AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 16, 2000
REGISTRATION NO. 333-____________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
____________________
WAMEX HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
NEW YORK 65-0789306
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3040 Nostrand Avenue
Marine Park, New York 11229
(Address of Principal Executive Offices, Including Zip Code)
Consulting Agreements
Legal Retainer Agreement
(Full Title of the Plan)
____________________
Mitchell H. Cushing
3040 Nostrand Avenue
Marine Park, New York 11229
(718) 677-4111
(Name, Address, and Telephone Number of Agent for Service)
CALCULATION OF REGISTRATION FEE
Title of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Offering Price per Share Aggregate Offering Price Registration Fee
Common Stock,
par value $0.012 285,000 $14.875(1) $4,239,375 $1119.20
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(c) based on the closing market price on
March 13, 2000.
1
EXPLANATORY NOTE
WAMEX Holdings, Inc., ("WAMX") has prepared this Registration Statement in
accordance with the requirements of Form S-8 under the Securities Act of 1933,
as amended (the "1933 Act"), to register certain shares of common stock, $.012
par value per share, issued to certain selling shareholders.
Under cover of this Form S-8 is a Reoffer Prospectus WAMX prepared in accordance
with Part I of Form S-3 under the 1933 Act. The Reoffer Prospectus may be
utilized for reofferings and resales of up to 285,000 shares of common stock
acquired by the selling shareholders.
2
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
WAMX will send or give the documents containing the information specified in
Part 1 of Form S-8 to employees or consultants as specified by Securities and
Exchange Commission Rule 428 (b) (1) under the Securities Act of 1933, as
amended (the "933 Act". WAMX does not need to file these documents with the
commission either as part of this Registration Statement or as prospectuses or
prospectus supplements under Rule 424 of the 1933 Act.
3
REOFFER PROSPECTUS
WAMEX Holdings, Inc.
3040 Nostrand Avenue
Marine Park, New York 11229
(718) 677-4111
285,000 SHARES OF COMMON STOCK
The shares of common stock, $0.012 1par value per share, of WAMEX Holdings,
Inc. ("WAMX" or the "Company") offered hereby (the "Shares") will be sold from
time to time by the individuals listed under the Selling Shareholders section of
this document (the "Selling Shareholders"). The Selling Shareholders acquired
the Shares pursuant to Consulting Agreements for consulting and legal services
that the Selling Shareholders provided to WAMX.
The sales may occur in transactions on the NASD Over-The-Counter market at
prevailing market prices or in negotiated transactions. WAMX will not receive
proceeds from any of the sale the Shares. WAMX is paying for the expenses
incurred in registering the Shares.
The Shares are "restricted securities" under the Securities Act of 1933 (the
"1933 Act") before their sale under the Reoffer Prospectus. The Reoffer
Prospectus has been prepared for the purpose of registering the Shares under the
1933 Act to allow for future sales by the Selling Shareholders to the public
without restriction. To the knowledge of the Company, the Selling Shareholders
have no arrangement with any brokerage firm for the sale of the Shares. The
Selling Shareholders may be deemed to be an "underwriter" within the meaning of
the 1933 Act. Any commissions received by a broker or dealer in connection with
resales of the Shares may be deemed to be underwriting commissions or discounts
under the 1933 Act.
WAMX's common stock is currently traded on the NASD Over-the-Counter Bulletin
Board under the symbol "WAMX."
________________________
This investment involves a high degree of risk. Please see "Risk Factors"
beginning on page 37.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER
THIS REOFFER PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
________________________
March 16, 2000
4
TABLE OF CONTENTS
Where You Can Find More Information 5
Incorporated Documents 5
The Company 7
Risk Factors 37
Use of Proceeds 41
Selling Shareholders 42
Plan of Distribution 42
Legal Matters 43
Experts 43
________________________
You should only rely on the information incorporated by reference or provided in
this Reoffer Prospectus or any supplement. We have not authorized anyone else
to provide you with different information. The common stock is not being
offered in any state where the offer is not permitted. You should not assume
that the information in this Reoffer Prospectus or any supplement is accurate as
of any date other than the date on the front of this Reoffer Prospectus.
WHERE YOU CAN FIND MORE INFORMATION
WAMX is required to file annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission (the "SEC") as
required by the Securities Exchange Act of 1934, as amended (the "1934 Act").
You may read and copy any reports, statements or other information we file at
the SEC's Public Reference Rooms at:
450 Fifth Street, N.W., Washington, D.C. 20549;
Seven World Trade Center, 13th Floor, New York, N.Y. 10048
Please call the SEC at 1-800-SEC-0330 for further information on the Public
Reference Rooms. Our filings are also available to the public from commercial
document retrieval services and the SEC website (http://www.sec.gov).
INCORPORATED DOCUMENTS
The SEC allows WAMX to "incorporate by reference" information into this Reoffer
Prospectus, which means that the Company can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this Reoffer
Prospectus, except for any information superseded by information in this Reoffer
Prospectus.
5
WAMX's Report on Form 8-K, dated March 14, 2000 is incorporated herein by
reference. WAMX also incorporates herein by reference the Form 10-SB
filed by Conchology, Inc., the Company's predecessor, filed on November 22,
1999. In addition, all documents filed or subsequently filed by the Company
under Sections 13(a), 13(c), 14and 15(d) of the 1934 Act, before the termination
of this offering, are incorporated by reference.
The Company will provide without charge to each person to whom a copy of this
Reoffer Prospectus is delivered, upon oral or written request, a copy of any or
all documents incorporated by reference into this Reoffer Prospectus (excluding
exhibits unless the exhibits are specifically incorporated by reference into the
information the Reoffer Prospectus incorporates). Requests should be directed to
the Chief Financial Offer at WAMX at WAMX's executive offices, located at 3040
Nostrand Avenue, Marine Park, New York 11229. WAMX's telephone number is
(727) 669-7781.
6
THE COMPANY
BUSINESS
This Reoffer Prospectus contains certain forward-looking statements within the
meaning of the federal securities laws. Actual results could differ materially
from those projected in the forward-looking statements due to a number of
factors, including those set forth under "Risk Factors" and elsewhere in this
Reoffer Prospectus.
CORPORATE HISTORY
WAMEX Holdings, Inc., a developmental stage company (hereinafter referred
to as "WHI" or "the Company") was organized as The World Auction Market and
Exchange (Holdings), Inc., under the laws of the State of Delaware, February 9,
1998. At the time of incorporation, the Company simultaneously incorporated in
the State of Delaware three (3) subsidiary corporations which were, The World
Auction Market and Exchange Services, Inc., WAMEX 3D, Inc. and INSTOX, Inc.
WAMEX Holdings, Inc. (WHI) was originally conceptualized in October, 1996.
The principle architects of that organization were Mitchell H. Cushing, Sascha
Mundstein, Russell Chimenti and Hans-Michael Schoebinger.
The Treasure Cache, Inc. (TCI) was incorporated in the State of New York in
April, 1992. TCI's business model and strategies centered around it's ability
to retail and profit from the distribution of unique arts and crafts merchandise
via Kiosks located in high traffic malls in the U.S. In early December, 1998,
TCI approached WAMEX Holdings, Inc. (WHI) to perform a feasibility study for TCI
as it related to the possible distribution of TCI's products via the Internet.
At that time it was decided that both entities should pursue discussions of a
merger.
On November 18, 1999, the Company changed its name in the State of Delaware
to WAMEX, Holdings, Inc. and changed the name of one (1) subsidiary, namely The
World Auction Market and Exchange Services, Inc., to WAMEX, Inc. The Company
changed its name and the name of one (1) subsidiary for the purposes of easier
identification and because the Company owns the registered domain name of
wamex.com. The Company's Website is presently under construction, however, with
the exception of the final graphic implementation and some relevant content the
Website can be viewed at the URL address of www.wamex.com. Some information on
the site is password protected due to proprietary information the Company deems
necessary to protect at this time.
On November 19, 1999, the Company consummated a merger with a New York
corporation named "The Treasure Cache, Inc". The surviving entity was The
Treasure Cache, Inc., a New York corporation. Subsequent to the terms of the
merger, the surviving entity changed it's name to WAMEX Holdings, Inc., which is
now registered as a New York corporation. The three (3) subsidiaries remain
registered and incorporated in the State of Delaware.
THE ORGANIZATIONAL STRUCTURE
WHI was formed along with its subsidiaries to develop, grow and maintain an
Alternative Trading System (ATS) (as defined under Regulation ATS promulgated by
the SEC). An ATS provides alternative pools of liquidity for its members as
well as allowing them the ability to trade directly with each other with the
possibility of price enhancement which is presently not available to individual
investors in today's present market structure.
7
As the parent, WHI, manages and oversees the activities of its subsidiaries
that perform the following activities:
- - WAMEX 3D, Inc. (W3D), is presently inactive. WHI plans to initiate
activities for W3D in June of 2000. Once activated, W3D will be tasked to
provide the Technological Infrastructure of WHI and the ATS. As a wholly owned
subsidiary, W3D's core mission and business activities encompass
conceptualizing, designing and implementing all of the software programming and
hardware construction necessary to operate an ATS. This would include but would
not be limited to research and development, functionality, capacity and security
features of our technology as it pertains to the ATS. After activation, W3D may
also have the resources available to perform consulting in the Financial and
Database software arenas.
In the initial stages, W3D will be primarily occupied with the further
development and perfection of the WAMEX ATS, as well as integrating this system
with in-house administration and accounting networks. However, the basic
structure of the ATS software is such that a number of applications can be
developed and used in the financial industry from the base platform or design.
3D technicians have developed the proprietary W3D ATS Software Program Version
1.0 trading software program that allow centralization or routing of individual
and institutional order flow. The 3D software has been designed to provide the
base platform user or ATS member with advanced trading applications and
professional users with customized service applications that are real time and
dynamic. 3D trading software is an easy to use order entry and management
program. The Database Management System (DMS) has been designed to provide the
matching of order parameters and the administration of order flow, client
portfolio and audit trail information. The main features of the program and the
DMS are as follows: Modular design for rapid increases in system capacity,
redundancy system design features for continuous operation during service or
malfunction, security designs to prevent unauthorized entry into the DMS. It
also provides for the processing of all administration, record keeping and order
flow functions in one system and allows integration of affiliate order execution
and routing.
Management has conceptualized that W3D will offer as its core business the
development, production and distribution of financial trading software, systems
hardware design and technical service and support for financial institutions and
their traders. At present the company's technicians work inside the parent
corporation WHI developing and installing trading software applications, designs
and services for the Database Management Systems (DMS) designed for the WAMEX
ATS activities and brokerage functions.
8
W3D plans to offer solutions for secure system functions by creating DMS designs
for institutions that consolidate client order flow or interact in a
decentralized trading environment. W3D will provide all necessary design,
development, and construction tasks that the prospective client needs. W3D will
also provide system testing for capacity and security and all associated
technical service and support.
W3D plans to provide integrated client management systems that allow broker
dealers to provide their financial advisors with the most functional,
easy-to-use and affordable order integration and client information management
solutions in the industry. W3D plans to be located and operate in Southern
Florida.
