30, ended June 30,
1997 1996
NET REVENUES:
Subscriber access $ 172,882 $ 20,326
Web Hosting 82,971 6,921
Web site origination 109,883 16,419
Agent enrollment fees 25,994 -
Sale of "dial-up" access service 67,773 -
Other revenues 2,222 -
459,725 43,665
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES:
Advertising 127,155 6,678
Payroll and payroll taxes 564,581 37,177
Depreciation and amortization 66,949 -
Telephone utilities 128,656 20,790
Commissions 46,359 -
Professional fees 71,797 25,026
Rent 34,520 1,400
Insurance 35,521 -
Printing and reproduction 26,830 1,041
Agent seminars and product supplies 40,146 -
Software 35,429 -
Other expenses 170,281 13,515
1,348,224 105,627
NET LOSS $ (888,499) $ (61,962)
NET LOSS PER SHARE $ (1.69) $ (0.33)
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN COMPUTATION 526,112 186,722
<PAGE>
WEB SERVICES INTERNATIONAL, INC.
REPORT ON AUDIT OF FINANCIAL STATEMENTS
THE YEAR ENDED JUNE 30, 1997 AND
THE SIX MONTHS ENDED JUNE 30, 1996
Statement of Changes in Shareholders' Equity (Deficit)
<TABLE>
CYTATION CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
JUNE 30, 1997 AND SIX MONTHS ENDED JUNE 30, 1996
<CAPTION>
Total
Additional Stockholders'
Preferred Shares Common Shares Paid-in Equity
Shares Amount Shares Amount Capital (Deficit) (Deficit)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 (inception)
Issuance of founder shares 342,612 $ 343 $ 20,057 $ 20,400
Issuance of shares for compensation 54,533 55 19,031 19,086
Issuance of shares with debt 8,556 9 2,817 2,826
Net loss for the period $ (61,962) (61,962)
Balance at June 30, 1996 405,701 406 41,905 (61,962) (19,651)
Issuance of shares with debt 6,417 6 2,113 2,119
Issuance of shares for compensation 1,650 2 12,373 12,375
Issuance of shares to founder 73,319 73 (25,000) (24,927)
Issuance of warrants for compensation 14,931 14,931
Sale of common shares, less expenses 120,000 120 874,807 874,927
Preferred issued 105 $ 105,000 (4,945) 100,055
Net loss for the period (888,499) (888,499)
Balance at June 30, 1997 105 105,000 607,087 607 941,185 (975,461) 71,331
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
WEB SERVICES INTERNATIONAL, INC.
REPORT ON AUDIT OF FINANCIAL STATEMENTS
THE YEAR ENDED JUNE 30, 1997 AND
THE SIX MONTHS ENDED JUNE 30, 1996
Statements of Cash Flows
Six months
Year ended ended
June 30, 1997 June 30, 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (888,499) $ (61,962)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 66,949 -
Net loss on equipment disposal 3,033 -
Issuance of shares and warrants as compensation 27,106 19,031
Changes in assets and liabilities:
Increase in accounts receivable (37,992) -
Increase in due from sale of
"dial-up" access service (69,810) -
Decrease (increase) in prepaid expenses
and other assets 13,518 (17,205)
Increase in other assets (3,000) -
Increase in accounts payable 49,863 -
Increase in wages payable 84,768 -
Increase in accrued expenses 24,952 -
Increase in unearned Web design revenue 26,946 -
NET CASH USED IN OPERATING ACTIVITIES (702,166) (60,136)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment (216,795) (40,918)
Proceeds from equipment disposals 29,155 -
Capitalization of software development costs (72,570) -
NET CASH USED IN INVESTING ACTIVITIES (260,210) (40,918)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligations (2,141) -
Net payments/borrowings under
short-term debt arrangements 114,306 80,912
Issuance of shares to founder (25,000) -
Proceeds from issuance of common shares 874,500 23,281
NET CASH PROVIDED BY FINANCING ACTIVITIES 961,665 104,193
NET DECREASE IN CASH (711) 3,139
CASH AT BEGINNING OF PERIOD 3,139 -
CASH AT END OF PERIOD $ 2,428 $ 3,139
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 5,786 $ -
<PAGE>
WEB SERVICES INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1997
AND SIX MONTHS ENDED JUNE 30, 1996
1. BUSINESS
Web Services International, Inc. (the "Company") was incorporated in
Rhode Island in January 1996 to market and host various forms of content on
the World Wide Web. The Company markets to small and medium sized businesses
the design, origination and hosting of Web sites on the Internet. Further,
the Company provides consulting, training, reselling and other services
relating to the Internet.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make significant estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.
b. Furniture and Equipment:
Furniture and equipment are stated at cost and depreciated using the
straight-line method over the estimated useful lives of the assets ranging
from three to seven years for equipment, auto and furniture.
Leasehold improvements are amortized over the term of the lease or the
estimated life of the improvement, whichever is shorter. Whenever assets are
sold or retired, their cost and related accumulated depreciation are removed
from the appropriate accounts. Any gains and losses on dispositions are
recorded in current operations.
c. Software Development Costs:
The Company has capitalized software development costs which totaled $60,475,
net of accumulated amortization, at June 30, 1997. The capitalization of such
costs and the related amortization is in accordance with Statement of
Financial Accounting
<PAGE>
Standards ("SFAS") No. 86. Software costs, which are
capitalized after technological feasibility is established, totaled $72,570
for the fiscal year ended June 30, 1997.
d. Fair Value of Financial Instruments:
The carrying amounts reported in the balance sheet for cash, trade receivables,
accounts payable and accrued expenses approximate fair value based on the
short-term maturity of these instruments as set forth in SFAS 107.
e. Income Taxes:
The Company utilizes the liability method of accounting for income taxes as
set forth in SFAS 109, "Accounting for Income Taxes." Under the liability
method, deferred taxes are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted
tax rates in effect in the years in which the differences are expected to
reverse.
f. Revenue Recognition:
Revenues from Web design services are recognized as such services are
performed. Revenues from Web site hosting are recognized on a monthly basis.
g. Employee Stock Options and Shares Issued for Services:
The Company accounts for employee stock transactions in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees." The Company has
adopted the proforma disclosure requirements of SFAS 123, "Accounting for
Stock-Based Compensation." Accordingly, any excess of fair market value of
stock issued to employees over exercise prices has been recorded as
compensation expense and additional paid in capital.
Shares issued for services of non-employees are recorded at estimated fair
market value.
h. Loss Per Share:
Loss per share is computed on the basis of weighted average number of
common shares outstanding during the respective periods.
<PAGE>
3. FURNITURE AND EQUIPMENT
Furniture and equipment consist of the following at June 30, 1997:
Estimated
useful
lives
Computer and office equipment 3 $ 106,897
Furniture and fixtures 7 68,228
Leasehold improvements 5 42,566
Auto under capital lease obligation 5 18,055
235,746
Less accumulated depreciation 46,320
$ 189,426
4. SHORT-TERM BORROWINGS
Short term debt due consists of the following at June 30, 1997:
Shareholder advances payable due
on demand and non-interest bearing. $ 48,044
Note payable to Richard A. Fisher,
due on demand and non-interest bearing. 45,000
$ 93,044
5. EQUITY PLACEMENTS AND OTHER FINANCING
a. During the years ended June 30, 1997 and 1996, the Company issued
$18,750 and $50,000 of debt with 6,417 and 8,556 shares, respectively. The
amounts allocated to the shares have been recorded as debt discount and are
being amortized.
b. During the year ended June 30, 1997, the Company issued $105,000 of
debt units
<PAGE>
consisting of Series A 10% convertible preferred shares to be
issued, $1,000 par value, none authorized ("CPS"). Each share of CPS is
subject to mandatory and automatic conversion into the Company's common shares
upon the effective date of an initial public offering of the Company's common
shares or September 1, 1998, whichever occurs first.
c. In February 1997, the Company completed a sale of 120,000 of its common
shares at $7.50 per share. A portion of these shares were sold over the
Internet.
6. COMMITMENTS
a. In December 1996, the Company issued to Richard A. Fisher, a founder of
the Company, 73,319 shares of stock and a note for $45,000 for the receipt of
certain assets at an estimated fair value of $20,000. The assets received
have been recorded at fair value; the excess of the note issued over the
assets received has been recorded as a distribution. Simultaneously with
this agreement, Mr. Fisher entered into a three year employment contract.
b. The Company entered into a five year rental lease beginning October 1,
1996 and ending September 30, 2001. The future minimum rental payments to be
made under noncancellable operating leases as of June 30, 1997 are as follows:
1997-1998 $ 36,960
1998-1999 36,960
1999-2000 40,560
2000-2001 12,510
2001 690
7. SALE OF "DIAL-UP" ACCESS SERVICE
In April 1997, the Company sold its business of providing "dial-up" access
service to Internet users. The sales price was $30,000, payable in four
installments through August 1997, fixed and contingent future revenues based
on the number of the Company's former "dial-up" customers and future radio
advertising credits to be provided by the buyer. Approximately $66,000 of
the future revenues were recorded as of June 30, 1997. No amount has been
allocated to the contingent revenue estimated at approximately $6,000 a month,
commencing May 1998 and continuing for twelve months, or the advertising
credit. The sales proceeds have been offset against equipment transferred.
<PAGE>
8. INCOME TAXES
The Company accounts for income taxes under SFAS 109, "Accounting for Income
Taxes" which requires the recognition of deferred tax assets and liabilities
for both the expected impact of differences between the financial statements
and tax basis of assets and liabilities, and for the expected future tax
benefit to be derived from tax loss and tax credit carryforwards. SFAS 109
additionally requires the establishment of a valuation allowance to reflect
the likelihood of realization of deferred tax assets. At June 30, 1997, a
valuation allowance was provided against the tax asset.
The following table illustrates the source and status of the Company's
deferred tax assets and (liabilities):
Net operating loss carryforward $ 210,000
Temporary differences 120,000
Valuation allowance (330,000)
$ -
The provision for income taxes differs from the amount computed applying the
statutory federal income tax rate to income before income taxes as follows:
Six
Year months
ended ended
June 30, June 30,
1997 1996
Income tax benefit computed at statutory rate $ (333,043) $ (21,687)
Tax benefit not recognized 333,043 21,687
Provision for income taxes (benefit) $ - $ -
8. SUBSEQUENT EVENT
In July through September 1997, the Company issued $262,000 of debt units
consisting of Series A 10% preferred shares, $1,000 par value ("CPS").
