UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PriorityAccess, Inc.
(Name of small business issuer in its charter)
Delaware 8742 14-181544
(State or jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
PriorityAccess, Inc.
20 Corporate Woods Boulevard
Albany, New York 12211
(518) 432-7270
(Address and telephone number of principal executive offices)
PriorityAccess, Inc.
20 Corporate Woods Boulevard
Albany, New York 12211
(Address of Principal place of business or intended
principal place of business)
Corporation Service Company, Inc.
2711 Centerville Road
Wilmington, Delaware 19808
(Name, address, and telephone number of agent for service)
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
the effective date of this registration statement and prospectus.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.[ ]
If the Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
Title of each class of Dollar amount Proposed maximum Proposed maximum Amount of
securities to be registered to be registered offering price aggregate offering registration fee
per unit price
Shares of common stock $5,000,000 $10.00 $5,000,000
TOTAL $5,000,000 $10.00 $5,000,000 $1195
- --------------------------------------------------------------------------------------------------------------------
Estimated solely for the purpose of calculating the registration fee.
We may amend this registration statement on such date or dates as may be
necessary to delay its effective date until we file a further amendment which
specifically states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or until
the registration statement shall become effective on a date that the SEC, acting
under Section 8(a), may determine.
Part I
Information required in prospectus
Prospectus
PriorityAccess, Inc.
This is our initial public offering of up to 500,000 shares of our common stock
at $10 per share. PriorityAccess, Inc. provides a wide range of financial
services to individuals and early-stage companies that are considering expanding
and growing through the public and private equity markets. PriorityAccess, Inc.
provides management support services while its other subsidiary, AccessCapital,
Inc., an independently managed registered broker-dealer, provides private equity
investment services and its subsidiary, PriorityFinancial, Inc., an
independently managed financial services company provides financial planning,
insurance, and retirement planning services.
This is a self-underwritten offering. The shares will be distributed on a "best
efforts" basis. There is no minimum amount of shares that must be sold. Our
president, Roger D. Shearer, will sell the shares directly to investors without
the use of a professional underwriter. The offering will continue for 180 days
after the effective date of this prospectus and may be extended for another 90
days at the discretion of our management.
No public market currently exists for the trading of our shares.
Investing in our common stock involves substantial risks. Consider carefully the
risk factors beginning on page 2 in this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
- --------------------------------------------------------------------------------
Underwriting
Price per share to Maximum shares discounts and Proceeds to the
public offered commissions company
- --------------------------------------------------------------------------------
$10 500,000 None $5,000,000
- --------------------------------------------------------------------------------
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
The date of this prospectus is January 25, 2002.
Dealer prospectus delivery obligation
Until 90 days after the effective date of this registration statement, all
dealers effecting transactions in the shares, whether or not participating in
this offering, may be required to deliver a prospectus. This is in addition to
the dealers' obligation to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
Table of contents
Prospectus Summary.............................................................1
Our company...............................................................1
Corporate information.....................................................1
The offering..............................................................2
Use of proceeds...........................................................2
Risk factors...................................................................2
Use of proceeds................................................................8
Determination of offering price................................................9
Dilution.......................................................................9
Plan of distribution..........................................................10
Limited state registration...............................................11
Method of subscribing ...................................................11
Expiration date...............................................................11
Legal proceeding..............................................................11
Management....................................................................12
Directors and officers........................................................12
Executive compensation........................................................14
Directors................................................................14
Summary compensation table...............................................14
Employment agreements....................................................14
Principal security holders....................................................15
Description of securities.....................................................15
Common stock.............................................................15
Preferred stock..........................................................16
Warrants.................................................................16
Dividends................................................................16
Shares eligible for future sale...............................................17
Transfer agent...........................................................18
Business......................................................................18
Plan of operation........................................................18
Our strategy.............................................................19
Statement as to indemnification...............................................20
Relationships and related transactions........................................20
Description of property.......................................................21
Legal opinions................................................................21
Experts.......................................................................22
Financial statements..........................................................23
Indemnification of directors and officers.....................................34
Expenses of issuance and distribution.........................................36
Recent sales of unregistered securities.......................................37
Exhibits......................................................................38
Undertakings..................................................................38
Signatures....................................................................39
Prospectus Summary
Our company
Our core mission is to serve the interests of our diverse investor network by
evaluating, supporting and providing access to sound, early-stage investment
opportunities and value added financial services. In a market that traditionally
limits access to early-stage investment opportunities to institutional
investors, venture capitalist and a select group of high net worth individual
investors, PriorityAccess bridges the gap between business innovators and
individual investors.
Since its inception the company's development objectives were to: (1) establish
and grow a network of qualified investors; (2) assemble a distribution of
individuals qualified in complementary business disciplines including marketing,
accounting, financial management, securities and investment banking; (3) form
and launch a financial services subsidiary; and (4) form or acquire a NASD
registered broker/dealer subsidiary.
The company has successfully met each of its development objectives, tested and
refined its business model and progressed to operations and revenue. Operating
revenues have been realized from the sale of financial services through the
company's subsidiary, PriorityFinancial, Inc. and support services through
EquiMerge the company's Merger & Acquisition operating division. Non-operating
revenues have been secured from the sale of certain assets. Our investor network
currently numbers approximately 2,500 individuals, our management and staff
include experienced marketing professionals, an accounting professional, a
Certified Public Accountant, licensed securities principals, licensed insurance
professionals, licenses securities brokers as well as experienced banking
support. PriorityFinancial, Inc. is a newly formed financial services subsidiary
that has been launched and is producing revenues and the NASD recently approved
our acquisition of AccessCapital, Inc. an NASD registered broker/dealer.
Additional non-operating subsidiary entities are Darby Acquisition Corporation
and Laurus Acquisition Corporation each of which was formed within EquiMerge the
company's operating division for the expressed purpose of filing for
registration as a blank check public shell to be used in reverse merger
transactions. Endpoint Technologies, Inc. is a majority owned subsidiary through
which PriorityAccess manages technology related activities. Endpoint currently
has one project under development and a second in negotiation.
Corporate information
We were incorporated under Delaware law on July 7, 1999.
Our offices are at 20 Corporate Woods Boulevard, Albany, New York 12211. Our
telephone number is (518) 432-7270.
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This offering
Securities offered Common stock, $.001 par value
up to 500,000 shares
Price per share $10.00
Common stock outstanding 3,749,834 shares
prior to the offering 27,500 warrants
Common stock to be 4,249,834 shares
outstanding after the 27,500 warrants
maximum offering
Use of Proceeds
We will use the net proceeds from this offering to support expansion of our core
business through acquisition, operating capital for PriorityAccess, marketing
support for our subsidiaries and to facilitate future access to public markets.
Risk factors
An investment in PriorityAccess is highly speculative and should be considered
only by persons able to bear the economic risk of the investment for an
indefinite period. Prospective investors should carefully consider the following
risk factors relating to PriorityAccess and its operations. You should carefully
consider the following risks and all other information contained in this
prospectus before deciding to purchase our common stock. Included is a
discussion of each material risk that PriorityAccess has identified as of the
date of this prospectus. However, additional risks and uncertainties not
presently known to us, or that is deemed immaterial at this time, may also
impair our business operations. If any of the following risks actually occur,
PriorityAccess's business, financial condition or operating results could
suffer. If this occurs, the trading price of our common stock could decline, and
you could lose all or part of your investment.
LIMITED OPERATING HISTORY PriorityAccess was incorporated on July 7, 1999 and
thus has a limited operating history. No assurance can be given that future
revenues and profits will meet the company's expectations, or that the company
will ever be able to operate profitably. Because of this limited operating
history and information, it will be difficult for you to predict whether we will
be successful. PriorityAccess is subject to the risks, expenses and
uncertainties frequently encountered by companies in the new and rapidly
evolving markets for financial products and services. We may not be successful
in addressing these risks or other risks we may face. If unable to address these
risks adequately, PriorityAccess's business, results of operations, and
operations and financial condition may suffer.
2
OPERATING LOSSES As the company increases its sales and marketing, significant
general, administrative, and development expenses will be incurred and near term
losses may arise. PriorityAccess currently generates limited revenues, and no
assurances can be made as to when, or if, sustained profitability will be
achieved. Failure to become and remain profitable may materially and adversely
affect the market price of our common stock and our ability to raise capital and
continue operations.
LACK OF PROVEN MODEL We are in the development stage of our new line of business
and we believe that our success will depend in a large part on our ability to
operate our broker-dealer and financial services subsidiaries profitably. No
assurance can be given that our business model will be successful or that it
will experience revenue growth or ever be profitable. It is difficult to
forecast our future growth rate, if any, and its ultimate size. If our business
fails to develop, develops more slowly than expected, or becomes saturated with
competitors, or if our products and services do not achieve or sustain market
acceptance, our business, results of operations, and financial condition will be
materially, adversely affected. Because of the uncertainty of these events you
should not purchase these securities unless you are able to lose the entire
amount of your investment in the securities.
DEPENDENCE UPON OFFERING FOR EXPANSION PriorityAccess's growth plans require the
net proceeds from this offering. If less than all of the shares offered are
sold, we may have to delay or modify its plan. Any delay or modification of our
plan may adversely affect our development.
MANAGEMENT OF GROWTH To implement PriorityAccess's business plan, we must expand
our operations, financial systems, and personnel. We may be unable to hire and
train sufficient personnel to manage the growth that may result from a
successful offering, which would result in our being unable to capitalize the
opportunity in the market, and might cause our financial condition and results
from operations to suffer.
In connection with our recently completed acquisitions we have undertaken and
will undertake in the future certain additional risks, many of which are not
risks presently associated with our core business and operations. For example,
our management will be presented with new challenges and risks associated with
the development, integration and implementation of the financial services,
insurance and securities brokerage businesses we have acquired or formed. These
risks include, but are not limited to, sales practices issues and related claims
procedures. We believe that our management team and the new internal procedures
we are implementing in connection with the expansion of our operations will be
adequate to manage and supervise these new business lines, however we cannot be
sure that management will be able to address all of the new risks associated
with these businesses or that the policies and procedures we implement will be
sufficient.
COMPETITION The financial services and securities brokerage businesses are very
competitive. Many current and potential competitors have longer operating
histories, larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources than PriorityAccess and its
subsidiaries posses. These competitors may be able to respond more quickly to
new opportunities in the industry, and to devote greater resources to the
3
development, promotion, and sale of their products and services than we can. We
might not be able to compete successfully against our current or future
competitors.
GOVERNMENT REGULATION The sale of securities is regulated by both federal and
state authorities. PriorityAccess will obtain all permits, and licenses required
to operate its business, although there can be no assurance that we will not
become subject to more restrictive regulations in the future.
REGULATORY RISKS PriorityAccess's business, and the securities industry
generally, are subject to extensive regulation at both the federal and state
levels. In addition, self-regulatory organizations, such as the NASD, require
strict compliance with their rules and regulations. Among other things, these
regulatory authorities impose restrictions on sales methods, trading practices,
use and safekeeping of customer funds and securities, record keeping and the
conduct of principals and employees. The extensive regulatory framework
applicable to broker-dealers, the purpose of which is to protect customers and
the integrity of the securities markets, imposes significant compliance
requirements on us. Failure to comply with any of the laws, rules or regulations
of any independent, state or federal regulatory authority could result in a
fine, injunction, suspension or expulsion from the industry, which could have a
material adverse effect on PriorityAccess. Although we have implemented
procedures designed to achieve compliance with such laws, rules and regulations,
there can be no assurance that such compliance procedures will prevent
violations. Furthermore, amendments to existing statutes and regulations or the
adoption of new statutes and regulations could require us to alter our methods
of operation at costs which could be substantial.