- - WAMEX, Inc. (WAMEX) is presently inactive. WHI plans to initiate
activities for WAMEX in June of 2000. Once activated, WAMEX will be tasked to
provide the Operational Features of the ATS. As a wholly owned subsidiary,
WAMEX's core mission and business activities encompass conceptualizing,
developing and implementing the ATS business strategy via the Internet as well
as overseeing ATS administrative operations. This would include but would not
be limited to analyzing and implementing marketing strategies, developing and
supervising the administration and customer service divisions and identifying
possible strategic acquisitions.
As a peripheral mission, WAMEX will be tasked by WHI to provide the Regulatory
Agencies (SEC and NASD) with assistance in forming a Standardized Internet Trade
Report (SITREP). WAMEX was one of the first announced ATS platforms (as defined
under Regulation ATS) and has, through its No-Action approval process, attempted
to provide the SEC's Division of Enforcement with advanced ATS Reporting
Techniques via its proprietary DMS design. It is an issue that WHI feels is
necessary in order to establish integrity within and for the ATS community as
the market for ATS trading grows.
In and of itself, WAMEX has no core proprietary product or service nor has it
conducted any business operations to date. WAMEX plans to be located and
operate in New York.
- - INSTOX, Inc. (INSTOX) is presently inactive. WHI plans to initiate
activities for INSTOX in June of 2001. Once activated, INSTOX will be tasked to
provide an Alternative Listing Facility (ALF) (Exchange or Market) via the
Internet for companies that elect to list on alternative forums (Exchanges or
Markets).
The INSTOX stock exchange operation is currently in its conceptual stage.
INSTOX plans to offer as its core business an Internet Stock Exchange for
companies that elect to list their shares for public trading. INSTOX will
provide a source of capital for companies that are at the level of development
and meet the listing requirements of the exchange.
9
There are thousands of companies that have applied to regulatory authorities
seeking approval for the issuance of private placement memorandums and Offerings
through the Internet. A majority of these companies do not meet the listing
standards of the traditional exchanges for various reasons. The main factor is
their inability to find and afford capital procurance through traditional means
of investment banking. Finding a lead underwriter, syndicate partners, selected
dealer agents, market maker support and exchange approval are all cumbersome,
costly and inefficient with respect to the needs and strategies of young
companies. Through the vision of the regulatory agencies, these companies have
seen the availability of alternative means of raising capital through the
Internet. At the present time, there are too few Internet Investment Banking
enterprises to satisfy demands for processing of registration, distribution and
support that these companies need in order to accelerate their corporate
objectives.
There are companies that are prepared to operate as publicly traded companies on
alternative exchanges, where liquidity is determined by the accessibility and
direct participation of the investing public. As this segment of the investment
banking industry grows very rapidly, the number of publicly traded companies is
expected to multiply in the coming years. Furthermore, companies both foreign
and domestic understand the advantages of co-listing their securities on as many
exchanges as possible in order to create the maximum exposure to global
liquidity.
INSTOX, by establishing listing requirements that are more easily obtainable and
still ensure the quality of the companies publicly traded, will create a new
avenue of opportunity for companies in need of capital. The creation of this
market further satisfies the needs of investors that are searching for unnoticed
values and equity stakes in companies at an early development stage. Management
understands that INSTOX will need regulatory approval as well as possibly
obtaining Self Regulatory Organization (SRO) status in order to operate and
realize its corporate and strategic objectives. WHI is currently exploring a
strategy to implement operations within the next 18-24 months. To date, INSTOX
has not conducted any business operations nor does it have any services,
products, assets or proprietary intellectual property. The planned location of
operations is in New York.
10
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OPERATIONS TO DATE
Since its inception the Company has maintained 2 locations for principal
business operations. An International office located in Vienna, Austria and a
U.S. office located in New York. The Vienna office manned by Mr. Mundstein has
served as the base of operations for the Company's European introduction and
funding operations. The U.S. office manned by Mr. Cushing, Mr. Chimenti and Mr.
Schoebinger has served as the base of operations for the technological and
business development of the Company.
The primary core business operations of WHI since its inception has been
the formulation and development of its strategies as it relates to operating an
ATS through its subsidiaries and corporate partners. The Company has relied
heavily on its key personnel, Mitchell H. Cushing, Russell Chimenti, Sascha
Mundstein and Hans-Michael Schoebinger to provide all of the key strategic,
developmental and funding functions of the Company.
The Company's management strategized a three prong approach towards
achieving its objective in launching and maintaining the WAMEX ATS: Technology,
Securities/Regulation, and Funding/Administration.
TECHNOLOGY
Mr. Schoebinger has been designated as the Chief Technology Officer (CTO)
of WHI. He was tasked in 1997 to theoretically design a platform of software
and hardware that would support the functions of investors trading directly with
each other via the Internet. In 1998, Mr. Schoebinger hired two (2) DMS
programmers to assist in building the base software platform (W3D ATS Software
Program ) and the customized trading application (IOMS).
The work on the base application was completed in April 1999. The software
was most recently reviewed by ORACLE in October 1999 for functionality and
theoretical design. That review concluded that the base application is sound
and will function as needed based on the design of the architecture of the DMS.
ORACLE has suggested some additions and changes to the program to increase
efficiency and system integrity which the Company has already implemented in the
program. As a result of that review, the Company has met with ORACLE and is
presently engaged in negotiations with them to assist in the implementation of
the software program and the web architecture for the ATS. The only remaining
features that need to be implemented are the necessary linking parameters to the
Clearing and Executing Broker Dealers. These features will be established once
the Company selects the entities to perform these functions (see
Securities/Regulation).
11
The hardware which consists of Sun Microsystems servers has been designed
to incorporate the proposed functions of the ATS and its members using ORACLE 8
serverware and WAMEX ATS Software. Contracts were negotiated in 1998 with Sun
to provide the equipment. Since 1998, the base design of the server has changed
twice because of the rapid advancement in functionality of the hardware, making
recent designs much more efficient and less expensive. Management originally
discussed the possibility of buying the equipment , however, through discussions
with ORACLE, Sun Microsystems and UUnet, management is presently considering
leasing the equipment. The leasing option affords the Company the luxury of
decreased initial cash investment into the DMS and the option to change server
equipment within 2-3 years as technology outpaces present hardware
functionality. The Company can have the hardware delivered, built, tested and
functional within 60 days.
Server location is also a primary concern for management. The location
must provide for the efficient operation, contingency power supplies and
security of the DMS hardware. As such, in 1998, the Company entered into a
preliminary agreement with Telehouse of New York to host the server upon the
initiation of ATS operations. Since 1998, the Company has identified several
other less expensive yet highly reliable locations to host the hardware. Among
them are NetLinks and AboveNet located in Florida and Washington, D.C.,
respectively. Management has entered into discussions with these companies to
bid for the hosting of the server. Management has concluded that all three
locations and companies would be compliant with the NASD's and SEC's requirement
in functionality, catastrophic contingency and redundant back-up power supplies.
The Company can have the location secured within 30 days.
Management also contemplates using one of the three hosting entities as a
site for its back-up server. As all three meet stringent regulatory
requirements and are located in different States in the U.S., management feels
this would represent the best possible scenario for implementation and
contingency planning
The wamex.com website was initially constructed by Trimoto Design of
Austria in 1998. Since then the Company has changed the design of the site
twice in order to make the website easier to navigate through and to present a
more updated approach to the market in terms of what the Internet users would
like to see and use. The website is presently hosted in Canada and the Company
plans to have the website hosted in the U.S. within the next 30 days. The site
presently is not password protected so that the public may view the content.
The website does not, at this time, contain the actual ATS content and trading
capability planned to be deployed by the Company in June of 2000. The Company
has engaged NYD2 through contract to design the front-end interface of the
website as well as assisting the Company in its branding, marketing, and
advertising strategies.
SECURITIES/REGULATION
Management has focused on completing two objectives in this arena. The
regulatory approval to operate an ATS as defined under Regulation ATS and the
support mechanism of the Sponsoring and Clearing Broker Dealers.
In 1997 the Company retained the legal services of Kogan and Taubman, LLC
of New York in order to format/submit an application and apply for a No-Action
approval from the SEC in order to operate a completely revolutionary ATS. At
the time, the SEC was contemplating through comments and introduction, a
regulation that encompassed the growing ATS market. The Company initiated
discussions with the SEC's Division of Enforcement (DOE) in June 1997. The
response was favorable and an application for No-Action approval was submitted
to the DOE in August 1997.
12
The Company worked closely with the DOE over the next year in responding to
comments that the DOE responded with, submitting three separate responses to
questions asked. When it appeared that the Company was close to receiving its
approval (based on the ability to operate the ATS) the SEC formally announced in
October 1998 that there would be no further No-Action approvals pertaining to
any ATS. The SEC had expedited its approval process for Regulation ATS and
announced the implementation of the regulation for January 1999. The Company
then reviewed the regulation and applied for approval to operate according to
the guidelines of Regulation ATS to the NASD in April of 1999. The Company
received comments from the NASD which incorporated the following concerns:
Written Supervisory Procedures, Clearing and Sponsoring Broker Dealers and
System Capacity. In June 1999, the Company formally withdrew its request for
approval so that it could form the necessary infrastructure that would pass
muster with the NASD and Regulation ATS.
In June 1999, Mr. Cushing and Mr. Chimenti began discussions with iCap,
Inc., a licensed Broker Dealer located in Virginia. These discussions centered
around an acquisition, whereby iCap would become the property of Mr. Cushing and
Mr. Chimenti and would subsequently be the Sponsoring Broker Dealer for the
WAMEX ATS activities. Those discussions are being concluded favorably and should
result in the purchase or acquisition of the Broker Dealer which will in turn
sponsor the activities of the ATS.
Since its inception, the Company has been exploring opportunities with
possible Clearing Broker Dealers. To date management has been unsuccessful in
obtaining a Clearing arrangement in large part because there was no sponsoring
Broker Dealer for the ATS clients or its activities. Other main concerns or
obstacles to agreements were: Lack of capital sufficient to operate an ATS, lack
of understanding of the ATS concept, competition, lack of sufficient profit for
the Clearing Agent, lack of technical expertise (Clearing side) to implement,
lack of motivation to change established clearing arrangements and lack of a
Sponsoring Broker. The Company received the most favorable responses from some
of the largest organizations of the financial industry such as DLJ and Merrill
Lynch, however, these organizations elected not to participate because the
business model of the ATS was diametrically opposed to their established
profitable business models and revenue streams.
In September 1999, the Company began to solicit certain other Clearing
Brokers on behalf of the Company. The Company has agreed to retain iCap as the
Sponsoring Broker Dealer. As such, the Company has identified no less than three
Clearing Brokers that are willing to employ Clearing arrangements with the
Company. All three are technologically advanced and sufficiently well structured
as to alleviate a vast majority of the concerns outlined above. The focus of the
discussions with these entities has centered around their profitability as
Clearing Brokers. Although proprietary in nature, management believes that it
has answered those concerns by adjusting pricing models that are favorable to
the Clearing Broker and the ATS member. The Company is presently engaged in
selecting the most favorable situation for the prospective ATS members.
