SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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eSAFETYWORLD, Inc.
(Name of Small Business Issuer in Its Charter)
Nevada 44290 11-3496415
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Classification Identification No.)
Organization) Code Number)
(Address and Telephone Number of Executive Offices)
Edward A. Heil
100-31 South Jersey Avenue
Setauket, New York 11733
212-894-3797, ext. 1042
Facsimile- (212) 208-3082
(Name, Address and Telephone Number of Agent for Service)
COPIES TO:
Steven W. Schuster, Esq. Gregory Sichenzia, Esq.
McLaughlin & Stern, LLP Sichenzia, Ross & Friedman LLP
260 Madison Avenue 135 West 50th Street, 20th Floor
New York, NY 10016 New York, New York 10020
Telephone - 212-448-1100 Telephone - (212) 664-1200
Facsimile - 212-448-0066 Facsimile - (212) 664-7329
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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(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 the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. | |
CALCULATION OF REGISTRATION FEE
Title of Each Class of Amount to Be Proposed Offering Proposed Aggregate Amount of
Securities to Be Registered Registered Price per Share (1) Offering Price (1) Registration Fee
Shares of common stock, $.001 par 1,150,000 $ 7.00 $8,050,000 2,237.90
value ("common stock") (2)
Underwriter's Warrant (3) 1 $ .001 $ 100 .28
Shares of common stock underlying 100,000 $10.50 $1,050,000 291.90
Underwriter's Warrant
Total Registration Fee 2,530.08
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
(2) Includes 150,000 shares of common stock which may be purchased by the
underwriter to cover over-allotments, if any.
(3) Represents warrant granted to the underwriter to acquire an aggregate
of 100,000 shares of common stock at an exercise price equal to 150% of the
price to the public in this Offering.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE TIME UNTIL THE REGISTRANT SHALL
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 SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE. ================================================================
CROSS REFERENCE SHEET
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
1. Forepart of Registration Statement and Cover Page
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Inside Front Cover and Outside Back Cover of Prospectus
of Prospectus
3. Summary Information; Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Cover Page; Cover Page Notes, Underwriting
9. Legal Proceedings Legal Proceedings
10. Directors, Executive Officers, Promoters Management
and Control Persons
11. Security Ownership of Beneficial Owners Principal Shareholders
and Management
12. Description of Securities to be Registered Cover Page; Description of Securities
13. Interest of Named Experts and Counsel Experts
14. Disclosure of Commission's Position Indemnification
on Indemnification for Securities Act Liabilities
15. Information with Respect to the Registrant Prospectus Summary; Risk Factors; Management;
Description of Securities; Business; Executive
Compensation and Financial Statements
16. Management's Discussion and Analysis or Management's Discussion and Analysis of Financial
Plan of Operation Condition and Results of Operations
17. Description of Property Not Applicable
18. Certain Relationships and Related Certain Relationships and Related Transactions.
Transactions
19. Market for Common Equity and Outside Front Cover
Related Stockholder Matters
20. Executive Compensation Management
21. Financial Statements Financial Statements
Subject to Completion Preliminary Prospectus dated September 2, 1999.
PROSPECTUS
eSAFETYWORLD, INC.
1,000,000 SHARES OF COMMON STOCK
eSAFETYWORLD, Inc.: The Offering:
C eSAFETYWORLD is developing a C eSAFETYWORLD is offering 1,000,000
business-to-business e-commerce site on the Internet shares of common stock through Kashner Davidson
to sell disposable garments and equipment used in Securities, Corp.
controlled environments or workplaces exposed to
environmental hazards. C The underwriter has an option to
C eSAFETYWORLD, 100-31 S. Jersey Avenue, , purchase an additional 150,000 shares from
Setauket, New York 11733 (212)894 3797 eSAFETYWORLD to cover any over-allotments.
C Proposed Nasdaq SmallCap Market Symbol: SFTY C We intend to use the offering proceeds
for marketing, development, repayment of debt,
C Proposed Boston Stock Exchange Symbol: SFT working capital and other general corporate
purposes.
Per Share Total
Public offering price $7.00 $7,000,000
Underwriting discounts and commissions $0.70 $ 700,000
Proceeds, before expenses, to eSAFETYWORLD $6.30 $6,300,000
The investment involves risk. See "Risk Factors" beginning on page 6.
Neither the SEC nor any state securities commission has approved or disapproved
of these securities or determined if this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense. The information in
this prospectus is not complete and may be changed. We may not sell these
securities until the registration statement filed with the SEC is effective.
This prospectus is not an offer to sell these securities and we are not
soliciting offers to buy these securities in any state where the offer or sale
is not permitted.
KASHNER DAVIDSON SECURITIES CORP.
TABLE OF CONTENT
Page
Prospectus Summary 3
Risk Factors 9
Use of Proceeds 19
Dividend Policy 20
Dilution 21
Capitalization 22
Selected Financial Information 23
Management's Discussion and Analysis of Results of
Operations and Financial Condition 25
Business 29
Management 41
Certain Relationships and Related Transactions 43
Principal Shareholders 44
Description of Securities 45
Indemnification of Officers and Directors 46
Underwriting 47
Legal Matters 49
Experts 49
Additional Information 50
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. Before making an investment decision, you should read the entire
prospectus carefully, including the consolidated financial statements and
related notes, in order to understand our business and this offering fully.
References in this prospectus to "eSAFETYWORLD," "We," "Our," and "Us"
refer to eSAFETYWORLD, Inc., a Nevada corporation. Unless otherwise indicated,
all references to dollar ($) amounts are to U.S. dollars.
eSAFETYWORLD
Our business
eSAFETYWORLD, Inc. sells disposable garments and equipment to companies
involved in production or other activities that must be done in a controlled
environment or whose employees are exposed to environmental hazards. Our goal is
to develop and operate a business-to-business e-commerce site on the world wide
web in order to sell our products. We believe that the Internet offers
significant opportunities in the areas of e-commerce, including the ability to
reach a large potential market without the need for significant advertising
expenditures.
Our market
We have identified two initial market niches: controlled environmental
facilities and industrial safety and hazardous work sites:
Controlled environment facilities - A clean room is a specially
designed room in which particulate presence and environmental conditions are
carefully maintained. Clean rooms are operated and maintained under strict
procedures to minimize the risk of introducing foreign particles. The
semiconductor market is the largest market for clean rooms and other
contamination control products. eSAFETYWORLD sells a large variety of disposable
items, such as hats, coats, boots and gloves, that are used in cleanroom
facilities. We focus on the sale of disposable items because they are generally
regularly reordered by customers.
Industrial safety and hazardous worksites - Products will be sold to
"end users," including manufacturing companies and service businesses, public
utilities, fisheries, pharmaceutical plants, the transportation industry and
companies whose employees are exposed to hazardous materials. Use of these
products has increased partly from the adoption of OSHA and other governmental
safety standards and the awareness of industry and the genera public for the
need to provide worker protection against hazardous materials contained in
industrial facilities, schools and buildings. These products include coveralls,
shirts, pants, headwear, hoods, aprons, smocks, lab costs, hazardous material
handler suits, examination gowns, sleeves, shoe covers and related items. Many
of these products are disposable and, therefore, offer the same benefits as do
disposable cleanroom products.
Our growth strategy
Our business model is designed to take advantage of the Internet as a
selling medium. Our goal is to use well developed Internet technology and not
incur significant expenditures for technological research and development.
We have identified several ancillary market niches for future
expansion, all of which appear to have the same attributes as eSAFETYWORLD's
initial market niches. The identified niches include products serving the
hospital, plumbing supply, construction and HVAC industries. These product areas
include disposable/limited use protective industrial garments, specialty safety
and industrial work gloves, reusable woven industrial and medical apparel, fire
and heat protective clothing, along with protective systems for personnel, and
suits for use by toxic waste clean up teams.
Our market opportunity
Our strategic plan is to become an Internet seller for a wide array of
available industrial safety and environmental products. We seek to be the
Internet independent sales representative for the industries that we serve and
will serve. To do this, fixed costs must be kept low to improve operating
leverage. The principal advantage of our use of the Internet as a selling
vehicle is the ability to do so without incurring significant levels of fixed
costs or maintaining inventory.
The Department of Commerce has projected that business-to-business
e-commerce revenues will increase from $8 billion in 1997 to $326 billion in
2002 (see The Emerging Digital Economy published in 1998). We believe that
products that are well received or sold through traditional printed catalogs are
well suited for sale on the Internet.
Our history
We were incorporated under the laws of Nevada in February 1997 under
the name The SL Group, Inc. In August, 1999, we changed our name to
eSAFETYWORLD, Inc. Our offices are located at 100-31 South Jersey Avenue,
Setauket, New York 11733, and our telephone number is (212) 894-3797.
In August 1999, we acquired from the distribution division of Laminaire
Corporation its business and intangible assets such as customer lists and vendor
lists. This division, which has been in operation for more than twenty years,
provides us with an important entree to the vendors and customers of a targeted
industry niche. The division sells disposable/limited use apparel, hoods,
gloves, packaging and flooring material, monitoring devices, electrostatic
devices, furnishings, wipers, and swabs as a distributor to a wide variety of
midsized and small companies.
The offering
Securities offered 1,000,000 shares
Common stock outstanding
prior to offering 2,000,000 shares
Common stock to be outstanding
after Offering 3,000,000 shares
Use of proceeds The net proceeds from the sale of the shares are
estimated to be approximately $5,890,000 deducting
commissions and expenses of the offering, which are
estimated at $1,110,000. We intend to use the net
proceeds of this offering for
C marketing, working capital
C general corporate purposes
Risk factors The shares that we are offering are
C speculative
C involve a high degree of risk
C subject to immediate substantial dilution
C the shares should be considered only by
investors who can afford to sustain a loss of their
entire investment.
Proposed Nasdaq SmallCap symbol SFTY
Proposed Boston Stock Exchange SFT
symbol
The proposed trading symbols does not imply that a liquid and active
market will be developed or sustained for the securities upon completion of this
offering.
Our calculation that 3,000,000 shares of common stock will be
outstanding after this offering is based on the 2,000,000 shares of common stock
outstanding prior to the offering and 1,000,000 shares of common stock being
sold by us in this offering. The shares of common stock to be outstanding after
this offering excludes:
C 150,000 shares of common stock subject to the underwriter's
over-allotment option.
C 100,000 shares of common stock issuable upon the exercise of the
underwriter's warrants.
C 500,000 shares of common stock reserved for issuance pursuant to our 1999
Stock Option Plan.
Summary Financial Information
The selected financial data set forth below at June 30, 1999 is derived
from and should be read in conjunction with eSAFETYWORLD's financial statements,
including the notes thereto, appearing elsewhere in this prospectus.
The selected financial data for the Cleanroom Distribution Product
Group of Laminaire Corporation for the years ended December 31, 1998 and 1997 is
derived from and should be read in conjunction with the Group's financial
statements, including the notes thereto, appearing elsewhere in this prospectus.
The summary financial data for the Group set forth below for the interim periods
ended June 30, 1999 and 1998 has been prepared from the Group's books and
records and reflects, inn out opinion, all adjustments necessary for a fair
presentation of the results of operations of the Group for the periods indicated
therein. Results for interim periods are not necessarily indicative of results
which can be expected for the entire year.
eSAFETYWORLD(1):
6/30/99 6/30/99 6/30/99
(as adjusted)(2) (as further adjusted)(3)
Current assets -------- $375,000 $5,950,000
Total assets $10,000 1,735,000 7,300,000
Stockholders' equity 10,000 710,000 6,610,000
Cleanroom Distribution Product Group(1):
Years Ended Six Months
December 31,(5) Ended June 30,(5)
1998 1999 1998
---- ---- ----
1997
----
Revenues $2,267,846 $1,506,607 $746,325 $867,700
Operating profit 54,067 204,106 95,984 142,164
Pro forma net income(4) 35,144 132,669 62,390 92,407
(1) eSAFETYWORLD had no revenues during the period ended June 30, 1999. In
August 1999, it acquired the Cleanroom Distribution Product Group in an
acquisition accounted for as a purchase. Therefore, the operating results of the
acquired business will be included in eSAFETYWORLD's results commencing with the
date of acquisition.
(2) Assumes:
C the acquisition of the Cleanroom Products Division that took place in August
1999; and C the receipt of $375,000 in debt financing that occurred in August
1999.
(3) Assumes:
C the completion of the offering;
C the acquisition of the Cleanroom Products Division that took place in August
1999; and C the receipt of $375,000 in debt financing that occurred in August
1999.
The pro forma data does not give effect to proceeds, if any, from the
exercise of the underwriter's overallotment option.
(4) Assumes an effective income tax rate of 35% for the purposes of calculation.
The Cleanroom Distribution Product Group was manages as a division by Laminaire
Corporation during this period. Its assets and liabilities were commingled with
the assets and liabilities of Laminaire, and its operating results were included
in Laminaire's overall results.
(5) eSAFETYWORLD acquired the business, customer and vendor lists of this
Product Group and is not acquiring any tangible assets of the Group.
RISK FACTORS
You should carefully consider each of the following risks and all of
the other information set forth in this prospectus before deciding to invest in
shares of our common stock. Some of the following risks relate principally to
our business in general and the industry in which we operate. Other risks relate
principally to the securities markets and ownership of our stock. The risks and
uncertainties described below are not the only ones facing our company.