Each share of CPS is subject to mandatory and automatic conversion into the
Company's shares upon the effective date of an initial public offering of
the Company's common shares or September 1. 1998, whichever occurs first.
<PAGE>
(b) Pro Forma Financial Information.
The pro forma financial statement required by this Item 7(b) will be filed no
later than May 15, 1999.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO DESCRIPTION
<S> <C> <C>
x 2.1 Articles of Merger between Cytation.com
Incorporated and Cytation
Corporation, dated February 11, 1999;
x 2.2 Plan of Merger dated February 11, 1999;
* 3.1 Articles of Incorporation of the Registrant, as amended;
* 3.2 Bylaws of the Registrant;
x 4.1 Instruments Defining Rights of Security Holders/Minutes of
Annual/Special Meetings of the Registrant;
x 5.1 Opinion on Legality of Securities to be Issued;
x 10.1 Issuance of Restricted Shares from Authorized Shares
x 10.2 Opinion to Transfer Agent Authorizing Issuance of
Restricted Shares from Authorized Shares
x 20.1 Board of Director's Resolution authorizing the name
change from Stylex Homes, Inc. to Cytation.com Incorporated;
x 23.1 Consent of Mark T. Thatcher, P.C.;
x 27 Financial Data Schedule
<PAGE>
EXHIBIT NO DESCRIPTION
x 99.1 Safe Harbor Compliance Statement
x 99.2 Text of press release dated January 27, 1999
_______________________
x Filed herewith.
* Incorporated by reference from the Registrant's Annual Report on
Form 10KSB (S.E.C. File No. 0-5388) filed December 31, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CYTATION.COM INCORPORATED
/s/ Kevin J. High
DATE: March 31, 1999 By: KEVIN J. HIGH
Name: Kevin J. High
Title: President
</TABLE>
CYTATION.COM INCORPORATED
and
CYTATION CORPORATION
ARTICLES OF MERGER
Pursuant to the provisions of the Rhode Island General Laws (R.I.G.L.
7-1.1-27, 7-1.1-30.3, 7-1.1-65, 7-1.1-67, 7-1.1-67, 7-1.1-68 and 7-1.1-74, et
seq., as amended) the undersigned corporations adopt the following Articles
of MERGER:
THIS IS TO CERTIFY:
FIRST:CYTATION.COM INCORPORATED, a corporation organized and existing
under the laws of the State of New York (hereinafter sometimes referred to as
the "Surviving Corporation"), and CYTATION CORPORATION, a corporation
organized and existing under the laws of the State of Rhode Island
(hereinafter sometimes referred to as the "Disappearing Corporation"), agree
that the Disappearing Corporation, shall be merged into the Surviving
Corporation. The terms and conditions of the merger and the mode of carrying
the same into effect are as herein set forth in these Articles of Merger.
SECOND:The Surviving Corporation shall survive the merger and shall
continue under the name of CYTATION.COM INCORPORATED.
THIRD:The parties to the Articles of Merger are CYTATION.COM
INCORPORATED, a corporation organized on June 10, 1966, under the General
Corporation Law of the State of New York, and CYTATION CORPORATION, a
corporation organized and existing under the laws of the State of Rhode
Island.
<PAGE>
FOURTH:No amendment is made to the Articles of Incorporation of the
Surviving Corporation as part of the merger.
FIFTH:The total number of shares of stock of all classes which the
Surviving Corporation has authority to issue is one hundred million
(100,000,000) shares of Common Stock (hereinafter referred to as the "Common
Stock").
SIXTH:Attached hereto as Exhibit A is the Plan of Merger of CYTATION.COM
INCORPORATED, a New York corporation, and CYTATION CORPORATION, a Rhode
Island corporation.
SEVENTH:The Plan of Merger was duly adopted by the Boards of Directors
of the respective corporations on January 25, 1999, and approved by the
Shareholders of the Disappearing Corporation on February 11, 1999, in the
manner prescribed by Sections 7-1.1-27, 7-1.1-30.3, 7-1.1-65, 7-1.1-67,
7-1.1-67, 7-1.1-68 and 7-1.1-74, et seq., as amended of the General Laws of
Rhode Island. The number of shares voted for the Plan of Merger was, with
respect to each corporation, sufficient for approval as set forth below.
The number of shares of CYTATION CORPORATION outstanding at the time of such
adoption was 1,231,493, and the number of Shares entitled to vote thereon was:
1,231,493
EIGHTH:The principal office of the Disappearing Corporation, organized
under the laws of the State of Rhode Island, is located in Middletown, Rhode
Island.
NINTH:The location of the principal office of the Surviving Corporation in the
State of New Jersey, is 3035 Main Street, Voorhees, New Jersey, 08043, and the
name and address of a resident agent of said Surviving Corporation in New
Jersey, service of process upon whom shall bind such Corporation in any
action, suit or proceeding pending at the time of filing these Articles of
Merger or thereafter instituted or filed against it, is:
3035 Main Street
Voorhees, NJ 08043
<PAGE>
TENTH:The effective date of this merger shall be February 11, 1999.
IN WITNESS WHEREOF, the following persons have duly executed and verify these
Articles of Merger this 11th day of February, 1999.
CYTATION.COM INCORPORATED,
a New York corporation
Attest:
/s/ Jerry Cole
_____________________ By:______________________
, JERRY COLE,
Secretary President
CYTATION CORPORATION,
a Rhode Island corporation
Attest:
/s/ Richard A. Fisher
_____________________ By:______________________
, RICHARD A. FISHER,
Secretary Chairman
STATE OF CALIFORNIA )
) ss:
COUNTY OF LOS ANGELES )
This instrument was acknowledged and executed before me this _____ day
of _______________, 1999, by Jerry Cole, Chairman and President of CYTATION.COM
INCORPORATED, a New York corporation.
______________________________
Notary Public
My Commission Expires:
[SEAL]
<PAGE>
STATE OF RHODE ISLAND )
) ss:
COUNTY OF NEWPORT )
This instrument was acknowledged and executed before me this _____ day of
_______________, 1999, by RICHARD A. FISHER, Chairman of CYTATION
CORPORATION, a Rhode Island corporation.
______________________________
Notary Public
My Commission Expires:
[SEAL]
EXHIBIT A
PLAN OF MERGER
CYTATION.COM INCORPORATED
AND
CYTATION CORPORATION
THIS PLAN AND AGREEMENT OF MERGER (hereinafter called "this Agreement"),
dated as of February 11, 1999, is by and between CYTATION.COM INCORPORATED, a
New York corporation (hereinafter referred to as "Cytation.com" and/or
"Surviving Corporation"), and CYTATION CORPORATION, a Rhode Island corporation
(hereinafter called "Cytation" and/or "Disappearing Corporation"), said
corporations being hereafter sometimes collectively referred to as the
"Constituent Corporations".
WITNESSETH:
WHEREAS, Cytation.com is a corporation duly organized and existing under
the laws of the State of New York, having been incorporated in 1966, and
Cytation is a corporation duly organized and existing under the laws of the
State of Rhode Island, having been incorporated in January 29, 1996; and
WHEREAS, the authorized capital stock of Cytation.com consists of ONE
HUNDRED MILLION (100,000,000) shares of .001 par value Common Stock, of which
ONE MILLION TWO HUNDRED FOUR THOUSAND AND SEVENTY-SIX (1,204,076) shares are
outstanding; and
WHEREAS, the authorized capital stock of Cytation consists of ONE MILLION
FIVE HUNDRED THOUSAND (1,500,000) shares of Common Stock, .01 par value, of
which ONE MILLION TWO HUNDRED THIRTY-ONE THOUSAND FOUR HUNDRED AND
NINETY-THREE (1,231,493) shares are outstanding; and
WHEREAS, the Boards of Directors of the Constituent Corporations deem it
advisable for the general welfare and advantage of the Constituent
Corporations and their respective shareholders that the Constituent
Corporations respectively desire to so merge pursuant to this Agreement and
pursuant to the applicable provisions of the laws of the State of New York
and Rhode Island;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereby agree, in accordance with the
applicable provisions of the laws of the State of New York, that the
Constituent Corporations shall merge, to wit: Cytation Corporation, a Rhode
Island corporation, one of the Constituent Corporations, which is not a new
corporation, and which shall cease its existence under the laws of the State
of Rhode Island pursuant to the Merger (said corporation hereafter being
sometimes called the "Disappearing Corporation"), and the terms and conditions
of the Merger hereby agreed upon (hereafter called the "Merger") which the
parties covenant to observe, keep and perform and the mode of carrying the
same into effect are and shall be as hereafter set forth:
ARTICLE I
CONDITIONS
The Merger shall be subject to the following conditions:
(a)the approval of the boards of directors of both Constituent
Corporations;
(b)the approval of the majority of shareholders of both Constituent
Corporations.
ARTICLE II
EFFECTIVE TIME OF THE MERGER
At the effective time of the Merger, the separate existence of Cytation
shall cease and Cytation.com shall become the Surviving Corporation.
Consummation of this Agreement shall be effected on the date on which a
Certificate and Articles of Merger in substantially the form annexed hereto is
filed in the office of the Secretary of State of the State of New York and
State of Rhode Island, all after satisfaction of the respective requirements
of the applicable laws of said state prerequisite to such filings.
ARTICLE III
GOVERNING LAW; CERTIFICATE OF INCORPORATION
The laws which are to govern the Disappearing Corporation are the laws of
the State of New York. The Certificate and Articles of Incorporation of
Stylex Homes, Inc., the predecessor corporation to Cytation.com, as heretofore
amended, shall, prior to the effective time of the Merger, be amended to the
extent set forth in Paragraph Third of the Articles of Merger, attached
hereto, to amend the name of Stylex Homes, Inc., as the Surviving Corporation,
to Cytation.com Incorporated. As so amended, such Articles of Incorporation
and Certificate of Incorporation shall remain in effect thereafter until the
same shall be further amended or altered in accordance with the provisions
thereof.
ARTICLE IV
BY-LAWS
The By-Laws of Cytation.com, at the effective time of the Merger shall be
the By-Laws of the Disappearing Corporation until the same shall be altered
or amended in accordance with the provisions thereof.
ARTICLE V
DIRECTORS AND OFFICERS
The Directors of the Disappearing Corporation at the effective time of
the Merger shall be the Directors of the Surviving Corporation until their
respective successors are duly elected and qualified. Subject to the
authority of the Board of Directors as provided by law and the By-Laws of the
Surviving Corporation, the officers of the Disappearing Corporation at the
effective time of the Merger shall be the officers of the Surviving
Corporation.
