AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 19, 2002
Registration No. 333-90618
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Pre-Effective Amendment No. 1
to
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INFOTEC BUSINESS SYSTEMS, INC.
(Name of small business issuer in its charter)
NEVADA 7380 98-0358149
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Identification
Classification No)
Code Number
444 Columbia Street E. New Westminster,
British Columbia, V3L 3W9, CANADA
(604) 777-1707
(Address and telephone number of principal executive offices)
Robert Danvers, CEO, President
444 Columbia Street E.
New Westminster, British Columbia, V3L 3W9, CANADA
(604) 777-1707
(Name, address and telephone number of agent for service)
___________________________
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering.
|__|____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |__|____________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |__|____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. |__|____________
CALCULATION OF REGISTRATION FEE
Title of each Proposed Proposed
class of maximum maximum
securities Amount to be offering price aggregate offering Amount of
to be registered registered per unit (1) price (2) registration
fee (2)
Common Stock 1200000 shares $0.05 $60,000 $5.52
(1) Based on last sales price on May 14, 2002 and the anticipated price
selling security holders will offer and sell their shares of common stock.
(2) Estimated solely for the purpose of calculating the registration fee
in accordance with Rule 457 under the Securities Act.
Note: Specific details relating to the fee calculation shall be furnished
in notes to the table, including references to provisions of Rule 457
(Section 230.457 of this chapter) relied upon, if the basis of the
calculation is not otherwise evident from the information presented in the
table. If the filing fee is calculated pursuant to Rule 457(o) under the
Securities Act, only the title of the class of securities to be
registered, the proposed maximum aggregate offering price for that class
of securities and the amount of registration fee needed to appear in the
Calculation of Registration Fee table. Any difference between the dollar
amount of securities registered for such offerings and the dollar amount
of securities sold may be carried forward on a future registration
statement pursuant to Rule 429 under the Securities Act.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be
any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, Dated August 15, 2002
PROSPECTUS
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
444 Columbia Street E.
New Westminster, British Columbia V3L 3W9, Canada
(604) - 777-1707
1,200,000 SHARES OF COMMON STOCK
----------------
This prospectus covers the 1,200,000 shares of common stock of
Infotec Business Systems, Inc. being offered by certain selling
security holders. See "Selling Security Holders" beginning on
page 4. We will not receive any proceeds from the sale of the
shares by the selling security holders.
There is presently no public market for our shares. The selling
security holders will offer and sell the shares of common stock
at prices between $.04 to $.05 per share until our shares are
quoted on the OTC Bulletin Board and thereafter at prevailing
market prices or privately negotiated prices. The initial
offering is based on recent sales at $0.05 per share in May 2002.
The purchase of the securities offered through this prospectus
involves a high degree of risk. You should purchase shares only
if you can afford a complete loss of your investment.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------
The Date of This Prospectus Is: __________, 2002.
TABLE OF CONTENTS
PART I PROSPECTUS
Page
No.
PROSPECTUS
SUMMARY..........................................................3
RISK FACTORS.....................................................4
Need for Additional Financing.................................4
No Market for Our Common Stock................................4
Lack of Operating History.....................................4
Doubt as to Our Ability to Continue as a Going Concern........4
Marketable Product............................................5
Part Time Management..........................................5
Competition...................................................5
Customer Base.................................................5
Program Errors and Defects....................................5
Rapid Technology Change.......................................5
Management Control............................................6
Penny Stock Rules.............................................6
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS.......................................7
USE OF PROCEEDS..................................................7
SELLING SECURITY HOLDERS.........................................7
PLAN OF DISTRIBUTION............................................10
LEGAL PROCEEDINGS...............................................11
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS.........................................................11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT......................................................12
DESCRIPTION OF SECURITIES.......................................13
INTEREST OF NAMED EXPERTS AND COUNSEL...........................13
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES..................................13
ORGANIZATION WITHIN LAST FIVE YEARS.............................14
DESCRIPTION OF BUSINESS.........................................14
PLAN OF OPERATION...............................................21
DESCRIPTION OF PROPERTY.........................................24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................24
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........26
EXECUTIVE COMPENSATION..........................................27
FINANCIAL STATEMENTS...........................................F-1
AVAILABLE INFORMATION...........................................29
REPORTS TO SECURITY HOLDERS.....................................29
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS.....................II-1
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION...................II-1
RECENT SALES OF UNREGISTERED SECURITIES.......................II-1
EXHIBITS......................................................II-2
UNDERTAKINGS..................................................II-2
2
PROSPECTUS SUMMARY
Infotec Business Systems, Inc.
