EXHIBIT 99.1
The Company
The X-Change Corporation ("XCHC" or "the Company") has built and created an
Alternative Trading System ("ATS" or "System") designed to centralize and
modernize order processing and trading for the securities that are currently
quoted on the Over-the-Counter Bulletin Board (the "Bulletin Board" or
"OTCBBSM"). The ATS is an internet-accessible, screen-based System that provides
order entry and routing, order execution and automatic reporting to clearance
and settlement for trades in OTCBBSM securities. The Company believes that its
System will modernize trading for shares that are currently traded by
market-makers over the telephone with bids and offers posted on a bulletin
board. The Company has completed development and testing of its trading System
and has obtained all the necessary regulatory consents and approvals required to
operate.
The Company will offer access to its System through subscription agreements with
broker-dealers who are members of the National Association of Securities
Dealers, Inc. (the "NASD") and will charge transaction fees for all trades that
are executed through the System. The System will operate under the trade name
WEBIXTRADER(R). XCHC has developed WEBIXTRADER(R) as an Internet-based software
system, as described above, to automatically execute trades in Microcap stocks,
thereby enhancing trading efficiency, increasing transparency, and disseminating
timely price information to the marketplace. "Microcap stocks" are stocks issued
by companies with extremely low market capitalization. Microcap companies
typically have limited assets and tend to be low priced and trade in low
volumes.
The Company's business is premised on the belief that effective markets thrive
on efficiency, investor confidence, transparency and the ready availability of
information to investors and market participants. In management's opinion, the
current mechanism available to trade in OTCBBSM securities does not meet the
criteria of an efficient market. The Company believes it has a unique
opportunity to introduce an electronic System under Regulation ATS that will
provide the same efficiencies and user acceptance as have been achieved in the
primary markets by Electronic Communications Networks ("ECN's").
In December 1998, the Securities and Exchange Commission ("SEC") adopted
Regulation ATS to establish a regulatory framework for alternative trading
systems such as WEBIXTRADER(R) and to more fully integrate these systems into
the national market system. Under Regulation ATS, an alternative trading system
can choose to be a market participant and register as a broker-dealer, or to be
a marketplace and register as an exchange. Regulation ATS recognizes the
evolving role that alternative trading systems can play in today's securities
markets and gives these systems the flexibility to operate either as an exchange
or as a broker-dealer. Of the two options available, XCHC chose to be registered
as a broker-dealer as the most expeditious means of obtaining authority to
operate. As of May 2002 XCHC believes it is in compliance with all requirements
prescribed under Regulation ATS.
On January 15, 2002, WEBiX Inc., a private Florida corporation ("WEBiX") became
a publicly-traded Bulletin Board company by virtue of a merger into X-Change
Technologies Corp., a Delaware corporation ("XCHC Technologies") and a
wholly-owned subsidiary of The X-Change Corporation, a Nevada corporation. The
Company is quoted on OTCBBSM under the symbol "XCHC". The Company's
broker-dealer affiliate, Mark Securities, Inc. ("MSI"), is an SEC registered
broker-dealer and NASD, Inc. member. MSI serves one purpose -- to operate the
Company's ATS as prescribed by Regulation ATS. As stipulated in the Membership
Agreement between Mark Securities, Inc. and the NASD, MSI may not and will not
carry customer accounts, engage in market making, or perform any other general
securities business.
The above restrictions on the activities of its sponsoring broker-dealer
distinguish WEBIXTRADER(R) from many other ECN's and ATS's in an important way.
In some cases, the same broker-dealer that sponsors the ECN also trades for its
own account or executes orders on behalf of customers. In other cases a
different broker-dealer affiliated with the ECN engages in these activities. In
either situation, the broker-dealer has the ability to "internalize" customer
orders entering the ECN, i.e., execute the orders by buying from or selling
directly to the customer, without exposing the orders to other orders in the
marketplace. The Company believes that this can, in some circumstances, prevent
customers from receiving the best possible price for their orders. The
restrictions on the activities of its sponsoring broker-dealer enables
WEBIXTRADER(R) to avoid this potential conflict of interest and to act as a
"pure" market with the sole function of bringing buyers and sellers together.