Said Directors and officers of the Surviving Corporation will be
identified in accordance with the present books and records of the
Disappearing Corporation as follows:
Name Age Position
Richard A. Fisher 52 Chairman of the Board and
General Counsel
Kevin J. High 34 President and Director
Jai N. Gupta, Ph.D. 52 Director
Michael W. Bryant 54 Director
Mark Rogers 39 Director
Nancy Gleason 43 Vice President of Marketing
ARTICLE VI
CONVERSION OF SHARES IN THE MERGER
The mode of carrying into effect the Merger provided in this Agreement,
and the manner and basis of converting the shares of the Constituent
Corporations into shares of the Surviving Corporation are as follows:
1.Cytation.com Common Stock. No Shares of Common Stock, .001 par value, of
Cytation.com issued and outstanding at the effective time of the Merger shall
be converted as a result of the Merger, and all of such shares shall remain
issued shares of Common Stock of the Surviving Corporation.
2.Cytation Common Stock. At the effective time of the Merger, each share
of .01 par value Common Stock of Cytation issued and outstanding shall be
converted into and become five and one-quarter (5.25) shares of Common Stock
of the Surviving Corporation. As a result, each holder of outstanding Common
Stock of Cytation shall surrender, on a five and one-quarter (5.25) share for
share basis, one stock certificate of Common Stock of Cytation for five and
one-quarter (5.25) shares of Cytation.com. Upon surrender to Cytation.com of
one or more stock certificates for Common Stock of Cytation, each Cytation
shareholder shall be entitled to receive one or more stock certificates for
the full number of shares of Common Stock of Cytation.com into which the
Common Stock of Cytation so surrendered shall have been converted as aforesaid
together with any dividends on the Common Stock of Cytation as to which the
payment date shall have occurred on or prior to the date of the surrender of
said shares and the proceeds from any sale of a fractional interest in
accordance with Paragraph 4 of this Article VI.
The common share allocation (the "Allocation") of the Surviving Corporation
will be as follows:
8,279,711 fully diluted, common shares of Cytation.com will be issued and
outstanding, inclusive of:
$2.50 Option Holders in Cytation Corporation who may exercise and purchase up
to one hundred ninety-six thousand eight hundred seventy-five (196,875)
shares of Cytation.com Incorporated;
$7.50 Warrant Holders in Cytation Corporation who may exercise and purchase up
to four hundred thirteen thousand four hundred and twenty-two (413,422)
shares of Cytation.com Incorporated;
Cytation shareholders will own 85.50% of the 8,279,711 fully diluted, common
shares of Cytation.com issued and outstanding.
3.Surrender of Cytation's Certificates. As soon as practicable after the
Merger becomes effective, the Stock Certificates representing Common Stock of
Cytation issued and outstanding at the time the Merger becomes effective shall
be surrendered for exchange to the Surviving Corporation as above provided.
Until so surrendered for exchange, each such Stock Certificate nominally
representing Common Stock of Cytation shall be deemed for all corporate
purposes (except for the payment of dividends, which shall be subject to the
exchange of stock certificates as above provided) to evidence the ownership of
the number of shares of Common Stock of the Disappearing Corporation which the
holder thereof would be entitled to receive upon its surrender to the
Surviving Corporation.
4.Issuance of Shares Subsequent to Merger. As soon as practicable after
the Merger becomes effective, the Surviving Corporation shall issue to the
shareholders of the Disappearing Corporation, on a pro rata five and
one-quarter (5.25) share basis, SIX MILLION FOUR HUNDRED SIXTY-FIVE THOUSAND
THREE HUNDRED AND THIRTY-EIGHT (6,465,338) shares of Common Stock in the
Surviving Corporation.
5.Fractional Interests. No fractional shares of Common Stock of the
Surviving Corporation or certificate or scrip representing the same shall be
issued. In lieu thereof each holder of Cytation Common Stock having a
fractional interest arising upon such conversion will be afforded through the
transfer agent for the Common Stock, on or before the 60th day following the
effective date of the Merger, or on or before such later date (but in any event
not later than the 90th day following the effective date of the Merger) as
the Disappearing Corporation may determine, to round up said holder's fractional
interest into one full additional share of Common Stock of the Surviving
Corporation. Any fractional interest with respect to which instructions shall
not have been so received by the transfer agent within the prescribed period
shall be canceled.
6.Status of Common Stock. All shares of Common Stock of the Surviving
Corporation into which shares of Common Stock of Cytation are converted as
herein provided shall be fully paid and non-assessable and shall be issued
in full satisfaction of all rights pertaining to such shares of Common Stock
of Cytation.
7.Independent Appraisal, Right to Dissent and Obtain Payment for Shares;
Procedures for Protection of Dissenter's Rights. In order to establish a
"fair value" for the shares of Cytation Common Stock which are paid in cash
in lieu of conversion into Cytation.com Common Stock, as provided in Article
VI above, the Board of Directors of Cytation shall establish the value of
Cytation's stock prior to the Merger, and shall afford to such shareholders of
Cytation all of the rights, and implement the procedures for protection of
dissenters' rights, pursuant to the provisions of the Rhode Island General
Laws (R.I.G.L. 7-1.1-27, 7-1.1-30.3, 7-1.1-65, 7-1.1-67, 7-1.1-67, 7-1.1-68
and 7-1.1-74, et seq., as amended, the terms and provisions of which are
hereby incorporated by reference and made a part hereof.
ARTICLE VII
EFFECT OF THE MERGER
At the effective time of the Merger, the Surviving Corporation shall
succeed to, without other transfer, and shall possess and enjoy, all the
rights, privileges, immunities, powers and franchises both of a public and a
private nature, and be subject to all the restrictions, disabilities and
duties of the Disappearing Corporation, and all the rights, privileges,
immunities, powers and franchises of the Disappearing Corporation on whatever
account, for stock subscriptions as well as for all other things in action or
belonging to the Disappearing Corporation, shall be vested in the Surviving
Corporation; and all property, rights, privileges, immunities, powers and
franchises, and all and every other interest shall be thereafter as
effectually the property of the Surviving Corporation as if it was the
Disappearing Corporation, and the title to any real estate vested by deed or
otherwise in the Disappearing Corporation shall not revert or be in any way
impaired by reason of the Merger; provided, however, that all rights of
creditors and all liens upon any property of either of said Constituent
Corporations shall be preserved unimpaired, limited in lien to the property
affected by such liens at the effective time of the Merger.
ARTICLE VIII
ACCOUNTING MATTERS
The assets and liabilities of the Disappearing Corporation as at the
effective time of the Merger, shall be taken up on the books of the Surviving
Corporation at the amounts of which they shall be carried at that time on the
books of the Surviving Corporation. The amount of capital of the Surviving
Corporation after the Merger shall be equal to the sum of the aggregate amount
of the par value of the Common Stock to be issued in the Merger and of the
aggregate par value of the Common Stock that will remain issued upon the
Merger. The surplus of the Surviving Corporation after the Merger, including
any surplus arising in the Merger, shall be available to be used for any
legal purposes for which surplus may be used.
ARTICLE IX
SHAREHOLDER APPROVAL;
FILING OF CERTIFICATE AND ARTICLES OF MERGER
This Agreement shall be submitted to the shareholders of each of the
Constituent Corporations for approval. If such requisite shareholder approval
is obtained, Articles of Merger in substantially the form annexed hereto as
the facing and original document shall be signed, verified and delivered to
the Secretary of State of the State of New York and State of Rhode Island for
filing as provided by Section 904 of the New York Business Corporation Act and
provisions of the Rhode Island General Laws (R.I.G.L. 7-1.1-27, 7-1.1-30.3,
7-1.1-65, 7-1.1-67, 7-1.1-67, 7-1.1-68 and 7-1.1-74, et seq..
ARTICLE X
CYTATION.COM REPRESENTS AND WARRANTS TO CYTATION AS FOLLOWS
1.Organization, Etc. Cytation.com is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York.
Cytation.com has corporate power to carry on its business as it is now being
conducted and is qualified to do business in every jurisdiction in which the
character and location of the assets owned by it or the nature of the business
transacted by it require qualification.
2.Capitalization. Cytation.com's capitalization consists of ONE HUNDRED
MILLION (100,000,000) authorized shares $.001 par value Common Stock, of which
ONE MILLION TWO HUNDRED FOUR THOUSAND AND SEVENTY-SIX (1,204,076) shares are
outstanding as of the date hereof. Each issued share is validly issued, fully
paid, non-assessable and each outstanding share is entitled to one vote.
Present capitalization is calculated in accordance with a recent 10:1 reverse
stock split in the predecessor corporation, Stylex Homes, Inc.
3.List of Information. Cytation.com has delivered to Cytation a list of
information concerning Cytation.com and its subsidiaries dated the date hereof.
The information set forth in such list and the copies of documents referred to
in such list and furnished to Cytation are complete and accurate.
4.Further Warranties and Representations:
(a) Cytation.com has and on the closing date will have good and
marketable title to all tangible/intangible assets in its records and books of
account, free and clear of all liens, encumbrances and charges and except for
current taxes and assessments not delinquent and liens, encumbrances and
charges shown in its records and books of account which are not substantial in
character or amount, and do not materially detract from the value or interfere
with the use of properties subject thereto or affected thereby.
(b) Cytation.com has and on the closing date will have good and
marketable title to the machinery, equipment, merchandise, materials, supplies
and other property of every kind, tangible or intangible, or shown as assets
in its records and books of account, free and clear of all liens, encumbrances
and charges and except for liens, encumbrances and charges, in any, which do
not materially detract from the value of or interfere with the use of the
properties subject thereto or affected thereby.
(c) There are no Pending claims, all taxes imposed by the U.S. or by any
foreign country or by any state, municipality, subdivision or instrumentality
of the U.S. or of any foreign county or by any other taxing authority, which
are due or payable by Cytation.com, and all price redetermination or
renegotiation claims asserted or that may be asserted against it, have been
paid in full or are adequately provided for by reserves shown in the records
and books of account of Cytation.com's and will be so paid or provided for on
the closing date. Cytation.com has no knowledge of any unassessed tax
deficiency proposed or threatened against it.