NET CAPITAL REQUIREMENTS The Securities and Exchange Commission (SEC) and the
NASD have adopted stringent provisions with respect to net capital requirements
applicable to the operation of securities firms. A significant operating loss or
any charge against the net capital of PriorityAccess's brokerage subsidiary,
could adversely affect its ability to operate, expand or, depending upon the
magnitude of the loss or charge, maintain its present level of business. These
rules could also restrict the ability of PriorityAccess to withdraw capital from
its brokerage subsidiary, AccessCapital, Inc., even in circumstances where it
has more than the minimum amount of required capital, which, in turn, could
limit the ability of PriorityAccess to implement its strategies.
UNDERWRITING LIABILITY Investment bankers/underwriters are subject to certain
liabilities resulting from underwriting the sale of securities. PriorityAccess's
subsidiaries intend to purchase liability insurance, if available at reasonable
rates, before selling securities for other parties. Part of an underwriter's
responsibility is research and fact verification. Although PriorityAccess
intends to be thorough and accurate in its review, it is possible that
materially inaccurate statements could appear in the offering documentation for
an equity candidate, or that material information is omitted from such
documentation. As a result of such events, it is possible that PriorityAccess
could be held liable, or at least be the subject of claims of liability.
PriorityAccess intends to utilize the services of independent auditors and
lawyers to help perform the research and verification process. If PriorityAccess
were to be the subject of claims of liability, or in fact found liable, such
fact could adversely impact the financial conditions and results of operations
of PriorityAccess.
4
INVESTMENT COMPANY ACT REGISTRATION The Investment Company Act restricts the
operations of companies that are deemed to be "investment companies". We believe
that we are not an investment company because our brokerage subsidiary
AccessCapital, Inc. is primarily engaged in the business of selling securities
to customers, acting as a broker, and related activities. The Investment Company
Act has not, however, been subject to substantial regulatory or judicial
interpretation. Accordingly, we cannot assure you that the SEC will agree with
our conclusion or that a court will agree with our conclusion if this issue is
ever litigated. If we fail to comply with the requirements of the Investment
Company Act, we would be prohibited from engaging in business or selling our
securities, and could be subject to civil and criminal actions for doing so. In
addition, our contracts would be avoidable and a court could appoint a receiver
to take control of us and liquidate our business. Any failure to comply with the
Investment Company Act would therefore seriously harm our business.
DETERMINATION OF PURCHASE PRICE The offering price of our common stock has been
arbitrarily determined by us and is not the result of arms-length negotiations
with any underwriter or other party. Such price is not necessarily related to
our asset value, net worth, results of operations or any other established
criteria of value. The foregoing factors may diminish your ability to assess the
likelihood that your purchase price will be recovered, if not exceeded, upon
sale, and no assurance can be given in that regard.
DILUTION Purchasers in this offering will experience immediate and substantial
dilution. The offering price of our common stock is substantially higher than
its book value immediately after the offering. As a result, if you invest in
this offering at an offering price of $10.00 per share, you will incur immediate
dilution of at least $8.63 per share in the book value of the shares purchased
from the price you pay for your stock if we sell the entire offering. You will
incur this dilution largely because our earlier investors paid substantially
less than the offering price when they purchased their common stock.
DEPENDENCY ON KEY OFFICERS The success of PriorityAccess depends on the
continued services of its key officers, including Roger D. Shearer, its
President, Valerie J. Balga, its Vice President for Marketing, and the continued
services of the key officers of its subsidiaries, including Paul J. Murray,
President of PriorityFinancial, Inc. The loss of the knowledge and industry
expertise of any these officers could seriously impede our success, and our
financial condition and results of operations could suffer.
DISCRETION IN USE OF PROCEEDS Management will have significant flexibility in
the use of the proceeds from this offering. We intend to use the net proceeds
for additional equity capital and working capital and general corporate
purposes. The failure of our management to apply the funds effectively could
harm our business.
LACK OF BRAND IDENTITY We do not have brand identity making it more difficult to
compete successfully. Establishing and maintaining brand identity will become a
critical part of our efforts to expand our business model and to promote client
relationships. If we fail to promote our brand successfully, or if we incur
excessive expenses in an attempt to promote and maintain our brand, our business
will grow more slowly, if at all. Promotion and enhancement
5
of our brand will also depend, in part, on our success in providing high quality
products and services to our clients. Such success cannot be assured. If our
clients do not perceive our relationship to be of high quality, or if we
introduce new products or services that are not favorably received by such
parties, the value of our brand would be diluted. Such brand dilution could
decrease the attractiveness of our business model to potential acquirors, and
could materially and adversely affect our business, results of operations and
financial condition.
NO PUBLIC MARKET HAS EXISTED FOR OUR SHARES AND AN ACTIVE TRADING MARKET MAY NOT
DEVELOP OR BE SUSTAINED The shares offered hereby will be registered with the
Securities Exchange Commission pursuant to the Securities Act and Regulation S-B
promulgated thereunder and, as such, the shares purchased in the offering will
be freely tradable under the Federal securities laws. However, the shares will
be registered in only a limited number of states, and may not be sold or
otherwise transferred to persons who are residents of any state in which the
shares have not been registered, unless they are subsequently registered, or
there exists an exemption from the applicable state's registration requirements
with respect to such sale or transfer.
This is our initial public offering and before this offering there has been no
public market for our common stock. We cannot assure you that an active trading
market will develop or be sustained after this offering. You may not be able to
resell your shares within a reasonable time or at or above the offering price.
There can be no assurance that the market price of our common stock after this
offering will relate to our book value, assets, past operating results,
financial condition or any other established criteria of value. Therefore, the
offering price or the price at which you may purchase the securities being
offered herein may not be indicative of the market price for our shares of
common stock or other securities after this offering.
NO CURRENT MARKET MAKERS PriorityAccess does not presently have any market
makers for its common stock or any other securities. Making a market in
securities involves maintaining bid and ask quotations and being able, as
principal, to effect transactions in reasonable quantities at those quoted
prices, subject to various securities laws and other regulatory requirements.
The development of a public trading market depends, however, upon the existence
of willing buyers and sellers, the presence of which is not within the control
of PriorityAccess or any market maker. Even with a market maker, factors such as
the limited size of the offering means that there can be no assurance of an
active and liquid market for the common stock developing in the foreseeable
future. Even if a market develops, there can be no assurance that a market will
continue or that shareholders will be able to sell their shares at or above the
price at which these shares are being offered to the public. Purchasers of
common stock should carefully consider the limited liquidity of their investment
in the shares being offered hereby.
WE MAY NOT BE ABLE TO OBTAIN OR MAINTAIN THE QUOTATION OF OUR COMMON STOCK ON
THE NASDAQ BULLETING BOARD, WHICH WOULD MAKE IT MORE DIFFICULT TO DISPOSE OF OUR
COMMON STOCK We intend to have our common stock quoted on the NASDAQ OTC
Bulletin Board ("OTCBB"). Even if it is accepted for quotation, we cannot
guarantee that it will always be available for OTCBB quotations. The OTCBB is
not an issuer listing service, market or exchange. Although the OTCBB does not
have
6
any listing requirements per se, to be eligible for quotation on the OTCBB,
issuers must remain current in their filings with the SEC. Market makers will
not be permitted to begin quotation of a security whose issuer does not meet
this filing requirement. Securities already quoted on the OTCBB that become
delinquent in their required filings will be removed following a 30 or 60 day
grace period if they do not make their required filing during that time. If our
common stock were not quoted on the OTCBB, trading in our common stock would be
conducted, if at all, in the over-the-counter market. This would make it more
difficult for stockholders to dispose of their common stock and more difficult
to obtain accurate quotations on our common stock. This could have an adverse
effect on the price of the common stock.
OUR STOCK MAY BE TREATED AS A "PENNY STOCK" WHICH WILL PLACE RESTRICTIONS ON
BROKER-DEALERS RECOMMENDING THE STOCK FOR PURCHASE The Securities and Exchange
Commission (SEC) has adopted regulations that define "penny stock" to include
common stock that has a market price of less than $5.00 per share, subject to
certain exceptions. These rules include the following requirements:
broker-dealers must deliver, prior to the transaction, a disclosure schedule
prepared by the SEC relating to the penny stock market; broker-dealers must
disclose the commissions payable to the broker-dealer and its registered
representative; broker-dealers must disclose current quotations for the
securities; if a broker-dealer is the sole market-maker, the broker-dealer must
disclose this fact and the broker-dealers presumed control over the market; and
a broker-dealer must furnish its customers with monthly statements disclosing
recent price information for all penny stocks held in the customer s account and
information on the limited market in penny stocks. Additional sales practice
requirements are imposed on broker-dealers who sell penny stocks to persons
other than established customers and accredited investors. For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and must have received the purchaser s written consent to the
transaction prior to sale. If our common stock becomes subject to these penny
stock rules these disclosure requirements may have the effect of reducing the
level of trading activity in the secondary market for our common stock, if such
trading market should occur. There is a lack of liquidity in our common stock
and you may not be able to sell the stock you purchase in this offering on terms
you consider reasonable.
VOTING CONTROL Stockholders of PriorityAccess are not entitled to cumulative
voting rights. Consequently, the elections of directors and all other matters
requiring stockholder approval will be decided by a majority vote except as
otherwise provided by law. Assuming all of the shares offered hereby are sold,
after the offering Roger D. Shearer will own 58% of the outstanding common
stock. Thus, Mr. Shearer will be in a position to substantially control the
election of the board of directors of the company and its management and
policies.
LIMITATION OF DIRECTORS' LIABILITY The by-laws of the company provide that a
director of the company will not be personally liable for monetary damages to
the company or its stockholders for breaches of its fiduciary duty as a
director, unless the director acted in bad faith, knowingly or intentionally
violated the law, personally gained a financial profit or other advantage to
which the director was not entitled, or violated federal securities law.
FORWARD LOOKING STATEMENTS This prospectus contains "forward looking
statements." These statements may include statements regarding: the company's
business plan;
7
plans for hiring additional personnel; acquiring a broker/dealer; adequacy of
anticipated sources of funds, including the proceeds from this offering; and
other statements regarding the plans of the company, and its objectives,
expectations, and intentions contained in this prospectus that are not
historical facts. When used in this prospectus, the word "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates," and similar
expressions are generally intended to identify forward looking statements.
Because these forward looking statements involve risks and uncertainties, actual
results could differ materially from those expressed or implied by these forward
looking statements for a number of reasons, including those discussed under
"Risk Factors" and elsewhere in this prospectus. Following the offering,
PriorityAccess assumes no obligation to update any forward looking statements
contained in this prospectus.
Use of Proceeds
The net proceeds to PriorityAccess from the offering, after deducting offering
expenses estimated to be approximately $62,195 (including filing, accounting and
legal fees) are projected to be as follows:
Gross Proceeds $500,000 $1,000,000 $2,500,000 $4,000,000 $5,000,000
Offering Expenses 62,195 62,195 62,195 62,195 62,195
-------- ---------- ---------- ---------- ----------
Net Proceeds $437,805 $ 937,805 $2,437,805 $3,937,805 $4,937,805
The principal purpose of the offering is to provide PriorityAccess with working
capital to conduct and expand its business operations, development and
management of investment projects to be marketed to its established investors
and to create a public market for our stock. Funds will also be used in
identifying new investment opportunities, and expanding the business operations
of our subsidiaries and developing and distributing marketing materials
concerning our subsidiaries.
As of the date of this prospectus, we have not allocated any specific amount of
the proceeds for the purposes listed above. We expect the expenditures
associated with our anticipated expansion will total between $500,000 and
$1,500,000 million in 2002. We also expect to use between $500,000 and
$1,000,000 of the proceeds from this offering in connection with marketing
activities. Although we may use a portion of the net proceeds to acquire or
invest in complementary businesses, products, and technologies in the future,
there are no present understandings, commitments, or agreements with respect to
any such acquisitions. The amounts actually expended for the purposes listed
above will depend upon a number of factors, including conditions in the public
and private equity markets and competitive developments in the market for
financial services. Therefore, we cannot be certain that the amounts we expect
to spend on any of the uses described above will fall within the estimated
ranges. We also cannot be certain of the timing of these expenditures.