Management is confident that it has solved in large part all of the concerns of
these Clearing Brokers and will have a Clearing arrangement for the ATS no later
than May 2000.
13
It is significant to mention that the final completion of the software
program is in large part dependant on whom the Sponsoring and Clearing Brokers
are because of the necessity to link all three organizations. The ATS, the
Sponsoring Broker and the Clearing Broker must be linked through dedicated
lines, and protocols must be shared in order for the ATS to become seamless.
Management is highly confident that although this is an integral step in
accomplishing the continuity of the ATS, it is rather easily accomplished from a
technical standpoint. Once all of the participants in this venture have been
identified, management estimates no more than 45 days of programming to be
required for the linking phase.
FUNDING/ADMINISTRATION
Since its inception, management has been working diligently on procuring
the necessary investment capital to build, grow and maintain the ATS and its
operations. In 1997 the Company was successful in structuring a convertible debt
instrument with a foreign company that provided approximately $1,800,000 in
funding. This funding was used amongst other things to develop the ATS software
program, procure computers and other programming software, procure the services
of web designers and other programmers and to establish offices in Vienna and
the U.S. This note was subsequently converted into equity and management was
able to bring the Company from the seed and developmental stages (in terms of
strategy) to its present stage of go-to-market.
Managements primary concern as it relates to funding was twofold: Operating
Capital and Implementation Funding. As such in January 1998, management
initiated a strategy to find investment principal through Venture Capital (VC),
Investment Banking (IB) and Private Investments (PI). Although the Company
received many positive responses to the concept, it was unsuccessful in
acquiring the necessary funding through exposure to IB and PI capital for the
first 18 months.
Managements experience in the financial industry lead to the initiation of
a strategy in late 1998, that the Company could best obtain funding through
venture capital (VC) exposure. As such, the Company aggressively pursued avenues
of venture capital. In November 1999, the Company structured and was successful
in placing a $1,000,000 offering under Rule 504 of Regulation D to private
investors. Management believes that the successful closing and availability of
funds are more than sufficient to operate WHI as the holding Company,
administratively for the next 18 months.
As a result of the merger and subsequent listing on the NASDAQ OTC-BB and
the successful placement of the offering, the Company has experienced an
increased exposure and awareness within the investment community. As such, the
Company is presently entertaining several relevant funding offers from both
public and private entities. Management is in the process of determining the
most favorable offers employing the following concerns: Size of investment,
shareholder value, cost of investment, ability to participate in ATS operations,
future funding capabilities, administrative and technical support, and corporate
partnerships. Management is confident that these negotiations will result in the
Company closing on one or more of the offers presently available which will
result in sufficient capital for the Company to fully implement the goals and
strategies of the business plan. Management expects to finalize one or more of
these negotiations no later than April 1, 2000.
14
To date, management has been the Administration of the Company with Mr.
Cushing as Chief Executive Officer (CEO), Mr. Chimenti as Chief Administrative
Officer (CAO), Mr. Mundstein as Chief Operating Officer (COO) and Mr.
Schoebinger as Chief Technology Officer (CTO). The Company has relied heavily on
the commitment, skills and work of these four principals to accomplish all of
the corporate strategies.
Management has assigned appropriate responsibilities to the senior
principals identified above during the Company's implementation phase.
Management is presently in discussions with two real estate agencies in the New
York area to procure space for its corporate activities. It is contemplated that
this space will house WHI, WAMEX ATS administration and iCap, Inc. It is also
contemplated that there may be an agreement with iNYC, Inc., of New York to
co-locate on the same premises as the companies intend to finalize an agreement
to provide WAMEX ATS members with free high speed Digital Subscriber Line (DSL)
Internet connection upon ATS activation.
Once the location for the Company has been procured, management plans to
initiate hiring of necessary employees as well as procuring the necessary
technological infrastructure. With the appropriate funding, management is
confident that it has the ability, experience and knowledge to accomplish these
tasks no later than July 2000. Management contemplates out-sourcing its customer
service activities (with the exception of Broker Orders and technical service
and support) and is presently seeking an established organization to assume that
responsibility.
RESEARCH AND DEVELOPMENT
As stated, the Company has completed its base platform software version
with the exception of its linking protocols to the Clearing Broker and the SEC
and NASD for purposes of reporting ATS activities.
In terms of its Research and Development (RD), the Company is presently
engaged in the production of its highly advanced Intelligent Order Management
System (IOMS). The ATS base platform and its DMS are proprietary and can only
be used when entering through the WAMEX ATS system and its protocols, whereas
IOMS is a separate software program that can be employed with any financial
software program from any financial order execution Website (any e-brokerage).
IOMS is a highly sophisticated order execution software program (by design)
that management considers to be extremely confidential. Management elects not
to discuss any details of its development, features, uses or applications at
this time except that the Company is presently in discussions with one or more
companies in the database management industry to assist in its development.
Management also elects not to discuss the cost of the development of this
software except to say that it will not have a substantive impact on the Company
budget.
MATERIAL ACQUISITION
Management does not contemplate any material equipment acquisition other
than the DMS (which may be leased) and what is described in the Implementation
Plan.
15
Management notes that it is presently in discussions with certain
organizations in the financial industry that the Company has identified as being
possible acquisition or merger candidates. As part of the strategy of
development, management intends to identify certain Internet and non-Internet
companies that have synergistic or common operations and strategies and discuss
possibly acquiring these entities. This would depend largely on the following
dynamics: Impact on present and future business operations, shareholder value,
available funding, need, necessity, competition and willingness to cooperate.
There can be no assurance that the Company will be successful in identifying
qualified merger or acquisition candidates, or if it does, that the Company will
be successful in completing a transaction with them.
Management is presently negotiating the acquisition of an on-line entity
that has the regulatory approval to operate an ATS as well as approval to
distribute offerings via the Internet to accredited and qualified participants.
This relationship would have a direct positive impact on the services that the
ATS would be able to offer its members and may have an accelerated impact as to
the accelerated initiation of INSTOX operations.
MATERIAL CHANGES
The Company does not contemplate any material changes in it's business
operations or staffing other than what is described in the Implementation Plan.
Management acknowledges that the Company may have to hire the appropriate Human
Resource personnel to administer the WHI and WAMEX workforce if operations of
the business exceed the contemplated goals.
Mr. Schobinger intends to move from the position of WHI CTO to the position
of W3D CEO when those operations are contemplated to begin in June 2000. This
would only affect the direct day-to-day management of the WHI technological
structure which at that time will have little if any effect on WHI operations.
As W3D will be responsible for the technological development and maintenance of
the WAMEX ATS and it's DMS, management feels that Mr. Schoebinger's talents and
time will be properly placed in W3D. The Company plans to hire sufficient
personnel to administer the day-to-day technology of WHI's infrastructure.
INDUSTRY OVERVIEW
Orders for the purchase or sale of stock on the New York Stock Exchange
(NYSE), the American Stock Exchange (AMEX) and the National Association of
Securities Dealers Automated Quotations (NASDAQ) are initiated at the broker
level whether the order is solicited or unsolicited. There are several
intermediaries that account for the steps involved when the execution of a
specific order is desired. Each one of these intermediaries, regardless of the
Exchange or Association, of course, gets a piece of the transaction as his
benefit for helping to provide a link in the chain of events that provide
so-called liquidity in a so-called free and transparent market.
The dedicated specialist who owns a seat on the NYSE has certain
obligations, such as "maintaining a market" for the security by providing
liquidity. His monopoly on a certain stock during trading hours gains him a
constant stream of revenue, a fraction of a dollar per share at a time. However,
access standards, transparency, order execution, price, criminal activity,
language barriers, market operating hours and enormous amounts of intermediaries
and commissions has made these markets and their methods inefficient and
unappealing.
16
A new breed of investor (self empowered Internet user) has been the fastest
growing segment of the investment population in the world over the last seven
years and has literally changed the way the markets and the industry views its
methodology and services today. The self empowered investor is concerned about
the key issues of trading and investing such as market transparency and
inclusion at the price display level as well as low cost transaction costs, 24
hour trade capability and rapid order execution. In short, a cheap efficient and
reliable marketplace.
This scenario does not and cannot exist under the present structure,
because there has to be a certain degree of proprietary trading against all
market participants in order for the chain of event custodians and participants
such as Market Makers and Specialists to be paid well enough for the inherent
risk of providing liquidity. The fact of the matter remains that the investing
public is disenchanted with the lack of inclusion associated with markets in
general and the unfair access that Institutional clients have to the markets and
exchanges .
ATS's are nothing new. They've been around for quite some time. In the
1960's, technological advances in computer networking lead to the creation of
Nasdaq, where Market Makers compete for orders by providing a firm quote for a
specific stock, i.e. the buy and sell price for a given quantity of
certificates. Additionally, investors may be aware of Instinet and the Arizona
Stock Exchange as other ATS's.
The problem is that there is not now and has never been an ATS for the
investing public. They have been restricted to market participants and
institutional clients. New developments challenge these niches of privilege.
So-called "Electronic Control Networks" (ECN's) exploit recent legislation from
the SEC that force market makers to immediately display all received orders that
are better than their own. Even more powerful computer networks allow instant
trading in between the Nasdaq spreads from dedicated terminals. Fifty percent of
Nasdaq volume is executed in this way today. As technology enables more and more
people to directly participate in the market, speed increases, spreads become
smaller; the market becomes more efficient.
MARKET
The trading of financial instruments is one of the largest and most active
industries in the world. Traditionally, established institutions such as
Exchanges (NYSE) and Associations of Quotation Markets (Nasdaq), set the
standards for access, execution prices and fees. However, a community of
self-empowered investors has emerged that is currently the fastest growing
segment of the investing population. This community is presenting the industry
with challenging demands that are proving to radically transform the industry.
Moreover, staggering developments in technologies such as the Internet have
allowed these investors to trade in a new and improved playing field, which
enables them to transact more quickly and at a much lower cost.
However, there are demands that have still not been met. Namely, the desire
on the part of the investor to gain direct access to the transaction, thus
eliminating inefficiencies such as the middle persons (brokers and traders) and
obtaining the ultimate state of self-empowerment, as well as securing the lowest
possible cost by direct trading within the open market spreads. This simple yet
basic concept would provide the individual investor with the ability to Price
Enhance similar to Institutions and Registered Broker Dealers.
17
Online Trading has proven, in the growth of customer base and its volume,
to be the long-awaited killer application for the retail financial services
industry online. Because the online medium empowers users with timely
information previously available only to brokers and institutional investors,
consumers are able to make better investment decisions on their own. As such,
the Web and online services have rapidly become a viable channel for investment
research and retail trading activity. Online investing is on a path to eclipse
online retail banking in market penetration, reaching 15 million accounts in
2002. By becoming a dominant consumer access channel in the near future, online
brokerage services will succeed where online banking services have faltered.
The online investors of today - active and self-directed - are bringing
volume to online-only brokerages, but the fact remains that the demographics of
online users will skew toward those of the mass market in the next five years.