(d) Except for agreement described in and appended to the Disclosure
Schedule, none of which materially and adversely affects the earnings,
business, properties, or assets of Cytation.com,
Cytation.com is not a party to:
(1)any sales agency agreement not subject to termination without
liability on notice of sixty (60) days or less;
(2)any pension, retirement or profit sharing plan or agreement not
cancelable within sixty (60) days without liability;
(3)any management or consultation agreement not terminable at will
without liability;
(4)any union agreement or loan agreement;
(5)any contract, accepted order or commitment for the purchase of
materials, products or supplies having a total contract price in excess of
$500,000; or
(6)any other agreement which materially affects the business,
properties or assets of Cytation.com's, or which was entered into other than
in the ordinary and usual course of business.
Adequate reserves will be provided and set up on the books of account of
Cytation.com, and will continue to be so provided and set up throughout the
expansion of the project, for any contract, order or commitment expected to
be performed.
(e) Cytation.com is enjoying and on the closing date will enjoy good
working relationships under all of the Agreements, dealer, sales
representation and other agreements necessary to the normal operation of its
business. All or substantially all of the real and personal properties used
in the business of Cytation.com are and on the closing date will be in good
and operable condition. Cytation.com is adequately insured with respect to
risks normally insured against by companies similarly situated. The
"Disclosure Schedule" shall contain a list, and be accompanied by copies, of
all existing insurance policies of Cytation.com's, including but not limited
to group insurance and pension plans. All such policies are in full force
and effect.
The Disclosure Schedule shall also contain a list of all claims for
insured losses filed by Cytation.com during the three (3) year period
immediately preceding the date of this Agreement, including but not limited to
workmen's compensation, automobile and general and product liability.
5.Litigation and Proceedings. There is no suit, action or legal or
administrative proceeding pending, or to the knowledge of Cytation.com
threatened, against it or any of its consolidated subsidiaries, which, if
adversely determined, might materially and adversely affect the financial
condition of Cytation.com or the conduct of its businesses nor is there any
decree, injunction or order of any court, governmental department or agency
outstanding against Cytation.com or any of its consolidated subsidiaries
having any such effect.
6.Material Contracts. Cytation.com is not in default in any material
respect under the terms of any material outstanding contract, agreement, lease
or other commitment.
7.No Conflict with Other Instruments. At the effective time of the Merger,
the consummation of the transactions contemplated by this Plan will not result
in the breach of any term or provision of or constitute a default under any
indenture, mortgage, deed of trust or other material agreement or instrument
to which Cytation.com or any of its subsidiaries is a party.
8.Governmental Authorizations. Cytation.com has all licenses, franchises,
permits and other governmental authorizations which are valid and sufficient
for all businesses presently carried on by Cytation.com and its consolidated
subsidiaries.
9.Exchange Act of 1934, Section 12 Reporting. Up to the effective time of
the Merger, Cytation.com will currently maintain a published bid (not less than
one [1] market maker] and ask on NASDAQ's Over-the-Counter Bulletin Board
("OTC:BB"), under the trading symbol OTC:BB "CYTA" or "CYTS". In addition,
Cytation.com will conduct its operations according to its ordinary and usual
course of business consistent with past practices and obligations with respect
to its current status as a fully reporting company pursuant to Section 12 of
the Securities Exchange Act of 1934 (the "Exchange Act") and will be current
with respect to having filed all reports required to be filed pursuant to
Section 12, 13 and 16 of the Exchange Act.
ARTICLE XI
CYTATION'S REPRESENTATIONS AND WARRANTIES
Cytation represents and warrants to Cytation.com, as follows:
1.Organization. Cytation is a corporation duly organized, validly existing
and in good standing under the laws of the State of Rhode Island. Cytation has
corporate power to carry on its business as it is now being conducted and is
qualified to do business in every jurisdiction in which the character and
location of the assets owned by it or the nature of the business transacted by
it require qualification.
2.Capitalization. Cytation's capitalization consists of ONE MILLION FIVE
HUNDRED THOUSAND (1,500,000) authorized shares of Common Stock, $.01 par
value, of which ONE MILLION TWO HUNDRED THIRTY-ONE THOUSAND FOUR HUNDRED AND
NINETY-THREE (1,231,493) shares are issued and outstanding as of the date
hereof. Each issued share is validly issued, fully paid, non-assessable and
each outstanding share is entitled to one vote.
3.Shares to be Issued. At the effective time of the Merger, each share
of no par value Common Stock of Cytation issued and outstanding shall be
converted into and become five and one-quarter (5.25) shares of Common Stock
of the Surviving Corporation. As a result, each holder of outstanding Common
Stock of Cytation shall surrender, on a five and one-quarter (5.25) share for
share basis, one stock certificate of Common Stock of Cytation for five and
one-quarter (5.25) shares of Cytation.com. Upon surrender to Cytation.com of
one or more stock certificates for Common Stock of Cytation.com, each Cytation
shareholder shall be entitled to receive one or more stock certificates for
the full number of shares of Common Stock of Cytation.com into which the
Common Stock of Cytation so surrendered shall have been converted as aforesaid
together with any dividends on the Common Stock of Cytation as to which the
payment date shall have occurred on or prior to the date of the surrender of
said shares and the proceeds from any sale of a fractional interest in
accordance with Paragraph 4 of this Article VI.
4.Financial Statements. Cytation has delivered to Cytation.com copies of
its unaudited consolidated balance sheet as at December 31, 1998, and related
statements of consolidated earnings and earnings retained in the business for
the fiscal year ended on such date, in each case including the notes thereto.
All of such financial statements are true and complete and have been prepared
in accordance with generally accepted accounting principles consistently
followed throughout the periods indicated, except as otherwise indicated in
the notes thereto. Each of such balance sheets presents a true and complete
statement as of its date of the corporation's financial condition and assets
and liabilities subject to year-end adjustments. Except as and to the extent
reflected or reserved against therein (including the notes thereto), Cytation
did not have, as of the date thereof, any liabilities or obligations (whether
accrued, absolute, contingent or otherwise) of a nature customarily reflected
in a consolidated corporate balance sheet or the notes thereto, prepared in
accordance with generally accepted accounting principles. Each of such
statements of earnings and earnings retained in the business presents a true
and complete statement of the results of operations of Cytation for the
period indicated.
5.Further Warranties and Representations:
(a) Cytation has and on the closing date will have good and
marketable title to all tangible/intangible assets in its records and books of
account, free and clear of all liens, encumbrances and charges and except for
current taxes and assessments not delinquent and liens, encumbrances and
charges shown in its records and books of account which are not substantial in
character or amount, and do not materially detract from the value or interfere
with the use of properties subject thereto or affected thereby.
(b) Cytation has and on the closing date will have good and
marketable title to the machinery, equipment, merchandise, materials, supplies
and other property of every kind, tangible or intangible, or shown as assets
in its records and books of account, free and clear of all liens, encumbrances
and charges and except for liens, encumbrances and charges, in any, which do
not materially detract from the value of or interfere with the use of the
properties subject thereto or affected thereby.
(c) There are no Pending claims, all taxes imposed by the U.S. or
by any foreign country or by any state, municipality, subdivision or
instrumentality of the U.S. or of any foreign country or by any other taxing
authority, which are due or payable by Cytation, and all price redetermination
or renegotiation claims asserted or that may be asserted against it, have been
paid in full or are adequately provided for by reserves shown in the records
and books of account of Cytation and will be so paid or provided for on the
closing date. Cytation has no knowledge of any unassessed tax deficiency
proposed or threatened against it.
(d) Except for agreement described in and appended to the
Disclosure Schedule, none of which materially and adversely affects the
earnings, business, properties, or assets of Cytation, Cytation is not a
party to:
(1)any sales agency agreement not subject to termination
without liability on notice of sixty (60) days or less;
(2)any pension, retirement or profit sharing plan or agreement
not cancelable within sixty (60) days without liability;
(3)any union agreement or loan agreement;
(4)any contract, accepted order or commitment for the purchase
of materials, products or supplies having a total contract price in excess of
$5,000; or
(5)any other agreement which materially affects the business,
properties or assets of Cytation, or which was entered into other than in the
ordinary and usual course of business.
Adequate reserves will be provided and set up on the books of account of
Cytation, and will continue to be so provided and set up throughout the
expansion of the project, for any contract, order or commitment expected to
be performed.
(e) Cytation is enjoying and on the closing date will continue to enjoy
good working relationships under all Franchise Relationships, dealer, sales
representation and other agreements necessary to the normal operation of its
business. All or substantially all of the real and personal properties used
in the business of Cytation are and on the closing date will be in good and
operable condition. Cytation is adequately insured with respect to risks
normally insured against by companies similarly situated. The Disclosure
Schedule shall contain a list, and be accompanied by copies, of all existing
insurance policies of Cytation, including but not limited to group insurance
and pension plans. All such policies are in full force and effect. The
Disclosure Schedule shall also contain a list of all claims for insured losses
filed by Cytation during the three (3) year period immediately preceding the
date of this Agreement, including but not limited to workmen's compensation,
automobile and general and product liability.
6.Absence of Certain Charges or Events. From January 1, 1999 to the
date hereof, there has not been:
(i) Any change in the corporate status, businesses, operations or
financial condition of Cytation, other than changes in the ordinary course of
business.
(ii) any declaration, setting aside or payment of any dividend or
other distribution with respect to Cytation's Common Stock; or any purchase,
redemption or acquisition of such stock by Cytation, other than the contingent
issuance of seventy-five thousand (75,000) Common shares to Brennan Dyer &
Company, Limited Liability Company in connection with consulting and advisory
services rendered to Cytation; and
(iii) any other event or condition of any character which has
materially and adversely affected the corporate status, businesses, operations
or financial condition of Cytation and its consolidated subsidiaries taken as
a whole.
7.Litigation and Proceedings. There is no suit, action or legal or
administrative proceeding pending, or to the knowledge of Cytation threatened,
against it or any of its consolidated subsidiaries, which, if adversely
determined, might materially and adversely affect the financial condition of
Cytation and its consolidated subsidiaries or the conduct of their businesses
nor is there any decree, injunction or order of any court, governmental
department or agency outstanding against Cytation or any of its consolidated
subsidiaries having any such effect.
8.Material Contracts. Cytation is not in default in any material respect
under the terms of any material outstanding contract, agreement, lease or other
commitment.
9.No Conflict with Other Instruments. At the effective time of the Merger,
the consummation of the transactions contemplated by this Plan will not result
in the breach of any term or provision or constitute a default under any
indenture, mortgage, deed of trust or other material agreement or instrument
to which Cytation or any of its subsidiaries is a party.