Infotec Business Systems, Inc. is a corporation formed under the
laws of the State of Nevada, whose principal executive offices
are located at 444 Columbia Street E., New Westminster, British
Columbia, V3L 3W9 Canada. Our telephone number is (604) 777-
1707.
Our Business and Business Strategy
We are a development stage company and have not as yet engaged
in revenue producing activities. Our business plan is to develop
and commercialize a system that provides customers with remote
access via the Internet to their software applications and
corporate data. Customers will also have access to a suite of
integrated business productivity applications which we are
developing for contact, document, time and project management.
We plan to market our virtual office as a service to businesses
in the U.S. and Canada. We plan to develop our virtual office
system as easy to use, functional, responsive and integrated and
to focus on the needs of small and medium businesses. The
virtual office system will be located on our servers and network
infrastructure. For each business we will create a virtual
office complete with email, calendar and scheduling, task and
project management, client, document, time, project and task
management. In addition, businesses will be able to run their
existing software from within their virtual office. Users will
access their virtual office securely from any computer that has
Internet access. While using their virtual office, users can
work with programs they are familiar with and also with our own
business productivity application programs. Our approach is to
provide integration of the various components of our system and
our users' data and documents.
Our plan is to earn revenue from monthly services fees, usage
fees and consulting.
We acquired the prior development and pilot implementation of
the virtual office system in October 2001 and have continued
development and testing since that time. Our development plan
calls for completion of the virtual office system, a web and
demonstration site, the development of an internal management
information system and network infrastructure. To complete our
plan we will need to hire additional staff and consultants and
invest in certain equipment and software licenses.
We incurred a loss in the amount of $92,438 for the period from
incorporation to April 30, 2002. At July 31, 2002, our working
capital was approximately $12,600. Our business plan calls for
spending of approximately $437,300 over the next twelve month
period. Accordingly, we do not have sufficient resources to
proceed with our business plan at this time without additional
financing.
Securities Being Offered 1,200,000 shares of
common stock.
Securities Issued
And to be Issued 4,500,000 shares of
common stock are
issued and outstanding
as of the date of this
prospectus. All of the
common stock to be sold
under this prospectus
will be sold by existing
stockholders.
Use of Proceeds We will not receive any
proceeds from the sale
of the common stock by
the selling stockholders.
3
References in this registration statement to Infotec, us, we,
the company and our are to Infotec Business Systems, Inc. or our
wholly owned subsidiary Infotec Business Solutions, Inc. and not
to our selling stockholders.
RISK FACTORS
An investment in us involves a high degree of risk. You should
carefully consider the risks described below and the other
information in this prospectus before investing. If any of the
following risks occur, our business, operating results and
financial condition could be seriously harmed. Our value could
decline due to any of these risks, and you could lose all or part
of your investment.
We need to obtain additional financing which may not be available
without substantial dilution. Our inability to raise additional
capital as needed will adversely affect our ability to implement
our business plan.
As at July 31, 2002, we had approximately $12,600 of working
capital on hand. Our business plan calls for significant
expenses in connection with the development of our virtual office
system. In addition, we anticipate that revenues, if any, from
operations will not be realized until sometime after development
of our virtual office system is complete.
We need to seek additional capital, possibly through
indebtedness or the issuance of equity securities. If we raise
additional capital through the issuance of debt, this will
increase interest expense. If we raise additional funds through
the issuance of equity or convertible debt securities, the
percentage ownership of our existing stockholders will be reduced
and those stockholders will suffer a dilution. In addition, new
securities may contain certain rights, preferences or privileges
that are senior to those of our common stock. We currently do
not have any arrangements for financing and we cannot assure you
that we will be able to obtain the required financing when
needed. If we are not successful in achieving financing our
business opportunities will be severely limited and we will not
be able to implement our business plan.