Market Background
The Over-the Counter ("OTC") securities quoted on the OTCBBSM are issued by
publicly-traded companies which are required to file reports with the Securities
and Exchange Commission (the "SEC") but which are not listed on a national
securities exchange, such as the New York Stock Exchange ("NYSE") or American
Stock Exchange ("AMEX"), or included on The Nasdaq Stock Market ("Nasdaq"). Many
of these securities are also referred to as "Microcap" issues since the market
capitalization of these companies is relatively small when compared to issues
listed on national securities exchanges. While there is no official quantitative
definition, the financial press typically breaks down market capitalization into
the following categories: Giant cap (over $25 billion), Large cap ($5 billion to
$25 billion), Medium cap ($1 billion to $5 billion), Small cap ($250 million to
$1 billion) and Microcap (under $250 million). The OTCBBSM principally differs
from registered exchanges and Nasdaq in that it functions solely as a quotation
service which displays prices entered by market makers who are NASD
broker-dealer members. The OTCBBSM is in effect a very nascent market both in
structure and technological development.
The Company supports the precepts of the national market system and has chosen
its business model in order to become a part of the national market as
envisioned by Regulation ATS. Under Regulation ATS, in the future as the Company
grows and volume reaches certain threshold levels, the Company has the option of
remaining as an ATS or registering as a national securities exchange.
On March 5, 1999, the SEC proposed amendments to Rule 15c2-11 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") to attempt to
address concerns expressed by industry members, regulators, issuers and other
interested parties over the perceived increase in the incidence of fraud in OTC
securities. These amendments, as proposed, would require broker-dealers who
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publish quotes on OTCBBSM securities to review and record the measures taken by
them to ensure that the issuers whose securities they are quoting and trading
are financially viable. In response to this proposed rule, which the SEC never
adopted, the NASD adopted a similar rule that restricts the OTCBBSM to only
those issuers that fully report their financial condition to the SEC by filing
annual reports on Form 10-K or 10-KSB and quarterly reports on Form 10-Q or
10-QSB and are current in these filings. All other non-reporting companies were
relegated to inclusion on what is referred to in the industry as the "Pink
Sheets."
At the time of the SEC's proposed amendment to Rule 15c2-11 in July 1999, the
OTCBBSM included quotations in roughly 6,700 issues. The adoption of the NASD
rule, which required all OTCBBSM companies to be current in their filings with
the SEC, resulted in a dramatic decline in the number of issues quoted on the
OTCBBSM. As of May 2002, the OTCBBSM included 3,817 securities and 278
market-makers. In May 2002, 634,923 transactions occurred on the OTCBBSM with
total volume of over 16.34 billion shares traded, representing a total dollar
volume of $1.33 billion. During May 2002, there were an average of 11.23
market-makers per security on the OTCBBSM maintaining an average of 42,875
positions each day.
The Opportunity
The Company's management believes that the absence of an efficient centralized,
automated market for OTCBBSM securities has led to persistent dissatisfaction by
investors and brokerages interested in the trading of these securities. OTCBBSM
issuers have not been provided with an efficient market structure or trading
system worthy of national recognition. In fact, since the OTCBBSM was launched
in 1990, market inefficiencies have resulted in diminished demand for OTCBBSM
securities, wide spreads between quoted "bid" and "asked" prices and overall
negative investor perception of OTCBBSM securities.
In recent years, the SEC has taken an interest in increasing the efficiency and
public confidence in the trading of OTCBBSM securities by proposing various
regulatory initiatives designed to foster the creation of an active and informed
trading market in these securities. Management believes that the SEC will
continue to demand increased regulation of the OTC securities market and that
the trading System developed by the Company will help to address the issues that
have historically caused concern for the SEC. For example, the Company believes
that limit orders by public customers introduced by brokers should have the
opportunity to be exposed in a centralized national market environment. The
Company's System provides such a centralized market easily accessible by any
market participant over the Internet.
The Business Model
At the present time, the market for OTCBBSM securities includes the following
inefficiencies:
o No Central National Market
o No Participant Anonymity
o No Limit Order File
o No Auto-Execution Capabilities
o No Order Routing Capabilities
o No Agency Order Exposure Capability
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o No Ability To Lock-In Trades
o No Straight-Through-Processing
The Company has developed a software solution, WEBIXTRADER(R), that allows for
the trading of Microcap stocks through an alternative trading system that
addresses all of these inefficiencies. The Company believes that its solution
provides the same tools to the Microcap market that have been previously
available only in the primary markets.