According to Jupiter Communications, although a full 68% of online households
(14.8 million) are investing households, only 15.6 percent of online households
(3.4 million) trade online presenting the opportunity for 11.4 million investing
households to be converted to online trading. Online brokerage customers have a
more active trading behavior than traditional customers that rely on a FA
(Financial Advisor) do. More than a third of total US investing households (10
million) are online, which corresponds with their familiarity with investing and
technology:
THE PRODUCT
The WAMEX ATSJ (a Database Management System) when constructed and
operational will allow both individual investors and institutions to trade
securities directly with each other over the Internet, eliminating the
intervention of brokers or traders.
When using the WAMEX Alternative Trading System, investors simply enter
their desired order parameters into the system and are matched with other
investors. There are no other intermediaries, procedural steps, executing broker
dealers, sale of order flow or proprietary trading against investors. Should the
member not be able to find satisfactory order parameters that match, he may
elect to modify, cancel or route the order through to the company's open market
trading affiliate directly to the floor of the exchange. The system will offer
accessibility, ease of use and virtually instantaneous reporting, settlement,
confirmation and clearing along with secure trades.
Management contemplates the main unique advantages of the WAMEX Alternative
Trading System to be proprietary in nature that have been discussed with the SEC
and NASD and will conform to Regulation ATS and industry standards. An
alternative to interacting with the Web site through a standard browser is a W3D
Customized Trading Software package called IOMS (The Intelligent Order
Management System), which will be made available for downloading. The customized
software application has been designed to provide the member with advanced
screen trading applications and formatting.
WHI has developed a workable prototype of the ATS. This prototype is hosted
on a WHI server that is equipped with the W3D ATS Software Version 1.0. System
capacity allows for a limited number of users to trade on the system with all of
the functionality of a larger scale version.
18
STRATEGY
The Chairman of the SEC and its entire organization have worked tirelessly
to transform the markets into a more individual investor focused atmosphere.
Following this mandate, management feels that the opportunity to provide
individual investors with the greatest possibility of market transparency and
price enhancement in the future will be provided through Alternative Trading
Systems (ATS's).
The company will leverage top management's industry expertise, as well as
in-house proprietary technology in implementing its strategic goals. Management
intends to target both individual and institutional investors, providing them
with value, service, and security. Marketing efforts will include both an online
and offline strategy. Management will first adopt the focus approach and target
individual online investors.
According to Jupiter's Consumer Brand Strategies report, all marketers must
employ a brand action marketing strategy: a communication with the consumer that
exploits interactivity to both build the brand and drive action. Most marketers
are presently failing to do this, taking instead either a branding or
direct-marketing approach, and underutilizing the online medium's unique
interactivity, which makes linking these activities not only possible, but also
essential.
Management intends to employ this dual approach of focusing on consumer
incentives without neglecting brand-building messages. The uniqueness of the ATS
will always be stressed, and ad campaigns will focus on the details of the
services offered, including performance, products and cost advantage over
traditional brokers and discount brokers.
WAMEX will basically offer the same trading scenario to individuals and
institutions, even if the approach to the trading system will be different by
these two customer segments. Institutions will trade on behalf of their
customers and for the advantage of their firm, while individuals will trade for
themselves. However, the procedure is the same. By putting individuals and
institutions into the same trading systems, both sides can profit. Institutions
will be able to capitalize from more liquidity and exposure, individuals from
access to each other.
CUSTOMERS
The Company presently has no customers. Management has identified the
future client base as follows:
Most WAMEX clients will be computer-literate, well educated and aware of
the Internet and the investment community, belonging to the information-hungry
and transaction-hungry categories described above. The average client would have
a yearly income of between $50,000 and $120,000, and have speculative investment
principal of between $30,000 and $500,000. A majority should be self-guided
decision-makers with semi-analytical sophistication, white-collar, in a middle
management position.
19
WAMEX clients buy based on some type of research and analysis. They conduct
transactions based on cost satisfaction, and therefore appreciate low fees and
transaction costs. However, loyalty and habit play an important role in their
decision with whom they want to conduct their business. They appreciate
convenient one-stop-shopping and interactive interfaces, that both facilitates
making investment decisions confidently, and delivers a certain degree of
entertainment value. In this context, a significant portion of potential clients
will appreciate a service-oriented intermediary.
The Internet gives access to a global customer base. WAMEX is going to
cater also to the non-US client who will appreciate the multi-language interface
for enhanced confidence and less psychic distance. Institutional WAMEX clients
can range from small to mid-size Broker Dealer operations, Mutual Funds,
Electronic Control Networks (ECN's), portfolio and equity managers and
professional traders. This profile does not preclude recruitment of divisions or
individuals working for larger firms in the investment banking business.
Small institutional investors are defined as brokerage firms with less than
$50MM of client capital under management. Many of these firms survive with a
mixed strategy of aggressive marketing ("cold calling") and so-called
proprietary products, i.e. securities that represent small-cap firms with which
the brokerage has a relationship of mutual benefit. These brokerages often have
a market liquidity problem, because even small transactions could influence the
price of the stock significantly and thus alarm all investors that have bought
stock of these companies. Such brokerages will need a place to liquidate their
holdings without running the risk of depressing the price of the securities they
want to sell.
Institutional clients generally work for investors and are thus forced to
be result-oriented, profit-driven entities. This seems to be the only criterion
in their purchasing behavior. They are generally less concerned with services
offered than with functionality and the bottom line. The products and services
would fit the characteristics of institutional purchasing behavior, should the
WAMEX client base begin to reach relevant proportions.
PATENTS, TRADEMARKS AND LICENSES
The Company owns no patents. The Company has explored the possibility of
patenting the ATS application as well as its software designs. Management has
presently elected not to seek patent protection.
The Company has trademarked its logo and name and that of its subsidiaries.
The Company owns several Web domain names: wamex.com. wamx.com and wamexny.com.
The Company is responsible to renew these domain registrations BI-annually with
Network Solutions, Inc.
SEASONAL EFFECTS
Management does not foresee any seasonal effect in its business model that
is not normal for the financial industry.
20
INVENTORY OF SECURITIES
Management acknowledges that there is a need for an inventory of tradable
securities in order to provide potential buyers with a market in which to
participate. Management had several issues in mind when devising this strategy.
Firstly, inclusivity is the only way to avoid antagonizing any market
participant. Secondly, to generate a market with a sufficient inventory of
known, deposited, largely liquid securities. This concern can be compared to the
grand opening of a consumer goods super-store, where on opening day thousand of
people rush into the store finding nothing but empty shelves without products.
Participants or members are at no risk, with a fully insured depository for
stock certificates carried by a Clearing Broker.
With a confidential pricing strategy, management believes that this will
motivate equity holders to deposit their certificates into the WAMEX trading
system, thus creating what management believes to not only be a viable inventory
solution, but also, in the long term, result in a large inventory of tradeable
equity.
GOVERNMENT APPROVAL
Management acknowledges that it needs regulatory approval in order to
operate the ATS. The Company has elected to seek regulatory approval in the
United States with the SEC because it believes that the U.S. regulatory
atmosphere would bring integrity in the International community. As pointed out
in previous discussion, the Company has worked closely with the SEC in the past
to seek approval and will continue to do so. Regulation ATS specifies the
necessary procedures that the Company will have to maintain in order to be
approved and maintain that approval. Management is confident that the Company
will be able to receive such approval and maintain the same.
The Company will have a licensed and registered Sponsoring and Clearing
Broker Dealers that are regulated by the SEC and the NASD and foresees no
problem with theses organizations not fulfilling their regulatory or fiduciary
responsibilities.
COMPETITION
The rapid growth of the retail financial services sector on the Web has
brought with it intense competition. Because the online investing industry is
riddled with price wars and threatened by increasing customer-acquisition costs,
only the strong will survive. This means larger institutions B brokerages,
retail banks, and other financial entities B are likely to acquire or partner
with smaller players, as evidenced by Dean Witter's acquisition of Lombard
Brokerage (now Discover Brokerage Direct), BancOne's partnership with E*Trade,
Ameritrade and Datek and most recently Merrill Lynch's interest in on-line
trading with their own site. WAMEX will compete or supplement services on two
fronts: Providing an Alternative Exchange that management believes will be a
significant resource for the buying, selling, and future listing of listed and
non-listed securities and providing traditional Brokerage services.
Although the major exchanges would appear to be the competition, they in
fact are not. These exchanges compete with each other for listings of publicly
traded companies. WAMEX has no intention of competing directly, in fact, we
could never become the primary liquidity providers for all the securities that
are listed on these exchanges. There is a need for the exchanges to set prices
for the securities that are listed so that the general investment community can
draw rational conclusions as to the stock values that can be traded on these
exchanges.
21
The other front is of course on-line trading and the services that
compliment these activities such as investment information and on-line banking.
There are multitudes of information providers that WAMEX has identified that
give all the necessary investment information needed. As for trade execution,
WAMEX will require a short period of time to structure it's technical execution
system, however management believes it would be difficult for other
organizations in the industry to compete with the cost of execution (in total),
as WAMEX will not trade proprietarily and therefore pass on savings to its
clients.
At present, there are full service and discount brokerage services
available to every investor in the world. A multitude of these operates through
the Internet, providing low cost and rapid executions for individual investors.
However, it should be understood that these systems trade proprietarily. In
addition, at least five major third-market trading systems are known to the
company, that have tailored their activities to cater to institutional investors
and proprietary traders only. To the company's knowledge there is no system in
operation that provides direct public investment interaction.
Potential competitors could try to emulate the WAMEX trading concept.
However, entry costs are high, not only because of the complexity of producing
such powerful software, but also because of the opportunity costs that would
have to be given up by companies that profit from proprietary trading.
Furthermore, the nature of an Alternative Market dictates that only sufficient
liquidity attracts more investors, so that a later entrant would have problems
reaching the critical growth rate.
Management's strategy to respond to challenges from the competition will be
to stay ahead of them: more speed, reliability, flexibility, better design,
marketing and customer service, state of the art technology and creative
innovation will make the Company difficult to challenge. The Company intends to
maintain its low pricing standards to attempt to remain one of the cheapest
alternatives for trading financial instruments. Moreover, potential competitors
are all focused on the US securities market, blatantly ignoring growth in
Europe, where individual stock trading is in its infant stages, and post-crisis
Asia, well known for its readiness to embrace new technologies and lifestyles.
The company will pursue strategic partnerships and acquisitions. The
majority of firms dealing in securities have an interest in increasing volume
and liquidity. Mutually beneficial cooperation is easily achievable, because of
the open architecture of the WAMEX Alternative Trading System, which can be
linked to stock markets, other alternative trading systems, third markets,
discount brokerages etc.
Competitors (among others)
- ----------------------------
Bear Stearns
Fidelity Investments
Painewebber
Prudential Securities
Smith Barney
Sutro & Co
22
These companies are traditional full commission brokerages of formidable
size. They use the web primarily to let customer's track their investments
rather than execute trades at a discount. Customers are mostly of the
advice-hungry type. They use their own customer base as the main customer
acquisition channel. As momentum builds on the alternative trading system, these
companies might be interested in using WAMEX as an alternative marketplace for
execution, rather than competing against WAMEX, because emulating the
alternative trading system would cannibalize their own business.