Additional risks that generally apply to publicly traded companies, that are not
yet identified or that we currently think are immaterial, may also impair out
business operations and adversely affect our business.
If any of the following risks and uncertainties develop into actual
events, our business, financial condition or results of operations could be
materially adversely affected. In such case, the trading price of our common
stock could decline, and you may lose all or part of your investment.
This prospectus contains forward-looking statements that involve risks
and uncertainties. These statements relate to:
C our future plans;
C objectives;
C expectations and intentions; and
C the assumptions underlying or relating to any of these statements.
We use words such as "expects," "anticipates," "intends,"
"plans" and similar expressions to identify forward-looking statements. Our
actual results could differ materially from those discussed in these statements
as a result of certain factors, which are more fully described below and
elsewhere in this prospectus. We believe that our forward-looking statements are
within the meaning of the safe harbor provisions of the Securities Exchange Act
of 1934.
Our business is subject to the following risks, which include risks
relating to the industry in which we operate.
We are in an early stage of development and we expect to encounter risks
associated with early-stage companies.
eSAFETYWORLD has a limited operating history upon which an evaluation
of our future performance and prospects can be made. Our prospects must be
considered in light of the risks, expenses, delays, problems and difficulties
frequently encountered in the establishment of a new business. An investor in
our common stock must consider the risks and difficulties frequently encountered
by early stage companies operating in new and rapidly evolving markets. These
risks include:
o an evolving business model based on using existing Internet
and software technologies to establish e-commerce businesses in market
niches currently being served in a fragmented or disjointed manner;
o competition;
o ability to maintain and expand a customer base;
o ability to manage working capital and product return risks;
o the need to manage growth and changing operations;
o the need to continue to develop and upgrade our websites,
transaction-processing systems and infrastructure;
o ability to scale our systems and fulfillment capabilities to accommodate
the growth of our business;
o ability to access and obtain additional capital when required;
o ability to develop and maintain strategic relationships;
o dependence upon key personnel; and
o dependence on the reliability and growing use of the
Internet for commerce and communication and on general economic
conditions.
We cannot be certain that our business strategy will be successful or that we
will successfully address these risks. We expect to incur operating losses and
negative cash flow for the foreseeable future because of costs and expenses
related to:
o brand development, marketing and other promotional activities;
o the expansion of financial, management and order fulfillment
infrastructure;
o the development of our website, transaction-processing systems and
management infrastructure;
o the expansion of product offerings and website content; and
o strategic relationship development.
We may need additional financing.
We may require additional financing to fund our operations. We believe
that our success is particularly dependent on marketing our services and
additional funds may be required to increase our marketing program. There can be
no assurance that additional financing will be available. If we are unable to
obtain additional financing, our ability to meet our obligations and plans for
expansion will be materially adversely affected.
Our markets are highly competitive.
The market for Internet electronic commerce and Internet marketing is
highly competitive. We may face competition from one or more entities in all
geographic areas. We anticipate that competition will increase as other
companies enter our market. We expect barriers to entry to decline as costs drop
for computer hardware and services, including creating and maintaining websites.
Many of these current and potential traditional manufacturer or distributor
competitors have longer operating histories, larger customer or user bases,
greater brand recognition and significantly greater financial, marketing and
other resources than do we. These current and potential competitors can devote
substantially more resources to website and systems development. Larger,
well-established and well-financed entities may acquire, invest in or form joint
ventures with online competitors.
Our online competitors can use the Internet as a marketing medium to
reach significant numbers of potential customers. New technologies and the
expansion of existing technologies may increase competition. The new
technologies include price comparison programs that select specific titles from
a variety of websites and may direct customers to other online sellers. If we
face increased competition, our operating results may be adversely affected.
We believe that competition for customers in our industry is based on:
C technology;
C marketing strategy;
C sales force;
C professional capability;
C price;
C reputation for reliability;
C technical support; and
C quality of service.
Our operating results may fluctuate.
Our operating results will be affected and may fluctuate significantly
because of factors outside of our control. Factors that may harm our business or
cause our operating results to fluctuate include:
o our inability to obtain customers at reasonable cost, retain
customers, or successfully encourage repeat purchases;
o decreases in the number of visitors to our websites or our
inability to convert visitors to our websites into customers;
o the mix of products;
o our inability to arrange and manage fulfillment operations;
o our inability to maintain, upgrade and develop our websites,
transaction-processing systems or infrastructure;
o the ability of our competitors to offer new or enhanced websites,
services or products;
o price competition and the impact of marketing alliances between
competitors and online providers;
o the level of our product returns;
o fluctuations in the demand for products sold on our websites;
o our inability to obtain popular products from our vendors;
o the failure to develop strategic marketing and fulfillment relationships;
o increases in the cost of online or offline advertising;
o our inability to attract new independent consultants or personnel
in a timely and effective manner or retain existing independent
consultants and personnel;
o the amount and timing of operating costs and capital expenditures
relating to expansion of our operations;
o unexpected increases in shipping costs or delivery times;
o technical difficulties, system downtime or Internet brownouts; and
o government regulations related to use of the Internet for commerce.
Factors that will cause our gross margins to fluctuate include:
o the mix of products sold,
o the terms negotiated with vendors,
o the level of product returns, and
o the level of discount pricing.
Any change in one or more of these factors could materially and
adversely affect our gross margins and operating results.
We will rely on strategic business alliances.
We anticipate that a portion of our growth will result from
entering into strategic business alliances for the purposes of :
C increasing traffic through our websites; and
C establishing effective fulfillment systems. Such alliances
will involve online and Internet service providers, Internet
portals, operators of other websites, and vendors providing
fulfillment for us. Strategic business alliances may be
executed. No allowances may result in increased levels of
sales or profit for us
Strategic business alliances may not result in additional customers,
sales and/or profits. Any strategic business alliance may involve a number of
risks, which may adversely affect our operating results and require management's
attention.
We are vulnerable to customer concerns regarding security.
Customer concerns over the security of transactions conducted on the
Internet or the privacy of users may inhibit our growth. To transmit
confidential information. We will rely on encryption and authentication
technology that we will obtain and license from third parties. We cannot predict
whether events or developments will result in a compromise or breach of the
algorithms that we will use to protect customer transaction data. The servers
used by us may be vulnerable to computer viruses, physical or electronic
break-ins and similar disruptions. Our business may be adversely affected by
customers' perception of Internet security or if our security measures do not
prevent security breaches. We cannot assure that we can prevent all security
breaches.
Under current credit card practices, we will be liable for fraudulent
credit card transactions because we will not obtain a cardholder's signature.
We rely on vendors with a broad variety of products.
Our success depends on our ability to have access to products in
sufficient quantities at competitive prices. Vendors may offer exclusive
allocations of product to certain distributors for limited periods of time. Some
potential vendors have their own online commerce efforts, which may eliminate or
reduce our ability to get sufficient product allocations from such vendors.
Certain competitors may also be able to secure products from vendors on more
favorable terms, fulfill customer orders more efficiently and adopt more
aggressive pricing or inventory availability policies than us.
Our business will be adversely affected if we are not able to
offer our customers sufficient quantities of products in a timely manner or have
access to products at acceptable prices and terms. Such terms include the
vendor's willingness to drop ship orders directly to customers.
A significant element of our strategic plan involves entering into
agreements with vendors under which such vendors will drop ship products
directly to our customers, thereby substantially reducing our requirements to
maintain and store inventory. There can be no assurances given that we will be
successful in negotiating such arrangements.
We rely on continued growth of the Internet for business-to-business
transactions.
Our success will depend in large part on continued growth in, and the
use of, the Internet, particularly for business-to-business commerce. The issues
concerning the commercial use of the Internet that we expect to affect the
development of the market for our services include:
C security;
C reliability;
C cost;
C ease of access;
C quality of service; and C increases in bandwidth availability.
If the Internet develops more slowly as a commercial or business medium
than predicted, it will adversely affect our business. In addition, companies
that control access to Internet transactions through network access or web
browsers could promote competitors or charge a substantial fee to us for
inclusion in their product or service offerings. Either of these developments
could adversely affect our business.
We must continue to enhance and improve the functionality and features
of our online site. The Internet and the online commerce industry are rapidly
changing. If competitors introduce new products and services embodying new
technologies, or if new industry standards and practices emerge, our websites
and systems may become obsolete. Our future success will depend on our ability
to:
o license or internally develop leading technologies useful in our
business;
o develop new services and obtain technologies that address the
increasingly sophisticated and varied needs of our prospective
customers; and
o respond to technological advances and emerging industry standards
and practices on a cost-effective and timely basis.
Develop our websites and other proprietary technology entails
significant technical and business risks. We may use new technologies
ineffectively or may fail to adapt our websites, transaction-processing systems
and infrastructure to customer requirements or emerging industry standards. If
we face material delays in introducing new services, products and enhancements,
our customers may forego the use of our services and use those of our
competitors.
We have no obligation to spend the offering proceeds in a specified
manner.
Our management will be able to spend most of the proceeds we
receive from this offering in ways in which stockholders may not agree. We
cannot predict that the proceeds will be invested to yield a favorable return.
We are subject to capacity constraints risks; reliance on internally
developed systems and system development risks.
A key element of our strategy is to generate a high volume of
traffic on, and use of, our website. Our revenues depend on the number of
customers who use our website to purchase safety equipment. Accordingly, our
website, transaction processing systems and network infrastructure performance,
reliability and availability are critical to our operating results. These
factors also are critical to our reputation and our ability to attract and
retain customers and maintain adequate customer service levels. The volume of
goods we sell and the attractiveness of our product and service offerings will
decrease if there are any systems interruptions that affect the availability of
our website or our ability to fulfill orders. We are continually enhancing and
expanding our technology and transaction processing systems, and other
technologies, to accommodate a substantial increase in the volume of traffic on
our website. We may be unsuccessful in these efforts or we may be unable to
accurately project the rate or timing of increases in the use of our website. We
may also fail to timely expand and upgrade our systems and infrastructure to
accommodate these increases. In addition, we cannot predict whether additional
network capacity will be available from third party suppliers as we need it.
Also, our network or our suppliers' network might be unable to timely achieve or
maintain a sufficiently high capacity of data transmission to timely process
orders or effectively conduct digital download, especially if our website
traffic increases. Our failure to achieve or maintain high capacity data
transmission could significantly reduce consumer demand for our services.
We are subject to risk of system failure; our systems are located in single
site.
Our success, in particular our ability to successfully receive orders
and provide high quality customer service, largely depends on the efficient and
uninterrupted operation of our computer and communications systems.
Substantially all of our development and management systems are in a single
facility that we lease in Setauket, New York. We contract with Spider, Inc. to
host our computer and communications hardware systems and to maintain our
critical connection to the Internet. These systems are in a single location in
East Northport, New York. Rapid technological change may adversely affect us.
To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our online store. The Internet and
the online commerce industry are characterized by rapid technological change,
changes in user and customer requirements and preferences and frequent new
product and service introductions. If competitors introduce new products and
services embodying new technologies or if new industry standards and practices
emerge, then our existing website and proprietary technology and systems may
become obsolete. Our future success will depend on our ability to do the
following:
C both license and internally develop leading technologies useful in our
business;
C enhance our existing services;
C develop new services and technology that address the
increasingly sophisticated and varied needs of our prospective
customers; and
C respond to technological advances and emerging industry
standards and practices on a cost-effective and timely basis.
To develop our website and other proprietary technology entails
significant technical and business risks. We may use new technologies
ineffectively or we may fail to adapt our website, proprietary technology and
transaction processing systems to customer requirements or emerging industry
standards. If we face material delays in introducing new services, products and
enhancements then our customers may forego the use of our services and use those
of our competitors.
Future public sales or our common stock could adversely affect our stock price
may depress our stock price.
If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could fall. Such sales also might make it more difficult for us to sell equity
or equity-related securities in the future at a time and price that we deem
appropriate. Upon completion of this offering, we will have outstanding
3,000,000 shares of common stock (3,150,000 if the underwriter's over-allotment
option is exercised in full). Of these shares, 1,900,000 will be freely
tradeable, subject to lock-up agreements with the underwriter and volume
restrictions imposed by Rule 144.
We may not be able retain the key personnel we need to succeed.
Our future success will depend in part on our ability to attract and
retain qualified personnel to manage the development and future growth of our
company. There can be no assurance that we will be successful in attracting and
retaining such personnel. The failure to recruit additional key personnel could
have a material adverse effect on our business, financial condition and results
of operations.
Our future success will be materially dependent upon continued services
and contributions of Edward A. Heil and David McClelland and our directors. The
loss of one or more of our other key personnel or consultants, or our inability
to attract qualified personnel, could have a material adverse effect on our
business, financial condition and results of operations. We are also dependent
on Spider, Inc and its affiliate, World Internet Marketing Corporation, for the
development of our websites. The loss of Spider as a vendor and consultant could
have a material adverse impact on us and our operations.
Management has broad discretion as to the use of proceeds of the offering.
Our management may spend the proceeds from this offering in ways which
differ from the specific proposed uses described in this prospectus. We have
allocated a large portion of the proceeds from this offering to discretionary
uses. You will be relying on the judgement of our management regarding the
application of the proceeds of this offering. As a stockholder, you may not
agree with management's spending decisions.
Existing shareholders can control our operations.
Upon the completion of this offering, our existing shareholders will
collectively beneficially own approximately 67% (63% if the underwriter's
over-allotment option is exercised in full) of the our outstanding common stock.