WEBIXTRADER(R) is accessible in real-time over the Internet, is fully automated
and provides order entry and routing, instantaneous executions, locked-in
trades, and "straight-through-processing" to clearance and settlement.
Straight-through-processing ("STP") is an integrated, end-to-end online
transaction processing solution that shortens transaction cycles, reduces manual
handling, and improves financial risk management. The System includes many of
the features ascribed to traditional exchanges and ECN's, including quotation
displays, price/time priority logic, an anonymous limit order book, custom order
routing logic for preferencing, on-line negotiation capabilities, and last sale
reports. Additionally, the System capabilities include full reporting to the
Depository Trust and Clearing Corporation ("DTCC") for clearing and settlement
as well as levels of support functionality that include a help desk, system
administration desk, and a supervisory desk. Furthermore, through several
supported levels of security, the System will provide an audit trail so that all
data entered and all data output is captured and stored.
The Company has adopted a fixed fee structure that is meant to encourage use of
the System by a majority of OTCBBSM participants, both market-makers and retail
brokerages. Currently, the Company intends to charge $1.25 for each side of a
transaction for a total of $2.50 per trade. Because the System is accessible
over the Internet, the Company believes that market participants will find
WEBIXTRADER(R) an economical trading solution, as there are no routing charges
and no connectivity costs typically associated with point-to-point systems
including peripheral workstations, Application Processing Interfaces ("APIs"),
and Service Delivery Platform ("SDP") service charges. In the future, the
Company expects to generate revenue from the sale of market data in a manner
similar to Nasdaq and exchanges.
WEBIXTRADER(R) System Technical Overview
WEBIXTRADER(R) is a proprietary internet-based software trading system, with the
ability to route, display, and automatically execute orders in a
straight-through-processing ("STP") environment. This user-friendly System
requires no client-side software other than a standard web/Internet browser.
WEBIXTRADER(R)'s features include instantaneous executions of orders, automated
locked-in trades, start and end-of-day processing and preferencing capabilities,
an anonymous order book display for each trading symbol, price and time
priority, and the ability of subscribers to preference counterparties for
execution. The System is designed to handle standard brokerage order types (such
as "market," "immediate or cancel" and "limit") and to report all trade
executions in real-time to subscribers. The System also provides a complete
quote and sales log audit trail for compliance and regulatory purposes.
WEBIXTRADER(R) was built to be broadly accessible, highly reliable, scalable,
flexible, and extensible. To that end, the Company believes that the
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technologies employed are some of the industry's strongest and most trusted.
WEBIXTRADER(R) is an object oriented application developed in Java 2 Enterprise,
using Enterprise Java Beans. Orders are routed by Java Messaging System. The
application is delivered via a BEA WebLogic Server. Data in the System is
secured in an Oracle Enterprise Database and communication between the client
and the System is protected under 128-bit encryption.
One particularly sophisticated feature of the System is the use of real-time
updates that allow subscribers to view changes in orders and executions using
only a standard web browser. This technology was designed to avoid having to
manually reload screens, while requiring no client-side installation, downloads,
plug-ins, applets, or executables of any kind. The System accomplishes this by
employing a proprietary technology developed and owned by the Company, which
transforms encrypted server-side enterprise Java objects over the Internet into
client-side objects that can be manipulated in real time. The net result is a
real-time application, easily accessible to anyone over the Internet. In the
Company's view, this technology distinguishes the WEBIXTRADER(R) system from
other system applications in the financial markets.
The following diagram reflects the hierarchy and STP environment on
WEBIXTRADER(R):
[GRAPHIC OMITTED]
WEBIXTRADER(R) System Functional Overview
Limit Order Book
The core of the System is the limit order book. A sample screen display of the
order book for a single stock is shown below. This display is available to all
subscribers, both market makers and brokerages.
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The System matches orders on a price and time priority basis. The System handles
Limit, Market and Immediate-or-Cancel order types.
[GRAPHIC OMITTED]
Order Book by Stock Symbol (visible to Brokers and Dealers)
Alternative Market Away Feature
When entering a market order, the System checks to see if an alternative market
has a better price than that which is available within the WEBIXTRADER(R)
system. If this is the case, a message is displayed to the user who then can
either submit the order ("Yes") or cancel it ("No").