Because there is currently no market for our common stock,
investors may find it extremely difficult to resell their shares
and should not expect liquidity.
There is currently no market for our common stock. We
anticipate applying for trading of our common stock on the OTC
Bulletin Board upon the effectiveness of this registration
statement of which this prospectus forms part. We can provide no
assurance, however that our common stock will be traded on the
bulletin board or, if traded, that a market will materialize. In
the absence of a public market for our common stock, an
investment in our shares would be considered illiquid. Even if a
public market is established, it is unlikely a liquid market will
develop. Investors seeking liquidity in a security should not
purchase our common stock.
Because we have no operating history, you may find it difficult
to evaluate our company.
We are presently in the process of developing a virtual office
system that will be required to complete our business plan. We
have not yet earned any revenues and we will not be able to earn
any revenues until development of our virtual office system is
complete. Accordingly, we have no operating history from which
investors can evaluate our future business prospects or
management's performance.
As we have suffered losses since our formation and we anticipate
that we will lose money in the future, our auditors have
expressed doubt we will be able to continue as a going concern.
Due to our present financial condition and our lack of current
operations, our auditors have expressed doubt as to our ability
to continue as a going concern. To date, we have not completed
the development or marketed a virtual office system and we can
provide no assurance that the service we are currently developing
will have a commercial application.
If we are unable to develop a marketable product, our ability to
generate revenue would be limited.
4
The virtual office system, management information system, web
site and system demonstration are currently in the development
stage. In order to commence sales, we will have to complete
development. If we are unable to complete development of a
commercial system or if we are unable to successfully integrate
the infrastructure, business systems and systems software into
the virtual office system, web and demonstration site, we will
not be able to market our service or earn any revenues.
We rely on our President who does not devote his full business
time to our business. If our President is not available, we may
not be able to implement our business plan.
We have only two directors and we rely principally on Mr. Robert
Danvers our President for his entrepreneurial skills and
experience and to implement our business plan. Presently Mr.
Danvers does not devote full time and attention to our affairs
which could result in delays in implementing our business plan.
Moreover, we do not have an employment agreement with any of our
directors or officers including Mr. Danvers. Accordingly, we can
provide no assurance Mr. Danvers will continue to manage our
affairs, that he will be able to devote sufficient amounts of his
business time to enable us to implement our business plan or that
he would not decide to join a competitor or otherwise compete
directly or indirectly with us. If Mr. Danvers were not to
devote a sufficient amount of his time to the management of our
business or if he was to compete with us and we were not able to
replace him, the loss of service would materially and adversely
effect the continued implementation of our business plan.
We will operate in a competitive market and we may not have
sufficient resources to compete.
We will face competition from competitors who are presently
engaged in the business of offering different implementations for
online application services. These competitors include large,
well-established companies and companies with greater financial,
human and customer resources than us. We will attempt to compete
by developing our virtual office system to provide users with a
system that is easy to use and provides the functionality they
need. We are however, at a competative disadvantage in
attracting staff and customers and we can provide no assurance
that we will have sufficient resources to compete.
If we are not able to develop a customer base, we will have
limited prospects for generating revenues.
We will commence marketing of our virtual office system once the
development of our infrastructure and software licensing is
completed. We anticipate that we will incur substantial costs in
marketing our services once the development stage is complete.
If we are not successful in developing a customer base as a
result of our marketing efforts, then our ability to generate
revenue would be limited.
If our systems contain programming errors or defects, it would
adversely affect our reputation and ability to earn Revenues.