10.Governmental Authorizations. Cytation and each of its consolidated
subsidiaries have all licenses, franchises, permits and other governmental
authorizations which are valid and sufficient for all businesses presently
carried on by Cytation and its consolidated subsidiaries.
11.Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Cytation directly
with Richard A. Fisher, and without the intervention of any other person.
ARTICLE XII
CONDUCT OF BUSINESSES PENDING THE MERGER
From and after the date of this Agreement and prior to the effective time
of the Merger, neither of the Constituent Corporations will, without the prior
written consent of the other:
1.Amend its Certificate of Incorporation or By-Laws except, in the case
as may be necessary to enable them to carry out the provisions of this
Agreement;
2.Engage in any material activity or transaction or incur any material
obligation (by contract or otherwise) except in the ordinary course of
business;
3.Issue rights or options to purchase or subscribe to any shares of its
capital stock or subdivide or otherwise change any such shares;
4.Issue or sell any shares of its capital stock or securities convertible
into shares of its capital stock, other than the contingent issuance of
seventy-five thousand (75,000) $.01 par value Common shares of Cytation to
Brennan Dyer & Company, Limited Liability Company in connection with consulting
and advisory services rendered to Cytation; or
5.Declare or pay any dividends on or make any distributions in respect
of any shares of its capital stock.
6.From and after the date of this Agreement and prior to the effective
time of the Merger, Cytation will use its best efforts to preserve its business
organizations; to keep available to Cytation.com the services of Cytation's
present officers and employees; and to preserve for Cytation.com the goodwill
of Cytation's suppliers, customers and others having business relations with
any of them. During the same period, Cytation will not put into effect any
material increase in the compensation or other benefits applicable to
officers or other key personnel.
ARTICLE XIII
ADDITIONAL AGREEMENTS
The Constituent Corporations further agree as follows:
1.Access and Information. Cytation.com and Cytation hereby agree that
each will give to the other and to the other's accountants, counsel and other
representatives full access during normal business hours throughout the period
prior to the Merger to all of its properties, books, contracts, commitments
and records, and that each will furnish the other during such period with all
such information concerning its affairs as such other party may reasonably
request. In the event of the termination of this Agreement each party will
deliver to the other all documents, work papers and other material obtained
from the other relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, and will use its best efforts
to have any information so obtained and not heretofore made public kept
confidential.
2.Expenses. Upon a termination of this Agreement as provided in Section
C of Article XIV hereof, each party will pay all costs and expenses of its
performance of and compliance with all agreements and conditions contained
herein to be performed or complied with, including fees, expenses and
disbursements of its accountants and control.
3.Further Assurances. If at any time the Disappearing Corporation shall
consider or be advised that any further assignment or assurance in law or other
action is necessary or desirable to vest, perfect, or confirm, of record or
otherwise, in the Disappearing Corporation, the title to any property or
rights of Cytation acquired or to be acquired by or as a result of the Merger,
the proper officers and directors of Cytation.com and the Disappearing
Corporation, respectively, shall be and they hereby are severally and fully
authorized to execute and deliver such proper deeds, assignments and
assurances in law and take such other action as may be necessary or proper in
the name of Cytation.com or the Disappearing Corporation to vest, perfect or
confirm title to such property or rights in the Disappearing Corporation and
otherwise carry out the purposes of this Agreement.
ARTICLE XIV
CONDITIONS PRECEDENT; TERMINATION; GENERAL PROVISIONS
Conditions Precedent to Cytation.com's Obligations. The obligations of
Cytation.com to effect the Merger shall be subject to the following
conditions (which may be waived in writing by Cytation):
1.The representations and warranties of Cytation.com's herein contained
shall be true as of and at the effective time of the Merger with the same effect
as though made at such time; Cytation.com shall have performed all obligations
and complied with all covenants required by this Agreement to be performed or
complied with by it prior to the effective time of the Merger; and
Cytation.com shall have delivered to Cytation a certificate, dated the
effective date of the Merger and signed by its President or one of its Vice
Presidents and its Secretary or one of its Assistant Secretaries, to such
effect.
2.No material changes in the corporate status, businesses, operations or
financial condition of Cytation.com, and its consolidated subsidiaries shall
have occurred since January 1, 1999 (whether or not covered by insurance), other
than changes in the ordinary course of business, none of which has been
materially adverse in relation to Cytation.com and its subsidiaries, taken as
a whole, and no other event or condition of any character shall have occurred
or arisen since that date which shall have materially and adversely affected
the corporate status, businesses, operations or financial condition of
Cytation.com, and its subsidiaries, taken as a whole.
3.Cytation.com shall have received such written consents and confirmations
(or opinions of counsel to the effect that such consents or confirmations are
not required), as it may reasonably request to the effect that the Disappearing
Corporation will succeed upon consummation of the Merger to all of
Cytation.com's right, title and interest in and to its material contracts,
agreements, leases and other commitments and that the Disappearing Corporation
shall possess and enjoy all material licenses, franchises, permits and other
governmental authorizations possessed by Cytation.com at the date hereof.
Conditions Precedent to Cytation's Obligations. The obligations of
Cytation to effect the Merger shall be subject to the following conditions
(which may be waived in writing by Cytation.com):
1.The representations and warranties of Cytation herein contained shall
be true as of and at the effective time of the Merger with the same effect as
though made at such time; Cytation shall have performed all obligations and
complied with all covenants required by this Agreement to be performed or
complied with by it prior to the effective time of the Merger; and Cytation
shall have delivered to Cytation.com a Certificate, dated the effective date of
the Merger; and signed by its Chairman of the Board and President or one of its
Vice Presidents and its Secretary or one of its Assistant Secretaries, to
such effect.
2.No material change in the corporate status, businesses, operations or
financial condition of Cytation and its consolidated subsidiaries shall have
occurred since January 1, 1999, (whether or not covered by insurance), other
than changes in the ordinary course of business, and no other event or condition
of any character shall have occurred or arisen since that date which shall have
materially and adversely affected the corporate status, businesses, operations
or financial condition of Cytation and its consolidated subsidiaries, taken
as a whole.
Termination and Abandonment. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and abandoned at any time
before the effective time of the Merger, whether before or after adoption or
approval of this Agreement by the Directors of the Constituent Corporations
under any one or more of the following circumstances:
1.By the mutual consent of the Boards of Directors of the Constituent
Corporations;
2.By Cytation if, prior to the effective time of the Merger, the conditions
set forth in Paragraphs 1 through 5, inclusive, of Section A of this Article XIV
shall not have been met;
3.By Cytation.com if, prior to the effective time of the Merger, the
conditions set forth in Paragraphs 1 and 2 inclusive of Section B of this
Article XIV shall not have been met;
4.By either of the Constituent Corporations if any action or proceeding
before any court or other governmental body or agency shall have been instituted
or threatened to restrain or prohibit the Merger and such Constituent
Corporation deem it advisable to proceed with the Merger; or
5.By either of the Constituent Corporations if the Certificate of Merger
shall not have been filed as provided in Article II hereof on or before March
1, 1999.
Upon any such termination and abandonment, neither party shall have any
liability or obligation hereunder to the other.
General. The headings in this Agreement shall not affect in anyway its
meaning or interpretation. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
Amendments. Any of the terms or conditions of this Agreement may be
modified or waived at any time before the effective time of the Merger by the
party which is, or the shareholders of which are, entitled to the benefit
thereof upon the authority of the Board of Directors of such party, provided
that any such modification or waiver shall in the judgment of the party making
it not affect substantially or materially or adversely the benefits to such
party or its shareholders intended under this Agreement.
IN WITNESS WHEREOF, this Agreement has been signed by the Chairman or
President of each of the Constituent Corporations and each of the Constituent
Corporations has caused its corporate seal to be hereunto affixed and
attested by the signature of its Secretary or an Assistant Secretary, all as
of the day and year first above written.
CYTATION.COM INCORPORATED,
a New York corporation
ATTEST:
/s/ Jerry Cole
_____________________________ __________________________________
, Secretary JERRY COLE, Chairman
CYTATION CORPORATION,
a Rhode Island corporation:
/s/ Richard A. Fisher
__________________________________
RICHARD A. FISHER, Chairman
CYTATION.COM INCORPORATED
UNANIMOUS WRITTEN CONSENT OF
THE BOARD OF DIRECTORS OF STYLEX HOMES, INC.
The undersigned being all of the directors of Stylex Homes, Inc. (the
"Company"), hereby adopt the following resolutions:
RESOLVED, that the Company hereby agrees to change its name to "Cytation.com
Incorporated", and
RESOLVED FURTHER, that the Company hereby agrees to effectuate a one for two
(1:2) reverse stock split, which shall be effective on the opening of
business on February 15, 1999; and
RESOLVED FURTHER, that the corporate officers of the Company are hereby
authorized and directed to implement the foregoing name change and reverse
stock split.
Dated: February 2, 1999
/s/ Jerry Cole
____________________________
Jerry Cole
/s/ Kevin J. Quinn
____________________________
Kevin Quinn
CYTATION CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
January 27, 1999
To the Stockholders of CYTATION CORPORATION:
Notice is hereby given that a special meeting of the stockholders of
CYTATION CORPORATION (hereinafter referred to as "Cytation" and/or the
"Corporation"), a Rhode Island corporation, will be held at the Viking Hotel,
One Bellevue Avenue, Newport, Rhode Island, on February 11, 1999, at 4:00
p.m., Rhode Island time.
The purpose of the meeting is to consider and to act upon the proposed
Plan of Merger (the "Merger"), pursuant to Sec. 7-1.1-65 of the Rhode Island
General Laws, whereby Cytation will be merged into Stylex Homes Inc.
(hereinafter referred to as "Stylex"), a publicly traded New York corporation,
trading under the symbol "SYLX" on NASDAQ's Over-the-Counter Bulletin Board
("OTC:BB"). The proposed Merger, that will effect the Corporation's capital
stock, will result in the following fully diluted capitalization whereby each
share of the Corporation's capital stock will be converted into five and
one-quarter (5.25) shares of Stylex capital stock, or, in lieu of this option
created thereby, cash in the amount of the fair value thereof will be paid
therefor as prescribed in Section 7-1.1-74 of the Rhode Island General Laws.