Management reserves the right to reallocate the net proceeds within the uses
outlined above.
8
Determination of offering price
Prior to this offering there has been no public market for our common stock. The
offering price of our common stock has been arbitrarily determined. The offering
price is not necessarily related to asset value, net worth, results of
operations or any other established criteria of value. The offering price should
not, therefore, be considered as an indication of the actual value of the shares
offered. Among factors considered by us in determining the offering price were:
o Estimates of our business potential.
o Our limited financial resources.
o The amount of equity desired to be retained by present shareholders.
o The amount of dilution to the public.
o The general condition of the securities markets.
Dilution
The difference between the offering price per share of our common stock and the
net tangible book value per share of our common stock after this offering
constitutes the dilution to investors in this offering. Net tangible book value
per share is determined by dividing our net tangible book value (total tangible
assets less total liabilities) by the number of our outstanding common shares
and warrants.
The net tangible book value of PriorityAccess as of December 31, 2001 was
$933,515 or $.25 per share of common stock. After giving effect to the sale of
500,000 shares of common stock at $10.00 per share and after deducting the
estimated offering expenses, the pro forma net tangible book value at that date
would have been $5,871,320 or $1.37 per share. This represents an immediate
increase in pro forma net tangible book value of $1.12 per share to existing
stockholders and an immediate dilution of $8.63 per share to the purchaser of
the shares.
The following table illustrates the per share dilution effect as of December 31,
2001:
If the maximum number
of shares are sold
---------------------
Public offering price per share $ 10.00
Net tangible book value per share,
before this offering $ 0.25
Net tangible book value per share,
after this offering $ 1.37
Increase per share attributable
to payment by new investors $ 1.12
Dilution to new investors per share $ 8.63
9
The following table summarizes the number and percentage of shares of common
stock purchased from PriorityAccess, the amount and percentage of consideration
paid and the average price paid per share by existing stockholders and by the
purchasers of the shares in this offering at $10.00 per share assuming the
maximum by number of shares are sold and before deducting the estimated offering
expenses. The table assumes that all warrant holders exercise all their rights
to purchase common stock.
Percentage of
Number of Percent Total amount total Average price
shares purchased paid amount paid per share paid
Existing
shareholders 3,777,334 88.31 % $1,835,803 26.86 % $ 0.49
New investors 500,000 11.69 % $5,000,000 73.14 % $10.00
Total 4,277,334 100 % $6,835,803 100 % $ 1.60
Plan of distribution
We are offering for sale 500,000 shares at $10.00 per share. We propose to offer
the shares directly to investors. The minimum purchase will be 250 shares.
Our prospectus will be distributed by our president, Roger D. Shearer. We will
pay no compensation to any person in connection with offer and sale of the
shares. However, Mr. Shearer earns a salary from PriorityAccess. Although he is
an "associated person" of us as that term is defined in Rule 3a4-1 of the
Securities and Exchange Act of 1934, he is not deemed to be a broker for the
following reasons:
1. He is not subject to a statutory disqualification as that term is
defined in Section 3(a)(39) of the Securities and Exchange Act at the
time he participates in the sale of our securities.
2. He will not be compensated for assisting in the sale of our securities
with commissions or other remuneration based either directly or
indirectly on transactions in securities.
3. He is not an associated person of a broker or dealer at the time he
participates in the sale of our securities.
4. He will restrict his participation to the following activities:
o preparing written communication and/or delivering such
communication through the mail or other means that do not involve
oral solicitation of a potential purchaser.
o responding to inquiries of potential purchasers made in
communications that the purchasers initiate; provided however,
that the content of their responses are
10
limited to information contained in a registration statement
filed under the Securities Act of 1933 or other offering
document.
o performing ministerial and clerical work involved in effecting
any transaction.
As of the date of this prospectus, we have not retained a broker in connection
with the sale of securities in this offering. In the event we retain a broker
who may be deemed an underwriter, we will file an amendment to our registration
statement with the SEC. Prior to involving any broker-dealer in the offering, we
intend to obtain a "no objection" position from the NASD regarding the
contemplated underwriting compensation and arrangements.
Limited state registration
Our shares will be registered in only a limited number of states, and may not be
sold or otherwise transferred to persons who are residents of any state in which
the shares have not been registered, unless they are subsequently registered, or
there exists an exemption from the applicable state's registration requirements.
Method of subscribing
You may subscribe by filling in and signing a subscription agreement and
delivering it to us before the expiration date. Under the agreement, the
subscription price of $10.00 per share must be paid by check, bank draft or
postal express money order payable in United States dollars to Capital Bank &
Trust Company. You may not pay in cash. Additionally, the subscription agreement
allows us to reject a subscription, in whole or in part, for any reason within
ten business days of receiving it.
The company's principals and any of its affiliates or associates may purchase a
portion of the shares offered in this offering. Shares purchased by the
company's officers, directors and principal shareholders will be acquired for
investment purposes and not with a view toward distribution.
Expiration date
This offering will expire 180 days from the effective date of this prospectus
and may be extended an additional 90 days in the sole discretion of management.
Legal proceedings
We are not presently a party to any litigation, nor to the knowledge of
management is any litigation threatened against us which may materially affect
the company.
11
Management
Directors and officers
The following table shows the names and ages of our directors, officers, and
significant employees and the positions they hold with our company and with our
subsidiaries.
Name Age Position Company
- ---- --- -------- -------
Roger D. Shearer 54 President, Treasurer, Secretary PriorityAccess, Inc.
and Director
President, Treasurer, Secretary Endpoint Technologies, Inc.
and Director
Director AccessCapital, Inc.
Valerie J. Balga 33 Vice President for Marketing PriorityAccess, Inc.
Paul J. Murray 62 President, Treasurer, Secretary PriorityFinancial, Inc.
and Director
Alfred P. Reeves 60 President AccessCapital, Inc.
Roger D. Shearer has been the President and a director of PriorityAccess, Inc.
since the founding of our company in 1999. He is responsible for managing our
operations as well as our administrative and financial activities. For the past
five years Mr. Shearer has served as a managing member of Spectrum Capital LLC
of Albany, New York. Spectrum Capital is a business development company that has
developed two businesses: StratoComm Corporation, which owns the rights to a
telecommunications technology throughout the continent of Africa, and
PriorityAccess, Inc.
Ms. Balga brings an impressive resume in marketing and business development to
her role at PriorityAccess. Her experience managing marketing operations include
developing branding, retention and acquisition focused marketing strategies and
overseeing the execution including the development of unique, state-of-the-art
marketing tools and collateral. This experience coupled with her valuable
knowledge in the application of technology to the marketing process gives her
the insight to take full charge responsibility for establishing the brand of
PriorityAccess and that of its subsidiary companies.
Ms. Balga is a graduate of the Business School at SUNY, Albany.
As President and General Manager of PriorityFinancial, Mr. Murray brings an
in-depth knowledge of insurance and other investment products into the mix. Mr.
Murray's 35 years of experience in the insurance and investment industry enable
him to anticipate and offer clients the
12
solutions that are most compatible with their investment strategy. As part of
our team, each PriorityFinancial investment executive is also able to work with
Mr. Murray to identify the best products that complement an individual portfolio
mix.
Prior to joining PriorityFinancial, Mr. Murray served as President of PKS
Financial Services, a subsidiary of Purshe, Kaplan, Sterling Investments,
between 1995 and 2001. This appointment succeeds 13 years of serving as a
general agent for Union Central Life.
Alfred P. Reeves has over 30 years experience in the securities industry and
holds all necessary NASD licenses to run a full service broker/dealer. He
currently serves as the President of AccessCapital a wholly owned subsidiary of
PriorityAccess. Between 1996 and 2001, he has held positions managing
broker/dealers in capacities including Chief Operating Officer for The Franklin
Trust Corporation and Franklin Ross, Inc., Assistant to the President for Meyers
Pollock Robbins, Inc., Chief Financial Officer for EquityLine Securities, Inc.,
Head Trader for Preferred Securities Group, Inc., Trader for Dynamic Trading,
and Chief Financial Officer for Farrand Investment Bankers.
As a former NASD examiner, he has overseen and conducted broker/dealer audits,
branch compliance audits and required annual compliance meetings with registered
representatives. He is a former NASD Business Conduct Committee Member in the
New York district (1987-1990), an NASD Arbitrator and has been an expert witness
on securities matters in U.S. Federal Court. He is currently a member of the
National Society of Compliance Professionals, the Security Traders Association
of New York and the Security Traders Association of Florida. Formerly, he was a
charter member of the National Society of Compliance Professionals.
Mr. Reeves is a graduate of the University of North Carolina.
Serving as Chief Executive Officer and founder of a New York-based Internet
software development firm between 1993 and 1998 and Director for a national
Internet Service Provider between 1998 and 2000 preceded Valerie J. Balga's most
recent assignment as Vice President of Marketing for PriorityAccess.
In October 2001, PriorityAccess, Endpoint Technologies and Roger D. Shearer
entered into an Order of Settlement with the SEC relating to the actions of a
third-party contractor hired to provide investor leads in connection with
certain anticipated private placement transactions. Due to the nature and volume
of the third-party's communications with potential investors, PriorityAccess,
Endpoint Technologies and Mr. Shearer were deemed to have engaged in a general
solicitation in connection with the private placements. The Order of Settlement
contained no fine and each party agreed to cease and desist from any future
violations of Section 5 of the Securities and Exchange Act of 1933.
All directors hold office until the next annual meeting of stockholders and
qualification of their successors. Officers are elected annually by the
discretion of the board.
13
Executive compensation
Directors
Our directors are not compensated for acting as directors, nor are they
reimbursed for expenses related to their service as directors.
Summary Compensation Table
The following table provides information concerning compensation paid by the
company and its subsidiaries during the fiscal year ended December 31, 2001, for
our chief executive officer and each other executive officer whose annual
compensation from the company exceeded $100,000 during the fiscal year December
31, 2001.
Name/Position Year Salary Other Compensation
- ------------- ---- ------ ------------------
Roger D. Shearer 2001 $ 200,000 $16,262 (1)
President, PriorityAccess, Inc.
President, Endpoint Technologies, Inc.
Paul J. Murray 2001 (2) --
President, PriorityFinancial, Inc.
Valerie J. Balga 2001 (2) --
Vice President, PriorityAccess, Inc.
Alfred P. Reeves 2001 (2) --
President, AccessCapital, Inc.
Adam R. Shaw 2001 $ 106,000 --
Vice President, PriorityAccess, Inc.
(1) Includes payments for certain term life and health insurance benefits and
automobile allowances.
(2) Annual salary received by Mr. Murray, Mr. Reeves and Ms. Balga in fiscal
year ended December 31, 2001 was less than $100,000.
Employment agreements
During the fiscal year ended December 31, 2001, PriorityAccess entered into an
employment agreement with Mr. Shaw for a term of one year and which provided for
an annual base salary of $120,000. The employment agreement contains a provision
that the employee will not compete,
14
solicit or engage in a business competitive with our business during the term of
employment and for a period of 6 months thereafter.
Principal security holders
The following table sets forth information regarding the beneficial ownership of
our common stock as of the date of this prospectus by the following individuals
or groups:
o Each of our executive officers.
o Each of our directors.
o Each person, or group of affiliated persons, whom we know beneficially
owns more than 5% of our outstanding stock.
o All of our officers and directors as a group.
Except as otherwise noted, and subject to the best of our knowledge, the persons
named in this table have sole voting and investing power with respect to all of
the shares of common stock held by them.