[GRAPHIC OMITTED]
Locked or Crossed Markets
If a quote or order is entered that will "cross" the market, i.e. an ask price
below another market participant's bid price or a bid price above another market
participant's ask price, the user will get an error message. However, if a quote
or order is entered which will "lock" the market, i.e. an ask price equal to
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another market participant's bid price, or a bid price equal to another market
participant's ask price, it is automatically executed.
[GRAPHIC OMITTED]
Order Preferencing Feature
The System also incorporates "preferencing," which enables subscribers to direct
order flow to preferred counterparties, for executions between the "spread" in
order to seek a better execution price. Placing a checkmark in the "Preference"
box after entering the details of an order will bring up a list of dealers who
have agreed to receive preferenced orders in the stock. The dealer has 30
seconds to either accept or reject the order. If there is no response, the order
will be automatically logged on the symbol limit order book for the stock.
[GRAPHIC OMITTED]
Order Entry Template with Preferencing
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Trade Report Feature
The WEBIXTRADER(R) System reports all executions in real-time to participating
subscribers. The trade details are locked-in (buyer and seller cannot change the
trades once its executed) and automatically submitted to DTCC. All System
participants receive a scrolling execution report which is subscriber-selected.
[GRAPHIC OMITTED]
Scrolling Execution Report (subscriber-Selected)
Quote Watch Screen Available to Dealers
WEBIXTRADER(R) provides dealer functionality. Dealers can customize each Quote
Watch page. All elements on the page are dynamically updated in real-time as
mentioned above.
[GRAPHIC OMITTED]
Quote Watch Screen (available to Dealers)
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Potential Advantages of the System
The Company believes that three important factors will contribute to the success
of the WEBIXTRADER(R) System. The first factor is that, in the Company's view,
WEBIXTRADER(R) brings critical efficiencies to the marketplace that include
automated order routing, immediate execution, and straight-through-processing to
DTCC. The Company believes that these efficiencies represent a significant
improvement over the present telephonic and complex reporting execution
methodologies of the OTCBBSM. The Company anticipates that, by automating the
process from order entry to trade reporting and eliminating the need to make and
receive telephone calls, WEBIXTRADER(R) will enable market makers to
substantially increase the number of stocks in which they make markets. The
Company believes increased market making interest will enhance liquidity in many
OTCBBSM stocks. Further the Company believes that participation by brokers will
lead to narrower spreads and further benefits to participants in these stocks.
The second factor is the support of legal and compliance personnel at
broker-dealers. The Company has been informed by compliance and legal personnel
at potential subscribers that the complete System audit trail feature, which
allows firms to reconstruct and document all trading activity, is a critical
component. Further, the Company believes that the alert feature, which indicates
that there is a "better price away" prior to submitting an order, effectively
assures compliance with the two-quote rule and best execution.
The third and most critical factor is the cost of participating in
WEBIXTRADER(R). The Company believes that the single most important factor for a
broker-dealer today is cost. Management believes that an OTCBBSM participant, by
using WEBIXTRADER(R), can reduce its communications costs by a minimum of $2,000
per month. Further, peripheral equipment costs and other charges required to
utilize the current OTCBBSM system raise the monthly participation fees by
approximately another $3,000 per month, or approximately $5,000 in total.
Finally, the Nasdaq stock market assesses dealers with monthly position charges
which in the case of the top ten dealers can amount to $12,000 per month per
firm. The Company believes that, by using WEBIXTRADER(R), broker-dealers will
not only reduce their costs associated with market making, but moreover increase
market making activity through enhanced efficiency and liquidity.