Charles Schwab
Merrill Lynch & Co
Quick & Reilly
Schwab and Quick & Reilly are traditional discount brokerages that have
only recently entered the online market. According to Jupiter, Schwab, which has
been tremendously successful after the 1995 launch of online services, has more
than 1 million active accounts that are also online, approximately 22% of total
accounts. All accounts generate about 111,300 average daily trades, of which
40,000 average daily trades online. Quick & Reilly has about 1 million clients,
of which 10% online, generating app. 10,000 average daily trades.
Important Competitors
- ----------------------
Ameritrade
DlJdirect
Datek Securities Corp
Discover Brokerage
E*Trade Securities
Suretrade
WebStreet Securities
These are the most important competitors for market share. Suretrade and
WebStreet Securities are smaller companies, but they have customer profiles that
fit the typical transaction-hungry WAMEX customer. They are not mentioned in the
Jupiter report, but WebStreet is the first online broker offering free trades.
Third-Market Trading Systems (among others)
- -----------------------------------------------
Instinet
Island
Bloomberg Tradebook
Arizona Stock Exchange
Market XT
23
These entities are closest to the WAMEX ATS core operation, but they cater
largely to institutions and are cost prohibitive for the individual investor.
Synergies by hooking these markets up to each other and making order flow
accessible by reciprocity are a possibility at a later stage of development.
While direct competition with WAMEX is also possible; management feels these
entities lack the consumer-oriented focus because they deal exclusively on an
institutional level. Market XT would appear to have the closest look to WAMEX
however, management feels that its after hours trading model is built primarily
on "Unexecuted Day Orders" and is therefore different enough to draw a rational
distinction for market share.
Conceptually Similar Companies (Direct Competitors):
- --------------------------------------------------------
Wit Capital
Grenex
Zoom Trade
Wit Capital has been operating a brokerage service through the Internet
since 1996. It is the only company that wants to encourage communication between
its clients, even with the purpose of letting them trade with each other.
However, the main profit-generating business is proprietary trading, as
explained above, and Internet Initial Public Offerings. Wit Capital's legal
background has enabled it to get early approval from the SEC. The purpose for
their internal trading system is merely to have investors in IPO's trade this
non-listed stock among themselves. Management feels their system is very crude
and primitive, and lacks all essential features of the WAMEX trading system,
including live feedback, clearing arrangements for international securities,
large database capacity for a variety of securities, etc. Grenex has folded.
Zoom Trade is in its conceptual stage and relying heavily on unsecured
Japanese capital. There is no indication that it will be operational within the
next three years.
Relatively similar operations, such as existing discount brokerages, all
conduct proprietary trading and have little motivation to enter the alternative
trading system market. Management believes that while these entities possess the
resources to compete with WAMEX, they will not do so, as it is inconsistent with
their business structures designed to gain profit elsewhere. Specifically,
entering the ATS market would cannibalize their current business, as well as put
at risk current industry relationships needed to conduct business.
PERSONS EMPLOYED
At present the Company employees four senior executives and two
programmers.
RISK TO FOREIGN OPERATIONS
The Company presently operates a European marketing office in Vienna,
Austria. This is a shared office space with a Company called WAMEX DATA SERVICE,
GmbH. an Austrian company wholly owned by Mr. Mundstein. The Company pays no
rent and has approximately $4,000 in computer equipment on premises. This
equipment is under the supervision of and is used by Mr. Mundstein for the WHI
business activities.
24
DESCRIPTION OF PROPERTY
The Company's principal business operations are conducted at 3040 Nostrand
Ave., Marine Park, N.Y. 11229. It shares a 1,250 sq. ft. facility with iNYC (an
Internet Service Provider (ISP)). The Company also has minor contact offices for
the purposes of client meetings located at 117 E. 57 St., N.Y., N.Y. and in
Vienna, Austria. Both facilities are smaller than 200 sq. ft and are shared
office spaces with WAMEX DATA SERVICE. The Company has no material assets other
than computer equipment and software programs located at these facilities. These
computers and programs are valued at less that $60,000, are fully insured and
are free and clear of any liens or encumbrances.
These facilities have been invaluable to the Company during it's operation
in the past, however, they will not be appropriate for the Company's planned
business activities in the future. The Company is presently seeking between
6-8000 sq. ft. of corporate space in the downtown Manhattan area in New York.
The Company contemplates a long term lease. The planned location will allow a
consolidation of all U.S. and International activities as it relates to WHI,
WAMEX and INSTOX as well as iCap. The Company expects to have the facility
available no later than April 2000.
As previously noted, the Company is negotiating with several hosting
entities to house the servers of the WAMEX ATS. The Company is presently
negotiating for W3D corporate space in the Southeast Florida region. This space
is contemplated to be no more than 1000 sq. ft. and will encompass all of the
W3D corporate personnel and functions.
25
MARKET FOR WAMEX'S SECURITIES
WAMEX has been a non-reporting publicly traded company with certain of
its securities exempt from registration under the Securities Act of 1933
pursuant to Rules 504 of Regulation D and Rule 144 of the General Rules and
Regulations of the Securities and Exchange Commission. WAMEX's common stock is
traded on the OTC Bulletin Board operated by Nasdaq under the symbol WAMX.
WAMEX has not become or otherwise been a reporting company under the Securities
Exchange Act of 1934. The Nasdaq Stock Market has implemented a change in its
rules requiring all companies trading securities on the OTC Bulletin Board to
become reporting companies under the Securities Exchange Act of 1934. WAMEX is
required to become a reporting company by the close of business on May 17, 2000
or no longer be listed on the OTC Bulletin Board. WAMEX effected the stock
exchange transaction with Conchology on March 1, 2000 and became a successor
issuer thereto in order to comply with the reporting company requirements
implemented by the over-the-counter bulletin board.
The following table sets forth the high and low prices for shares of our
common stock for the periods noted, as reported by the National Daily Quotation
Service and the OTC bulletin board maintained by Nasdaq. Quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions. Our stock began trading on November 2, 1999
under the symbol WAMX.
BID PRICES
YEAR PERIOD HIGH LOW
----- ------ ------ -----
2000 First Quarter 22.88** 2.50**
(through March 10, 2000)
1999 Fourth Quarter 4.88* 0.375*
* Reflects the prices of the stock during this period with very little, if
any, trading volume or transactions. The Company is not aware of any market
maker or broker-dealer activity that would encompass Mark-ups, Mark-downs or
Commissions as it relates to the trading or non-trading of the stock. The
Company assumes that these prices reflect the market for the stock.
** Reflects the prices of the stock during this period. As the awareness of
the Company has become greater, there has been a significant amount of increased
activity in the trading of the stock. The Company is not aware of any market
maker or broker-dealer activity that would encompass Mark-ups, Mark-downs or
Commissions as it relates to the trading or non-trading of the stock. The
Company assumes that these prices reflect the market for the stock.
The Company made a public announcement of a merger with The Treasure Cache,
Inc. on December 9, 1999. Prior to that announcement, the stock had a market
price and range of 3/8 to 1 3/8.
26
The number of beneficial holders of record of the common stock of WAMEX as
of the close of business on February 25, 2000 was approximately 400. Many of
the shares are held in street name and consequently reflect numerous additional
beneficial owners.
DIVIDEND POLICY
We have never paid any cash dividends on our common stock and do not
anticipate paying any cash dividends on our common stock in the future.
Instead, we intend to retain future earnings, if any, to fund the development
and growth of our business.
The Company declared a stock dividend in the form of a 4 for 1 forward
stock split to its shareholders on February 24, 2000. The Record Date for the
dividend is March 17, 2000, and the Payable Date is April 6, 2000.
27
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of the current directors
and executive officers of WAMEX who will remain so with the combined entity,
their principal offices and positions and the date each such person became a
director or executive officer. Our executive officers are elected annually by
the Board of Directors. Our directors serve one year terms until their
successors are elected. The executive officers serve terms of one year or until
their death, resignation or removal by the Board of Directors. There are no
family relationships between any of the directors and executive officers. In
addition, there was no arrangement or understanding between any executive
officer and any other person pursuant to which any person was selected as an
executive officer.
The directors and executive officers of WAMEX are as follows:
Name Age Positions
- ---- --- ---------
Mitchell H. Cushing 37 Chairman of the Board and Chief Executive
Officer
Sascha Mundstein 32 Chief Operating Officer and Director
Russell Chimenti 29 Chief Administrative Officer and Director
Hans Michael Schobinger 30 Chief Technology Officer and Director
Dr. Joseph Monaco 44 Chairman of Advisory Board
MITCHELL H. CUSHING: CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Mr. Cushing conceptualized and founded WAMEX Inc. in 1996 and 1998
respectively. As the CEO he has been responsible for overseeing every aspect of
the company's structure and growth. Mr. Cushing's vast experience in the
investment banking industry and trading environments, as well as his numerous
accomplishments in early stage businesses commend him for the role of CEO in
this critical phase of the company's establishment.
Since 1994 he has been serving as the CEO of J.J. Braik Inc., a consulting
corporation. He has served in the capacity of Corporate Strategist to provide
advice in corporate expansion, security and acquisitions, International
Portfolios Manager, Financial Advisor, and Analyst for several U.S. and European
Investment Firms. He has had extensive experience in Investment Banking in New
York, Budapest, Berlin, Prague, Switzerland and Vienna.
28
From 1996 to 1998, Mr. Cushing had been responsible for the growth and
development of portfolios in Europe that grew from under $10 million to over $40
million under management in under 2 years. As a Corporate Strategist, he was
responsible for the expansion of licensed Broker Dealers in 6 European
countries, which was the largest non-institutional expansion in Europe in the
1990's. From 1994 to 1996 he served in the Investment Banking industry in New
York as a Broker for small-cap firms. In this period he participated in raising
over 100 million USD on Public Offerings for privately held corporations.
From 1992 to 1994 Mr. Cushing served as the President and Chairman of the
Board of West Howston Investors N.Y. with the responsibility of corporate
organization and overall Portfolio Management.
From 1989 to 1992 Mr. Cushing was retained as Corporate Inspector General
of Inta-Boro Inc., the premier Transportation Company in New York where he was
responsible for reviewing all facets of the company's budget and expenditures.
During this period, the company had its most profitable 4-year period in its
20-year history. In 1991 he was given the additional responsibility of managing
the company's retirement accounts.
SASCHA MUNDSTEIN: CHIEF OPERATING OFFICER AND DIRECTOR
Mr. Mundstein has played a key role in developing all aspects of the WAMEX
system's organizational, technical as well as financial structure. Mr. Mundstein
has been tasked by WAMEX to serve as COO whose responsibilities extend to all
non-US WAMEX operations, including coordination with international stock
exchanges, managing multi-lingual customer service and coordinating WAMEX
activities with international securities regulators. His proven strategic
vision, international experiences and accomplished educational and business
backgrounds make him uniquely qualified for this position.