Because of their beneficial stock ownership, these stockholders will be in a
position to continue to elect a majority of the Board of Directors and decide
matters requiring stockholder approval.
Our Board can issue blank check preferred stock.
Our Board of Directors will have the authority to issue up to 1,000,000
shares of preferred stock with designations, rights and preferences determined
from time to time by the Board of Directors. Accordingly, the Board of Directors
is empowered, without stockholder approval, to issue classes of preferred stock
with voting liquidation, conversion or other rights that could adversely effect
the holders of our common stock in that the issuance of such preferred stock may
adversely dilute the proportionate equity interest and voting power of such
holders. However, no such preferred stock may issued by us without the
underwriter's consent for a period of 12 months following the effective date of
this offering.
We face risks regarding the year 2000.
Any failure of our material systems, our vendors' material systems or
the Internet to be year 2000 compliant would have material adverse consequences
for us. Such consequences would include difficulties in operating our website
effectively, taking product orders, making product deliveries or conducting
other fundamental parts of our business. We are currently assessing the year
2000 readiness of the software, computer technology and other services that we
use which may not be year 2000 compliant. At this time, we have not yet
developed a contingency plan to address situations that may result if we or our
vendors are unable to achieve year 2000 compliance. The cost of developing and
implementing such a plan, if necessary, could be material.
We also depend on the year 2000 compliance of the computer systems and
financial services used by customers. A significant disruption in the ability of
customers to reliably access the Internet or portions of it or to use their
credit cards would have an adverse effect on demand for our services and would
have a material adverse effect on us.
USE OF PROCEEDS
The net proceeds to us from the sale of the shares being offered hereby
at an assumed public offering price of $7.00 per share are estimated to be
$5,890,000, after deducting the underwriting discount and estimated offering
expenses payable by us (or $1,110,000 million if the underwriter's
over-allotment option is exercised in full).
Marketing and website development $4,417,500 75%
Equipment 100,000 1.7
Repayment of promissory notes(1) 375,000 6.4
General working capital 997,500 16.9
- ------- ----
Total $5,890,000 100%
========== ====
(1) The proceeds will be used to repay promissory notes executed in
July 1999 in the aggregate principal amount of $375,000 and all accrued
interest. The principal amount of the promissory notes has been used for general
working capital and to pay for expenses incurred in connection with the
acquisition of the division from Laminaire and expenses related to this
offering.
This allocation is only an estimate and we may adjust it as necessary
to address our operational needs in the future. For instance, we may also use a
portion of the net proceeds to acquire complementary technologies or businesses.
However, we currently have no commitments or agreements and are not involved in
any negotiations with respect to any such transactions.
We reserve the right to reallocate proceeds to different uses if, in
management's view, the needs of the business so require. In addition, a large
portion of the proceeds is allocated to discretionary purposes. Investors may
not agree with any such allocation or reallocation. Based on our operating plan,
we believe that the net proceeds of this offering, together with available funds
on hand and cash flow from future operations, will be sufficient to satisfy our
working capital requirements for at least 12 months following this offering.
Such belief is based upon certain assumptions (including assumptions as to our
contemplated operations and business plan and economic and industry conditions).
If we were able to make significant acquisitions for cash consideration, we
would require additional capital. In addition, contingencies may arise that may
require us to obtain additional capital. We cannot be certain that we will be
able to obtain such capital on favorable terms or at all. Pending use of the net
proceeds of this offering, we intend to invest the net proceeds in short-term,
interest-bearing, investment grade securities or similar quality investments.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We
currently intend to retain all available funds and any future earnings for use
in the operation and expansion of our business and do not anticipate paying any
cash dividends in the foreseeable future.
DILUTION
Our net tangible book value as of June 30, 1999 was deminimis, or $0
per share. Net tangible book value per share represents the amount of our total
tangible assets reduced by the amount of our total liabilities and divided by
the total number of shares of common stock outstanding. Dilution in net tangible
book value per share represents the difference between the amount per share paid
by purchasers of shares of common stock in this offering and the net tangible
book value per share of common stock immediately after the completion of this
offering. After giving effect to the sale of the 1,000,000 shares of common
stock offered by us at an assumed initial public offering price of $7.00 per
share, and after deducting the underwriting discount and estimated offering
expenses payable by us, our net tangible book value at June 30, 1999 would have
been approximately $5,900,000 or $1.97 per share of common stock. This
represents an immediate increase in net tangible book value of $1.97 per share
to existing stockholders and an immediate dilution of $5.03 per share to new
investors of common stock. The following table illustrates this dilution on a
per share basis:
Assumed initial public offering price per share $7.00
Net tangible book value per share before the offering $0.00
Increase per share attributable to new investors 1.97
-----
Pro forma net tangible book value per share after the offering 1.97
----
Dilution per share to new investors $5.03
=====
The following table summarizes on an as adjusted basis after giving
effect to the offering, as of June 30, 1999, the differences between the
existing stockholders and new investors with respect to the number of shares of
common stock purchased from us, the total consideration paid to us and the
average price per share paid:
Shares Owned Consideration Average
Price per Share
Number Percent Amount Percent
Present Shareholders 2,000,000 67% $10,000 .1 $.001
New Investors 1,000,000 33% 7,000,000 99.9 7.00
--------- --- ---------- ----
Total (1) 3,000,000 100% $7,010,000 100.00
========= ==== ========== === ======
(1) Does not give effect to:
150,000 additional shares of common stock that are issuable upon the
exercise of the underwriter's over-allotment option; and
100,000 shares of common stock reserved for issuance upon the exercise
of the underwriter's warrants.
CAPITALIZATION
The following table sets forth our capitalization as of August 31, 1999
and as adjusted to reflect the sale of the 1,000,000 shares and the application
of the estimated net proceeds. This table should be read in conjunction with our
financial statements included elsewhere in this prospectus.
ACTUAL AS ADJUSTED (2)
Debt $375,000 $500,000
-------- -------
Stockholders' Equity; 2,000 3,000
Common stock, par value of $.001 per share; 20,000,000 authorized; 2,000,000
shares outstanding; 3,000,000 shares outstanding as adjusted (1)
Additional paid-in capital 8,000 6,607,000
Retained earnings -- --
---------- ---- ---------- --
Total stockholders' equity 10,000 6,610,000
---- ------ ---------
Total Capitalization $385,000 $7,110,000
======== ==========
1. Does not give effect to:
150,000 additional shares of common stock that are issuable upon the
exercise of the underwriter's over-allotment option; and
100,000 shares of common stock reserved for issuance upon the exercise of
the underwriter's warrants.
2. The "As Adjusted" column treats the $100,000 fee for a 24-month consulting
agreement with the underwriter as a prepaid asset and assumes the
completion of the acquisition of the Cleanroom Distribution Product Group.
SELECTED FINANCIAL INFORMATION
The selected financial data set forth below at June 30, 1999 is derived
from and should be read in conjunction with eSAFETYWORLD's financial statements,
including the notes thereto, appearing elsewhere in this prospectus.
The selected financial data for the Cleanroom Distribution Product
Group of Laminaire Corporation for the years ended December 31, 1998 and 1997 is
derived from and should be read in conjunction with the Group's financial
statements, including the notes thereto, appearing elsewhere in this prospectus.
The summary financial data for the Group set forth below for the interim periods
ended June 30, 1999 and 1998 has been prepared from the Group's books and
records and reflects, inn out opinion, all adjustments necessary for a fair
presentation of the results of operations of the Group for the periods indicated
therein. Results for interim periods are not necessarily indicative of results
which can be expected for the entire year.
eSAFETYWORLD(1):
6/30/99 6/30/99 6/30/99
(as adjusted)(2) (as further adjusted)(3)
Current assets -------- $375,000 $5,950,000
Total assets $10,000 1,735,000 7,300,000
Stockholders' equity 10,000 710,000 6,610,000
Cleanroom Distribution Product Group(1):
Years Ended Six Months
December 31,(5) Ended June 30,(5)
1998 1999 1998
---- ---- ----
1997
----
Revenues $2,267,846 $1,506,607 $746,325 $867,700
Operating profit 54,067 204,106 95,984 142,164
Pro forma net income(4) 35,144 132,669 62,390 92,407
(1) eSAFETYWORLD had no revenues during the period ended June 30, 1999. In
August 1999, it acquired the Cleanroom Distribution Product Group in an
acquisition accounted for as a purchase. Therefore, the operating results of the
acquired business will be included in eSAFETYWORLD's results commencing with the
date of acquisition.
(2) Assumes:
C the acquisition of the Cleanroom Products Division that took place in August
1999; and C the receipt of $375,000 in debt financing that occurred in August
1999.
(3) Assumes:
C the completion of the offering;
C the acquisition of the Cleanroom Products Division that took place in August
1999; and C the receipt of $375,000 in debt financing that occurred in August
1999.
The pro forma data does not give effect to proceeds, if any, from the
exercise of the underwriter's overallotment option.
(4) Assumes an effective income tax rate of 35% for the purposes of calculation.
The Cleanroom Distribution Product Group was manages as a division by Laminaire
Corporation during this period. Its assets and liabilities were commingled with
the assets and liabilities of Laminaire, and its operating results were included
in Laminaire's overall results.
(5) eSAFETYWORLD acquired the business, customer and vendor lists of this
Product Group and is not acquiring any tangible assets of the Group.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
The following discussion should be read in conjunction with the
financial statements and notes included elsewhere in this prospectus.
Results of operations
General - We had no operating history prior to June 30, 1999.
Distribution division - During the periods discussed below, the
division operated as a product group of Laminaire Corporation. Laminaire lacked
the financial resources to develop the division's business fully and often
"stretched" out its vendors. The principal fluctuations resulted from the
changes in Laminaire's ability to commit resources during the period. Also,
Laminaire used cash generated by the division to help it meet its overall
obligations. Therefore, past operating results are not necessarily indicative of
future performance.
Comparison of the six months ended June 30, 1999 and 1998
A summary of sales and cost of sales by product type follows:
Sales by Product 6/30/98 6/30/99
- ---------------- ------- -------
Gloves $130,400 17.5% $148,311.00 17.1%
Wipers 227,890 30.5% 264,594.00 30.5%
Accessories 111,325 14.9% 154,786.00 17.8%
Mats 111,177 14.9% 91,893.00 10.6%
Disposable Garments 117,469 15.7% 97,125.00 11.2%
Clean Room Furniture 5,476 0.7% 41,053.00 4.7%
Chairs 8,587 1.2% 10,988.00 1.3%
Fabric Garments 11,142 1.5% 12,713.00 1.5%
Vacuum Products 14,592 2.0% 35,602.00 4.1%
Foam Wipers 7,402 1.0% 7,873.00 0.9%
Static Products 865 0.1% 2,832.00 0.3%
Total $746,325 100.0% $867,770.00 100.0%
Cost Of Sales 6/30/98 6/30/99
- ------------- ------- -------
Gloves $ 94,143 12.6% $121,240 14.0%
Wipers 172,651 23.1% 211,140 24.3%
Accessories 78,433 10.5% 121,946 14.1%
Mats 89,062 11.9% 68,836 7.9%
Disposable Garments 99,142 13.3% 72,456 8.4%
Clean Room Furniture 3,918 0.5% 28,937 3.3%
Chairs 6,386 0.9% 6,768 0.8%
Fabric Garments 6,191 0.8% 8,569 1.0%
Vacuum Products 11,997 1.6% 7,689 0.9%
Foam Wipers 2,724 0.4% 2,830 0.3%
Static Products 686 0.1% 2,327 0.3%
Total $565,333 75.7% $652,738 75.2%
The division did not emphasize particular products during any period.
Therefore, the fluctuations are a result of orders received in the normal course
of business and not of any concerted marketing efforts.
Comparison of the years ended December 31, 1998 and 1997
1998 % 1997 % Difference
---- - ---- - ----------
Revenues $2,267,846 $1,506,607 $761,239
Cost of Revenues 2,070,174 1,117,464 952,710
Gross Profits 197,672 8.72% 389,143 25.83% -191,471
Selling 98,148 4.33% 154,905 10.28% -56,757
General and Administrative 45,357 2.00% 30,132 2.00% 15,225
Operating Profits 54,167 2.39% 204,106 13.55% -149,939
In 1998, the division had a significant amount of low margin sales
that required minor sales efforts. Also in 1998, the division had one
fewer full-time employee resulting in a reduction of selling expenses.