The Company believes that the cost savings and efficiencies that WEBIXTRADER(R)
brings to the Microcap market are extremely attractive. The chart on the
following page compares the costs of participating on WEBIXTRADER(R) to the
Nasdaq OTCBBSM:
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========================================= ========================================= ==================================
Monthly WEBIXTRADER(R) Nasdaq OTCBBSM
- ----------------------------------------- ----------------------------------------- ----------------------------------
- ----------------------------------------- ----------------------------------------- ----------------------------------
Workstation $ No Charge $525.00 each
- ----------------------------------------- ----------------------------------------- ----------------------------------
- ----------------------------------------- ----------------------------------------- ----------------------------------
API $ No Charge $525.00 each
- ----------------------------------------- ----------------------------------------- ----------------------------------
- ----------------------------------------- ----------------------------------------- ----------------------------------
SDP service (8 devices per cluster) $ No Charge $2,035.00 per cluster
- ----------------------------------------- ----------------------------------------- ----------------------------------
- ----------------------------------------- ----------------------------------------- ----------------------------------
TCP/IP Connectivity $ No Charge (via public Internet) $1,600.00 /month
- ----------------------------------------- ----------------------------------------- ----------------------------------
- ----------------------------------------- ----------------------------------------- ----------------------------------
Routing Charge $ No Charge Not available
- ----------------------------------------- ----------------------------------------- ----------------------------------
- ----------------------------------------- ----------------------------------------- ----------------------------------
Execution Charge $1.25 per trade Not available
- ----------------------------------------- ----------------------------------------- ----------------------------------
- ----------------------------------------- ----------------------------------------- ----------------------------------
TOTAL FIXED MONTHLY $0.00 $4,685.00
BILLABLE CHARGES
========================================= ========================================= ==================================
Competition
The industry in which the Company operates is highly competitive and is
characterized by rapidly changing technologies, evolving market structure
standards and constant changes in customer requirements. The Company's trading
system will operate in direct competition with Nasdaq's OTCBBSM system.
Additionally, GlobeNet Securities, Inc. ("GlobeNet"), an ECN/ATS, has just
launched a new system, "bullet-X," which provides broker-dealers the ability to
display limit orders on the OTCBBSM. GlobeNet has stated that the firm will
display its best prices on the OTCBBSM on behalf of its subscribers. The
GlobeNet Order Management System is a web base applet designed to facilitate
direct order entry into the GlobeNet trading system by market makers and order
entry firms. In addition, other ECNs have announced their intention to begin
trading OTCBBSM securities.
In 2003, Nasdaq intends to launch a new market, the Bulletin Board Exchange
(BBX) subject to timely approval by the SEC. The BBX will eventually take the
place of the OTC Bulletin Board(R) (OTCBBSM), which will be phased out. The BBX
will list many of the same companies that are currently quoted on the OTCBBSM.
In addition, to the extent that the Company achieves visibility and is
successful in attracting order flow to its trading System, it expects to
encounter competition from new entrants, many of which have substantially
greater financial resources.
Annual Meeting
The Company has not always held annual meetings in the past, but intends to hold
such meetings in the future. The Company's 2002 annual meeting is tentatively
scheduled for August 6, 2002. At this meeting, the Company intends to solicit
shareholder votes on proposals to adopt a stock option plan, conduct a
one-for-ten reverse stock split and amend its articles of incorporation to
increase its number of authorized shares of common stock, after the split, to 15
million shares, in addition to other matters such as the election of directors
and the appointment of accountants.
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Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the beneficial ownership of
shares of the Company's voting stock as of June 24, 2002 by:
o each director who beneficially owns shares of the Company's
voting stock;
o each of the Company's executive officers;
o each person that is known by the Company to beneficially own
more than 5% of the outstanding shares of its voting stock; and
o all of the Company's directors and executive officers as a
group.
As of June 24, 2002, the Company had 37,002,000 shares of common stock and
4,000,000 shares of Series A Preferred Stock outstanding. The outstanding shares
of the Company's Series A Preferred Stock are currently convertible into shares
of the Company's Common Stock at a rate of ten shares of Common Stock for each
share of Preferred Stock. Accordingly, as of June 24, 2002, the outstanding
shares of the Company's Series A Preferred Stock were convertible into a total
of 40,000,000 shares of the Company's Common Stock. As a result, the Company's
total voting power consisted of 77,002,000 shares as of June 24, 2002.
A person is deemed to be the beneficial owner of securities that can be acquired
by the person within 60 days from the date of this summary upon the exercise of
warrants or the conversion of the Series A Preferred Stock. Each beneficial
owner's percentage ownership is determined by assuming that warrants that are
held by the person, and which are exercisable within 60 days from the date of
this summary, have been exercised. Unless otherwise indicated, the Company
believes that all persons named in this table have sole voting and investment
power with respect to all shares of Common Stock and Series A Preferred Stock
beneficially owned by them. Unless otherwise indicated, the address of each
person listed in the following table is 36 West 44th Street, Suite 1201, New
York, New York 10036.