Only stockholders of record at the close of business on January 27, 1999,
will be entitled to notice of and to vote at the special meeting. The stock
transfer books of the Corporation will be closed as of said record date until
the effective date of the Merger, or until February 28, 1999, whichever is the
first to occur. As of the record date, the Corporation had outstanding
1,231,493 shares of capital stock entitled to one vote per share. The
affirmative vote of the holders of a majority of the Corporation's outstanding
stock is required to approve the Merger. Certain Officers, Directors and
Affiliates of the Corporation own in excess of 55.80% of the outstanding stock
of the Corporation and has advised the Corporation that they intend to vote in
favor of the Merger. Consequently, the Merger will be approved at the special
meeting of stockholders regardless of whether other stockholders vote in
favor of or against the proposed Merger.
The proposed Merger will convert the number of authorized shares of
capital stock of Cytation to five and one-quarter (5.25) shares of Stylex.
Provided any shareholder does not elect to have their shares converted to
Stylex shares in connection with the Merger, in lieu thereof, each holder of
Cytation shares will be paid the fair value thereof as determined by the
Board of Directors.
The Board of Directors has determined the fair value of each share of
capital stock to be $.01 per share. The determination of the per share fair
value was computed by reference to the book value of the capital stock of the
Corporation as of December 31, 1998.
Enclosed for your information is a copy of the Corporation's unaudited
balance sheet as of December 31, 1998, which reflects a book value of -$.53
per share.
Upon the approval of the Merger, the Corporation and Stylex will
immediately file appropriate Articles of Merger, in accordance with New York
and Rhode Island law, to effect the change in the issued and outstanding
capital stock of Stylex. The Merger will become effective upon the filing of
such Articles. Upon the filing, and without any further action being required
by the Corporation and Stylex, each share of capital stock of Cytation will be
converted into five and one-quarter (5.25) shares of Stylex capital stock,
although the holder of Cytation shares will be entitled to receive the fair
value of such shares, in lieu of receiving Stylex capital shares.
In order to obtain the fair market value payment for Cytation shares, a
stockholder must mail or deliver the stock certificates representing the
shares being subject to Merger to the following address:
Richard Fisher, Chairman Mark T. Thatcher, Esq.
Cytation Corporation Law Offices of Mark T. Thatcher
809 Aquidneck Avenue 360 Thames Street
Middletown, RI 02842 Newport, RI 02840
Each certificate must be endorsed in blank by the stockholder. Upon
receipt of the certificates so endorsed, the Corporation will promptly mail to
the stockholder a check for the fair value of the shares being exchanged, or
$.01 per share.
The Board of Directors of the Corporation believes that the Merger will
be in the best interest of stockholders whose shares are to be exchanged for
Stylex capital stock. Provided any shareholder is not interested in having
their shares exchanged for Stylex capital stock, then they will be paid the
value equal to the full book value thereof as computed above. In determining
fair value, the Board of Directors did not reduce the book value for (i) any
federal or state income taxes to be incurred by the Corporation in connection
with the sale of any of its marketable securities, (ii) any contingent
liabilities, or (iii) any expenses of liquidation. As a consequence, the Board
of Directors believes that the amount to be received by stockholders in
exchange for Cytation shares will be greater than the amount those
stockholders could possibly receive in the event of the liquidation of the
Corporation. Therefore, the Board of Directors recommends that stockholders
vote in favor of the proposed Merger.
Stockholders may be entitled to assert the above stated dissenter's
rights (fair market value of $.01 per share) within ten (10) business days as
a result of this transaction as explained in the attached copy of Section
7-1.1-74 of the Rhode Island General Laws.
Prior to the effective date of Merger, Stylex will complete a name
change with the Secretary of State of New York to Cytation Corporation.
If there are any questions or any further information is required with
respect to the proposed Merger and the transactions contemplated thereby,
please call Mark T. Thatcher, Esq., special counsel to the Corporation at
(401) 841-9444.
By order of the Board of Directors,
/s/ Richard A. Fisher
___________________________________
RICHARD FISHER,
Chairman
PLAN OF MERGER SUMMARY
Cytation Corporation
and
Cytation.com Incorporated
(presently OTC:BB "CYTA")
(formerly Stylex Homes Inc. OTC:BB "SYLX")
(1) Corporate Name (original name and subsequent changes)
Cytation.com Incorporated (formerly Stylex Homes Inc.)
(2) Shares Outstanding:
8,775,184, fully diluted
(3) Stock Options or Warrants Issued:
None
Due Date(s)
None
(4) Type of Registration, SEC File No.
SEC File No. 000-05388
(5) State of Incorporation and
Date of Incorporation/Mergers, etc.
New York, June 10, 1966
(6) Trading History and Symbols:
Ticker OTC:BB "CYTA"
(7) Name and Address of Contact Person:
Kevin J. High
Investor Relations
Cytation.com Incorporated
809 Aquidneck Avenue, 1B
Middletown, RI 02842
401-845-8800
(8) Share Structure, including authorized capital,
par values and issued and outstanding:
Common Stock, $.001 par value, 100,000,000 authorized, 8,775,184
issued/outstanding
Convertible Preferred Stock, 5,000,000 authorized, none
issued/outstanding
(9) Terms of Merger:
Eighty-Five and Forty-Six One-Hundredths Percent (85.46%) of the total issued
and outstanding common shares of Stylex Homes Inc. will be issued to Cytation
Corporation shareholders as follows:
Cytation Corporation shareholders will receive five and one-quarter (5.25)
shares of Stylex Homes Inc. for every one (1) share presently owned in
Cytation Corporation, to be subsequently registered pursuant to the Securities
Act of 1933 (the "Act") and filed on Form S-4 or SB-1 with the Division of
Corporation Finance; $2.50 Option Holders in Cytation Corporation may exercise
and purchase up to one hundred ninety-six thousand eight hundred seventy-five
(196,875) shares of Stylex Homes, Inc.;
$7.50 Warrant Holders in Cytation Corporation may purchase up to four
hundred thirteen thousand four hundred and twenty-two (413,422) shares of
Stylex Homes, Inc.;
Subsequent to completion of the Plan of Merger, the fully diluted
capitalization of Stylex Homes, Inc. will be eight million seven hundred and
seventy-five thousand one hundred and eighty-four (8,775,184) total issued
and outstanding common shares.
(10) Assets/Liabilities:
See attached Financial Statements
(11) Number of Shareholders:
One thousand one hundred seventy-three (1,173)
(12) Standard and Poors and/or Moody's:
Standard and Poors Manual Listing (Corporate Records)
(13) Certificate of Good Standing:
New York
(14) Name and Address of last auditor and tax returns and IRS Identification
number:
Cayer, Prescott, Clune & Chattellier
Contact: Jim Prescott, CPA
2 Charles Street
Providence, RI
Federal Taxpayer ID No. 16-0961436
(15) Cusip No.
Cytation.com: 232819-10-2 (formerly 86428-20-0)
(16) Transfer Agent and monies due:
American Securities Transfer, Inc.
Operations Division
938 Quail Street, Ste. 101
Lakewood, CO 80215-5518
March 31, 1999
CONFIDENTIAL
Office of Small Business Policy
Division of Corporation Finance
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re:Cytation.com Incorporated-
Opinion re Legality of Securities to be Issued
Ladies and Gentlemen:
I have acted as special counsel for Cytation.com Incorporated, a New York
corporation (the "Registrant"), in connection with the execution, delivery and
performance of a Plan of Merger executed between the Registrant and Cytation
Corporation (hereinafter referred to as "Disappearing Corporation"), whose
corporate address is 809 Aquidneck Avenue, Middletown, Rhode Island 02842.
In connection with this matter, I have examined the originals or copies
certified or otherwise identified to my satisfaction of the following:
(a) Articles of Incorporation of the Registrant and Disappearing Corporation,
as amended to date;
(b) By-laws of the Registrant and Disappearing Corporation, as amended to
date;
(c) Certificates from the Secretary of State of the States of New York and
Rhode Island, dated as of a recent date, stating that the Registrant and the
Disappearing Corporation are duly incorporated and in good standing in their
respective states of incorporation;
(d) Certificates from the Secretary of State of the State of New York and Rhode
Island, dated as of a recent date, stating that the Registrant and the
Disappearing Corporation are duly qualified to do business and are in good
standing in their respective states of incorporation and have filed all
required reports and paid all taxes due;
Page 2
S.E.C.
March 31, 1999
- -------------------
(e) Certificates from the Secretary of State of the States of New York and
Rhode Island dated as of a recent date for the Registrant and the Disappearing
Corporation listing all charter documents on file, attaching a copy of each
charter document so listed, and certifying as to the true nature of each such
copy;
(f) Certificate of the Registrant and the Disappearing Corporation, dated the
date hereof, described in the Plan of Merger between the Disappearing
Corporation and the Registrant;
(g) Certificate of the Secretary of the Registrant and the Disappearing
Corporation, dated the date hereof, relating to various matters of fact;
(h) Resolutions of the Board of Directors of the Registrant adopted on
February 12, 1999, authorizing the issuance of six million four hundred
sixty-five thousand three hundred thirty-nine (6,465,339) of Registrant
shares, the execution and delivery of the Plan of Merger between the
Disappearing Corporation and the Registrant, the filing of said documents, and
establishing the market value per share for the shares that will be issued;
(i) Executed copy of the Plan of Merger;
In addition to the foregoing, I have also relied as to matters of fact upon
the representations made by the Registrant in compliance with due diligence
requirements submitted by my office and related certificates and upon
representations made by the Registrant. Based upon and in reliance upon the
foregoing, and after examination of such corporate and other records,
certificates and other documents and such matters of law as I have deemed
applicable or relevant to this opinion, it is my opinion that:
1. The Registrant and the Disappearing Corporation have been duly
incorporated and are validly existing as corporations in good standing under
the laws of the jurisdiction of their incorporation and have full corporate
power and authority to own their properties and conduct their businesses; the
Registrant and the Disappearing Corporation are duly qualified as foreign
corporations and are in good standing in New York and in each other
jurisdiction in which the ownership or leasing of property requires such
qualification (except for those jurisdictions in which the only material
consequence of a failure to be so qualified, other than potential penalties
not individually or in the aggregate material to the Registrant or the
Disappearing Corporation taken as a whole, is that actions may not be brought
in the courts of such jurisdictions by the Registrant until its failure to so
qualify, if required, has been cured);
Page 3
S.E.C.