From 1996 to 1998, he worked in the European securities industry as a
Broker, Financial Consultant and Portfolio Manager of a European Investment
Advisory group with an extensive European network. Prior to entering the
securities industry, he had held a key position at an institution affiliated
with the Austrian Ministry of Foreign Affairs. Foreign Affairs duties have given
him access to critical familiarity with cultural and financial conditions in
Europe and Asia.
Before entering the securities industry, Mr. Mundstein has been a lecturer
at Harvard University and a computer consultant for the Austrian Foreign Service
School Diplomatische Akademie in Vienna. He has played a key role in modernizing
the entire technological infrastructure of that institution, including its
Internet presence.
In 1995 he conceptualized and planned Zhonghua Zai Xian, a commercial
online system for mainland China, which proved highly attractive to the Chinese
government due to its educational use and independent platform that is capable
of screening undesired content from the Internet. It was sold to a Chinese
consortium of entrepreneurs for an undisclosed sum.
From 1993 to 1995 Mr. Mundstein worked as a representative for various
European industrial firms exporting to China and Southeast Asia, including AV
Technology, OMV, and Thyssen, facilitating sales in the order of 350 million
USD.
29
From 1988 to 1990 Mr. Mundstein was based in Southern Thailand, where he
founded a successful business school (The Trang International Languages and
Business School), building a student body of above 350, and where he bought and
ran a rubber plantation, increasing productivity by 260% within two years
through reengineering of work and production processes. In this period, he
established the Trang Holiday Resort Company, Ltd., which planned, financed,
built, managed and marketed innovative holiday resorts in Southern Thailand for
families with high educational background, generating more than 4.5 million USD
in commission based consulting fees. He sold his businesses to attend his
studies for a master's degree at Harvard University.
Mr. Mundstein is fluent in spoken and written German, English, Italian,
French, Thai, and Mandarin Chinese, and has an extensive knowledge of Spanish,
Russian, Arabic and Japanese. He won two piano competitions with his Chopin and
Debussy interpretations and led a Volleyball team achieving the vice
Jugendmeister title in Vienna.
RUSSELL CHIMENTI: CHIEF ADMINISTRATIVE OFFICER AND DIRECTOR
Mr. Chimenti joined WAMEX Inc. in 1997. He has been responsible for
coordinating all aspects of the company's Broker Dealer strategies; all company
capital raises and has conceptually developed the core design of the Alternative
Trading System, its proprietary software and its marketing strategy. His strong
drive for sales and his marketing expertise have enabled the company to
accomplish its essential milestones to date.
Since 1996 he has been serving as the Vice-president of J.J. Braik Inc., a
consulting corporation. He has served for several U.S. and European Investment
Firms as a specialist in the area of corporate finance and provides financial
advisory services and general business advice to a wide range of private and
public sector clients. He has had extensive experience in Investment Banking in
the Middle East, New York, Budapest, Prague, Switzerland and Vienna.
From 1997 to 1998, Mr. Chimenti was responsible for the design and
implementation of Order Routing Systems for European Investment Banking and
Advisory Firms. He was credited with establishing the first non-institutional
order routing system between Europe, the Middle East and the U.S. He was
credited with a 2000% increase in automated order flow in Europe and a 500%
increase in the Middle East. He was further credited with the strategy and Phase
1 development of advanced integration systems in the Internet arena for the
Dubai Chamber of Commerce and Stock Exchange.
From 1996 to 1997, Mr. Chimenti was responsible for the growth and
development of portfolios in the Middle East theatre that grew from under 4
million USD to over 14 million USD under management in 1 year. As a Corporate
Finance specialist, he was responsible for the establishment of relationships
with the government of the United Arab Emirates and the Chamber of Commerce of
Dubai. He was further personally credited with the successful placement of 4
Private Placements and was directly involved in the Syndicate Management of four
Initial Public Offerings all of which in sum exceeded 30 million USD.
30
From 1994 to 1996 served in the Investment Banking industry in New York as
a Broker for small-cap firms. In this period he participated in raising over 65
million USD on Public Offerings for privately held corporations and was tasked
to assist in the recruiting and training of new Brokers.
From 1990 to 1993 Mr. Chimenti served as an Industrial Real Estate Agent
for Tricia Realty and was the leading sales representative in both 1992 and
1993.
Mr. Chimenti competes in golf, swimming and softball. He speaks English and
has a working knowledge of Spanish and German.
HANS MICHAEL SCH EBINGER: CHIEF TECHNOLOGY OFFICER AND DIRECTOR
Mr. Schoebinger joined WAMEX in 1997 and has designed the Database Kernel.
His responsibilities at WAMEX include database design, hardware procurement,
strategic backup deployment, user friendly interface, client portfolio
integration as well as internal and external security and the database interface
design for the communication links with WAMEX affiliates. His programming
wizardry and proven skills in negotiating with IT giants make him an invaluable
asset to the company.
From 1995 to 1997 he served as the President of SPW Inc., a software
consulting and database design corporation in Austria. Mr. Schoebinger has 16
years of computer programming experience and his database designs and interface
implementations as well as Press Information Systems that download
high-resolution photographs and client management systems are widely known
throughout Central Europe. During this period, Mr. Schoebinger was responsible
for the design, implementation and growth of information systems design and web
sites for SPW. During this period he was credited with the development of the
database management system for Picus Verlag, one of the largest publishers in
Central Europe. Additionally, he is credited with the design of high-resolution
download information systems for Viennareport, the largest Press Agency in
Austria.
Mr. Schoebinger is credited with the first designs of Archive System, a
database retrieval system for over 10 million color slides, the Online Access
and First Class Link that integrates whole archive systems and Web sites. He
developed the Database management system for the Austrian Film Commission and
created the first dynamic link to the Movie Database in London. His Web site
integration work was presented at the Berlin Film Festival in 1997 and the
Cannes Film Festival in 1998. His work for the Salzburger Festspiele is on the
official CD-ROM and has been sold worldwide.
From 1990 to 1994 Mr. Schoebinger served as a Database Designer for ORACLE.
He was responsible for the system integration of corporate database management
systems in Eastern Europe. Prior to 1990, Mr. Schoebinger designed Database
Systems for Internet companies.
Mr. Schoebinger has been a Visiting Lecturer at the University of Vienna
concerning his theoretical database designs since 1992. He is an accomplished
horseback rider and is an amateur astronomer. He speaks fluent German and
English and some Chinese.
31
DR. JOSEPH MONACO: CHAIRMAN, ADVISORY BOARD
Dr. Monaco joined WAMEX in 1998 as the Chairman of the Board of Advisors.
He is the founder of the Derivatives Research Group, which performs mathematical
modeling of financial strategies and conducts trading based on these strategies.
Dr. Monaco presently holds the positions of Senior Research Scientist and
Director of Operations for Industrial Polymer Research and Engineering in N.Y.
and is the Head of Mathematics and Adelphi Academy as well as Science
Instruction for The Center for Scholastic Advancement in N.Y. and serves with
the United States Congressional Scientific Advisory Board.
Dr. Monaco is the Author of twenty-three classified papers, co-author and
developer of the Monaco-Wang Operator used in applied physics, the holder of two
patents involving computerized servo-functions for hybrid-electric propulsion
systems and is the co-recipient of the Hughes Aircraft "Excellence in
Engineering Award".
Dr. Monaco served as a Major in the United States Army 11th Special Forces
(Green Berets), Special Consultant to the Department of Defense and was
instrumental in the development of advanced radio image technology for the CIA
and Long Range Doppler Radar Systems for the U.S Army. He is an active member of
APS, ACS, AMS, NYAS, AAAS, NSF, AAS, IEEE and is a member of Who's Who in
America and Who's Who in Global Business.
Dr. Monaco holds PhD's in Applied Mathematics and Theoretical Physics
(Columbia), Post PhD's in Astrophysics (M.I.T. and Cambridge), MS degrees in
Electrical Engineering and Physical Chemistry (Columbia) and BS degrees in
Mathematics and Computer Science (Columbia and City University at BC).
EXECUTIVE COMPENSATION
Summary Compensation Table
The Summary Compensation Table shows selected compensation information for
services rendered in all capacities for the fiscal years ended December 31, 1999
and 1998. Other than as set forth, no executive officer's salary and bonus
exceeded $100,000 in any of the applicable years. The following information
includes the dollar value of base salaries, bonus awards, the number of stock
options granted and selected other compensation, if any, whether paid or
deferred.
32
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
-------------------- ------------------------------
Awards Payouts
------------------ -------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($) SARS (#) ($) ($)
Mitchell H. Cushing 1999 60,000 -0- -0- -0- -0- -0- -0-
1998 11,000 -0- -0- -0- -0- -0- -0-
Sascha Mundstein(1) 1999 60,000 -0- -0- -0- -0- -0- -0-
1998 11,000 -0- -0- -0- -0- -0- -0-
Russell Chimenti 1999 60,000 -0- -0- -0- -0- -0- -0-
1998 11,000 -0- -0- -0- -0- -0- -0-
Hans Michael 1999 60,000 -0- -0- -0- -0- -0- -0-
Schobinger
1998 11,000 -0- -0- -0- -0- -0- -0-
Christoph Wessely(2)1999 60,000 -0- -0- -0- -0- -0- -0-
1998 11,000 -0- -0- -0- -0- -0- -0-
Michael Greene(3) 1999 84,000 -0- -0- -0- -0- -0- -0-
(1) Mr. Mundstein was not paid during the period of June 1999 through
September 1999 (representing an amount of $20,000) due to a lack of working
capital. Mr. Mundstein is owed this amount in back salary and has decided to
allow the Company to pay this debt through accelerated salary this fiscal year
or through other arrangements. The Executive Compensation Committee is
reviewing proposals.
(2) Mr. Wessely was the Company's Chief of Information Technology during the
periods of October 1998 through September 1999. Mr. Wessely resigned in
September 1999 due to personal hardship and therefore did not receive $30,000 of
his planned salary.
(3) Mr. Green was hired in August 1999 as a Senior Database Programmer. He
resigned in January 2000 to pursue other business opportunities. In lieu of the
back salary of $29,000 due to Mr. Green, the Company is presently negotiating
the issuance of some amount of restricted stock.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
-------------------
NUMBER OF SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS/SAR'S
OPTIONS/SAR'S GRANTED TO EMPLOYEES EXERCISE OF BASE PRICE
NAME GRANTED (#) IN FISCAL YEAR ($/SH) EXPIRATION DATE
- ----------------- --------------------- -------------------- ----------------------- ---------------
Mitchell H. Cushing -0- -0- N/A N/A
Sascha Mundstein -0- -0- N/A N/A
Russell Chimenti -0- -0- N/A N/A
Hans Michael -0- -0- N/A N/A
Schobinger
Christoph Wessely -0- -0- N/A N/A
Michael Greene -0- -0- N/A N/A
33
Employment Agreements
At the present time, the Company has no employment agreements or executive
compensation package for any employee. The Board of Directors (BOD) voted in
December 1999 to authorize an Executive Compensation package for those senior
officers of the Company that are essential to the success of the Company. It
tasked the Executive Committee (Compensation Committee as defined for the
purposes of this registration) to explore the avenues that best represent
compensation for those executives who have directly contributed to the success
of the Company to date and in the future. The Executive Committee expects to
present it's initial findings to the BOD no later than May 2000.