The composition of
sales and cost of sales was as follows:
Sales by Product Type 12/31/98 12/31/99
- --------------------- -------- --------
Gloves $328,478 14.5% $340,731 22.6%
Wipers 652,221 28.8% 313,362 20.8%
Accessories 348,738 15.4% 272,093 18.1%
Mats 265,795 11.7% 261,631 17.4%
Disposable Garments 456,453 20.1% 163,815 10.9%
Clean Room Furniture 65,238 2.9% 69,175 4.6%
Chairs 89,128 3.9% 23,482 1.6%
Fabric Garments 18,992 0.8% 22,877 1.5%
Vacuum Products 15,985 0.7% 17,737 1.2%
Foam Wipers 14,307 0.6% 15,131 1.0%
Static Products 12,511 0.6% 6,573 0.4%
Total $2,267,846 100.0% $1,506,607 100.0%
Cost of Sales 12/31/98 12/31/99
- ------------- -------- --------
Gloves $228,379 10.1% $236,030 15.7%
Wipers 647,253 28.5% 240,072 15.9%
Accessories 260,488 11.5% 196,244 13.0%
Mats 194,526 8.6% 180,714 12.0%
Disposable Garments 360,238 15.9% 113,566 7.5%
Clean Room Furniture 45,975 2.0% 45,133 3.0%
Chairs 80,249 3.5% 15,028 1.0%
Fabric Garments 12,311 0.5% 15,048 1.0%
Vacuum Products 11,356 0.5% 12,371 0.8%
Foam Wipers 6,415 0.3% 5,142 0.3%
Static Products 4,190 0.2% 6,143 0.4%
Total $1,851,380 81.6% $1,065,491 70.7%
Liquidity and Capital Resources
Based on our operating plan, we believe that the net proceeds of this
offering, together with available funds on hand and cash flow from future
operations, will be sufficient to satisfy our working capital requirements for
at least 12 months following this offering. Such belief is based upon certain
assumptions (including assumptions as to our contemplated operations and
business plan and economic and industry conditions). Furthermore, if we are able
to make significant acquisitions for cash consideration, we would require
additional capital. In addition, contingencies may arise that may require us to
obtain additional capital. We cannot be certain that we will be able to obtain
such capital on favorable terms or at all. Pending use of the net proceeds of
this offering, we intend to invest the net proceeds in short-term,
interest-bearing, investment grade securities or similar investments.
We entered into a promissory note executed in July 1999 in the principal
amount of $250,000. The principal amount of the promissory note has been used
for general working capital and to pay for expenses incurred in connection with
the acquisition of the division from Laminaire and expenses related to this
offering. The note will be repaid from the proceeds of this offering.
Seasonality
The demand for our products is somewhat seasonal. Vacations in the summer
reduce the demand for our products in the summer months.
New accounting pronouncements
No new pronouncement issued by the Financial Accounting Standards Board,
the American Institute of Certified Public Accountants or the Securities and
Exchange Commission is expected to have a material impact on our financial
position or reported results of operations.
Year 2000 issues
Management has initiated a company-wide program and has developed a formal
plan of implementation to prepare us for the year 2000. This includes taking
actions designed to ensure that our information technology ("IT") systems,
products and infrastructure are year 2000 compliant and that our customers,
suppliers and service providers have taken similar action. We are in the process
of evaluating our internal issues - all of our IT systems, products, equipment
and other facilities systems. At this time, Management believes that we do not
have any internal problem other than to upgrade some of its software to
available new releases that are year 2000 compliant. With respect to its
external issues - customers, suppliers and service providers, we are surveying
them primarily through written and oral correspondence and communication. Spider
has advised us that its servers and systems are year 2000 compliant Despite the
efforts to survey customers, suppliers and service providers, we cannot be
certain as to the actual year 2000 readiness of these third parties. To the
extent any of our suppliers or service providers are not year 2000 ready, we
believe that we will be able to obtain other suppliers or service providers
without a significant interruption to our business. To date, we have not
formulated a year 2000 contingency plan. Based upon responses to our inquiries,
we will determine the need for a contingency plan by the end of the third
quarter of 1999.
We believe that the costs related to our compliance with the year 2000
issue should not have a material adverse effect on our financial position,
results of operations or cash flows.
BUSINESS
eSAFETYWORLD was established as a Nevada corporation in July
1997 as The SL Group, Inc. We changed our name to eSAFETYWORLD, Inc. in August
1999. Our purpose is to sell disposable garments and equipment to companies
involved in production or other activities that must be done in controlled
environments or whose employees are exposed to environmental hazards through the
development and operation of a business-to-business e-commerce site on the world
wide web. We believe that this market niche is attractive because:
o We believe the business-to-business market available to Internet
sellers is much greater than the business-to-consumer market.
o Businesses, as a group, are generally further along in accepting
e-commerce and electronic data interchange than is the consumer
market.
o The targeted industry segment is large and being serviced in a
very fragmented way by the current entrants.
o A significant part of the selling effort now done in these
segments is done through the distribution of catalogs and
brochures. Our principal premise is that sales and orders placed
through the Internet offers an ideal replacement for traditional
catalogs.
o The identified market niches are currently served by a large
number of small companies. We believe that our state-of-the-art
e-commerce site will provide a competitive advantage.
Our business model is designed to take advantage of the Internet as a
selling medium. eSAFETYWORLD believes that the Internet offers significant
opportunities in the areas of e-commerce, including the ability to reach a large
potential market without the need for substantial advertising expenditures. The
ability to reach a worldwide market means that even a small degree of
penetration can result in a high level of sales revenue. The keys needed to
succeed in e-commerce include:
o Having user friendly software;
o Using a business model that does not require significant amounts
of development costs or working capital; and
o Developing a methodology for encouraging visitors to visit the
website and advertising at a reasonable cost.
Our strategic plan is to:
o Become a significant factor in the marketplace by becoming the
Internet seller for a wide array of available products,. We want
to become the Internet independent sales representative for the
industries that we serves and will serve; and
o Utilize and modify existing technology in an effective, user friendly
way.
eSAFETYWORLD's goal is to use well-developed Internet technology and
therefore not incur significant expenditures for technological research and
development. We will seek ways to use this technology profitably, like targeting
market niches, and will allow others to assume the technological risk of new
development.
The United States Department of Commerce has projected that
business-to-business e-commerce revenues will increase from $8 billion in 1997
to $326 billion in 2002 (see The Emerging Digital Economy published in 1998).
We believe that industrial safety products that are sold through
traditional printed catalogs are uniquely suited for sale on the Internet. The
reasons for this include:
o Products bought through catalogs are purchased by people who do
not need to "touch" or "feel" the product prior to purchase;
o E-commerce can make purchasing easier and quicker than filling out
forms in a catalog or calling a toll-free telephone number; and
o E-commerce can provide more information and update such
information more quickly than can distributors of catalogs.
We also believe that fixed costs must be kept to a minimum in order to
increase operating leverage. The principal advantage of using the Internet as a
selling vehicle is the ability to not incur significant fixed costs. The key
element of this strategy is to:
o minimize or eliminate inventory holding and shipping costs;
o minimize the need for expensive advertising campaigns by selecting
market niches that can be reached through trade shows and less
expensive forms of advertising; and
o out source services wherever possible.
Keeping fixed cost to a minimum is achievable if fulfillment contracts
are negotiated with vendors to perform all or most fulfillment functions. We
believe that most of our vendors will agree to such contracts. We will eliminate
products from our site if the associated vendors will not perform fulfillment
functions. We believe that this strategy may result in some lost sales. However,
we also believe that the strategy offers the best means of achieving the
potential high degree of operating leverage afforded by Internet commerce.
In August 1999, we acquired from the distribution division of
Laminaire Corporation its business and intangible assets such as customer lists
and vendor lists. The purchase price consisted of 100,000 shares of common
stock, notes payable to the seller in the principal amount of $500,000 and the
assumption of debt of $125,000. This division, which has been in operation for
more than twenty years, provides us with an important entree to the vendors and
customers of a targeted industry niche. The division sells disposable/limited
use apparel, hoods, gloves, packaging and flooring material, monitoring devices,
electrostatic devices, furnishings, wipers, and swabs as a distributor to a wide
variety of midsized and small companies. Its principal vendors include
Techswipe, Alma and Kimberly Clark. Its website is linked to a variety of other
sites, including Thomas Register. The Thomas Register is an industry catalogue
which lists thousands of companies in the industrial safety parts and equipment
field. Laminaire also markets its products through telemarketing and
distribution of print catalogs and materials. We have included the products
distributed by the division on our website. Edward A. Heil, our Chairman, is a
director of Laminaire. Steven W. Schuster, one of our directors, is Laminaire's
corporate secretary.
Our principal website is located at www.esafetyworld.com.
Nature of the Internet
The Internet is an increasingly significant medium for communication,
information and commerce. International Data Corporation estimates that there
were 97 million web users worldwide at the end of 1998 and anticipates this
number will grow to approximately 320 million users by the end of 2002. In
addition, business-to-business sales on the Internet are presently a $35 billion
dollar industry, which Forrester Research and the International Data Corporation
have projected to increase to approximately $300 billion by 2002. We believe
that growth in Internet usage and online commerce is being fueled by a number of
factors including:
o a large and growing installed base of personal computers in the workplace
and home;
o advances in the performance and speed of personal computers and modems;
o improvements in network security, infrastructure and bandwidth;
o easier and cheaper access to the Internet; and
o the rapidly expanding availability of commerce sites.
The Internet provides several advantages for online distributors.
Online distributors are able to "display" a larger number of products than
traditional store-based or catalog distributors at a lower cost. In addition,
online distributors are able to frequently adjust their featured selections,
editorial content, shopping interfaces and pricing, thus providing significant
merchandising flexibility. The minimal cost to publish on the web, the ability
to reach and serve a large and global group of customers electronically from a
central location, and the potential for personalized low-cost customer
interaction provide additional economic benefits for online distributors. Unlike
traditional distribution channels, online distributors do not have the
burdensome costs of managing and maintaining a retail store infrastructure or
the significant printing and mailing costs of catalogs. Online distributors can
also easily obtain demographic and behavioral data about customers, increasing
opportunities for direct marketing and personalized services.
We will further expanded the benefits of online selling by
devising a distribution model that requires us to maintain little or no
inventory and by utilizing state-of-the-art software that can be modified or
updated easily and cheaply.
The business-to-business sector of Internet commerce is, in
many ways, more mature than the business-to-consumer sector. However, it is
largely served by individual company sites selling that particular company's
products. In many cases, these sites are looked at as a minor adjunct to a
company's traditional selling efforts.
Market niches and background
The market for disposable industrial garments and equipment
has increased substantially in the past twenty-five years. In 1970, Congress
enacted the Occupational Safety and Health Act ("OSHA"), which requires
employers to supply protective clothing in certain work environments. At about
the same time, DuPont developed Tyvek(TM) which, for the first time, allowed for
the economical production of lightweight, disposable protective clothing. The
attraction of disposable garments grew in the late 1970's with the increases in
both labor and material costs of producing cloth garments and the promulgation
of Federal, state and local regulations requiring that employees wear protective
clothing to protect against exposure to certain contaminants, such as asbestos
and hydro-carbons ("PCBs").
The use of disposable garments avoids the continuing costs of
laundering and decontaminating woven cloth work garments and reduces the
overhead costs associated with handling, transporting and replacing such
garments. As manufacturers have become aware of the advantages of disposable
clothing, the demand for such garments has increased. This has allowed for
greater production volume and, in turn, has reduced the cost of manufacturing
disposable industrial garments.
We believe that this market will grow because of:
Government legislation which mandates the clean up of toxic
waste sites and the elimination of hazardous materials from the environment as
promulgated under various Congressional Super Fund Acts. The Environmental
Protection Agency ("EPA") designated OSHA to be responsible for the health and
safety of workers in and around areas of hazardous materials and contaminated
waste, as well as regulations requiring that employees wear protective clothing
to protect against exposure to certain contaminants, such as, asbestos, PCBs,
lead, acids and other numerous hazardous chemicals and radioactive materials.
Lower cost of disposable/limited use garments compared to
reusable woven and cloth garments because of the elimination of costs associated
with laundering, decontaminating, handling, transporting and replacing reusable
woven or cloth garments.
Increasing workers' compensation claims and large class action
liability suits instituted by both present and prior employees for failure to be
protected against hazardous agents found in the workplace.
Ongoing expansion in the semiconductor, microelectronics,
medical device and pharmaceutical industries, all of which require manufacturing
in a cleanroom environment.
We have identified two initial market niches:
Controlled environment facilities - Clean rooms are one of the
most effective approaches to achieving a contamination controlled environment. A
clean room is a specially designed room in which particulate presence and
environmental conditions are carefully maintained. Clean rooms are used for
product manufacture and assembly, testing, research and development, packaging,
aseptic processing and to perform medical/surgical procedures. Clean rooms are
operated and maintained under strict procedures to minimize the risk of
introducing foreign particles. The greatest demand for clean room products and
services has been and continues to be in the manufacture and assembly of
products based on modern technology. The semiconductor market is the largest
market for clean rooms and other contamination control products, as integrated
circuits can be rendered ineffective by a minute particle, undetectable to the
human eye, and must be discarded.
eSAFETYWORLD sells a large variety of disposable items, such as hats,
coats, boots and gloves, that are used in cleanroom facilities. Disposable items
are ideal products for a distributor because they must be reordered on a regular
basis.
Industrial safety and hazardous worksites - This product group will
sell products to "end users," including manufacturing companies and service
businesses, public utilities, fisheries, pharmaceutical plants, the
transportation industry and companies whose employees are exposed to hazardous
materials. Use of these products has in a large part resulted from the adoption
of OSHA and other governmental safety standards and the awareness of industry
and the general public for the need to provide worker protection against
hazardous materials contained in industrial facilities, schools and buildings.
These products include coveralls, shirts, pants, headwear, hoods, aprons,
smocks, lab coats, hazardous material handler suits, examination gowns, sleeves,
shoe covers and related items. Many of these products are disposable and,
therefore, offer the same benefits as do disposable cleanroom products.
Future market niches - We have identified several additional market
niches for future expansion, all of which appear to have the same attributes as
eSAFETY's initial market niches. The identified niches include products serving
the hospital, plumbing supply, construction and HVAC industries.
The identified product areas include disposable/limited use protective
industrial garments, specialty safety and industrial work gloves, reusable woven
industrial and medical apparel, fire and heat protective clothing, along with
protective systems for personnel, and suits for use by toxic waste clean up
teams.