March 31, 1999
- ---------------------
2. The authorized capital stock of the Registrant consists of 100,000,000
shares of Common Stock, .0001 par value, of which there are outstanding
1,204,071 shares. Proper corporate proceedings have been taken validly to
authorize such authorized capital stock; all the outstanding shares of such
capital stock (including the Shares) have been duly and validly issued and are
fully paid and nonassessable; the shareholders of the Registrant have no
preemptive rights with respect to the Common Stock of the Registrant;
3. The Registrant timely files reports and is current with respect to all
reports required to be filed on behalf of the Registrant, pursuant to Section
12, 13 and/or 15 of the Securities Exchange Act of 1934 (the "Exchange Act")
and, to the best of my knowledge, no stop order suspending the effectiveness
of any registration statement, Exchange Act filing, or suspending or
preventing trading on the Over-the-Counter ("OTC") Bulletin Board is in effect
and no proceedings for that purpose have been instituted or are pending or
contemplated by the N.A.S.D.;
4. The Registrant's reports (except as to the financial statements contained
therein, as to which I express no opinion) comply as to form in all material
respects with the requirements of the Exchange Act and with the rules and
regulations of the Securities and Exchange Commission thereunder;
5. On the basis of information developed and made available to me, the
accuracy or completeness of which has not been independently verified by me, I
have no reason to believe that the Plan of Merger or the Exchange Act reports
(except as to the financial statements contained therein, as to which I
express no opinion) contains any untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading;
6. The information required to be set forth in the Plan of Merger is, to the
best of my knowledge, accurately and adequately set forth therein in all
material respects or no response is required with respect to such items, and,
to the best of my knowledge, the description of the Registrant's plans and
agreements granted thereunder accurately and fairly represents the information
required to be shown with respect to said plans, agreements, and reports by
the Exchange Act and the rules and regulations of the Securities and Exchange
Commission thereunder;
7. The terms and provisions of the capital stock of the Registrant conform to
the description thereof contained in all filed reports under the caption
"Description of Common Stock" and have been reviewed by me and insofar as
such statements constitute a summary of the law or documents
Page 4
S.E.C.
March 31, 1999
_____________________
referred to therein, are correct in all material respects, and the forms of
certificates evidencing the Common Stock comply with the New York law;
8. The descriptions in the filed reports and Plan of Merger of material
contracts and other material documents are fair and accurate in all material
respects; and I do not know of any franchises, contracts, leases, licenses,
documents, statutes or legal proceedings, pending or threatened, which in my
opinion is of a character required to be described in the filed reports and
Plan of Merger or to be filed as exhibits to the reports or Plan of Merger,
which are not described and filed as required;
9. The Plan of Merger has been duly authorized, executed, and delivered by
the Registrant and constitutes the valid and legally binding obligation of the
Registrant except as the indemnity provisions thereof may be limited by the
principles of public policy;
10. The issuance of six million four hundred sixty-five thousand three hundred
thirty nine (6,465,339) Shares of the Registrant as contemplated by the Plan
of Merger will not conflict with, or result in a breach of, any material
agreement or instrument known to me which the Registrant is a party or by
which it is bound, or any applicable law or regulation, or, so far as is known
by us, any order, writ, injunction or decree applicable to the Registrant of
any jurisdiction, court or governmental instrumentality, or the Articles of
Incorporation or By-laws of the Registrant;
11. To the best of my knowledge and belief after due inquiry, there are no
holders of Common Stock or other securities of the Registrant having
registration rights with respect to such securities on account of the filing
of a registration statement who have not effectively waived such rights; and
12. No consent, approval, authorization, or order of any court or
governmental agency or body is required for the consummation by the Registrant
of the transactions on its part contemplated by the Plan of Merger, except
such as have been obtained under the Exchange Act and such as may be required
under state or other securities or blue sky laws in connection with the
distribution of the Shares to the shareholders of the Disappearing
Corporation.
Page 5
S.E.C.
March 31, 1999
_____________________
In addition, I have participated in conferences with representatives of the
Disappearing Corporation and the Registrant and accountants for the
Disappearing Corporation at which the contents of the Plan of Merger were
discussed. Although I have not verified the accuracy or completeness of the
statements contained in the Plan of Merger (other than the caption
"Description of Common Stock"), I advise you that on the basis of foregoing, I
have no reason to believe that the Plan of Merger, as of the effective date,
contained any untrue statements of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading (except in each such case for the financial
statements or other financial data contained in the Plan of Merger as to
which I am not called upon to and do not express any opinion).
This letter is furnished to you as for filing purposes on behalf of the
Company, and is solely for the benefit of the United States Securities and
Exchange Commission.
Respectfully,
/s/ Mark T. Thatcher
Mark T. Thatcher, Esq.
Atty Reg. No. 25-275 CO
Atty Reg. No. 453658 DC
CYTATION.COM INCORPORATED
UNANIMOUS WRITTEN CONSENT OF
THE BOARD OF DIRECTORS OF
CYTATION.COM, INCORPORATED
The undersigned being all of the directors of Cytation.com Incorporated (the
"Company"), hereby adopt the following resolutions:
RESOLVED, that the Company hereby agrees to merge with Cytation Corporation,
a Rhode Island corporation ("Merger"); and
RESOLVED FURTHER, that in connection with the Merger, the Company hereby
agrees to issue 6,465,339 restricted shares of its common stock to the former
shareholders of Cytation Corporation; and
RESOLVED FURTHER, that the form of Certificate of Merger attached to this
Written Consent as Exhibit A to be filed with the State of New York to
consummate the Merger and in connection with the Merger, the Company hereby
agrees to issue 6,465,339 restricted shares of its common stock to the former
shareholders of Cytation Corporation; and the form of the Articles of Merger
attached to this Written Consent as Exhibit B to be filed with the State of
Rhode Island to consummate the Merger, are hereby adopted and confirmed; and
RESOLVED FURTHER, that the corporate officers of the Company are hereby
authorized and directed to implement the foregoing resolutions.
Dated: February 8, 1999
/s/ Jerry Cole
____________________________
Jerry Cole
/s/ Kevin J. Quinn
____________________________
Kevin Quinn
CERTIFICATE OF MERGER
OF
CYTATION CORPORATION
AND
CYTATION.COM INCORPORATED
INTO
CYTATION.COM INCORPORATED
UNDER SECTION 904 OF THE BUSINESS CORPORATION LAW
1.(A)The name of each constituent corporation is as follows:
CYTATION CORPORATION AND CYTATION.COM INCORPORATED WHICH WAS
INCORPORATED UNDER THE NAME OF STYLEX HOMES, INC.
(B)The name of the surviving corporation is CYTATION.COM INCORPORATED
and following the merger its name shall be CYTATION.COM INCORPORATED.
2.As to each constituent corporation, the designation and number of
outstanding shares of each class and series and the voting rights thereof are
as follows:
Designation and
Number of shares Class or series Shares Entitled
in each class or of shares entitled to vote as a class
Name of Corporation series outstanding to voteor series
____________________ __________________ __________________ __________________
CYTATION CORPORATION COMMON STOCK COMMON STOCK 1,231,493
1,231,493
CYTATION.COM COMMON STOCK COMMON STOCK 1,204,076
CORPORATION 1,204,076
3. No amendments will be made in the Certificate of Incorporation of the
survivor.
4. The date when the Certificate of Incorporation Of each constituent
corporation was filed by the Department of State is as follows:
NAME OF CORPORATION DATE OF INCORPORATION
_____________________________ _____________________
CYTATION CORPORATION, A RHODE JANUARY 29, 1996
ISLAND CORPORATION
CYTATION.COM INCORPORATED, JUNE 10, 1966
A NEW YORK CORPORATION
5. The merger was adopted by the New York constituent corporation in the
following manner:
As to CYTATION.COM INCORPORATED,
by the written consent of the shareholders given in accordance with
Section 615 of the Business Corporation Law, written notice having been duly
given to nonconsenting shareholders as and to the extent required by such
Section.
As to CYTATION CORPORATION, it has complied with the applicable provision
of the laws of the State of Rhode Island in which it is incorporated and
this merger is permitted by such laws. The manner in which the merger was
authorized with respect to said corporation was by the affirmative vote of a
majority of the outstanding shares of said corporation.
CYTATION CORPORATION
/s/ Richard A. Fisher
FEBRUARY 11, 1999 By:__________________________
RICHARD A. FISHER,
CHAIRMAN
CYTATION.COM INCORPORATED
/s/ Jerry Cole
By:__________________________
JERRY COLE,
President
March 31, 1999
FEDERAL EXPRESS
CONFIDENTIAL
American Securities Transfer, Inc.
As Representative of Cytation.com Incorporated
938 Quail Street, Suite 101
Lakewood, CO 80215-5513
Re:Cytation.com Incorporated ("Cytation") -
Restricted Issuance of 6,465,339 common shares of Cytation to
the shareholders of Cytation Corporation
Ladies and Gentlemen:
This office represents Cytation.com Incorporated ("Cytation"). I am in
receipt of various communications from Cytation relating to the proposed
issuance of 6,465,339 shares of Cytation common stock to the shareholders of
Cytation Corporation (the "Disappearing Corporation"), pursuant to a Plan of
Merger and Section 4(2) of the Securities Act of 1933.
Based on representations contained in these documents, copies of which are
attached hereto, it is my opinion that you may issue the 6,465,339 shares of
common stock from the authorized, but un-issued, common shares of Cytation in
reliance upon the exemption from registration provided for in Section 4(2).
All shares, when issued, should bear a restricted legend in standard form and
should not be further transferred without the prior written consent of
Cytation.
In rendering the above opinion, I have excluded from consideration state
securities or blue sky laws, except as specifically noted. My opinion is
limited to the federal laws of the United States, the laws of the State of New
York and Rhode Island and the General Corporation Law of the States of New
York and Rhode Island, and I can assume no responsibility with respect to the
applicability or effect of the laws of any other jurisdiction. I disclaim any
obligation to notify you or any other person or entity if any change in fact
and/or law should change my opinion with respect to any matter on which I am
expressing an opinion herein.
Page 2
American Securities Transfer, Inc.
March 31, 1999
_________________________________
The foregoing opinion is furnished by me as counsel for the Registrant and is
solely for your benefit and may not be relied upon by any other person unless
my prior written consent is obtained.
Respectfully,
/s/ Mark T. Thatcher
Mark T. Thatcher, Esq.
Atty. Reg. No. 25-275
MTT/jet
cc:Richard A. Fisher
Kevin J. Quinn
CYTATION.COM INCORPORATED
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF THE BUSINESS CORPORATION LAW
OF
STYLEX HOMES, INC.