As of December 31, 2001, we had 3,749,834 shares and 27,500 warrants
outstanding, which were held by approximately 170 shareholders.
Percent of class
Amount and nature --------------------------------------------
Name and address of of beneficial Before the offering After the maximum
beneficial owner ownership offering
- ---------------- --------- ------------------- -----------------
Roger D. Shearer 2,490,156 66 % 58 %
20 Corporate Woods Blvd.
Albany, NY 12211
Laurance C. Monks 709,844 19 % 17 %
123 Teal Avenue
Broadalbin, NY 12025
Named officers and directors 2,490,156 66 % 58 %
as a group
Description of securities
The securities being offered are shares of our common stock, par value $.001 per
share.
Common stock
We are authorized to issue up to 6,000,000 shares of common stock, $.001 par
value per share. 3,749,834 shares and 27,500 warrants were issued and
outstanding as of December 31, 2001. Our principal shareholders, Mr. Shearer and
Mr. Monks, hold 2,490,156 shares and 709,844 shares respectively. The remaining
549,834 shares and 27,500 warrants outstanding, as of December 31, 2001, are
held by approximately 170 other stockholders.
15
Each outstanding share of common stock is entitled to one non-cumulative vote,
either in person or by proxy, on all matters that may be voted upon at meetings
of the stockholders.
There is currently no established public trading market for our stock.
Stockholders of common stock have the following rights or limitations on their
rights:
o They have equal ratable rights to dividends from legally available
funds when and if the board of directors declares dividends of the
company.
o They are entitled to share ratably in all of the assets of the company
available for distribution to holders of common stock.
o In the event of liquidation, dissolution or winding up of the affairs
of the company, they do not have preemptive, subscription or
conversion rights, or redemption or sinking fund provisions applicable
to those rights.
All shares of common stock which are the subject of this offering, when issued,
will be fully paid for and non-assessable, and will have no personal liability
attaching to the ownership of them. Our stockholders do not have cumulative
voting rights, which means that the holders of more than 50% of the outstanding
shares voting for the election of directors can elect all of the directors of
the company if they so choose. In that event, the holders of the remaining
shares will not be able to elect any of the company's directors. At the
completion of this offering our principal stockholder, Mr. Shearer, will
beneficially own 58% of the outstanding shares if the maximum number of shares
are sold in this offering. Therefore, he will be in a position to control the
affairs of the company.
Preferred stock
The company has the authority to issue shares of preferred stock with the
preferences, limitations and rights determined by the board of directors. We
have not yet issued any preferred stock and thus the rights and preferences of
any such shares, when issued, have not been established.
Warrants
We currently have outstanding 31,250 warrants, each of which allows the holder
to acquire one share of common stock at a price of $.50 per share for a period
of ten years commencing on various dates in November and December 2001. The
exercise price and number of shares of common stock issuable upon exercise of
the warrants are subject to adjustment in certain circumstances, including in
the event of a stock dividend, recapitalizations, reorganization, merger or
consolidation. However, the warrants are not subject to adjustment for issuances
of common stock at prices below the exercise price of the warrants.
Dividends
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings to finance the growth and
development of our business and therefore do not anticipate paying any cash
dividends in the foreseeable future. Any future determination
16
to pay cash dividends will be made at the discretion of our board of directors
and will depend on our financial condition, results of operations, capital
requirements, deem relevant. Our rights to declare a divided is not limited by
any restrictive covenant, contract or agreement.
Shares eligible for future sale
Upon completion of the offering, if the maximum number of shares are sold, we
will have 4,249,834 shares of common stock outstanding. Of these shares, the
500,000 shares of common stock being registered under this Registration
Statement will be freely tradable without restriction under the Securities Act
of 1933, except that any shares purchased by our "affiliates," as that term is
defined in Rule 144 under the Securities Act of 1933, may only be sold in
compliance with the provisions of Rule 144, as defined below. In general, our
affiliates are any persons that directly, or indirectly through one or more
intermediates, control, or are controlled by, or are under common control with
us. The remaining 3,749,834 shares of common stock will be "restricted
securities" as defined in Rule 144 and will become eligible for public sale
subject to the restrictions of Rule 144 commencing one year from their issuance.
In general, under Rule 144, if a period of at least one year has elapsed since
the later of the date the "restricted shares" (as that phrase is defined in Rule
144) were acquired from us and the date they were acquired from an affiliate of
ours, then the holder of the restricted shares (including an affiliate) is
entitled to sell a number of shares within any three-month period that does not
exceed the greater of 1% of the then outstanding shares of the common stock or
the average weekly reported volume of trading of the common stock during the
four calendar weeks preceding the sale. The holder may only sell the shares
through unsolicited brokers' transactions or directly to market makers. Sales
under Rule144 are also subject to certain requirements pertaining to the manner
of the sales, notices of the sales and the availability of current public
information concerning us. An affiliate may sell shares not constituting
restricted shares in accordance with the foregoing volume limitations and other
requirements but without regard to the one-year holding period.
Under Rule 144(k), if a period of at least two years has elapsed between the
later of the date restricted shares were acquired from us and the date they were
acquired from an affiliate, as applicable, a holder of these restricted shares
who is not an affiliate at the time of the sale and has not been an affiliate
for at least three months prior to the sale would be entitled to sell the shares
immediately without regard to the volume limitations and other conditions
described above.
As of December 31, 2001, there have been 224,000 shares held by non-affiliates
for a period exceeding one year. No shares have been held by non-affiliates for
more than two years.
We can make no predictions as to the effect, if any, that sales of shares or the
availability of shares for sale will have on the market price prevailing from
time to time. Nevertheless, sales of significant amounts of the common stock in
the public market, or the perception that these sales may occur, could adversely
affect prevailing market prices.
17
Transfer agent
We are currently acting as our own transfer agent. After completion of this
offering we will choose a registered transfer agent for our common stock.
Business
PriorityAccess, Inc. was incorporated in July of 1999. Our core mission is to
serve the interests of our diverse investor network by evaluating, supporting
and providing access to sound, early-stage investment opportunities and value
added financial services. In a market that traditionally limits access to
early-stage investment opportunities to institutional investors, venture
capitalist and a select group of high net worth individuals, PriorityAccess
bridges the gap between business innovators and individual investors.
Since its inception the company's development objectives were to: (1) establish
and grow a network of qualified investors; (2) assemble a distribution of
individuals qualified in complementary business disciplines including marketing,
accounting, financial, management, securities and investment banking; (3) form
and launch a financial services subsidiary; and (4) form or acquire a NASD
registered broker/dealer subsidiary.
The company has successfully met each of its development objectives, tested and
refined its business model and progressed to operations and revenue. Our
investor network currently numbers approximately 2,500 individuals, our
management and staff include experienced marketing professionals, an accounting
professional, a Certified Public Accountant, licensed securities principals,
licensed insurance professionals, licensed securities brokers as well as
experienced banking support. PriorityFinancial, Inc. is a financial services
subsidiary that has been launched and is producing revenues and the NASD
recently approved our acquisition of AccessCapital, Inc. an NASD registered
broker/dealer. The company, through its EquiMerge operating division, owns
Laurus Acquisition Corporation and Darby Acquisition Corporation, both of which
have been formed for the expressed purpose of seeking registration as blank
check companies that would qualify and have internets in such a reverse merger
transaction.
Endpoint Technologies, Inc. is a technology accelerator that is majority owned
by the company and is the entity through which the company pursues technology
related opportunities.
Plan of operation
The funds raised from the sale of securities in this offering will provide
capital sufficient to support company activates going forward. Successfully
selling the securities registered under this filing will provide working capital
and project funds sufficient to support all company operations and grow and
require no future funding.
All capital expenditures relating to plant and equipment have been expended
during development stage of the company. Research and development costs
associated with the testing refinement of the company's business model have been
incurred during its development stage.
18
The company and its subsidiaries currently employ nineteen individuals. It is
planned that total staffing will increase to approximately thirty during the
twenty four months following the effective date of this prospectus.
Since its inception the company has progressed through its research and
development and now into being dully structured and operational. The company's
operating revenues has resulted form the delivery of support services to
Endpoint Technologies, Inc. and support to its two wholly owned subsidiaries,
PriorityFinancial, Inc. and AccessCapital, Inc. Operating revenue to date totals
$115,600. Non-operating revenue has been realized from the sale of certain
assets that were originally secured specifically to enhance the company's value
and enable revenue from its strategic sale. Non-operating revenue to date totals
$1,751,879.
The company's only debt is the result of the limited offering to current
investors of a debt instrument that has enabled the roll out of services by the
two operating subsidiaries. The company moved to full operation in December 2001
and anticipates cash positive operations commencing in fiscal 2002 and forward.
The company's financial condition is as presented in the attached financial
statements which accurately represent the absence of substantial revenue and
continuing losses throughout its development stage operations.
The company's marketing programs are defined and on schedule for implementation
commencing January 2002 and forward. Revenues to the company and its
subsidiaries commenced during 2001 and will be positively impacted with the
implementation of its marketing programming during the first quarter of 2002.
Our strategy
The company is structured in three specific and inter-relating components.
PriorityAccess, Inc., the parent, is focused in three specific areas of
activity.
1. Identifying new business innovators to which we can deliver value
added services that support the innovator in the process of
commercializing his product or services.
2. As funding benefits PriorityAccess' efforts on behalf of its clients
it will engage AccessCapital, Inc., a subsidiary and NASD registered
broker/dealer, to conduct its own due diligence and support funding
needs of our clients by making the investment opportunity known to its
clients who are also members of the PriorityAccess investor network.
3. PriorityAccess will support marketing, administrative and capital
requirements of its two subsidiaries AccessCapital, Inc. and
PriorityFinancial, Inc. for which it will derive fee-based revenues.
AccessCapital, Inc. is an NASD registered broker/dealer and a subsidiary of
PriorityAccess. It is available to support the funding needs of various
PriorityAccess projects and/or clients.
PriorityFinancial, Inc. is a subsidiary of PriorityAccess and it offers a menu
of financial products
19
and services to is clientele and to the PriorityAccess investor network. It is
managed by appropriately licensed insurance and securities professionals and
derives it revenues entirely from the delivery of fee-based services and the
sale of various insurance and financial products.
The company will market itself in a manner to establish and promote the common
branding of PriorityAccess and its subsidiaries by presenting itself as a sole
source to meet the needs of innovators and investors alike. There exists an
increasing gap between the need for high yield, patient capital and its
availability to emerging businesses. This "capital gap" limits and investor's
access to early stage investments and an innovators access to critical funds.
PriorityAccess represents a common platform between innovators and investors,
effectively bridging the "capital gap".
PriorityAccess, Inc. along with its two subsidiaries is a development stage
company that has progressed to operations and revenues. The company has tested
and refined its business model in the course of its development stage and that
of its two subsidiaries. The company is young yet it is staffed and managed by
experienced professionals that now work in a collaborative manner to meet the
objectives of the common innovator and in investor client base.
Statement as to indemnification
Section 145 of Delaware General Corporation law permits, and our certificate of
incorporation provides for, indemnification of the officers, directors,
employees and agents of registrants by the company.
Our articles of incorporation provide that we shall indemnify, to the full
extent permitted by Delaware law, persons whom we have the legal power to
indemnify. Under the law, PriorityAccess, Inc. has the power to indemnify any of
our directors, officers, employees or agents who are made, or threatened to be
made, a party to a proceeding by reason of the fact that he or she is or was one
of our directors, officers, employees or agents against judgments, penalties,
fines, settlements and reasonable expenses incurred by the person in connection
with the proceeding if specified standards are met.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling the registrant
pursuant to the foregoing provisions, the registrant has been informed that in
the opinion of the Securities and Exchange Commission that such indemnification
is against the public policy as expressed in the Securities Act and is
therefore, unenforceable.