Protective garments, including boots, goggles, aprons and overalls, are
used primarily for:
C Safety and hazard protection, to protect the wearer from
contaminants or irritants, such as, chemicals, pesticides,
fertilizers, paint, grease, and dust and from limited
exposures to hazardous waste and toxic chemicals including
acids, asbestos, lead, and hydro-carbon's (PCB's);
C Clean room environments, for the prevention of human
contamination of manufacturing processes in clean room
environments;
C Physical protection, to protect a wearer from laceration,
splinters, eye injuries, heat and chemical irritants without
sacrificing manual dexterity or comfort;
C Heat and fire protection, to protect municipal fire fighters,
military, airport and industrial fire fighting teams and for
maintenance of "hot" equipment, such as ovens, kilns, glass
furnaces, refinery installations, and smelting plants;
C Protection from viral and bacterial microbiologicals, to
protect the wearer from contagious diseases, such as AIDS and
hepatitis, at hospitals, clinics and emergency rescue sites;
and
C Protection from highly concentrated and chemical and
biological toxins, to protect the wearer from toxic waste at
Super Fund sites, accidental toxic chemical spills or
biological discharges, the handling of chemical or biological
warfare weapons and the cleaning and maintenance of chemical,
petrochemical and nuclear facilities.
Other ancillary products, all of which are used in cleanroom and
laboratory environments, include:
C Packaging materials,
C Monitor devices,
C Flooring and mats;
C Electrostatic devices;
C Furnishings, and
C Wipers and swabs.
Disposable/limited use industrial garments are used in a wide variety
of industries and applications. Typical industry users are chemical plants,
petrochemical refineries and related installations, automotive manufacturers,
pharmaceutical companies, coal and oil power generation utilities and telephone
utility companies. There are many smaller industries that use these garments for
specific safety applications unique to their situation.
Other - In addition, eSAFETYWORLD sells customized work stations used
in cleanrooms and laboratories, all of which will be manufactured by others.
Software technology
Our strategy has been and is to license commercially available
technology whenever possible rather than seek internally developed solutions.
With this objective in mind, we have entered into an agreement with an
electronic commerce software company, Spider, Inc. and its affiliate, World
Internet Marketing Corporation. Through these agreements, we will have access to
state-of-the-art, end-to-end electronic commerce software. We believe that our
software solution is equal to or better than any comparable systems currently in
use because it is user friendly and easy to administer.
The Spider Web Commercial 2000 System is designed to be a total
end-to-end electronic commerce solution for stand alone interactive e-commerce
enabled business-to-business websites. Each virtual store is an electronic
commerce-enabled website designed to sell products over the Internet.
Because of our software technology, the maintenance of the website is
performed easily and requires fewer operating personnel. The Spider Web
Commercial 2000 software can be maintained by employees having skill levels
equal to order entry employees or store checkout employees. This feature is
advantageous because it enables us to maintain our own websites, as well as
scaling up employees to setup and build e-commerce websites commensurate with
the growth of the Internet. Entry level employees can easily, quickly and
efficiently add, delete or modify products within the website. These changes,
including prices, are simultaneously updated, in real time, in our
Business-to-Business site. Product displays may be enhanced with image animation
that can be added by the same level of employees. Spider's unique technology was
designed so that each Business-to-Business site may have an unlimited number of
departments and unlimited number of products under each department or
sub-department. The website is easily navigable by the consumer, who may move
fluidly among departments, sub-departments and products.
eSAFETYWORLD will use a new e-commerce method, developed with Spider
and World Internet Marketing Corporation, "E-Branding (TM)," which permits our
virtual store to be linked seamlessly with the websites of manufacturers and
distributors. The method was developed by Spider and licensed to eSAFETYWORLD.
Once inside the Virtual Store, a customer can immediately view all of a
manufacturer's or distributor's products including those which are not available
in the retailer's "brick and mortar" store. A customer can then order the
desired product from an "E-Branded(TM)" website.
Our systems are and will continue to be designed based on industry
standard architectures and will be designed to reduce downtime in the event of
outages or catastrophic occurrences. These systems will provide 24-hour-a-day,
seven-day-a-week availability. The system hardware are hosted by Spider in East
Northport, New York, and will provide redundant communications lines and
emergency power backup.
Marketing
Our goal is to become the independent Internet sales representative for
the industrial safety market. Historically, the division purchased from
Laminaire relied on catalogues distributed to customer to generate orders. We
intend to phase out use of the paper catalogue and use a portion of the proceeds
of the offering to convert the catalogue to CD-ROMS's to distribute to
customers. Our standard arrangement is:
o Split the profit on all items sold based on negotiated arrangements
with each "vendor."
o Arrange for the manufacturer to distribute products directly to end
customers.
We will expand our product offerings by:
o Marketing our services and availability at trade shows; and
o Contacting potential users directly.
We will market our availability to customers by:
o Being active in all significant industry trade shows;
o Advertising in catalogs such as the Thomas Register;
o Implementing aggressive e-mailing and brochure campaigns; and
o Making direct sales calls on targeted companies by independent
representatives.
These efforts will be coordinated with a full scale Internet marketing
campaign done in conjunction with WINCORP, an entity engaged solely in that
area. WINCORP has developed proprietary techniques to facilitate high ranking of
clients' websites on search engines. Our efforts will include:
o Distributing a specially designed CD-ROM for trade shows that uses
a patent pending software technology and several Internet
marketing opportunities. The multimedia interactive trade show
CD-ROM interactively displays our products in a manner that
functions seamlessly with our Internet e-commerce website.
o Obtaining e-mail addresses of targeted groups. WINCORP's marketing
staff can identify all newsgroups and chat rooms on the Internet
that discuss a specific topic and extract applicable e-mail
addresses or addresses from local or regional geographic
locations. All such addresses will receive information by e-mail
including selected "sales" and promotions. The e-mail includes a
hotlink to our website.
o Searching the entire Internet for all websites that display
targeted keywords to locate and extract target market e-mail
addresses. Once all targeted e-mail addresses are extracted, a
customized e-mail message, including text and/or banner
advertisement with a website hotlink, is sent to each e-mail
address included on the list.
The identified industry niches offer an advantage in that many vendors
participate in several trade shows each year. Therefore, we can meet with and
have access to these companies without incurring significant advertising
expenditures. We will attend these shows and:
o Distribute our CD-ROM
o Make actual presentations showing that use of our service may add
incremental sales without incurring incremental costs prior to the
sale
o Collect the e-mail and mailing addresses of participants for
follow-up.
We will also engage in traditional mailing and telemarketing efforts.
In most cases, we will perform all billing and collection functions,
even if vendors drop ship products directly to customers.
Competition
We believe that there are hundreds of competitors selling products that
are similar to those sold by us based on listings in industry catalogs such as
Thomas Register. Many of these competitors are regional companies selling
through catalogs and independent sales representatives. Increasing numbers of
these competitors are also establishing websites and e-commerce sites. We
believe that our e-commerce site and our business strategy provide us with a
competitive advantage because:
C Our e-commerce site is user-friendly with significant amounts of
graphics.
C Our strategy requires low levels of working capital and few inventory
holding costs.
However, we can give no assurances that our approach will not be duplicated or
improved upon by others.
Customer service
We believe that a high level of customer service and support is
critical to retaining and expanding its customer base and encouraging repeat
purchases. A customer service representative will be available from 8:00 a.m. to
8:00 p.m. Eastern Time, five days a week, to provide assistance via e-mail or
telephone. We will strive to answer all customer inquiries within 24 hours.
Customer service representatives handle questions about orders, assist customers
in finding desired products and register customers' credit card information over
the telephone. Customer service representatives are expected to be a valuable
source of feedback regarding user satisfaction.
Order fulfillment
In substantially all cases we arrange for vendors to dropship products
directly to customers. In certain cases, this practice involves paying a premium
for the purchased product. We believe that payment of such premium is more cost
beneficial than incurring inventory holding costs.
Products are purchased pursuant to purchase orders or verbal
agreements. No long-term supply agreements exist.
Security
We use the Secure Socket Layer (known as "SSL") transaction protocol to
protect sensitive information transferred to and from our servers. SSL is
currently used for most web-based e-commerce projects to protect credit card and
other processing.
Regulation
Although there are few laws and regulations directly applicable to the
Internet, it is likely that new laws and regulations will be adopted in the
United States and elsewhere covering issues such as unsolicited bulk e-mailing,
license fees, copyrights, privacy, pricing, sales taxes and characteristics and
quality of Internet services. The adoption of restrictive laws or regulations
could slow Internet growth or expose us to significant liabilities associated
with content available on its websites or Internet marketing methods. The
application of existing laws and regulations governing Internet issues such as
property ownership, libel and personal privacy is also subject to substantial
uncertainty. There can be no assurance that current or new government laws and
regulations, or the application of existing laws and regulations (including laws
and regulations governing issues such as property ownership, content, taxation,
defamation and personal injury), will not expose us to significant liabilities,
significantly slow Internet growth or otherwise cause a material adverse effect
on our business, results of operations or financial condition.
We currently do not collect sales or other taxes with respect to the
sale of services or products in states and countries where we believe that it is
not required to do so. One or more states or countries have sought to impose
sales or other tax obligations on companies that engage in online commerce
within their jurisdictions. A successful assertion by one or more states or
countries that we should collect sales or other taxes on products and services,
or remit payment of sales or other taxes for prior periods, could have a
material adverse effect on our business, results of operations and financial
condition.
The Communications Decency Act of 1996 (the "CDA") was enacted in 1996.
Although those sections of the CDA that, among other things, proposed to impose
criminal penalties on anyone distributing "indecent" material to minors over the
Internet were held to be unconstitutional by the U.S. Supreme Court, there can
be no assurance that similar laws will not be proposed and adopted. Although we
do not currently distribute the types of materials that the CDA may have deemed
illegal, the nature of such similar legislation and the manner in which it may
be interpreted and enforced cannot be fully determined, and legislation similar
to the CDA could subject us to potential liability, which in turn could have an
adverse effect on our business, financial condition and results of operations.
Such laws could also damage the growth of the Internet generally and decrease
the demand for our products and services, which could adversely affect our
business, results of operations and financial condition.
As a distributor of Internet content, we face potential liability for
negligence, copyright, patent, trademark, defamation, indecency and other claims
based on the nature and content of the materials that it broadcasts. Such claims
have been brought, and sometimes successfully pressed, against Internet content
distributors. In addition, we could be exposed to liability with respect to the
content or unauthorized duplication or broadcast of content. Although we will
maintain general liability insurance, our insurance may not cover potential
claims of this type or may not be adequate to indemnify us for all liability
that may be imposed. In addition, although we will generally require our content
providers to indemnify us for such liability, such indemnification may be
inadequate. Any imposition of liability that is not covered by insurance, is in
excess of insurance coverage or is not covered by an indemnification by a
content provider could have a material adverse effect on our business, results
of operations and financial condition.
We will hold various web domain names and trademarks. The acquisition
and maintenance of domain names generally is regulated by governmental agencies
and their designees. For example, in the United States, the National Science
Foundation has appointed Network Solutions, Inc. as the current exclusive
registrar for the ".com",".net" and ".org" generic top-level domains (wasn't
this changed). The regulation of domain names in the United States and in
foreign countries is subject to change in the near future. Such changes in the
United States are expected to include a transition from the current system to a
system that is controlled by a non-profit corporation and the creation of
additional top-level domains. Governing bodies may establish additional
top-level domains, appoint additional domain name registrars or modify the
requirements for holding domain names. As a result, we may be unable to acquire
or maintain relevant domain names in all countries in which it may conduct
business. Furthermore, the relationship between regulations governing domain
names and laws protecting trademarks and similar proprietary rights is unclear.
Therefore, we may be unable to prevent third parties from acquiring domain names
that are similar to, infringe upon or otherwise decrease the value of our
trademarks and other proprietary rights.
Intellectual property
We regard the technology we use as proprietary, but have no
existing or pending patent or copyright protection. We rely on the following to
protect our software and other propriety technology:
C confidentiality and license agreements with third parties, C trade
secret and trademark laws, and C common law copyright.
Properties
We will operate out of rented 1,200 square feet of office space located
at 100-3 South Jersey Avenue, East Setauket, New York 11733. The lease calls for
monthly payments of $1,000 through 2001. In addition, we plan on leasing a
similar amount of office space in New Jersey.
Legal proceedings
We are not a party to any legal proceedings.
Personnel
We currently have two full-time employees, as well as officers who
devote various amounts of time to our business. At the completion of the
offering we expect to have fewer than ten full-time employees. Our strategic
plan is to use dedicated consultants and to outsource as many functions as
possible. Therefore, growth is not expected to result in significant increases
in personnel.
MANAGEMENT
Our management consists of:
Edward A. Heil 47 Chairman and Chief Executive Officer
David McClelland 39 President and Chief Operating Officer
John C. Dello-Iacono 50 Director
R. Bret Jenkins 41 Director
Bridget C. Owens 42 Director
Steven W. Schuster 44 Director
James Brownfiel 28 Vice President
Peter J. Daniele 42 Chief Financial Officer
Paul White 41 Chief Technology Officer
Edward A. Heil has been a director since 1997. He is a certified public
accountant and a managing director, since January 1992, in Independent Network
Group, Inc., a financial consulting firm. From 1984 through December 1991 he was
a partner in the accounting firm, Deloitte & Touche, LLP. From 1973 to 1984 he
was employed in various professional capacities by Deloitte & Touche, LLP. Mr.