WE, THE UNDERSIGNED, Jerry Cole and Kevin J. Quinn, being respectively the
President and Secretary, of STYLEX HOMES, INC., hereby certify:
1.The name of the corporation is STYLEX HOMES, INC.
2.The Certificate of Incorporation of said corporation was filed by the
Department of State on April 2, 1969.
3.(a)The Certificate of Incorporation is amended to change the name of
said corporation.
(b)To effect the foregoing, Article FIRST is amended to read as follows:
"FIRST: That the name of the corporation is
Cytation.com Incorporated."
4.The amendment was authorized in the following manner:
The amendment of the Certificate of Incorporation was authorized by the
Board of Directors of the corporation and approved by the written consent of
a majority of all outstanding shares of the corporation entitled to vote on
the amendment.
IN WITNESS WHEREOF, we have signed this certificate on the 3rd day of
February, 1999, and we affirm the statements contained as true under
penalties of perjury.
/s/ Jerry Cole
_____________________________
Jerry Cole, President
/s/ Kevin J. Quinn
_____________________________
Kevin J. Quinn, Secretary
CONSENT OF COUNSEL
I hereby consent to the use of my name as legal counsel in the Current Report
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 filed
by Cytation.com Incorporated on
Form 8-K.
MARK T. THATCHER, P.C.
/S/ Mark T. Thatcher
By:_____________________________
MARK T. THATCHER, President
Newport, RI
March 31, 1999
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PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD LOOKING STATEMENTS
In passing the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"), 15 U.S.C.A. Sections 77z 2 and 78u 5 (Supp. 1996), Congress encouraged
public companies to make "forward looking statements" by creating a safe
harbor to protect companies from securities law liability in connection with
forward looking statements. Cytation.com Incorporated ("Cytation" or the
"Company") intends to qualify both its written and oral forward looking
statements for protection under the Reform Act and any other similar safe
harbor provisions.
"Forward looking statements" are defined by the Reform Act. Generally, forward
looking statements include expressed expectations of future events and the
assumptions on which the expressed expectations are based. All forward
looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to those
uncertainties and risks, the investment community is urged not to place undue
reliance on written or oral forward looking statements of Cytation. The
Company undertakes no obligation to update or revise this Safe Harbor
Compliance Statement for Forward Looking Statements (the "Safe Harbor
Statement") to reflect future developments. In addition, Cytation undertakes
no obligation to update or revise forward looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future
operating results over time.
Cytation provides the following risk factor disclosure in connection with its
continuing effort to qualify its written and oral forward looking statements
for the safe harbor protection of the Reform Act and any other similar safe
harbor provisions. Important factors currently known to management that could
cause actual results to differ materially from those in forward looking
statements include the disclosures contained in the Item 5, Other Information,
Business Plan, to which this statement is appended as an exhibit and also
include the following:
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
The Company has incurred indebtedness and, as a result, debt service
obligations. The Company's ability to make payments on its debt
obligations will depend on its future operating performance, which will be
affected by prevailing economic conditions and financial, business and other
factors, certain of which are beyond the Company's control. If the Company is
unable to service its indebtedness, it will be required to adopt alternative
strategies, which may include actions such as reducing or delaying capital
expenditures, selling assets, restructuring or refinancing its indebtedness
or seeking additional equity capital. There can be no assurance that any of
these strategies could be effected on satisfactory terms.
The degree to which the Company is leveraged could have important
consequences, including: (i) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures,
acquisitions or other general corporate purposes may be impaired; (ii) a
substantial portion of the Company's cash flow from operations may be
dedicated to the payment of principal and interest on its indebtedness,
thereby reducing the funds available to the Company for its operations; (iii)
the Company's existing indebtedness contains, and future financings are
expected to contain, financial and other restrictive covenants, including
without limitation those restricting the incurrence of additional
indebtedness, the creation of liens, the payment of dividends, sales of
assets, capital expenditures, and prepayment of indebtedness and those
requiring maintenance of minimum net worth, minimum EBITDA and minimum
interest coverage and limiting leverage; (iv) certain of the Company's
borrowings are and will continue to be at variable rates of interest which
expose the Company to the risk of increases in interest rates; and (v) the
Company may be more leveraged than certain of its competitors, which may place
the Company at a relative competitive disadvantage and make the Company more
vulnerable to changes in its industry and changing economic conditions. As a
result of the Company's level of indebtedness, its financial capacity to
respond to market conditions, extraordinary capital needs and other factors
may be limited.
LIQUIDITY
The Company expects to consummate the sale of equity in connection with a
planned secondary offering prior to September 30, 1999 and to use a portion of
the net proceeds from the sale to pay off indebtedness. There can be no
assurance that the sale will close by such date or at all.
LITIGATION AND GOVERNMENT INVESTIGATIONS
Numerous federal and state civil and criminal laws govern computer
technology and Internet service activities. In general, these laws provide
for various fines, penalties, multiple damages, assessments and sanctions
for violations.
EVOLVING INDUSTRY STANDARDS; RAPID TECHNOLOGICAL CHANGES
Cytation's success in its business will depend in part upon its continued
ability to enhance its existing products and services, to introduce new
products and services quickly and cost effectively to meet evolving customer
needs, to achieve market acceptance for new product and service offerings and
to respond to emerging industry standards and other technological changes.
There can be no assurance that Cytation will be able to respond effectively to
technological changes or new industry standards. Moreover, there can be no
assurance that competitors of Cytation will not develop competitive products,
or that any such competitive products will not have an adverse effect upon
Cytation's operating results.
Moreover, management intends to continue to implement "best practices" and
other established process improvements in its operations going forward. There
can be no assurance that the Company will be successful in refining, enhancing
and developing its operating strategies and systems going forward, that the
costs associated with refining, enhancing and developing such strategies and
systems will not increase significantly in future periods or that the Company's
existing software and technology will not become obsolete as a result of
ongoing technological developments in the marketplace.
YEAR 2000
It is possible that the Company's currently installed computer systems,
software products or other business systems, or those of the Company's
customers, vendors or resellers, working either alone or in conjunction with
other software or systems, will not accept input of, store, manipulate and
output dates for the year 2000 or thereafter without error or interruption
(commonly known as the "Year 2000" problem). The Company has conducted a
review of its business systems, including its computer systems, and is
querying its customers, vendors and resellers as to their progress in
identifying and addressing problems that their computer systems may face in
correctly interrelating and processing date information as the year 2000
approaches and is reached. Through its review, the Company has identified a
number of older legacy systems that will be abandoned in favor of a limited
number of more efficient processing systems, rather than make all the systems
Year 2000 compatible. Customers, vendors and resellers have been identified
and requests for information distributed regarding the Year 2000 readiness of
such parties.
Responses are expected through the first quarter of 1999. The Company will
develop contingency plans during the first quarter of 1999 through the second
quarter of 1999 in response to assessments of the Year 2000 readiness of
customers, vendors and resellers. The estimated cost of the Company's Year
2000 efforts is $10,000 to $15,000 over 1998 and 1999, the majority of which
represents redirection of internal resources. However, there can be no
assurance that the Company will identify all such Year 2000 problems in its
computer systems or those of its customers, vendors or resellers in advance of
their occurrence or that the Company will be able to successfully remedy any
problems that are discovered. The expenses of the Company's efforts to identify
and address such problems, or the expenses or liabilities to which the Company
may become subject as a result of such problems, could have a material adverse
effect on the Company's business, financial condition and results of operations.
The revenue stream and financial stability of existing customers may be
adversely impacted by Year 2000 problems, which could cause fluctuations in the
Company's revenue. In addition, failure of the Company to identify and remedy
Year 2000 problems could put the Company at a competitive disadvantage
relative to companies that have corrected such problems.
VOLATILITY OF STOCK PRICE
Cytation believes factors such as the Company's liquidity and financial
resources, Internet reform measures and quarter to quarter and year to year
variations in financial results could cause the market price of Cytation Common
Stock to fluctuate substantially. Any adverse announcement with respect to
such matters or any shortfall in revenue or earnings from levels expected by
Management could have an immediate and material adverse effect on the trading
price of Cytation Common Stock in any given period. As a result, the market
for Cytation Common Stock may experience material adverse price and volume
fluctuations and an investment in the Company's Common Stock is not suitable
for any investor who is unwilling to assume the risk associated with any such
price and volume fluctuations.
99.2 Text of press release dated January 27, 1999
Exhibit 99.2
Stylex Homes Inc. Signs Letter of Intent to Merge With Cytation Corp.;
Merged Company to be Renamed Cytation.com
Business Wire - January 27, 1999 14:06
VOORHEES, N.J.--(BUSINESS WIRE)--Jan. 27, 1999--Stylex Homes Inc. (OTC
BULLETIN BOARD: SYLX) announced today that it has signed a binding letter of
intent to merge with Cytation Corp., a Middletown, R.I. provider of Internet
training services to corporate and government markets.
The merger, which is subject to approval by shareholders of both companies,
is
expected to be completed by mid-February. At that time, all of the assets of
Cytation will transfer to Stylex, and Stylex will issue 6,465,338 common
shares to the shareholders of Cytation. Cytation shareholders will own
approximately 85.5 percent of the issued and outstanding shares of the
combined enterprise.
Upon completion of the merger, Stylex will change its name to Cytation.com Inc.
"We believe this merger will provide Cytation with the capital growth
formation potential and valuation required to aggressively compete in the
rapidly growing market for Internet training and related services," said
Kevin High, Cytation's president. High added that "Cytation's Web-based
training delivery services will enable organizations to deploy and manage
online learning solutions efficiently and cost-effectively. Corporate trainers
are just beginning to realize the tremendous cost-savings that can be achieved
by putting employees in front of computers instead of on airplanes."
Cytation is a provider of Internet training and related services and competes
in the $85 billion a year corporate training market. The company's principal
service is Roll Call(tm), a proprietary online, browser-based, enterprise-wide
training management operating system that enables students to enroll and take,
training managers to administer, and instructors to teach -- courses over the
Internet or on intranets.
Forward-looking statements in this release concerning trends or anticipated
operating results are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are not guarantees of future performance and are subject to risks
and uncertainties related to the company's operations. These risks and
uncertainties include, but are not limited to, competitive factors (including
the possibility of increased competition or technological development,
competitors and price pressures); legal factors (such as limited protection of
the company's proprietary technology and changes in government regulation);
and the company's dependence on key personnel and significant customers.
CONTACT: Cytation
Kevin High, President
401/845-8800
[email protected]
www.cytation.com