Relationships and related transactions
PriorityAccess shares office space, certain employees and other overhead
expenses with several of its subsidiaries. PriorityAccess allocates
compensation, benefit and administrative expenses to PriorityFinancial, Inc.
based on actual compensation and expenses. Pursuant to that allocation
arrangement, as of December 31, 2001, PriorityFinancial owed PriorityAccess
$143,257.08. PriorityAccess treats such outstanding allocation amounts as normal
receivables to be paid in the ordinary course of business.
20
In October, 1999, Endpoint Technologies, Inc. entered into a 15 month agreement
with PriorityAccess that ended on January 31, 2001 and required Endpoint
Technologies to pay a total of $450,000 to PriorityAccess for administrative
support services. Endpoint Technologies also engaged PriorityAccess to provide
management advisory services between October 1, 2001 and October 1, 2002 for
$25,000 per month plus reimbursement for actual expenses incurred.
PriorityAccess has agreed to provide certain capital contributions and pay
certain expenses of its broker-dealer subsidiary AccessCapital. PriorityAccess
is committed to providing capital contributions to AccessCapital to ensure it
complies with certain net capital requirements of the National Association of
Securities Dealers. As of December 31, 2001, PriorityAccess provided
approximately $15,000 in capital contributions, and may be required to make
additional capital contributions in the future. In addition, PriorityAccess will
pay all of AccessCapital's non-regulatory expenses until such time as
AccessCapital, Inc. generates positive net earnings. There is no certainty as to
when, if ever, AccessCapital will produce positive net earnings.
In February 2001 PriorityAccess entered into support services agreement with
Grubstreet Capital LLC, a New York limited liability company controlled by
Laurance C. Monks, a principal shareholder of PriorityAccess. The agreement
provides for payments to Grubstreet Capital of $15,000 for two months and
$14,000 per month through February 2002 for specific support and businesses
services.
In January, 2000, PriorityAccess entered into a management consulting agreement
with Spectrum Capital LLC, a business development company controlled by Roger D.
Shearer and Laurance C. Monks, PriorityAccess principal stockholders. The
agreement provided for payments to Spectrum Capital of $25,000 per month for
management advisory and consulting services. The twelve-month agreement was
terminated effective December 31, 2000.
Description of property
The principal executive offices of the company are located at 20 Corporate Woods
Boulevard, 2nd Floor, Albany, New York, 12211, where the company leases
approximately 4400 square feet of office space. The lease expires in 2006. The
company also leases approximately 1570 square feet of office space at 4800 N.
Federal Highway, Suite 300A, Boca Raton, Florida 33431. The lease expires in
2003.
Legal opinions
Whiteman Osterman & Hanna, One Commerce Plaza, Albany, New York 12260, our
special counsel, has rendered an opinion that the shares are validly issued and
non-assessable.
21
Experts
Kaufman, Rossin & Co., independent accountants have audited our financial
statements as of December 31, 2001. Our financial statements are included in
this prospectus and elsewhere in the registration statement in reliance upon the
report of Kaufman, Rossin & Co. given on their authority as experts in auditing
and accounting.
22
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
PriorityAccess, Inc.
We have audited the accompanying consolidated balance sheet of PriorityAccess,
Inc. and Subsidiaries (a development stage company) as of December 31, 2000, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the year ended December 31, 2000, the period from inception (July 7,
1999) through December 31, 1999 and the period from inception (July 7, 1999)
through December 31, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of PriorityAccess, Inc.
and Subsidiaries as of December 31, 2000, and the results of its operations and
its cash flows for the year ended December 31, 2000, the period from inception
(July 7, 1999) through December 31, 1999 and the period from inception (July 7,
1999) through December 31, 2000, in conformity with accounting principles
generally accepted in the United States.
KAUFMAN, ROSSIN & CO.
Miami, Florida
June 19, 2001
23
PRIORITYACCESS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000
ASSETS
- --------------------------------------------------------------------------------
CURRENT ASSETS
Cash $111,224
- --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, net of accumulated depreciation
of $7,949 (Note 4) 54,151
OTHER ASSETS 3,831
- --------------------------------------------------------------------------------
TOTAL ASSETS $169,206
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 22,191
Current maturities of long-term debt (Note 5) 6,500
- --------------------------------------------------------------------------------
Total current liabilities 28,691
LONG-TERM DEBT (NOTE 5) 21,231
MINORITY INTEREST 3,400
COMMITMENTS AND CONTINGENCY (NOTE 7)
STOCKHOLDERS' EQUITY 115,884
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $169,206
- --------------------------------------------------------------------------------
24
PRIORITYACCESS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
Period from Period From
Inception Inception
Year ended (July 7, 1999) (July 7, 1999)
December 31, through through
2000 December 31, 1999 December 31, 2000
- ------------------------------------------------------------------------------------------------------------
EXPENSES:
Compensation and benefits $ 608,557 $ -- $ 608,557
Consulting 517,720 46,022 563,742
General and administrative 182,168 25,332 207,500
Interest 3,327 585 3,912
Professional fees 57,819 14,331 72,150
Rent 66,037 21,747 87,784
Sky Station International technology expenses 500,000 -- 500,000
- ------------------------------------------------------------------------------------------------------------
Total expenses 1,935,628 108,017 2,043,645
- ------------------------------------------------------------------------------------------------------------
OTHER INCOME
Gain on sale of stock 682,929 -- 682,929
- ------------------------------------------------------------------------------------------------------------
LOSS BEFORE MINORITY INTEREST 1,252,699 108,017 1,360,716
MINORITY INTEREST IN LOSS OF SUBSIDIARY 5,300 -- 5,300
- ------------------------------------------------------------------------------------------------------------
NET LOSS $ 1,247,399 $ 108,017 $ 1,355,416
- ------------------------------------------------------------------------------------------------------------
NET LOSS PER SHARE ($ 0.75) ($ 0.07) ($ 0.82)
- ------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 1,670,993 1,600,000 1,647,721
- ------------------------------------------------------------------------------------------------------------
25
PRIORITYACCESS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JULY 7, 1999) THROUGH DECEMBER 31, 2000
Common Stock, Deficit
$.001 par value; 3,000,000 Accumulated
shares authorized Additional During the
-------------------------- Paid-in Development
Transaction Date Shares Par Value Capital Stage Total
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock for cash 7/7/99 1,600,000 $ 1,600 $ 23,400 $ -- $ 25,000
Net loss from inception (July 7, 1999) -- -- -- -- ( 108,017) ( 108,017)
to December 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1999 -- 1,600,000 1,600 23,400 ( 108,017) ( 83,017)
Issuance of common stock for compensation 1/1/00 10,000 10 490 -- 500
Issuance of common stock for cash 3/29/00 20,000 20 99,980 -- 100,000
Issuance of common stock under Private Placement 7/15/00 98,950 99 989,401 -- 989,500
Private placement offering costs -- -- -- ( 10,000) -- ( 10,000)
Issuance of common stock to minority interest of 12/15/00 -- -- 366,300 -- 366,300
subsidiary for cash
Net loss for the year ended December 31, 2000 -- -- -- -- ( 1,247,399) ( 1,247,399)
- -----------------------------------------------------------------------------------------------------------------------------------
Total 1,728,950 $ 1,729 $ 1,469,571 ($ 1,355,416) $ 115,884
- -----------------------------------------------------------------------------------------------------------------------------------
26
PRIORITYACCESS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Period from Period From
Inception Inception
Year ended (July 7, 1999) through (July 7, 1999) through
December 31, 2000 December 31, 1999 December 31, 2000
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ( $ 1,247,399) ( $ 108,017) ( $ 1,355,416)
- -----------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 6,883 1,066 7,949
Common stock issued for compensation 500 -- 500
Minority interest in loss of subsidiary ( 5,300) -- ( 5,300)
Changes in operating assets and liabilities:
Other assets ( 3,831) -- ( 3,831)
Accounts payable and accrued expenses 22,191 -- 22,191
- -----------------------------------------------------------------------------------------------------------------------------------
Total adjustments 20,443 1,066 21,509
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities ( 1,226,956) ( 106,951) ( 1,333,907)
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Minority interest in net proceeds from issuance of
common stock of subsidiary 8,700 -- 8,700
Purchases of property and equipment ( 39,491) ( 22,609) ( 62,100)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities ( 30,791) ( 22,609) ( 53,400)
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long-term debt 40,700 109,596 150,296
Repayments of long-term debt ( 121,647) ( 918) ( 122,565)
Net proceeds from the issuance of common stock 1,079,500 25,000 1,104,500
Net proceeds from the issuance of common stock of
subsidiary 366,300 -- 366,300
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,364,853 133,678 1,498,531
- -----------------------------------------------------------------------------------------------------------------------------------
INCREASE IN CASH 107,106 4,118 111,224
CASH - BEGINNING 4,118 -- --
====================================================================================================================================
CASH - ENDING $ 111,224 $ 4,118 $ 111,224
====================================================================================================================================
Supplemental Disclosures:
- -----------------------------------------------------------------------------------------------------------------------------------
Interest paid $ 3,327 $ 585 $ 3,912
====================================================================================================================================
Income taxes paid $ -- $ -- $ --
====================================================================================================================================
See accompanying notes.
27
PRIORITYACCESS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The consolidated financial statements include the accounts of
PriorityAccess, Inc., f/k/a Priority Access Networks, Inc.,
("PriorityAccess"), its wholly owned subsidiaries, Darby Acquisition
Corporation ("Darby") and Laurus Acquisition Corporation ("Laurus"),
and its 98% owned subsidiary, Endpoint Technologies, Inc.
("Endpoint"). The consolidated group is collectively referred to as
the Company. All significant intercompany balances and transactions
have been eliminated in consolidation.
Organization and Business Activity
PriorityAccess was formed in July 1999 to create and manage new
investment opportunities for near term delivery to the public equity
markets through the implementation of direct public offerings.
PriorityAccess' business activities to date have primarily consisted
of raising capital through a private placement offering, developing
materials for use in the promotion of its investment projects and
identifying and evaluating potential investment projects.
Endpoint was formed in October 2000 to support and facilitate the
development and introduction of new technologies. Endpoint's business
activities to date have primarily consisted of raising capital through
a private placement offering, identifying and securing rights for new
technologies and engaging consulting firms to provide due diligence
related to these new technologies.
Darby and Laurus were formed in October and November 2000,
respectively, for the purpose of creating corporate vehicles to engage
in business combinations. Their business activities to date have
primarily consisted of preparing to file registration statements for
initial public offerings.
The Company is considered to be in the development stage, and the
accompanying financial statements represent those of a development
stage company.
Cash
The Company, from time to time, maintains cash balances in excess of
federally insured limits.
Income Taxes
The Company accounts for income taxes according to Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
which requires a liability approach to calculating deferred income
taxes.
28
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management
to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities as of the balance sheet date and the reported amounts of
revenues and expenses for the periods presented. Actual results could
differ from those estimates.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments" requires that the Company
disclose estimated fair values for its financial instruments. The
following methods and assumptions were used by the Company in
estimating the fair values of each class of financial instruments
disclosed herein:
Cash and accounts payable and accrued expenses - The carrying
amounts approximate fair value because of the short maturity of
these instruments.
Long-term debt - The fair value of long-term debt is estimated
using discounted cash flows analyses based on the Company's
incremental borrowing rates for similar types of borrowing
arrangements. At December 31, 2000, the fair values approximate
the carrying values.
Property and Equipment
Property and equipment is recorded at cost. Expenditures for major
betterments and additions are charged to the asset accounts, while
replacements, maintenance and repairs which do not extend the lives of
the respective assets are charged to expense in the period incurred.
Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected future undiscounted cash flows
is less than the carrying amount of the asset, a loss is recognized
for the difference between the fair value and carrying value of the
asset.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets which range from 5 to 7 years.
Net loss per share
Net loss per share is computed in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share," based on
the weighted average number of common shares outstanding. There were
no potentially dilutive securities outstanding during the periods.
29
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Preferred Stock
The Company has the authority to issue shares of preferred stock with
the preferences, limitations and relative rights determined by the
Board of Directors. At December 31, 2000 no preferred stock was issued
and outstanding.
Minority Interest
Minority interest in loss of subsidiary represents the minority
shareholders' share of the loss of Endpoint. The minority interest in
the consolidated balance sheet reflects their proportionate share of
the stockholders' equity of the subsidiary.
RELATED PARTY TRANSACTIONS
Management and Consulting Agreement
Effective January 1, 2000, PriorityAccess entered into a management
and consulting agreement with Spectrum Capital, LLC (Spectrum), its
principal shareholder. The agreement provided for payments to Spectrum
of $25,000 per month for management advisory and consulting services,
as defined. The agreement was for a period of twelve months and was
terminated effective December 31, 2000.
Support Services Agreement
In February 2001, PriorityAccess entered into a support services
agreement with a company owned by an officer of Spectrum. The
agreement provides for payments to the service provider of $15,000 per
month for two months and $14,000 per month through February 2002 for
specific support and business services, as defined.
SKY STATION INTERNATIONAL TECHNOLOGY
During November 2000, Endpoint entered into a contract with Sky
Station International, Inc. ("SSI") whereby Endpoint purchased for
$250,000 the exclusive right to joint venture with SSI in the
development and commercialization of a terrestrial high capacity
wireless technology owned by SSI. The contract also provides for,
among other things, Endpoint to pay SSI a management fee of $250,000.
These amounts are included in Sky Station International technology
expenses in the accompanying consolidated statement of operations.
30
PROPERTY AND EQUIPMENT
At December 31, 2000, property and equipment consisted of the
following:
Computer and office equipment $ 29,603
Website development costs 21,140
Furniture and fixtures 11,357
---------------------------------------------------------------------
62,100
Less accumulated depreciation ( 7,949)
---------------------------------------------------------------------
$ 54,151
---------------------------------------------------------------------
Depreciation expense amounted to $6,883 and $1,066 for the year ended
December 31, 2000 and the period from inception (July 7, 1999) through
December 31, 1999, respectively.
LONG-TERM DEBT
At December 31, 2000, long-term debt consisted of a note payable to a
bank bearing interest at 9.25% per annum, with monthly principal and
interest payments of approximately $700. The note matures in September
2004, is secured by all of the assets of PriorityAccess and is
guaranteed by Spectrum.
Scheduled maturities of long-term debt for years subsequent to
December 31, 2000 are as follows:
2001 $ 6,500
2002 7,130
2003 7,821
2004 6,280
---------------------------------------------------------------------
$ 27,731
---------------------------------------------------------------------
INCOME TAX BENEFIT
The income tax benefit consisted of the following for the year ended
December 31, 2000 and the period from inception (July 7, 1999) through
December 31, 1999:
2000 1999
---------------------------------------------------------------------
Deferred:
Federal $ 446,000 $ 38,000
State 19,000 2,000
Increase in valuation allowance ( 465,000) ( 40,000)
---------------------------------------------------------------------
$ -- $ --
---------------------------------------------------------------------
31
NOTE 6. INCOME TAX BENEFIT (Continued)
Deferred income tax assets at December 31, 2000 of approximately
$505,000 are principally comprised of net operating loss carryforwards
and are completely offset by a valuation allowance.
The difference between the tax benefits and the amounts computed by
applying the federal statutory tax rates to the losses before income
taxes are due to increases in the valuation allowance and permanent
differences.
The Company has net operating loss carryforwards totaling
approximately $1,346,000, expiring in various years through 2020.
COMMITMENTS AND CONTINGENCY
Operating Leases
The Company is obligated under non-cancelable operating leases for its
office facilities and various equipment, which expire through January
2006.
Approximate future minimum lease payments under all non-cancelable
leases for years subsequent to December 31, 2000 are as follows:
2001 $ 120,000
2002 121,000
2003 95,000
2004 79,000
2005 78,000
Thereafter 6,000
----------------------------------------------------------------------
$ 499,000
----------------------------------------------------------------------
Rent expense incurred under all operating leases amounted to
approximately $66,000 and $22,000 for the year ended December 31, 2000
and the period from inception (July 7, 1999) through December 31,
1999, respectively.
Stock Repurchase
Subsequent to December 31, 2000, PriorityAccess and Endpoint made
offers in several states to repurchase shares of common stock from
investors who had previously acquired shares in the private
placements. Of these offers, to date, four investors sold their shares
back to the Company at the original purchase price aggregating $17,000
plus interest at varying rates. There is a possibility that the
Company may offer to repurchase additional shares aggregating $89,000.
32
INVESTMENT IN STRATOCOMM
During 2000, Spectrum transferred 3,180,000 shares of common stock of
Stratocomm, Inc. ("Stratocomm") to PriorityAccess. The shares
represented an ownership interest of approximately 30% of Stratocomm.
Spectrum had a historical cost of zero in the stock at the time of
transfer. The Company accounts for its investment in Stratocomm under
the equity method. Under this method, the investment is stated at
Spectrum's cost and adjusted for the Company's proportionate share of
earnings or losses. As the Company's share of Stratocomm's losses
exceeded the carrying value of the investment at December 31, 2000 and
the Company had not guaranteed obligations of Stratocomm, the
investment is carried at zero. The Company determines the amount of
equity method losses based on the ownership level of the investee
security.
In November and December 2000, PriorityAccess sold 52,533 shares of
Stratocomm stock to unrelated investors for a sales price of $682,929.
This amount is included as other income on the accompanying
consolidated statement of operations.
ENDPOINT WARRANTS
In December 2000, pursuant to a private placement, Endpoint issued
38,500 shares of common stock for an aggregate of $385,000. The
purchasers of the common stock also received a warrant to purchase one
share of common stock of Endpoint at 75% of the average of the initial
bid and ask prices at the time the shares begin trading publicly.
SUBSEQUENT EVENTS
Subsequent to December 31, 2000, PriorityAccess sold additional shares of
Stratocomm for a sales price of approximately $750,000. In addition,
PriorityAccess is in the process of formalizing a private placement
offering which is expected to raise in excess of $500,000.
33
Part II
Information not required in prospectus
Item 24. Indemnification of directors and officers
The Delaware General Corporation Law provides for the indemnification of our
officers, directors and corporate employees and agents under certain
circumstances as follows:
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS; INSURANCE. - - (a)
A corporation shall have power to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contender or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe the person's
conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in
34
subsections (a) and (b) of this section, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the present or
former director, officer, employee or agent is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made, with
respect to a person who is a director or officer at the time of such
determination, (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (4)
by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that such person is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses (including attorneys'
fees) incurred by former directors and officers or other employees and agents
may be so paid upon such terms and conditions, if any, as the corporation deems
appropriate.
(f) The indemnification and advancement expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify him against such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) or absorbed in a consolidation of
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting
35
or surviving corporation as such person would have with respect to such
constituent corporation as if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors, and
administrators of such person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees)
Article 8 of our By-laws provides for the indemnification of our officers,
directors, and corporate employees and agents under certain circumstances as
follows:
"The corporation shall, to the fullest extent permitted by Section 145 of
the General Corporation Law of the State of Delaware, indemnify all persons
whom it may indemnify pursuant thereto."
Item 25. Expenses of issuance and distribution
SEC registration fee $ 1,195
Legal fees and expenses 40,000*
Accounting fees and expenses 10,000*
Blue Sky fees and expenses 5,000*
Printing and engraving 3,500*
Miscellaneous 2,500*
--------
Total $62,195*
- ----------------
* Estimate
36
Item 26. Recent sales of unregistered securities
On September 1, 1999, in connection with the organization of the company, the
company issued 1,600,000 pre-split shares of common stock to Spectrum Capital,
LLC for an aggregate price of $25,000. The transaction was exempt from
registration under Section 4(2) the Securities Act of 1933 because it did not
involved public offering.
On February 28, 2000, and April 3, 2000, we completed a private placement of
20,000 pre-split shares of our common stock to one accredited individual for an
aggregate purchase price of $100,000. We completed the placement without the use
of an underwriter and in reliance on the exemption from registration under the
Securities 4(2) of such Act and Rule 506 of Regulation D. The purchaser received
and was given access to the information required under Rule 502(b) and no
selling commissions or other compensation was paid in connection with such
transactions.
On November 2, 2000, we competed a private placement of 92,000 pre-split shares
of our common stock. The private placement was made to 144 investors for an
aggregate purchase price of $920,000. We completed the placement without the use
of an underwriter and in reliance on the exemption from registration under the
Securities Act of 1933 provided by Sections 3(b) and 4(2) of such Act and Rule
504 of Regulation D. All purchasers received or were given access to the
information required under Rule 502(b) of Regulation D. No selling commissions
or other compensation was paid in connection with such transaction.
On September 12, 2001, we completed a private placement of 102,917 pre-split
shares of our common stock. We completed the placement without the use of an
underwriter and in reliance on the exemption from registration under the
Securities Act of 1933 provided by Section 4(2) of such Act and Rule 506 of
Regulation D. The private placement was made to 44 investors (24 accredited and
20 non-accredited) for an aggregate purchase price of $786,552.50. All
purchasers received or were given access to the information required under Rule
502(b) of Regulation D. No selling commissions or other compensation was paid in
connection with such transaction.
On December 14, 2001, we completed a private placement 10% unsecured Promissory
Notes totaling $275,000 and 27,500 warrants to purchase an equal number of
shares of common stock. The principal and interest on the notes are due
four-months from the date of execution, and the maturity date may be extended
for another four months at the discretion of the company. If extended, each
warrant holder is entitled to receive one additional warrant for each warrant
owned, which would bring the number of outstanding warrants to 55,000. The
warrants are exercisable at $.50 each for a period of ten years from the date of
the Promissory Note. We completed the placement without the use of an
underwriter and in reliance on the exemption from registration under the
Securities Act of 1933 provided by Section 4(2) of such Act and Rule 506 of
Regulation D. The private placement was made to 12 investors (8 accredited and 4
non-accredited). All purchasers received or were given access to the information
required under Rule 502(b) of Regulation D. No selling commissions or other
compensation was paid in connection with such transaction.
37
In September 2001, we amended our Certificate of Incorporation to increase our
authorized capital from 3,000,000 shares of common stock to 6,000,000 shares of
common stock. In connection with our amendment, we forward split our shares on a
2-for-1 basis so that each holder of a share received 2 shares for each share
held.
On November 2, 2000, the company issued 10,000 pre-split shares of common stock
to one individual and on December 12, 2001, the company issued 100,000 shares of
common stock to five individuals as compensation for services and as an
incentive to continue to provide services for and create loyalty to the company.
There were no fees or deductions.
Item 27. Exhibits.
3.1 Certificate of Incorporation.
3.2 By-Laws.
4.1 Specimen Certificate of Common Stock.
4.6 Executed Escrow Agreement.
4.7 Form of Subscription Agreement
5.0 Opinion of Counsel.
24.0 Accountant's Consent to Use Opinion.
24.1 Counsel's Consent to Use Opinion.
Item 28. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned small business issuer will:
38
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this registration statement as of the time
the Commission declared it effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and the offering of the securities at that time as the initial bona fide
offering of those securities.
(3) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement; and
(iii) Include any additional or changed material information on the plan of
distribution.
(4) For determining liability under the Act, treat each post-effective amendment
as a new registration statement of the securities offered, and the offering of
the securities at that time to be the initial bona fide offering.