Compensation Committee Interlocks and Insider Participation
The Company has formed an Executive Committee that carry out among other
duties relevant to the corporation such as contracts, hiring and significant
corporate decisions, the task of exploring and presenting to the BOD Executive
Compensation. The BOD has assigned Mr. Cushing (CEO), Mr. Chimenti (CAO), and
Dr. Monaco (Chairman Advisory Board) as the members of the Executive Committee.
To the best knowledge of the Company none of these committee members serve
on any other corporate Compensation Committee or Board.
34
Compensation of Directors
The directors have not received any compensation other than reimbursement
of expenses for serving in such capacity, and we do not currently contemplate
compensating our directors in the future for serving in such capacity.
35
CERTAIN TRANSACTIONS
The Company presently retain the Services of Randolph Management in New
York to consult on corporate and business strategies. Mr. DeTrano is the
principal director of that company and simultaneously serves on the Advisory
Board of the Company. The terms of the arrangement are that Randolph Management
receives $750 per month for as long as the Company engages them and pays nominal
transportation cost up to a total of $100 (unless plane fare is involved) and
accommodations cost of $150 per night if asked by the Company to relocate. The
Company does not see this as a material conflict of interest.
The Company is presently seeking approval to operate an ATS. As such, the
Company needs a Sponsoring Broker Dealer. The Company has been unsuccessful in
acquiring the services of a Registered Broker Dealer in large part because the
ATS represents a direct threat to the established proprietary business of
established NASD Member Brokers. As a result of this obstacle, Mr. Cushing and
Mr. Chimenti entered into discussions in June 1999, with the principal owners of
iCap a Registered Broker Dealer and Member NASD firm. Although this purchase is
not yet consummated, management feels it is important to mention in light of the
importance of the transaction as it relates to possible conflicts of interest.
Management is satisfied that the acquisition and subsequent sponsorship
activities of a Broker Dealer for the ATS that is owned by Mr. Cushing and Mr.
Chimenti does not present a material conflict of interest.
To the best of the Company's knowledge, there are no other conflicts of
interest.
36
RISK FACTORS
RISKS RELATED TO OUR INTERNET AND TECHNOLOGY BUSINESS
YOU MAY BE UNABLE TO EFFECTIVELY EVALUATE OUR COMPANY FOR INVESTMENT PURPOSES
BECAUSE OUR INTERNET TECHNOLOGY BUSINESS HAS EXISTED FOR ONLY A SHORT PERIOD OF
TIME. We began in the Internet and technology business in early 1999. As a
result, we have only a limited operating history upon which you may evaluate our
business and prospects. In addition, you must consider our prospects in light
of the risks and uncertainties encountered by companies in an early stage of
development in new and rapidly evolving markets.
YOUR INVESTMENT MAY NOT INCREASE IN VALUE UNLESS WE ARE ABLE TO BECOME
PROFITABLE. We have incurred losses in our business operation since inception.
We expect to continue to lose money for the foreseeable future, and we cannot be
certain when we will become profitable, if at all. Failure to achieve and
maintain profitability may adversely affect the market price of our common
stock.
WE ARE PRESENTLY IN UNSOUND FINANCIAL CONDITION WHICH MAKES INVESTMENT IN
OUR SECURITIES HIGHLY RISKY. Our financial statements include an auditor's
report containing a modification regarding an uncertainty about our ability to
continue as a going concern. Our financial statements also include an
accumulated deficit of $591,758 as of December 31, 1999 and other indications of
weakness in our present financial position. We have been operating primarily
through the issuance of common stock for services by entities, including
affiliates, that we could not afford to pay in cash. We are consequently deemed
by state securities regulators to presently be in unsound financial condition.
OUR BUSINESS DEPENDS ON A FEW KEY INDIVIDUALS AND MAY BE NEGATIVELY
AFFECTED IF WE ARE UNABLE TO KEEP OUR KEY PERSONNEL. Our future success depends
in large part on the skills, experience and efforts of our key marketing and
management personnel. The loss of the continued services of any of these
individuals could have a very significant negative effect on our business. In
particular, we rely upon the experience of Mitchell H. Cushing, our chief
executive officer. We do not currently maintain a policy of key man life
insurance on any of our employees or management team.
OUR BUSINESS PLAN REQUIRES ADDITIONAL PERSONNEL AND MAY BE NEGATIVELY
AFFECTED IF WE ARE UNABLE TO HIRE AND RETAIN NEW SKILLED PERSONNEL. Qualified
personnel are in great demand throughout the software and Internet start-up
industries. Our success depends in large part upon our ability to attract,
train, motivate and retain highly skilled sales and marketing personnel, web
designers, software engineers and other senior personnel. Our failure to
attract and retain the highly trained technical personnel that are integral to
our direct sales, product development, service and support teams may limit the
rate at which we can generate sales and develop new products and services or
product and service enhancements. This could hurt our business, operating
results and financial condition.
37
OUR TECHNOLOGY BUSINESSES OWN PROPRIETARY TECHNOLOGY AND OUR SUCCESS
DEPENDS ON OUR ABILITY TO PROTECT THAT TECHNOLOGY. The unauthorized
reproduction or other misappropriation of our proprietary technology could
enable third parties to benefit from our technology without paying us for it.
This could have a material adverse effect on our business, operating results and
financial condition. We have relied primarily on the use of trade secrets to
protect our proprietary technology, which may be inadequate. We do not know
whether we will be able to defend our proprietary rights because the validity,
enforceability and scope of protection of proprietary rights in Internet-related
industries are uncertain and still evolving. Moreover, the laws of some foreign
countries are uncertain and may not protect intellectual property rights to the
same extent as the laws of the United States. If we resort to legal proceedings
to enforce our intellectual property rights, the proceedings could be burdensome
and expensive and could involve a high degree of risk.
WE WILL INCUR SIGNIFICANT EXPENSES IF OTHER COMPANIES CLAIM WE HAVE
INFRINGED ON THEIR PROPRIETARY RIGHTS. Although we attempt to avoid infringing
known proprietary rights of third parties, we are subject to the risk of claims
alleging infringement of third party proprietary rights. If we were to discover
that any of our products violated third party proprietary rights, there can be
no assurance that we would be able to obtain licenses on commercially reasonable
terms to continue offering the product without substantial reengineering or that
any effort to undertake such reengineering would be successful. We do not
conduct comprehensive searches to determine whether the technology used in our
products infringes patents, trademarks, tradenames or other protections held by
third parties. In addition, product development is inherently uncertain in a
rapidly evolving technological environment in which there may be numerous patent
applications pending, many of which are confidential when filed, with regard to
similar technologies. Any claim of infringement could cause us to incur
substantial costs defending against the claim, even if the claim is invalid, and
could distract our management from our business. Furthermore, a party making
such a claim could secure a judgment that requires us to pay substantial
damages. A judgment could also include an injunction or other court order that
could prevent us from selling our products. Any of these events could have a
material adverse effect on our business, operating results and financial
condition.
IF WE ARE UNABLE TO RAISE SUFFICIENT CAPITAL IN THE FUTURE, WE MAY NOT BE
ABLE TO STAY IN BUSINESS. Currently, our capital is insufficient to conduct our
business and if we are unable to obtain needed financing, we will be unable to
promote our products and services, engage in and exploit potential business
opportunities and otherwise maintain our competitive position. Since we intend
to grow our business rapidly, it is certain that we will require additional
capital. We have not thoroughly investigated whether this capital would be
available, who would provide it, and on what terms. If we are unable to raise
the capital required to fund our growth, on acceptable terms, our business may
be seriously harmed or even terminated.
38
WE COULD LOSE REVENUE AND INCUR SIGNIFICANT COSTS IF OUR COMPUTER SYSTEMS
OR THE COMPUTER SYSTEMS OF THIRD-PARTIES ARE NOT YEAR 2000 COMPLIANT. Many
currently installed computer systems and software products accept only two
digits to identify the year in any date. Thus, the year 2000 will appear as
"00," which a system or software might consider to be the year 1900 rather than
the year 2000. This error could result in system failures, delays or
miscalculations that disrupt our operations. The failure of our internal
systems, or any material third-party systems, to be year 2000 compliant could
result in significant liabilities and could seriously harm our business. We
have conducted a review of our business systems, including our computer systems.
We have taken steps to remedy potential problems, but have not yet developed a
comprehensive year 2000 contingency plan. There can be no assurance that we
will identify all year 2000 problems in our computer systems before they occur
or that we will be able to remedy any problems that are discovered. We have
also queried many of our customers, vendors and resellers as to their progress
in identifying and addressing problems that their computer systems may face in
correctly interrelating and processing date information as the year 2000
approaches and is reached. We have received responses from several of these
parties, but there can be no assurance that we will identify all such year 2000
problems in the computer systems of our customers, vendors or resellers before
they occur or that we will be able to remedy any problems that are discovered.
Our efforts to identify and address year 2000 problems, and the expenses we may
incur as a result of such problems, could have a material adverse effect on our
business, financial condition and results of operations. In addition, the
revenue stream and financial stability of existing customers may be adversely
impacted by year 2000 problems, which could cause fluctuations in our revenue.
If we fail to identify and remedy year 2000 problems, we could also be at a
competitive disadvantage relative to companies that have corrected such
problems. Any of these outcomes could have significant adverse effects on our
business, financial condition and results of operations.
WE MAY NOT HAVE SUFFICIENT INTEREST IN OUR INTERNET BUSINESS TO MAKE MONEY.
If the market for our services do not grow at a significant rate, our business,
operating results and financial condition will be negatively affected. Our
Internet-related services are a relatively new concept. Future demand for
recently introduced technologies is highly uncertain, and therefore we cannot
guaranty that our business will grow as we expect.
OUR INTERNET BUSINESS IS IN A HIGHLY COMPETITIVE INDUSTRIES, AND THUS THERE
MAY NOT BE ENOUGH DEMAND FOR OUR PRODUCTS OR SERVICES FOR US TO MAKE MONEY.
There are numerous competitors offering the same services as ours. Many of our
current and potential competitors have longer operating histories, larger
customer bases, greater brand recognition and significantly greater financial,
marketing and other resources than we do and may enter into strategic or
commercial relationships with larger, more established and well-financed
companies. Some of our competitors may be able to enter into such strategic or
commercial relationships on more favorable terms. In addition, new technologies
and the expansion of existing technologies may increase competitive pressures on
us. Increased competition may result in reduced operating margins and loss of
market share.