The development of our virtual office requires that we undertake
system integration and computer programming. There is a risk
that the system integration and software programming that we
complete as part of the development process will contain errors
and defects including errors and defects in the system's security
subsystem that we will not be able to discover until we commence
operations. There is also the risk that once developed, we may
develop system errors or defects or security failures that cause
harm to our users' data or systems or may fail to protect the
users' data or systems from harm. Disruptions to our services,
problems experienced by users and loss of users' data and
business processes could adversely impact our reputation and
ability to earn revenues, to retain existing customers or to
develop new customers.
Our industry is subject to rapid technical change. If we are not
able to adapt, we may not be able to attract or retain customers.
We will be required to update and refine the virtual office
system, web and demonstration site once we complete development
in order to address technological change. The market for systems
such as ours is characterized by rapid technological changes,
frequent new product introductions and changes in consumer
requirements. We may be unable to respond quickly or effectively
to these developments, as we may not have sufficient resources or
money required to develop or acquire new technologies or to
introduce new services capable of addressing these developments.
If we are unable to update and refine our technology and services
once development is complete in response to technological change,
then we may not be able to attract or retain customers.
5
Because Robert Danvers, our President controls approximately 73%
of our outstanding common stock, he will control and make
corporate decisions and investors will have limited ability to
affect corporate decisions.
Mr. Robert Danvers owns or controls approximately 73% of the
outstanding shares of our common stock. Accordingly, he will
have a significant influence in determining the outcome of all
corporate transactions, including mergers, consolidations and the
sale of all or substantially all of our assets, and also the
power to prevent or cause a change in control. As a result, our
investors will have limited ability to affect decisions made by
management.
Because we are subject to the Apenny stock rules, the
tradeability of our common stock will be limited which may make
it more difficult for investors to sell their shares.
We are subject to Apenny stock regulations and even if a market
for our common stock ever develops, unless the trading price of
our common stock is $5.00 per share or more, then trading in our
common stock would be subject to the requirements of Rule 15g-9
under the Securities Exchange Act. Under this rule, additional
sales practice requirements are imposed on broker-dealers who
sell such securities to persons other than established customers
and accredited investors (generally those with assets in excess
of $1,000,000 or annual income exceeding $200,000 or $300,000
together with a spouse). For transactions covered by these
rules, the broker-dealer must make a special suitability
determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior
to the purchase. Additionally, for any transaction involving a
penny stock, unless exempt, the rules require the delivery, prior
to the transaction, of a disclosure schedule prescribed by the
Commission relating to the penny stock market. The broker-dealer
also must disclose the commissions payable to both the broker-
dealer and the registered representative and current quotations
for the securities. Finally, monthly statements must be sent
disclosing recent price information on the limited market in
penny stocks. Consequently, the "penny stock" rules may restrict
the ability of broker-dealers to sell our shares of common stock.
The market price of our shares would likely suffer as a result.
A market in our common stock may never develop due to these
factors.
6
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary", "Risk
Factors", "Plan of Operation", "Description of Business", and
elsewhere in this prospectus constitute forward-looking
statements. In some cases, you can identify forward-looking
statements by terminology such as "may", "will", "should",
"expects", "plans", "anticipates", "believes", "estimated",
"predicts", "potential", or "continue" or the negative of such
terms or other comparable terminology. These statements are only
predictions and involve known and unknown risks, uncertainties,
and other factors that may cause our actual results, levels of
activity, performance, or achievements to be materially different
from any future results, levels of activity, performance, or
achievements expressed or implied by such forward-looking
statements. These factors include, among other things, those
listed under "Risk Factors" and elsewhere in this prospectus.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, factors previously
noted could cause our actual results to differ materially from
those contained in any forward looking statements.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common
stock offered through this prospectus by the selling
stockholders.
SELLING SECURITY HOLDERS
The selling stockholders named in this prospectus are offering
all of the 1,200,000 shares of common stock offered through this
prospectus. The shares include the following:
1. 1,200,000 shares of our common stock that the selling
stockholders acquired from us in an offering that was exempt from
registration under Regulation S of the Securities Act of 1933 and
completed on May 14, 2002.
The following table provides information regarding the
beneficial ownership of our common stock held by each of the
selling stockholders, including:
1. the number of shares owned by each prior to this offering;
2. the total number of shares that are to be offered for each;
3. the total number of shares that will be owned by each upon
completion of the offering;
4. the percentage owned by each; and
5. the identity of the beneficial holder of any entity that owns
the shares.