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- ----------------------------------------------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP
- ----------------------------------------------------------------------------------------------------------------------
Name Beneficial Beneficial % of Total % of Total
% of
Ownership of Beneficial Beneficial
Common Stock Ownership of Beneficial Ownership of Beneficial
and Warrants Common Stock Ownership of Ownership of Common Stock Ownership of
as converted Including the Series A the Series A Including Common Stock
into Common Warrants Preferred Preferred Warrants and Including
Stock Excluding Stock as Stock as Series A Warrants and
Excluding Series A Converted into Converted Preferred Series A
Series A Preferred Common Stock into Common Stock as Preferred as
Preferred Stock Stock Stock Converted Converted
- -------------------- ---------------- --------------- ---------------- --------------- ---------------- --------------
Donald E. Weeden 17,112,050(1) 32.84% 15,112,050(2)(3) 37.78% 32,224,100(2) 47.93%
- -------------------- ---------------- --------------- ---------------- --------------- ---------------- --------------
K. Richard B. 14,849,040(4) 38.22% 1,849,040(5) 4.62% 16,698,080 41.03%
Niehoff
- -------------------- ---------------- --------------- ---------------- --------------- ---------------- --------------
John D. Weeden 4,178,436(6) 10.15% 4,178,436(7) 10.45% 8,356,872 18.42%
Living Trust
- -------------------- ---------------- --------------- ---------------- --------------- ---------------- --------------
Eric B. Nissan 1,910,720(8) 5.13% 250,720(9) 0.63% 2,161,440 5.76%
- -------------------- ---------------- --------------- ---------------- --------------- ---------------- --------------
Molly G. Bayley 922,300(10) 2.46% 522,300(11) 1.31% 1,444,600 3.80%
- -------------------- ---------------- --------------- ---------------- --------------- ---------------- --------------
Karl R.B. Niehoff 3,175,770(12) 7.90% 3,175,770(13) 7.94% 6,351,540 14.65%
Jr.
- -------------------- ---------------- --------------- ---------------- --------------- ---------------- --------------
All Executive
Officers and
Directors as a 34,794,110(14) 63.57% 17,734,110(15) 44.34% 52,528,220 72.48%
Group (4 Persons)
- -------------------- ---------------- --------------- ---------------- --------------- ---------------- --------------
- ------------------
(1) Consists of 2,000,000 shares of Common Stock and 15,112,050 shares
issuable upon the exercise of warrants at an exercise price of $1.00 per
share. The address of Donald E. Weeden is 145 Mason Street, Greenwich,
Connecticut 06830.
(2) Includes shares held by the Donald E. Weeden IRA Rollover, Weeden
Foundation, Weeden Family Trust No. 1 and High Fields, L.P.
(3) Consists of 1,511,205 shares of Series A Preferred Stock which are
convertible into, and have voting rights equivalent to, 15,112,050
shares of Common Stock.
(4) Consists of 13,000,000 shares of Common Stock and 1,849,040 shares
issuable upon the exercise of warrants at an exercise price of $1.00 per
share.
(5) Consists of 184,904 shares of Series A Preferred Stock which are
convertible into, and have voting rights equivalent to, 1,849,040 shares
of Common Stock.
(6) Consists of 4,178,436 shares of Common Stock issuable upon the exercise
of warrants at an exercise price of $1.00 per share.
(7) Consists of 417,843 shares of Series A Preferred Stock which are
convertible into, and have voting rights equivalent to, 4,178,436 shares
of Common Stock.
(8) Consists of 1,660,000 shares of Common Stock and 250,720 shares issuable
upon the exercise of warrants at an exercise price of $1.00 per share.
(9) Consists of 25,072 shares of Series A Preferred Stock which are
convertible into, and have voting rights equivalent to, 250,720 shares
of Common Stock.
(10) Consists of 400,000 shares of Common Stock and 522,300 shares issuable
upon the exercise of warrants at an exercise price of $1.00 per share.
(11) Consists of 52,230 shares of Series A Preferred Stock which are
convertible into, and have voting rights equivalent to, 522,300 shares
of Common Stock.
(12) Consists of 3,175,770 shares of Common Stock issuable upon the exercise
of warrants at an exercise price of $1.00 per share.
(13) Consists of 317,577 shares of Series A Preferred Stock which are
convertible into, and have voting rights equivalent to, 3,175,770 shares
of Common Stock.
(14) Consists of 17,060,000 shares of Common Stock and 17,734,110 shares
issuable upon the exercise of warrants at an exercise price of $1.00 per
share.
(15) Consists of 1,773,411 shares of Series A Preferred Stock which are
convertible into, and have the voting rights equivalent to, 17,734,110
shares of Common Stock.
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