(5) File a post-effective amendment to remove from registration any of the
securities which remain unsold at the end of the offering.
Signatures
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Albany,
State of New York, on January 25, 2002.
(Registrant): PriorityAccess, Inc.
--------------------
BY: /s/ Roger D. Shearer
-------------------------
Roger D. Shearer, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Roger D. Shearer, as principal executive officer
and as principal financial and accounting officer January 25, 2002
39
RESTATED CERTIFICATE OF INCORPORATION
OF
PRIORITYACCESS, INC.
Under Section 242 and 245 of the Delaware General Corporation Law
The undersigned, being the President of PriorityAccess, Inc., a Delaware
corporation, pursuant to Section 242 and 245 of the Delaware General Corporation
Law, does hereby restate, certify and set forth:
1. The name of the corporation is PriorityAccess, Inc. (the "Corporation").
The Corporation was originally incorporated under the name thinkubation.com,
inc.
2. The Certificate of Incorporation of the Corporation was filed with the
Secretary of State on the 7th of July, 1999.
3. The text of the Certificate of Incorporation of the Corporation is
hereby restated, as amended hereby, to read as herein set forth in full:
FIRST: The name of the corporation (hereinafter called the
("corporation") is PriorityAccess, Inc.
SECOND: The registered office of the corporation in the State of
Delaware is 2711 Centerville Road, Wilmington, Delaware 19808. The
name of the corporation's registered agent at such address is
Corporation Service Company, Inc.
THIRD: The purpose of the corporation is to engage in any lawful
act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation
shall have authority to issue is Six Million (6,000,000) shares of
common stock. The par value of each of such shares is $.001.
FIFTH: The name and mailing address of the Incorporator is as
follows:
NAME MAILING ADDRESS
---- ---------------
Robert J. Murphy Spectrum Capital, LLC
16 Corporate Woods Blvd.
Albany, NY 12211
SIXTH: The following provisions are inserted for the management
of the business and for the conduct or the affairs of the corporation,
and for further definition, limitation and regulation of the powers of
the corporation and of its directors and stockholders:
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(1) The number of directors of the corporation shall be such
as from time to time shall be fixed by, or in the manner provided
in, the by-laws. Election of directors need not be by written
ballot.
(2) The board of directors of the corporation shall have the
power to adopt, amend or repeal the by-laws of the corporation;
provided, however, that the fact that such power has been
conferred upon the board of directors shall not divest the
corporation's stockholders of the power, nor limit their power to
adopt, amend or repeal the by-laws of the corporation.
(3) In addition to the powers and authorities hereinbefore
or by statute expressly conferred upon them, the directors are
hereby empowered to exercise all such powers and do all such acts
and things as may be exercised or done by the corporation;
subject, nevertheless, to the provisions of the statutes of
Delaware, of this certificate, and to any by-laws from time to
time made by the stockholders; provided, however, that no by-laws
so made shall invalidate any prior act of the directors which
would have been valid if such by-laws had not been made.
SEVENTH: The corporation shall, to the fullest extent permitted
by Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any
and all persons whom it shall have power to indemnity under said
section from and against any and all expenses, liabilities, or other
matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of
any other rights to which those indemnified maybe entitled under any
by-law, agreement, vote of stockholder or disinterested directors or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
EIGHTH: The personal liability of the directors of the
corporation is hereby eliminated to the fullest extent permitted by
paragraph (7) of subsection (b) of Section 102 of the General
Corporation Law of the State of Delaware, as the same may be amended
and supplemented.
NINTH: Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them and/or between
this corporation and its stockholders any class of then, any court of
equitable jurisdiction within the State of Delaware may, or on the
application in a summary way of this corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers
appointed for this corporation under the provisions of section 291 of
Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this
corporation under the provision of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class or creditors,
and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in
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such manner as the court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of this corporation, as
the case may be, agree to any compromise or arrangement and to any
reorganization of this corporation as a consequence of such compromise
or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of
this corporation, as the case may be, and also on this corporation.
TENTH: From time to time any of the provisions of this
certificate of incorporation may be amended, altered or repealed, and
other provisions authorized by the laws of the State of Delaware at
the time in force may be added or inserted in the manner and at the
time prescribed by said laws, and all rights and powers at any time
conferred herein on stockholders, directors and officers are subject
to the provision of the Article TENTH.
IN WITNESS WHEREOF, I have signed this Certificate as of the 25
day of January 2002, and I affirm the statements contained herein as
true under penalties of perjury.
------------------------------
Roger D. Shearer
President
42
BY-LAWS
OF
PRIORITYACCESS, INC.
ARTICLE I
OFFICES
The registered office of the corporation shall be established and
maintained in the county of New Castle, State of Delaware. The corporation may
also have offices at such other places within or without the State of Delaware
as the board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
STOCKHOLDERS
1. Place of Meetings. Meetings of stockholders shall be held at the registered
office of the corporation or at such other place within or without the State of
Delaware as the board of directors shall authorize.
2. Annual Meetings. An annual meeting of the stockholders shall be held for the
election of directors on any business day, chosen by the board of directors,
within five months after the close of the corporation's preceding fiscal year,
at 10:00 o'clock A.M., local time. Any other proper business may be transacted
at the annual meeting.
3. Special Meetings. Special meetings of the stockholders may be called by the
board of directors or by the president or secretary. Business transacted at a
special meeting of the stockholders shall be confined to the purpose or purposes
set forth in the notice of such meeting.
4. Notice of Stockholders' Meetings. Written notice, stating the place, date and
hour of the meeting, and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be given either personally or by
mail to each stockholder entitled to vote at such meeting, not less than ten nor
more than sixty days before the date of the meeting. If mailed, notice is given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation.
5. Quorum of Shareholders. Unless the certificate of incorporation provides
otherwise, the holders of a majority of the shares entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum at a
meeting of stockholders for the transaction of any business.
6. Adjourned Meetings. The stockholders present at a meeting may adjourn the
meeting despite the absence of a quorum. When a determination of stockholders of
record entitled to notice of or to vote at any meeting of stockholders has been
made, such determination shall
43
apply to any adjournment thereof, unless the board of directors fixes a new
record date for the adjourned meeting. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting any business may be transacted which might have been
transacted at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
7. List of Stockholders. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
election, arranged in alphabetical order, showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
8. Voting. Unless otherwise provided in the certificate of incorporation, all
elections of directors shall be by written ballot. Except as otherwise required
by applicable law or as provided in the certificate of incorporation, at each
and every meeting of the stockholders, every stockholder shall be entitled to
vote in person or by proxy appointed by an instrument in writing. Each
stockholder shall be entitled to one vote for each share of capital stock held
by such stockholder. Directors shall be elected by a plurality of the votes cast
at a meeting of the stockholders by the holders of shares entitled to vote in
the election, and any other corporate action to be taken by vote of the
stockholders shall be authorized by a majority of the votes cast at a meeting of
stockholders by the holders of shares entitled to vote thereon; provided,
however, that where a separate vote by class is required, the affirmative vote
of the majority of shares of such class present in person or represented by
proxy at the meeting shall be the act of such class.
9. Proxies. Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy, but no such proxy
shall be voted or acted upon after three years from its date, unless the proxy
provides for a longer period. A duly executed proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally.
10. Written Consent of Stockholders. Any action required by the General
Corporation Law of the State of Delaware to be taken at any annual or special
meeting of stockholders or any action which may be taken at any annual or
special meeting of stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth
44
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
1. Board of Directors. Except as provided by the General Corporation Law of the
State of Delaware or the certificate of incorporation, the business and affairs
of the corporation shall be managed by or under the direction of its board of
directors.
2. Number of Directors. The number of directors initially constituting the whole
board shall be two (2). The number of directors may be increased or decreased by
action of a majority of the whole board subject to the limitation that no such
decrease in the number of directors shall shorten the term of any incumbent
director.
3. Election and Term of Directors. At each annual meeting of the stockholders,
the stockholders shall elect directors to hold office until the next annual
meeting. Each director shall hold office until the expiration of the term for
which he is elected, and until his successor has been elected and qualified, or
until his prior resignation or removal. Directors may be shareholders or
non-shareholders.
4. Vacancies and Newly Created Directorships. Unless otherwise provided in the
certificate of incorporation, vacancies and newly created directorships
resulting from any increase in the authorized number of directors elected by all
of the stockholders having the right to vote as a single class may be filled by
a majority of the directors then in office, although less than a quorum, or by a
sole remaining director. A director elected to fill a vacancy shall hold office
until the next meeting of stockholders at which the election of directors is in
the regular order of business, and until his successor has been elected and
qualified.
5. Removal of Directors. Any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
6. Resignation of Directors. A director may resign at any time by giving written
notice to the corporation. Unless otherwise specified in the notice, the
resignation shall take effect upon receipt thereof by the corporation. The
acceptance of a resignation shall not be necessary to make it effective.
7. Quorum of Directors. Unless otherwise provided in the certificate of
incorporation, a majority of the whole board shall constitute a quorum for the
transaction of business.
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8. Action of the Board. Unless otherwise required by law or the certificate of
incorporation, the vote of the majority of the directors present at a meeting at
which a quorum is present shall be the act of the board of directors.
9. Place and Time of Board Meetings. The board of directors may hold its
meetings at the office of the corporation or at such other places, either within
or without the State of Delaware, as it may from time to time determine.
10. Regular Annual Meeting. A regular annual meeting of the board of directors
shall be held immediately following the annual meeting of stockholders at the
place of such annual meeting of stockholders.
11. Notice of Meetings of the Board; Adjournment. Regular meetings of the board
of directors may be held without notice at such time and place as it shall from
time to time determine. Special meetings of the board of directors shall be held
upon notice to the directors and may be called by the president upon three days'
notice to each director either personally or by mail or by wire; special
meetings shall be called by the president or by the secretary in a like manner
on written request of two directors. A majority of the directors present,
whether or not a quorum is present, may adjourn any meeting to another time and
place. Notice of the adjournment shall be given to all directors who were not
present at the time of the adjournment and, unless such time and place are
announced at the meeting, to the other directors.
12. Chairman of Meetings of the Board. At all meetings of the board, a chairman
chosen by the board shall preside.
13. Action by Board of Directors by Written Consent. Any action required or
permitted to be taken at any meeting of the board of directors, or of any
committee thereof, may be taken without a meeting if all members of the board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board or committee.
14. Director and Committee Action by Conference Telephone. Members of the board
of directors, or any committee thereof, may participate in a meeting of such
board or committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation by such means shall constitute presence in person
at such meeting.
15. Committees of the Board. The board of directors may, by resolution passed by
a majority of the whole board, designate one or more committees, each committee
to consist of one or more of the directors. The board may designate one or more
directors as alternate members of any such committee, who may replace any absent
or disqualified member at any meeting of such committee.
16. Compensation of Directors. No compensation shall be paid to directors, as
such, for their services, but by resolution of the board, a fixed sum and
expenses of actual attendance at each regular or special meeting of the board
may be authorized. Nothing herein contained shall
46
be construed to preclude any director from serving the corporation in any other
capacity and receiving compensation therefore.
17. Interested Directors. (a) No contract or transaction between the corporation
and one or more of its directors or officers, or between the corporation and any
other corporation, partnership, association, or other organization in which one
or more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the board of directors or
the committee, and the board or committee in good faith authorizes the contract
or transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum;
provided, however, that in the event the whole board shall consist of one
director, the contract or transaction shall be approved or ratified by vote of
the stockholders, as provided below; or
(2) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified, by the board of directors, a
committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
1. Offices; Election; Term. The officers of the corporation shall be a
president, a secretary and a treasurer, and such other officers (including one
or more vice presidents) as the board of directors may determine, each of whom
shall be elected or appointed by the board of directors and shall have such
duties, powers and functions as hereinafter provided. Any number of offices may
be held by the same person. Each officer shall hold office for the term for
which he is elected or appointed, and until his successor has been elected or
appointed and qualified, or until his earlier resignation or removal. Any
officer may resign at any time upon written notice to the corporation.