Heil holds Bachelor of Arts and Master of Business Administration degrees from
New York University. Mr. Heil, who will devote from 50 to 60 percent of his time
to eSAFETYWORLD, is also a director of Laminaire Corporation and Worldwide
Financial Holdings, Inc. EH Associates, LLC, a firm affiliated with Mr. Heil,
has a consulting contract to provide us with management and financial services.
David McClelland has been an officer since August 1999. He has held
executive positions with Laminaire Corporation, a manufacturer and distributor
of cleanroom products, since 1980. Mr. McClelland is a graduate of New Jersey
Institute of Technology.
John C. Dello-Iacono has been a director since 1997. He has been a
managing director of Independent Network Group, Inc., a financial consulting
firm since 1995. He holds a Bachelors degree from St. John's University.
R. Bret Jenkins has been a director since 1997. He has been in the
private practice of securities and general business law for the past 15 years.
Mr. Jenkins, who is also a director of Worldwide Financial Holdings, Inc., holds
Bachelor of Arts and Juris Doctorate degrees from the University of Utah. JP,
Inc., a consulting firm associated with Mr. Jenkins, has a contract to provide
us with business services.
Bridget C. Owens has been a director since June 1999. She has served as
Special Assistant to the Board of Directors of Laminaire Corporation from
1995-1999. Prior thereto she was director of marketing for Independent Network
Group, Inc in 1994 and for Primac Inc., a privately-held transportation company
from 1992-1993. Prior to Primac, Ms. Owens owned and operated a trucking and
transportation company.
Steven W. Schuster has been a director since August 1999. He is a member of
McLaughlin & Stern, LLP, company counsel. Mr. Schuster has practiced corporate
and securities law for the past 20 years. He received a Bachelor of Arts degree
from Harvard University and a Juris Doctorate from New York University. Mr.
Schuster is also a director of ACTV, Inc., an interactive television company.
James Brownfiel has been an officer since August 1999. He has been engaged
in the contracting business for the past five years. He is a graduate of the
University of Notre Dame. Mr. Brownfiel is Mr. Heil's son-in-law.
Peter Daniele has been an officer since August 1999. He is a certified
public accountant who will devote approximately 50% of his time to us. From 1998
to the present, he founded and operates of Strategic Business Consultants, a New
Jersey-based provider of strategic and financial consulting services. From 1994
to 1998, Mr. Daniele held various financial management positions with Automatic
Data Processing, Inc. He holds a Bachelors Degree from Rutgers University and
also provides services to Laminaire Corporation.
Paul White has been chief technology officer since January 1999. He
founded and is CEO of Spider and World Internet Marketing Corporation. He has
passed the Patent Bar and writes software patents, trademarks and copyrights.
From 1994 to 1995, he invented and managed the development of medical laboratory
billing software at a medical laboratory software firm. From 1982 to 1994, Mr.
White owned and operated a chain of retail stores, The Wind & Surf Shop.
Board of directors
All directors hold office until the completion of their term of office,
which is not longer than three years, or until their successors have been
elected. We have a staggered Board of Directors. All officers are appointed
annually by the Board of Directors and, subject to existing employment
agreements, serve at the discretion of the Board.
The Board of Directors will have an Audit Committee, Finance, Operating
and Compensation Committee. The Audit Committee will review the results and
scope of the audit and other services provided by our independent auditors,
review and evaluate our system of internal controls. The Finance Committee will
oversee our treasury function. The Operating Committee will review and establish
our strategies, goals and direction.
Directors shall receive $4,000 per year and $350 per meeting as
compensation for serving on the Board of Directors. All directors are reimbursed
by us for any expenses incurred in attending directors' meetings. We also intend
to obtain officers and directors liability insurance, although no assurance can
be given that it will be able to do so. Stock option plan
We have a stock option plans which expires in 2009 and enables us to
grant incentive stock options, non-qualified options and stock appreciation
rights ("SARs") for up to an aggregate of 500,000 shares of our common stock.
Incentive stock options granted under the Plan must conform to applicable
Federal income tax regulations and have an exercise price not less than the fair
market value of shares at the date of grant (110% of fair market value for ten
percent or more stockholders). Other options and SARs may be granted on terms
determined by a committee of the Board of Directors.
Executive compensation
No officer, director or employee has received compensation of $100,000,
and no director, officer or employee other than David McClelland, has a contract
or commitment to receive annual compensation in excess of $100,000 except as
described below:
Mr. McClelland has a three-year employment agreement that becomes
effective January 1, 2000 and calls for an annual salary of $125,000 as well as
reimbursement of business expenses including a car allowance.
Mr. Brownfiel has a three-year employment agreement that becomes
effective January 1, 2000 and calls for an annual salary of $75,000 in 2000,
$85,000 in 2001 and $100,000 in 2002, as well as reimbursement of business
expenses including a car allowance.
We have an agreement with EH Associates, LLC, an entity associated with
Mr. Heil, under which we will pay annual consulting fees of $125,000, $140,000
and $150,000 in each of the three years in the period ended December 31, 2002.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In August 1999, we acquired the business and certain intangible assets
of the Distribution Division of Laminaire Corporation and incorporated such
business on our website. This division distributes disposable products used in
Cleanrooms to a wide variety of commercial customers. The purchase price
consisted of 100,000 shares of our common stock, notes payable to the seller in
the principal amount of $500,000 and the assumption of debt of $125,000. This
transaction was accounted for as a purchase in conformity with Opinion No. 16 of
the Accounting Principles Board. Edward A. Heil, our Chairman, is a director of
Laminaire. Steven W. Schuster, one of our directors, is Laminaire's corporate
secretary.
Paul White is President of Spider, Inc. and World Internet Marketing
Corporation. Our business depends heavily on its licensing and marketing
agreements with Spider and Wincorp under which Spider designs and upgrades our
software and website and provides us with servers, internet marketing and
support services for approximately $10,000.
Mr. Heil holds, directly or beneficially, a 10% interest in World Internet
Marketing Corporation, which performs Internet marketing services for us.
We have an agreement with EH Associates, LLC, an entity associated with
Mr. Heil, under which we will pay annual consulting fees of $125,000, $140,000
and $150,000 in each of the three years in the period ended December 31, 2002.
Mr. Heil receives reimbursement for expenses, but receives no other compensation
from us.
EDK Associates, LLC, an entity affiliated with Ms. Owens, has a
contract with us under which we have agreed to pay annual fees of $58,000,
$65,000 and $75,000 in each of the three years in the period ended December 31,
2002 for marketing and investor relations services.
JP Inc., an entity affiliated with Mr. Jenkins, has a contract with us
under which we have agreed to pay minimum annual fees of $50,000 in each of the
three years in the period ended December 31, 2002 for legal and other business
services.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information known to us
regarding beneficial ownership of our common stock at the date of this
Prospectus by
o each person known by us to own, directly or beneficially, more than 5% of
our common stock,
o each of our directors, and
o all of our officers and directors as a group.
Except as otherwise indicated, we believe that the beneficial owners of
the common stock listed below, based on information furnished by such owners,
have sole investment and voting power with respect to such shares, subject to
community property laws, where applicable.
Shares of Common Stock Shares of Common Stock
Owned Before Offering Owned After Offering
Name and Address of Beneficial Number of Shares Percent of Shares Number of Shares Percent of Shares
----------- ------- ------- ------- ------
Owner Owned Owned Owned Owned
- ------------ ----- ----- ----- -----
Edward A. Heil 443,000 22.15% 443,000 14.77%
JP, Inc. (3) 255,000 12.75% 255,000 8.33%
Donald Arbisi 147,000 7.35% 147,000 4.90%
Shannon White 145,000 7.25% 145,000 4.83%
Windsor Fund 145,000 7.25% 145,000 4.83%
Raymond Burghard 100,000 5.00% 100,000 3.33%
Ben Hoskins 100,000 5.00% 100,000 3.33%
Bret Jenkins 100,000 5.00% 100,000 3.33%
Laminaire Corp. 100,000 5.00% 100,000 3.33%
Steven W. Schuster 100,000 5.00% 100,000 3.33%
John C. Dello-Iacono 50,000 2.50% 50,000 1.67%
Bridget C. Owens 50,000 2.50% 50,000 1.67%
David McClelland 20,000 1.00% 20,000 0.67%
Directors and Officers
as a Group (6 persons) 1,018,000 50.90% 1,018 33.93%
1. The address for all officers, directors and 5% shareholders is 100-31 South
Jersey Avenue, Setauket, New York 11733.
2. Does not give effect to 150,000 additional shares of common stock reserved
for the underwriter's over-allotment option; and 100,000 shares of common stock
reserved for issuance upon the exercise of the underwriter's warrants.
3.JP, Inc. is affiliated with Mr. Jenkins.
DESCRIPTION OF OUR SECURITIES
We are incorporated in the State of Nevada and are authorized to issue
up to 20,000,000 shares of common stock having a par value of $.001 per share
and 1,000,000 shares of blank check preferred stock. Neither the certificate of
incorporation nor the by-laws contain any provision that would delay, defer or
prevent a change in control.
Common stock
2,000,000 shares of common stock are issued and outstanding. Each share
of common stock entitles the holder to one vote on each matter submitted to the
stockholders. The holders of common stock:
C have equal ratable rights to dividends from funds legally
available for payment of dividends when, as and if declared by the
board of directors;
C are entitled to share ratably in all of the assets available for
distribution to holders of common stock upon liquidation,
dissolution or winding up of our affairs.
C do not have preemptive, subscription or conversion rights, or
redemption or access to any sinking fund; and
C are entitled to one non-cumulative vote per share on all matters
submitted to stockholders for a vote at any meeting of
stockholders. We have not paid any dividends on its common stock
to date. eSAFETYWORLD anticipates that, for the foreseeable
future, it will retain earnings, if any, to finance the continuing
operations of its business. The payment of dividends will depend
upon, among other things, capital requirements and the operating
and financial conditions of eSAFETYWORLD.
Shareholders do not have any preemptive rights to subscribe for or
purchase any stock, warrants or other securities of eSAFETYWORLD. The common
stock is not convertible or redeemable. Neither the certificate of incorporation
nor its by-laws provide for preemptive rights.
Preferred stock
Our Certificate of Incorporation authorizes the issuance of 1,000,000
shares of preferred stock with designations, rights and preferences determined
from time to time by its Board of Directors. Accordingly, our Board of Directors
is empowered, without stockholder approval, to issue shares of preferred stock
with voting, liquidation, conversion, or other rights that could adversely
affect the rights of the holders of the common stock. Although we have no
present intention to issue any shares of preferred stock, there can be no
assurance that we will not do so in the future. No preferred stock may be issued
by us without the underwriter's consent for a period of 12 months following the
effective date.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our bylaws provide that we shall indemnify its officers, directors,
employees and other agents to the fullest extent permitted by Nevada law. In
addition, our Certificate of Incorporation provides that, to the fullest extent
permitted by Nevada law, our directors will not be liable for monetary damages
for breach of the directors' fiduciary duty of care to us or our shareholders.
This provision in the Certificate of Incorporation does not eliminate the
directors' duty of care, and in appropriate circumstances equitable remedies
such as an injunction or other forms of non-monetary relief would remain
available under Nevada law. Each director will continue to be subject to
liability for breach of the director's duty of loyalty to us or our
shareholders, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any transaction from which the
director derived an improper personal benefit and for improper distributions to
shareholders. In addition, this provision does not affect a director's
responsibilities under any other laws, such as the Federal securities laws or
state or Federal environmental laws.
Insofar as indemnification for liabilities arising under the Securities
Act maybe permitted to directors, officers, and controlling persons pursuant to
the foregoing provision, or otherwise, we have been advised that in the opinion
of the SEC, such indemnification is against public policy as expressed in the
Securities Act of 1933, as amended, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by us of expenses incurred or paid by a director, officer or controlling
person in the successful defense of any action, suitor proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, we 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 us is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such case.
There is no pending litigation or proceeding involving a director or
officer as to which indemnification is or may be sought.
UNDERWRITING
The underwriting agreement provides that the obligations of the
underwriter are subject to certain conditions. The nature of the underwriter's
obligations is that they are committed to purchase and pay for all of the above
shares of common stock if any are purchased.
Public offering price and dealers concession
The underwriter proposes initially to offer the shares of common stock
offered by this prospectus to the public at the public offering price per share
set forth on the cover page of this prospectus and to certain dealers, who are
members of the National Association of Securities Dealers, Inc., at that price
less a concession not in excess of $ per share. The underwriter may allow, and
these dealers may reallow, a discount not in excess of $ per share on sales to
certain other NASD member dealers. After commencement of this offering, the
offering price, discount price and reallowance may be changed by the
underwriter. No such change will alter the amount of proceeds to be received by
us asset forth on the cover page of this prospectus.
Over-allotment option
We have granted the underwriter an option, which may be exercised
within 45 days after the date of this prospectus, to purchase up to 150,000
additional shares of common stock to cover over-allotments, if any, at the
initial public offering price, less the underwriting discount set forth on the
cover page of this prospectus. If the underwriter exercise its over-allotment
option to purchase any of these additional 150,000 shares of common stock, these
additional shares will be sold by the underwriter on the same terms as those on
which the shares offered by this prospectus are being sold. We will be
obligated, pursuant to the over-allotment option, to sell shares to the
underwriter if the underwriter exercises their over-allotment option. The
underwriter may exercise its over-allotment option only to cover over-allotments
made in connection with the sale of the shares of common stock offered by this
prospectus.