REVENUES FROM OUR INTERNET BUSINESS WILL BE LESS LIKELY TO DEVELOP IF THE
INTERNET DOES NOT REMAIN A VIABLE COMMERCIAL MARKETPLACE. Our ability to
generate revenues is substantially dependent upon continued growth in the use of
the Internet and the infrastructure for providing Internet access and carrying
Internet traffic. We don't know if the necessary infrastructure or
complementary products will be developed or that the Internet will prove to be a
viable commercial marketplace. To the extent that the Internet continues to
experience significant growth in the level of use and the number of users, we
cannot guaranty that the infrastructure will continue to be able to support the
demands placed upon it by such potential growth. In addition, delays in the
development or adoption of new standards or protocols required to handle levels
of Internet activity, or increased governmental regulation may restrict the
growth of the Internet. If the necessary infrastructure or complementary
products and services are not developed or if the Internet does not become a
viable commercial marketplace, our business, operating results and financial
condition would be negatively affected.
39
WE MAY INCUR A LOSS OF REVENUES AND SIGNIFICANT COSTS IF WE CANNOT MAINTAIN
THE SECURITY OF OUR INTERNET PRODUCTS AND SERVICES. Internet companies rely on
encryption and authentication technology to provide the security and
authentication necessary to effect secure transmission of confidential
information. There can be no assurance that advances in computer capabilities,
new discoveries in the field of cryptography or other developments will not
result in a compromise or breach of the algorithms used by companies to protect
consumer's transaction data. If any such compromise of this security were to
occur, it could have a material adverse effect on our potential clients,
business, prospects, financial condition and results of operations. A party who
is able to circumvent security measures could misappropriate proprietary
information or cause interruptions in operations. We may be required to expend
significant capital and other resources to protect against such security
breaches or to alleviate problems caused by such breaches. Concerns over the
security of transactions conducted on the Internet and the privacy of users may
also hinder the growth of online services generally. To the extent that our
activities or third-party contractors involve the storage and transmission of
proprietary information, such as credit card numbers, or personal data
information, security breaches could damage our reputation and expose us to a
risk of loss or litigation and possible liability. We cannot be sure that our
security measures will not prevent security breaches or that failure to prevent
such security breaches will not have a material adverse effect on our business.
RISKS RELATED TO OWNERSHIP OF OUR STOCK.
OUR BOARD OF DIRECTORS CAN ISSUE PREFERRED STOCK WITHOUT SHAREHOLDER
CONSENT AND DILUTE OR OTHERWISE SIGNIFICANTLY AFFECT THE RIGHTS OF EXISTING
SHAREHOLDERS. Our articles of incorporation provide that preferred stock may be
issued from time to time in one or more series. Our board of directors is
authorized to determine the rights, preferences, privileges and restrictions
granted to and imposed upon any wholly unissued series of preferred stock and
the designation of any such shares, without any vote or action by our
shareholders. The board of directors may authorize and issue preferred stock
with voting power or other rights that could adversely affect the voting power
or other rights of the holders of common stock. In addition, the issuance of
preferred stock could have the effect of delaying, deferring or preventing a
change in control, because the terms of preferred stock that might be issued
could potentially prohibit the consummation of any merger, reorganization, sale
of substantially all of its assets, liquidation or other extraordinary corporate
transaction without the approval of the holders of the outstanding shares of the
preferred stock. We will not offer preferred stock to promoters except on the
same terms as it is offered to all other existing shareholders or to new
shareholder or unless the issuance is approved by a majority of our independent
directors who do not have an interest in the transactions and who have access,
at our expense, to our legal counsel or independent legal counsel.
THE MARKET FOR OUR COMMON STOCK IS VERY VOLATILE. Our stock is presently
trading on the OTC bulletin board maintained by Nasdaq under the symbol WAMX.
Nevertheless, there has been limited volume in trading in the public market for
the common stock, and there can be no assurance that a more active trading
market will develop or be sustained. The market price of the shares of common
stock is likely to be highly volatile and may be significantly affected by
factors such as fluctuations in our operating results, announcements of
technological innovations or new products and/or services by us or our
competitors, governmental regulatory action, developments with respect to
patents or proprietary rights and general market conditions.
40
WE ARE SUBJECT TO THE PENNY-STOCK RULES. The Securities Enforcement and
Penny Stock Reform Act of 1990 requires additional disclosure relating to the
market for penny stocks in connection with trades in any stock defined as a
penny stock. The Commission has adopted regulations that generally define a
penny stock to be any equity security that has a market price of less than $5.00
per share, subject to a few exceptions. Such exceptions include any equity
security listed on Nasdaq and any equity security issued by an issuer that has
- - net tangible assets of at least $2,000,000, if such issuer has been in
continuous operation for three years,
- - net tangible assets of at least $5,000,000, if such issuer has been in
continuous operation for less than three years, or
- - average annual revenue of at least $6,000,000, if such issuer has been in
continuous operation for less than three years.
Unless an exception is available, the regulations require the delivery, prior to
any transaction involving a penny stock, of a disclosure schedule explaining the
penny stock market and the risks associated therewith.
USE OF PROCEEDS
WAMX will not receive any of the proceeds from the sale of shares of common
stock by the Selling Shareholders.
41
SELLING SHAREHOLDERS
The Shares of the Company to which this Reoffer Prospectus relates are being
registered for reoffers and resales by the Selling Shareholders, who acquired
the Shares pursuant to a compensatory benefit plan with WAMX for consulting
and legal services they provided to WAMX. The Selling Shareholders may resell
all, a portion or none of such Shares from time to time.
The table below sets forth with respect to the Selling Shareholders, based upon
information available to the Company as of March 13, 2000, the number of
Shares owned, the number of Shares registered by this Reoffer Prospectus and the
number and percent of outstanding Shares that will be owned after the sale of
the registered Shares assuming the sale of all of the registered Shares.
NUMBER OF NUMBER OF % OF SHARES
SHARES SHARES NUMBER OF OWNED BY
SELLING OWNED REGISTERED BY SHARES OWNED SHAREHOLDER
SHAREHOLDERS BEFORE SALE PROSPECTUS AFTER SALE AFTER SALE
- ----------------- ------------- ------------- ------------ ------------
Magnus Tillerby 100,000 100,000 0 0
- ----------------- ------------- ------------- ------------ ------------
M. Richard Cutler 178,500 142,000 36,500 less than 1%
- ----------------- ------------- ------------- ------------ ------------
Brian A. Lebrecht 29,250 21,000 8,250 less than 1%
- ----------------- ------------- ------------- ------------ ------------
Vi Bui 9,750 7,000 2,750 less than 1%
- ----------------- ------------- ------------- ------------ ------------
Edward H. Burnbaum 15,000 15,000 0 0
- ----------------- ------------- ------------- ------------ ------------
PLAN OF DISTRIBUTION
The Selling Shareholders may sell the Shares for value from time to time under
this Reoffer Prospectus in one or more transactions on the Over-the-Counter
Bulletin Board maintained by the NASD, or other exchange, in a negotiated
transaction or in a combination of such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at prices otherwise negotiated. The Selling Shareholders may effect
such transactions by selling the Shares to or through brokers-dealers, and such
broker-dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Shareholders and/or the purchasers
of the Shares for whom such broker-dealers may act as agent (which compensation
may be less than or in excess of customary commissions).
42
The Selling Shareholders and any broker-dealers that participate in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of Section 2(11) of the 1933 Act, and any commissions received by them and any
profit on the resale of the Shares sold by them may be deemed be underwriting
discounts and commissions under the 1933 Act. All selling and other expenses
incurred by the Selling Shareholders will be borne by the Selling Shareholders.
In addition to any Shares sold hereunder, the Selling Shareholders may, at the
same time, sell any shares of common stock, including the Shares, owned by him
or her in compliance with all of the requirements of Rule 144, regardless of
whether such shares are covered by this Reoffer Prospectus.
There is no assurance that the Selling Shareholders will sell all or any portion
of the Shares offered.
The Company will pay all expenses in connection with this offering other than
the legal fees incurred in connection with the preparation of this registration
statement and will not receive any proceeds from sales of any Shares by the
Selling Shareholders.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Moneesh A. Bakshi.
EXPERTS
The balance sheets as of December 31, 1999 and 1998 and the statements of
operations, shareholders' equity and cash flows for the years then ended of WAMX
have been incorporated by reference in this Registration Statement in reliance
on the report of Charles R. Eisenstein, Certified Public Accountant, given on
the authority of that firm as experts in accounting and auditing.
43
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents are hereby incorporated by reference in this
Registration Statement:
(i) Registrant's Form 8-K for an event on March 13, 2000, filed on March 14,
2000.
(ii) Registrant's Form 10-SB, (in the name of Conchology,Inc., the Company's
predecssor), originally filed on November 22, 1999.
(iii) All other reports and documents subsequently filed by the Registrant
pursuant after the date of this Registration Statement pursuant to Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 and prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference and to be a part hereof
from the date of the filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Corporation Laws of the State of New York and the Company's Bylaws
provide for indemnification of the Company's Directors for liabilities and
expenses that they may incur in such capacities. In general, Directors and
Officers are indemnified with respect to actions taken in good faith in a manner
reasonably believed to be in, or not opposed to, the best interests of the
Company, and with respect to any criminal action or proceeding, actions that the
indemnitee had no reasonable cause to believe were unlawful. Furthermore, the
personal liability of the Directors is limited as provided in the Company's
Articles of Incorporation.
44
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
The Shares were issued for advisory and legal services rendered. These
sales were made in reliance of the exemption from the registration requirements
of the Securities Act of 1933, as amended, contained in Section 4(2) thereof
covering transactions not involving any public offering or not involving any
"offer" or "sale".
ITEM 8. EXHIBITS
*3.1 Certificate of Incorporation of The World Auction Market and Exchange
(Holdings), Inc.
*3.2 Certificate of Amendment of Certificate of Incorporation of The Worls
Auction Market and Exchange (Holdings), Inc.
*3.3 Certificate of Incorporation of The Treasure Cache, Inc.
*3.4 Certificate of Amendment to the Certificate of Incorporation of The
Treasure Cache, Inc.
*3.5 Certificate of Amendment to the Certificate of Incorporation of The
Treasure Cache, Inc.
*3.6 Certificate of Merger of WAMEX Holdings, Inc. and The Treasure Cache,
Inc. into The Treasure Cache, Inc.
*3.7 Bylaws
5 Opinion of Moneesh A. Bakshi
*10.1. Exchange Agreement between WAMEX Holdings, Inc. and certain Conchology
shareholders dated as of February 9, 2000.
10.2 Consulting Agreement
*10.3 Put Option Agreement
*10.4 Escrow Agreement
10.5 Consulting Agreement
23.1 Consent of Charles R. Eisenstein, Certified Public Accountant.
________________________
* Incorporated by reference to WAMX's Form 8-K, filed on March 6, 2000.
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any material
information with respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment 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 thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement 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 thereof.
45
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to 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 Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that is meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Marine Park, State of New York, on March 14, 2000.
WAMEX Holding, Inc.
/s/ Mitchell H. Cushing
By: Mitchell H. Cushing
Its: CEO
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/S/ Sascha Mundstein
- -------------------------------------------------------
Sascha Mundstein, Chief Operating Officer and Director
/S/ Russell Chimenti
- -------------------------------------------------------
Russell Chimenti, Chief Administrative Officer and Director
/S/ Hans Michael Schobinger
- -------------------------------------------------------
Hans Michael Schobinger, Chief Technology Officer and Director