2. President. The president shall preside at all meetings of stockholders. He
shall be an ex officio member of all standing committees and shall, in general,
supervise, manage, and control all of the business and affairs of the
corporation, subject to the control of the board of directors. He shall have
power to sign certificates representing shares of the corporation and to sign
and
47
execute all contracts and instruments of conveyance in the name of the
corporation, to sign checks, drafts, notes and orders for the payment of money,
and to appoint and discharge agents and employees of the corporation, subject to
the control of the board of directors. He shall perform all the duties usually
incident to the office of president.
3. Secretary. The secretary shall keep the minutes of all meetings of the board
of directors, and the minutes of all meetings of the stockholders, and also,
unless otherwise directed, the minutes of all meetings of committees in books
provided for that purpose. He shall give, or cause to be given, notice of all
meetings of stockholders and directors, and all other notices required by law or
by these by-laws, and in case of his absence or refusal so to do, any such
notice may be given by any person thereunto directed by the president or by the
directors or stockholders upon whose requisition the meeting is called. He shall
have charge of the corporate books and records. He shall have custody of the
seal of the corporation and affix the same to all instruments requiring it when
authorized by the directors or the president, and attest the same. He shall sign
with the president or vice-president all certificates representing shares of the
corporation. And he shall, in general, perform all the duties incident to the
office of secretary.
4. Treasurer. The treasurer shall have custody of all funds, securities,
evidences of indebtedness and other valuable documents of the corporation; when
necessary or proper he shall endorse on behalf of the corporation for collection
checks, notes and other obligations and shall deposit the same to the credit of
the corporation in such bank or banks or depository as the board of directors
may designate. He shall receive and give or cause to be given receipts and
acquaintances for moneys paid in on account of the corporation and shall pay out
of the funds on hand all just debts of the corporation of whatever nature upon
maturity of the same; he shall enter or cause to be entered in books of the
corporation to be kept for that purpose full and accurate accounts of all moneys
received and paid out on account of the corporation, and whenever required by
the president or the directors, he shall render a statement of his accounts. He
shall keep or cause to be kept such other books as will show a true record of
the expenses, losses, gains, assets and liabilities of the corporation; he shall
at all reasonable times exhibit his books and accounts to any director of the
corporation upon application at the office of the corporation during business
hours; he shall sign with the president or a vice-president certificates
representing shares of the corporation; he shall perform all other duties and
acts incident to the office of treasurer. He shall, if required by the board of
directors, give the corporation security for the faithful performance of his
duties in such sum and with such surety as the board of directors may determine.
5. Vice-President. The vice-president, if there be one (or, if there be more
than one, the executive vice-president) shall, in the absence or disability of
the president, perform the duties and exercise the powers of the president. The
vice-president(s) shall have such powers and perform such duties as may be
delegated to him by the president or prescribed by the board of directors.
6. Assistant Secretaries and Assistant Treasurers. The assistant secretaries and
the assistant treasurers, if there be any, may sign with the president or
vice-president, certificates representing shares of the corporation. The
assistant secretaries and the assistant treasurers shall have such other powers
and shall perform such other duties as may be assigned to them by
48
the board of directors, the president or by the secretary or treasurer,
respectively. In the absence or disability of the secretary or the treasurer,
the assistant secretary or the assistant treasurer, respectively, shall perform
all their duties and exercise all their powers. The assistant treasurer may be
required to give security for the faithful performance of his duties in such sum
and with such surety as the board of directors may require.
7. Removal of Officers. Any officer elected or appointed by the board of
directors may be removed by the board of directors with or without cause.
8. Vacancies. If the office of any officer becomes vacant, the directors may
appoint any qualified person to fill such vacancy, who shall hold office for the
unexpired term of his predecessor and until his successor is elected or
appointed and qualified.
9. Compensation of Officers. The officers shall receive such salary or
compensation as may be determined by the board of directors. No officer shall be
precluded from receiving any compensation by reason of the fact that he is also
a director of the corporation.
ARTICLE V
SHARES
1. Certificates Representing Shares. The shares of the corporation shall be
represented by certificates in such form as shall be prepared or approved by the
board of directors and shall be numbered consecutively. The certificates shall
be signed by the president or vice-president, and by the treasurer or an
assistant treasurer, or the secretary or an assistant secretary of the
corporation. Any or all of the signatures on the certificate may be a facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
2. Lost, Destroyed and Stolen Share Certificates. Any person claiming a
certificate representing shares to be lost, apparently destroyed or wrongfully
taken shall make an affidavit or affirmation of that fact, and, if required by
the board of directors, shall give the corporation an indemnity bond in such
form and in such amount as the board may determine, to protect it or any person
injured by the issue of the new certificate from any liability or expense which
it or they may incur by reason of the original certificate remaining
outstanding, whereupon a new certificate may be issued of the same tenor and for
the same number of shares as the one alleged to be lost, destroyed or wrongfully
taken if the claimant so requests prior to notice to the corporation that the
lost, apparently destroyed or wrongfully taken certificate has been acquired by
a bona fide purchaser.
3. Transfer of Shares. The certificated shares of the corporation shall be
transferable only upon its books by the holders thereof in person or by their
duly authorized attorneys or legal representatives, and upon such transfer the
old certificates duly endorsed or accompanied by evidence of succession,
assignment or authority to transfer shall be surrendered to the corporation by
the delivery thereof to the person in charge of the list of stockholders and the
49
transfer books and ledgers, or the transfer agent, or to such other person as
the board may designate, by whom they shall be canceled, and new certificates
shall thereupon be issued. A record shall be made of each transfer, and whenever
any transfer of shares shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of transfer if, when the
certificates are presented to the corporation for transfer, both the transferor
and transferee request the corporation to do so.
4. Record of Stockholders. The corporation shall keep at its office or at the
office of its transfer agent or registrar a record containing the names and
addresses of all stockholders, the number and class of shares held by each and
the dates when they respectively became the owners of record thereof in written
form or in any other form capable of being converted into written form within a
reasonable time. The corporation shall be protected in treating the persons in
whose names shares stand on the record of stockholders as the owners thereof for
all purposes, and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such shares on the part of any other person
whether or not it shall have express or other notice thereof, except as
expressly provided by the laws of the State of Delaware.
5. Fixing Record Date. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. If no record
date is fixed, it shall be determined in accordance with the provisions of the
laws of the State of Delaware.
ARTICLE VI
AMENDMENT AND REPEAL OF BY-LAWS
Except as provided in the certificate of incorporation, the by-laws may be
adopted, amended or repealed by vote of the stockholders entitled to vote in the
election of directors.
ARTICLE VII
MISCELLANEOUS PROVISIONS
1. Fiscal Year. The fiscal year of the corporation shall begin on the first day
of January and terminate on the 31st day of December in each calendar year.
2. Dividends. The board of directors may, but shall not be required to, declare,
and the corporation may pay, dividends in cash, in property, or in shares of the
corporation's capital stock. Such dividends may be declared or paid out of
surplus, or, in case there shall be no such surplus, out of the corporation's
net profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year, upon such terms and conditions provided by the
certificate of
50
incorporation or by law. The directors may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve.
3. Seal of Corporation. The seal of the corporation shall be circular in form
and have inscribed thereon the name of the corporation, the year of its
organization, and the words "Corporate Seal" and "Delaware". The seal shall be
in the charge of the secretary. If and when so directed by the board of
directors or the president, a duplicate of the seal may be kept and used by the
secretary, assistant secretary, treasurer or assistant treasurer. The seal may
be used by causing it or a facsimile to be affixed or impressed or reproduced in
any other manner.
4. Waivers. Whenever notice is required to be given under any provision of the
General Corporation Law of the State of Delaware or of the certificate of
incorporation or these by-laws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the stockholders, directors or members of a
committee of directors, need be specified in any written waiver of notice unless
so required by the certificate of incorporation.
5. Execution of Instruments. All checks, drafts, notes, contracts or other
obligations of the corporation shall be signed or countersigned, executed,
verified, or acknowledged by the president or such of the officers of the
corporation or by such other person or persons as may be authorized by the board
of directors.
6. Reference to Certificate of Incorporation. References in these by-laws to the
certificate of incorporation shall include all amendments thereto or changes
thereof unless specifically excepted.
ARTICLE VIII
INDEMNIFICATION
The corporation shall, to the full extent permitted by Section 145 of the
General Corporation Law of the State of Delaware, as amended from time to time,
indemnify all persons it may indemnify pursuant thereto.
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PRIORITYACCESS, INC.
SUBSCRIPTION AGREEMENT
To: PriorityAccess, Inc.
20 Corporate Woods Boulevard
Albany, New York 12211
Gentlemen:
You have informed me that PriorityAccess, Inc., a Delaware corporation (the
"Company"), is offering up to 500,000 shares of its $.001 par value common stock
(the "Common Stock") at a price of $10.00 per share as described in and offered
pursuant to the Prospectus furnished to the undersigned herewith (the
"Prospectus"). In addition, you have informed me that the minimum subscription
is 250 shares.
1. SUBSCRIPTION. Subject to the terms and conditions hereof, the undersigned
hereby tenders this subscription, together with payment in United States
currency by check, bank draft or money order payable to "Capital Bank & Trust
Company as Escrow Agent for PriorityAccess, Inc." or any other consideration
satisfactory to the company (the "Funds"), representing the payment of $10.00
per share for the number of shares of the Common Stock indicated below.
2. ACCEPTANCE OF SUBSCRIPTION. It is understood and agreed that the company
shall have the right to accept or reject this subscription in whole or in part,
for any reason whatsoever. The company shall reject this subscription, if at
all, in writing within ten business days after receipt of this subscription.
Subscriptions not rejected by the company within this ten day period shall be
deemed accepted by the company. The company may reduce the number of shares for
which the undersigned has subscribed, indicating acceptance of less than all of
the shares subscribed on its written form of acceptance.
3. ACKNOWLEDGMENTS. The undersigned hereby acknowledges that he has received a
copy of the Prospectus and agrees to be bound by the terms of this Agreement.
4. REVOCATION. The undersigned agrees that once this Subscription Agreement is
accepted by the company, it may not be withdrawn by him. Therefore, until the
earlier of the expiration of ten business days after receipt by the company of
this Subscription Agreement or acceptance of this Subscription Agreement by the
company, the undersigned may withdraw his or her subscription and receive a full
refund of the subscription price. The undersigned agrees that, except as
provided in this Section 4, he shall not cancel, terminate or revoke this
Subscription Agreement or any agreement of the undersigned made hereunder and
that this Subscription Agreement shall survive the death or disability of the
undersigned.
By executing this subscription agreement, the subscriber is not waiving any
rights he may have under federal securities laws, including the Securities Act
of 1933, as amended and the Securities Exchange Act of 1934, as amended.
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Please fill in the information requested below, make your check payable to
"Capital Bank & Trust Company as Escrow Agent for PriorityAccess, Inc. " and
mail Subscription Agreement, Stock Certificate Registration Instructions and
check to the attention of Roger D. Shearer, President, PriorityAccess, Inc., 20
Corporate Woods Boulevard, Albany, New York 12211.
- -------------------------- -----------------------------
No. of Shares (Signature of Subscriber)
Subscribed
$------------------------- -----------------------------
Funds Tendered ($10.00 Name (Please Print or Type)
per share subscribed)
Date: January 25, 2002
Phone Number:
- -------------------------- (Home)
- -------------------------- (Office)
- --------------------------
(residence street address)
- --------------------------
(city, state and zip code)
- --------------------------
(social security or other taxpayer
identification number)
53