Non-accountable expense allowance
We have agreed to pay the underwriter a non-accountable expense
allowance of 3% of the gross proceeds derived from the sale of the shares of
common stock underwritten (including the sale of any shares of common stock that
the underwriter may sell to cover over-allotments, if any, pursuant to the
over-allotment option), of which $25,000 has been paid as of the date of this
prospectus. We have also agreed to pay all expenses in connection with
qualifying the common stock offered hereby for sale under the laws of the states
as eSAFETYWORLD and the underwriter may designate and registering the offering
with the NASD, including filing fees and fees and expenses of counsel retained
for these purposes.
Underwriting compensation
The following table summarizes the compensation to be paid to the
underwriter by us:
With
Per Share Overallotment
Underwriting discounts paid by us
Indemnification of underwriter
We have agreed to indemnify the underwriter against certain civil
liabilities, including liabilities under the Securities Act.
Underwriter's warrants
Upon completion of this offering, we will sell to the underwriter, for
its own accounts, warrants covering an aggregate of up to 100,000 shares of
common stock exercisable at a price of $10.50 per share. The underwriter will
pay a price of $0.001 per warrant. The underwriter may exercise these warrants
as to all or any lesser number of the underlying shares of common stock
commencing on the first anniversary of the date of this offering until the fifth
anniversary of the date of this offering. The terms of these warrants require us
to register the common stock for which these warrants are exercisable within one
year from the date of the prospectus. These underwriter's warrants are not
transferable by the warrant holders other than to officers and partners of the
underwriter. The exercise price of these underwriter's warrants and the number
of shares of common stock for which these warrants are exercisable are subject
to adjustment to protect the warrant holders against dilution in certain events.
Stabilization and other transactions
In connection with this offering, the underwriter may engage in
transactions that stabilize, maintain or otherwise affect the market price of
the common stock. These transactions effected in accordance with Rule 104 of
Regulation M under the Exchange Act, pursuant to which the underwriter may bid
for, or purchase, common stock for the purpose of stabilizing the market price.
The underwriter also may create a short position by selling more common stock in
connection with this offering than they are committed to purchase from us, and
in such case may purchase common stock in the open market. Any of the
transactions described in this paragraph may result in the maintenance of the
price of the common stock at a level above that which might otherwise prevail in
the open market. None of the transactions described in the paragraph is
required, and, if they are undertaken, they may be discontinued at any time.
Discretionary accounts
The underwriter has informed that it does not intend to confirm sales
to any account over which it exercises discretionary authority.
Determination of offering price
Prior to this offering, there has been no market for our common stock.
Accordingly, the initial public offering price for the common stock was
determined by negotiation between us and the underwriter. Among the factors
considered in determining the initial public offering price were our results of
operations, our current financial condition, our future prospects, the state of
the markets for our services, the experience of our management, the economics of
the online information industry in general, the general condition of the equity
securities market and the demand for similar securities of companies considered
comparable to us.
LEGAL MATTERS
Certain legal matters in connection with the Offering will be passed
upon for the Underwriter by its counsel, Sichenzia, Ross & Friedman LLP, 135
West 50th Street, 20th Floor, New York, New York.
Certain legal matters will be passed upon for us by McLaughlin & Stern,
LLP, 260 Madison Avenue, New York, New York.
EXPERTS
The financial statements of eSAFETYWORLD, Inc. at June 30, 1999 and for
each of the three fiscal periods in the period then ended and the financial
statements of the Cleanroom Distribution Product Group of Laminaire Corporation
as of December 31, 1998 and for each of the two years in the period ended
December 31, 1998 appearing in this Prospectus and Registration Statement have
been audited by Eichler, Bergsman & Co., LLP, Certified Public Accountants, as
set forth in their reports thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
eSAFETYWORLD files reports, proxy statements and other information with
the Commission. Those reports, proxy statements and other information may be
obtained:
C At the public reference room of the Commission, Room 1024-
Judiciary Plaza, 450 Fifth Street, N.W. Washington, D.C.
20549;
C At the public reference facilities at the Commission's
regional offices located at Seven World Trade Center, 13th
Floor, New York, NY 10048 or Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661;
C By writing to the Commission, Public Reference Section, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549;
C At the offices of the Nasdaq Stock Market, Reports Section,
1735 K Street, N.W., Washington, D.C. 20549
C From the Internet site maintained by the Commission at
http://www.sec.gov, which contains reports, proxy information
statements and other information regarding issuers that file
electronically with the Commission.
eSAFETYWORLD has filed with the Commission a registration statement
under the Securities Act of 1933, as amended, with respect to the common stock
offered hereby. This prospectus, which is a part of the registration statement,
does not contain all the information set forth, or annexed as exhibits to, such
registration statement, certain portions of which have been omitted pursuant to
rules and regulations of the Commission. For further information with respect to
eSAFETYWORLD and the common stock, reference is made to such registration
statement, including exhibits thereto, copies of which may be inspected and
copied at the aforementioned facilities of the Commission. Copies of such
registration statement, including exhibits, may be obtained from the Public
Reference Section of the Commission at the aforementioned address upon payment
of the fee prescribed by the Commission. Information regarding the operation of
the Commission's public reference facilities may be obtained by calling the SEC
at 1-800-SEC-0330.
eSAFETYWORLD intends to distribute to its stockholders annual reports
containing financial statements audited and reported upon by its independent
public accountants after the close of each fiscal year, and will make such other
periodic reports as the company may determine to be appropriate or as may be
required by law.
eSAFETYWORLD 's fiscal year ends December 31 each year.
FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page Number
eSAFETYWORLD, Inc.:
Independent Auditors' Report F-2
Balance Sheet, June 30, 1999 F-3
Statements of Operations for the Period July 17, 1997 (inception) to F-4
December 31, 1997, the Year Ended December 31, 1998 and the Six
Months Ended June 30, 1999.
Statements of Cash Flows for the Period July 17, 1997 (inception) to F-5
December 31, 1997, the Year Ended December 31, 1998 and the Six Months Ended
June 30, 1999.
Notes to Financial Statements F-6
Cleanroom Distribution Product Group of Laminaire Corporation:
Independent Auditors' Report F-8
Balance Sheet, December 31, 1998 F-9
Statements of Operations for the Years Ended December 31, 1998 and F-10
1997
Statements of Cash Flows for the Years Ended December 31, 1998 and F-11
1997
Notes to Financial Statements F-12
Condensed Balance Sheet, June 30, 1999 F-14
Condensed Statements of Operations for the Six Months Ended June 30, F-15
1999 and 1998 (unaudited)
Condensed Statements of Cash Flows for the Six Months Ended June 30, F-16
1999 and 1998
Notes to Condensed Financial Statements for the Six Months Ended June F-17
30, 1999 and 1998 (unaudited)
Eichler Bergsman & Co., LLP Gilbert Bergsman
Certified Public Accountants Paul Eichler
404 Park Avenue South, New York, New York 10016 Richard M. Plutzer
Tel 212-447-9007 Fax 212-447-9006 Michael E. Silverman
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
eSafetyworld, Inc.
We have audited the accompanying balance sheet of eSafetyworld, Inc. as of June
30, 1999, and the related statements of income and cash flows for the period
ended December 31, 1997, for the year ended December 31, 1998 and for the six
months ended June 30, 1999. This financial statement is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above presents fairly, in
all material respects, the financial position of eSafetyworld, Inc. as of June
30, 1999, and the results of its operations and its cash flows for the period
ended December 31, 1997, for the year ended December 31, 1998 and for the six
months ended June 30, 1999 in conformity with generally accepted accounting
principles.
/s/Eichler Bergsman & Co., LLP
New York, New York
August 25, 1999
eSAFETYWORLD, Inc.
Balance Sheet
June 30, 1999
Assets: Pro forma (unaudited
6/30/99 Note 4)
Current Cash -- $375,000
Customer and Vendor Lists -- 1,350,000
Deferred Offering Costs $10,000 10,000
------- ------
Total $10,000 $1,735,000
======= ==========
Liabilities and Stockholders' Equity:
Notes Payable $ -- $575,000
Accrued Expenses -- 150,000
-------
Total Current Liabilities -- 725,000
Long Term Debt 300,000
Stockholders' Equity:
Preferred Stock; 1,000,000 shares authorized, -- --
none issued
Common stock, par value $.001; 20,000,000 1,900 2,000
authorized; 1,900,000 issued (2,000,000 pro forma)
Paid in capital 8,100 708,000
----- -------
Total Stockholders' Equity 10,000 710,000
------ -------
Total Liabilities and Stockholders' Equity $10,000 $1,735,000
======= ==========
See Notes to Financial Statements.
eSAFETYWORLD, Inc.
Statements of Operations
Forthe Period July 17, 1997 (inception) to December
31, 1997, the Year Ended December 31, 1998 and the
Six Months Ended
June 30, 1999
Six Months Ended June 30, Year Ended December 31, July 17, 1997 to December
1999 1998 31, 1997
Revenues $-- 0 -- $-- 0 -- $-- 0 --
Costs -- 0 -- -- 0 -- -- 0 --
-- ------- -- ------- -- -------
Results of Operations $-- 0 -- $-- 0 -- $-- 0 --
======== ======== ========
Primary Earnings $-- 0 -- $-- 0 -- $-- 0 --
======== ======== ========
Per Share
See Notes to Financial Statements.
eSAFETYWORLD, Inc.
Statements of Cash Flows
Forthe Period July 17, 1997 (inception) to December
31, 1997, the Year Ended December 31, 1998 and the
Six Months Ended
June 30, 1999
Six Months Ended June 30, Year Ended July 17, 1997 to December
--------- - --------
1999 December 31, 1998 31, 1997
---- ----------------- --------
Cash from Operating
Activities $-- 0 -- $-- 0 -- $ -- 0 --
-------- -------- ---------
Cash from Financing
Activities
Capital Contribution 10,000 --- ---
Deferred Offering
Costs (10,000) --- ---
-------- ---------- --- --------- ---
Cash End of Period $-- 0 -- $-- 0 -- $-- 0 --
======== ======== ========
See Notes to Financial Statements.
ESAFETY WORLD, Inc.
Notes to Financial Statements
June 30, 1999
1. ORGANIZATION
eSAFETYWORLD was established as a Nevada corporation in July 1997 as The SL
Group, Inc. and changed its name to eSAFETY WORLD, Inc. in August 1999. Its
purpose in being formed was to develop and operate a Business-to-Business
E-Commerce site on the World Wide Web.
In August 1999, the Company entered into an agreement under which it
acquired the distribution business of Laminaire Corporation in exchange for
100,000 shares of its common stock, notes in the principal amount of $500,000
and the assumption of payables in the amount up to $125,000. The Company also
acquired customer and vendor lists but acquired no tangible assets such as
inventories or accounts receivable as part of the transaction. The acquired
business distributes disposable products used in Cleanrooms to a wide variety of
commercial customers. The transaction was accounted for as a purchase in
conformity with Opinion No. 16 of the Accounting Principles Board.
2. ACCOUNTING AND REPORTING POLICIES
A summary of the Company's principal accounting and financial reporting
policies is as follows:
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods, The principal assumptions
inherent in the accompanying financial statements relate to the allocation of
expenses included in such financial statements.
Revenue Recognition - Revenue for product sales will be recognized in
the period in which the product is shipped.
Advertising - The Company will charge advertising costs to expense as
incurred. Costs related to CD-ROMs, promotional literature and catalogs will be
charged to operations when mailed or distributed.
3. STOCKHOLDERS' EQUITY
The Company is a Nevada corporation. Its Certificate of Incorporation
provides that its authorized capital stock consists of 1 million shares of blank
check preferred stock and 20 million shares of common stock, par value S.001 per
share. The holders of the common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders. Holders of
common stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. The Board of
Directors, without shareholder approval, could issue shares of common stock upon
such terms as it determines to whomever it pleases, including persons who or
entities that would help present management maintain control.
4. SUBSEQUENT EVENTS
In July and August 1999, The Company received one year loans in the
principal amounts of $250,000 and S 125,000, respectively. Both loans bear
interest at the rate of 8% per annum, are repayable one year from the date of
issue and are prepayable upon the completion of a public offering or private
placement of equity securities.
The unaudited pro forma financial information set forth on the Balance
Sheet was prepared assuming that the acquisition described in Note 1 and the
loans described in the paragraph above had taken place on June 30, 1999. For the
purposes of preparing the pro forma information, the shares of common stock
issued were valued at the estimated public offering price. The acquired
business, which functioned as a product group of Laminaire Corporation and not
as a separate and distinct entity, reported the following results in 1998 and
1997:
1998 1997
---- ----
Revenues $2,267,846 $1,506,607
Cost of revenues 2,070,174 1,117,464
Gross profit 197,672 389,143
Operating profit 54,067 204,106
In August 1999, The Company made a demand loan to Laminaire Corporation
in the principal amount of $102,000. The loan bears interest at the rate of 9%
per annum and is convertible, at the holder's option into shares of Laminaire's
common stock.
Eichler Bergsman & Co., LLP Gilbert Bergsman
Certified Public Accountants Paul Eichler
404 Park Avenue South, New York, New York 10016 Richard M. Plutzer
Tel 212-447-9007 Fax 212-447-9006 Michael E. Silverman
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Cleanroom Distribution Product Group
We have audited the accompanying balance sheet of Cleanroom Distribution Product
Group as of December 31, 1998 and the related statements of income and cash
flows for the years ended December 31, 1998 and 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
These standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cleanroom Distribution Product
Group as of December 31, 1998 and the results of its operations and its cash
flows for the two years ended December 31, 1998 and 1997 in conformity with
generally accepted accounting principles.
/s/Eichler, Bergsman & Co., LLP
New York, New York
August 12, 1999
Cleanroom Distribution Product Group
Balance Sheet
December 31, 1998
ASSETS:
Accounts receivable $213,935
Inventory 75,174
Total $289,109
LIABILITIES AND OTHER:
Accounts payable $318,899
Deficit (30,790)
Total $289,109
See Notes to Financial Statements.
Cleanroom Distribution Product Group
Statements of Operations
Years Ended December 31, 1998 and 1997
1998 1997
Revenues $2,267,846 $1,506,607
Cost of revenues 2,070,174 1,117,464
--------- ---------
Gross profit 197,672 389,143
Selling 98,148 154,905
General and administrative 45,357 30,132
------ ------
Operating profit 54,067 204,106
Transferred to Laminaire Corporation
(54,067) (204,106)
-------- ---------
Division Equity, End of Year
$ -0- $ -0-
===== =====
See Notes to Financial Statements
Cleanroom Distribution Product Group
Statements of Cash Flows
Years Ended December 31, 1998 and 1997
1998 1997
Cash From Operations $54,067 $204,106
Cash Transferred to Laminaire
(54,067) (204,106)
-------- ---------
Cash, End of Year $-0- $-0-
==== ====
See Notes to Financial Statements.
Cleanroom Distribution Product Group
Notes to Financial Statements
Years Ended December 31, 1998 and 1997
1. Operations and Organization
The Cleanroom Distribution Product Group is a Division of Laminaire
Corporation and is engaged in the sale and distribution of disposable safety
garments and equipment. In August 1999, Laminaire entered into an agreement
under which its distribution business was sold to The SL Group, Inc. in exchange
for common shares of The SL Group, Inc., notes and the assumption of certain
payables.
2. Accounting and Reporting Policies
A summary of the Division's principal accounting and financial
reporting policies is as follows:
Assets and Liabilities
The operating assets and liabilities used by Laminaire are commingled.
The accompanying balance sheet reflects the direct assets and liabilities of the
Cleanroom Product Distribution Group of Laminaire Corporation. All earnings
prior to December 31, 1998 were retained by Laminaire. The cash associated with
such earnings was commingled with other Laminaire cash and was not necessarily
used to satisfy the Group's trade obligations. The deficit represents the extent
to which cash generated by the Group was used for other Laminaire purposes. No
such assets or liabilities were included in the sale to The SL Group, Inc.
The inventories included in the accompanying balance sheet are recorded
at the lower of cost (determined on a FIFO basis) or market.
Revenue Recognition
Revenue for product sales is recognized in the period in which the
product is shipped.
Expenses
The operations of the Division were conducted in Laminaire's facility
during 1998 and 1997. Accordingly, such operations utilized Laminaire's building
and administrative staff. Cost of sales in the accompanying Statement of
Operations consists of direct product costs. Payroll costs represent the payroll
costs of people directly associated with the Division's operations. All other
expenses represent an allocation of corporate and joint expenses. The Division
believes that the cost of obtaining the services represented by the allocated
costs and expenses from outside sources would not be materially higher than the
amount allocated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. The principal assumptions inherent in the
accompanying financial statements relate to the allocation of expenses included
in such financial statements.
Advertising
The Division will charge advertising costs to expense as incurred.
Costs related to mail order catalogs and promotional materials are charged to
operations when mailed or distributed.
Cleanroom Distribution Product Group
Balance Sheet
June 30, 1999
(unaudited)
ASSETS:
Accounts receivable $156,403
Inventory 70,680
Total $227,083
LIABILITIES AND OTHER:
Accounts payable $325,859
Deficit (98,776)
Total $227,083
See Notes To Financial Statements.
Cleanroom Distribution Product Group
Condensed Statements of Operations
Six Months Ended June 30, 1999 and 1998
(Unaudited)
1999 1998
Revenues $746,325 $867,770
Cost of revenues 565,333 652,738
------- -------
Gross profit 180,992 215,032
Selling 70,081 55,513
General and administrative 14,927 17,355
------ ------
Operating profit 95,984 142,164
Transferred to Laminaire Corporation (95,984) (142,164)
-------- --------
Division Equity, End of Period $ -0- $ -0-
===== =====
See Notes to Condensed Statements of Operations.
Cleanroom Distribution Product Group
Condensed Statements of Cash Flows
Six Months Ended June 30, 1999 and 1998
(unaudited)
1999 1998
Cash From Operations $95,984 $142,164
Cash Transferred to Laminaire (95,984) (142,164)
-------- ---------
Cash, End of Period $-0- $-0-
==== ====
See Notes to Financial Statements.
Cleanroom Distribution Product Group
Notes to Statements of Operations
Six Months Ended June 30, 1999 and 1998
(Unaudited)
NOTE 1--BASIS OF PRESENTATION
The accompanying interim condensed statements of for the six-month
periods ended June 30, 1999 and 1998 are unaudited and include all adjustments
considered necessary by Management for a fair presentation. The results of
operations realized during an interim period are not necessarily indicative of
results to be expected for a full year.
- --------------------------------------------------------------------- -------------------------------------------------------------
We have not authorized anyone to give any information different
from that contained in this prospectus. You must not rely on any unauthorized
information. We are offering to sell, and seeking offers to buy, shares of
common stock only in states where offers and sales are permitted. The
information in
this prospectus is accurate only as of the date of this prospectus. 1,000,000 Shares
of Common Stock
TABLE OF CONTENTS
Page
Prospectus Summary 3
Risk Factors 9 eSAFETYWORLD, INC.
Use of Proceeds .19
Dividend Policy .20
Dilution 21
Capitalization 22
Selected Financial Information 23
Management's Discussion and Analysis of
Results of Operation and Financial Condition 25
Business 29
Management 41 PROSPECTUS
Certain Relationships and
Related Transactions 43
Principal Shareholders 44
Description of Securities 45 KASHNER DAVIDSON Indemnification of
Officers and Directors 46 SECURITIES CORP.
Underwriting 47
Legal Matters 49
Experts 49
Additional Information 50
Financial Statements F-1 , 1999
Until , 1999 (25 days after the date of this prospectus), all
dealers effecting transactions in the securities offered hereby, whether or not
participating in the distribution, may be required to deliver a prospectus. This
is in addition to the obligation of dealers to deliver a prospectus when acting
as underwriters and with regard to their unsold allotments or subscription.
- --------------------------------------------------------------------- -------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Officers and Directors
Subsection 1 of Section 78.7302 of Chapter 78 of the Nevada General Corporation
Law ("NGCL") empowers a corporation 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 (except in an action by or in the right of the corporation) by
reason of the fact that he 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 or enterprise,
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceedings, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe his action was unlawful.
Subsection 2 of Section 78.7502 of the NGCL empowers a corporation 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 he
acted in any of the capacities set forth above, against expenses, including
amounts paid in settlement and attorneys' fees, actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit if he
acted in accordance with the standard set forth above, except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged by a court of competent jurisdiction after
exhaustion of all appeals therefrom to be liable to the corporation or for
amounts paid in settlement to the corporation unless and only to the extent that
the court in which such action or suit was brought or other court of competent
jurisdiction determines that, in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as the
court deems proper.
Section 78.751 of the NGCL provides that unless indemnification is ordered by a
court, the determination to provide indemnification must be made by the
stockholders, by a majority vote of a quorum of the board of directors who were
not parties to the action, suit or proceeding, or in specified circumstances by
independent legal counsel in a written opinion. In addition, the articles of
incorporation, bylaws or an agreement made by the corporation may provide for
the payment of the expenses of a director or officer of the expenses of
defending an action as incurred upon receipt of an undertaking to repay the
amount if it is ultimately determined by a court of competent jurisdiction that
the person is not entitled to indemnification. Section 78.751 of the NGCL
further provides that, to the extent a director or officer of a corporation has
been successful on the merits or otherwise in the defense of any action, suit or
proceeding referred to in subsection (1) and (2) , or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that indemnification provided for by Section 78.751 of the
NGCL shall not be deemed exclusive of any other rights to which the indemnified
party may be entitled and that the scope of indemnification shall continue as to
directors, officers, employees or agents who have ceased to hold such positions,
and to their heirs, executors and administrators.
Finally, Section 78.752 of the NGCL empowers the corporation to purchase and
maintain insurance on behalf of a director, officer, employee or agent of the
corporation against any liability asserted against him or incurred by him in any
such capacity or arising out of his status as such whether or not the
corporation would have the authority to indemnify him against such liabilities
and expenses.
The Registrant's bylaws provide for indemnification of officer, directors and
others to the fullest extent permitted by the laws of the State of Nevada.
Item 25. Other Expenses of Issuance and Distribution
The expenses payable by registrant in connection with the issuance and
distribution of the securities being registered are estimated as follows:
Securities and Exchange Commission Fees................................................................$2,530
Accounting Fees and Expenses...........................................................................15, 000
Blue Sky Fees and Expenses.............................................................................25,000
Printing Expenses (including Securities)...............................................................50,000
Legal Fees.............................................................................................75,000
Miscellaneous..........................................................................................32,470
Total..........................................................................................$200,000
The selling security holders will not assume any of the expenses of their
offering except to the extent that they engage their own legal counsel. The
estimate of expenses includes expenses in connection with the issuance and
distribution of shares by the selling security holders.
Item 26. Recent Sales of Unregistered Securities
All issuances were under Section 4(2) unless otherwise indicated. The issuances
under 4(2) to officers, employees or legal counsel were to persons familiar with
the operations of the registrant. Other issuances under Section 4(2) were to
advisors. The Company believed that these advisors were sufficiently
sophisticated to qualify for the exemption because they are in the business of
advising corporations on marketing, finance or public relations, as the case may
be, and are familiar with the business of the registrant.
Item 27. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit
Number Description
1.1 -- Form of Underwriting Agreement
3.1 -- Registrant's Articles of Incorporation dated July 21, 1997
3.2 -- Registrant's Amendment to Articles of Incorporation dated
August 19, 1999
3.3 -- Registrant's By-laws
4.1 -- Form of Common Stock Certificate1
4.2 -- 1999 Stock Option Plan
4.3 -- Form of Underwriter's Warrant Agreement
5.1 -- Opinion of McLaughlin & Stern, LLP
10.1 -- Asset Purchase Agreement with Laminaire Corp.
10.2 -- Agreement with EH Associates, LLC
10.3 -- Agreement with JP, Inc.
10.4 -- Agreement with EDK Associates, LLC
10.5 -- Employment Agreement with David McClelland1
10.6 -- Employment Agreement with James Brownfiel1
10.7 -- Form of Advisory Investment Banking Agreement between
Registrant and Kashner Davidson Securities Corp.
23.1 -- Consent of Eichler Bergsman & Co., LLP
23.2 -- Consent of McLaughlin & Stern, LLP (included in Exhibit 5.1).
24 -- Power of Attorney (contained on signature page).
27 -- Financial Data Schedule.
Schedules other than those listed above have been omitted since they are either
not required, are not applicable or the required information is shown in the
financial statements or related notes.
Item 28. Undertaking
The undersigned Registrant hereby undertakes to:
(a) (1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
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1 To be filed by amendment.
(i) Include any prospectus required by section 10(a) (3) of the Securities
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. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of a prospectus filed with the Commission
under Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement;
(iii) Include any additional or changed material information on the plan of
distribution;
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement for the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering;
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering; and
(b)Provide to the underwriter at the closing specified in the underwriting
agreement certificates in such denominations and registered in such names as
required by the Underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer under the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the 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 Registrant 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 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 Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the
Securities Act of 1933, 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
under Rule 424(b) (1) or (4) or 497 (h) under the Securities Act shall
be deemed to be part of this registration as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide 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
Town of Setauket, State of New York, on August 31, 1999.
eSAFETYWORLD, Inc.
By: /s/ Edward A. Heil
Edward A. Heil
By:/s/ Peter Daniele, Chief Financial Officer
Peter Daniele, Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Edward A. Heil and Peter Daniele and each of
them his true and lawful attorney-in-fact and agent with power of substitution
and resubstitution, for him or her, and in his or her name, place and stead,
in any and all capacities, to sign any and all amendments (including post
effective amendments) to this Registration Statement on Form SB-2, and to file
the same, with all exhibits thereto, and all documents in connection
therewith, with the Commission, granting unto said attorneys-in-fact and
agents and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done to comply with the
provisions of the Securities Act and all requirements of the Commission,
hereby ratifying and confirming all that said attorneys-in-fact or either of
them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Name Title Date
By:/s/ Edward A. Heil Director August 31, 1999
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Edward A. Heil
By:/s/ Steven W. Schuster Director August 31, 1999
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Steven W. Schuster
By:/s/ Bridget C. Owens Director August 31, 1999
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Bridget C. Owens
By:/s/ John C. Dello-Iacono Director August 31, 1999
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John C. Dello-Iacono
By:/s/ R. Bret Jenkins Director August 31, 1999
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R. Bret Jenkins