Total number Total shares
Shares shares to to be owned Percent
owned be offered upon owned upon
prior for selling completion completion
Selling to this security holders of this of this
security holder offering account offering offering
Albert Amar
1546 Hope Road
North Vancouver, BC V7P 1W9 2,000 2,000 NIL NIL
Robert Cherniack
301 - 4838 Fraser St.
Vancouver, BC V5V 4H4 90,000 90,000 NIL NIL
7
TABLE IS CONTINUED FROM PAGE 7
Total number Total shares
Shares shares to to be owned Percent
owned be offered upon owned upon
prior for selling completion completion
Selling to this security holders of this of this
security holder offering account offering offering
Stephen Bass
120 - 6450 East Boulevard
North Vancouver, BC V6M 3V9 90,000 90,000 NIL NIL
Evelyn Cable
1400 - 400 Burrard Street
Vancouver, BC V6C 3G2 86,000 86,000 NIL NIL
Doreen Danvers
315 - 7122 Mary Ave.
Burnaby, BC 5E4 N23 2,000 2,000 NIL NIL
Morris Ergas
840 Younette Drive
West Vancouver, BC V7T 1S9 2,000 2,000 NIL NIL
Carol Hill
5537 Marine Drive
West Vancouver, BC V7W 2R4 30,000 30,000 NIL NIL
Peter Hill
5537 Marine Drive
West Vancouver, BC
V7W 2R4 90,000 90,000 NIL NIL
Faouzi Kossentini
506 - 1323 Homer Street
Vancouver, BC V6B 5T1 2,000 2,000 NIL NIL
Phillip Levy
10771 Swinton Crescent
Richmond, BC V7A 3T2 2,000 2,000 NIL NIL
Debra MacArthur
8170 Muirfield Cres.
Whistler, BC V0N 1B8 95,000 95,000 NIL NIL
Maxwell Capital Inc.
1400-400 Burrard Street
Vancouver, BC V6C 3G2 85,000 85,000 NIL NIL
Beneficial owner:
Bram Solloway
Susan Miller
4060 Goldie Court
North Vancouver, BC
V7G 2P4 90,000 90,000 NIL NIL
Sheila Milstein
3062 Spencer Drive
West Vancouver, BC
V7V 3C7 2,000 2,000 NIL NIL
Alberto Moscona
701 - 2288 Bellvue Ave.
West Vancouver, BC
V7V 1C6 90,000 90,000 NIL NIL
8
TABLE IS CONTINUED
FROM PAGE 8
Total number Total shares
Shares shares to to be owned Percent
owned be offered upon owned upon
prior for selling completion completion
Selling to this security holders of this of this
security holder offering account offering offering
Carolynne Newcombe
11B - 6128 Patterson Ave.
Burnaby, BC V5H 4P3 2,000 2,000 NIL NIL
Lita Nuguid
10 - 10980 No. 2 Road
Richmond, BC V7E 2E3 90,000 90,000 NIL NIL
Richard Paisley
2221 Inglewood Ave.
West Vancouver, BC V7V 1Z7 2,000 2,000 NIL NIL
Neil Pollock
3938 Braemar Place.
North Vancouver, BC V7N 4M8 2,000 2,000 NIL NIL
Julius Roitman
1530 Boundry Road
Burnaby, BC V5K 4V4 90,000 90,000 NIL NIL
Alan Sacks
3625 Bluebonnet Road
North Vancouver, BC V7R 4C9 2,000 2,000 NIL NIL
Bram Solloway
5476 Monte Bre Crescent
West Vancouver, BC V7W 3A7 95,000 95,000 NIL NIL
Maureen Solloway
5476 Monte Bre Crescent
West Vancouver, BC V7W 3A7 4,000 4,000 NIL NIL
Robert Thompson
102 - 1040 Hamilton Street
Vancouver, BC V6B 2R9 60,000 60,000 NIL NIL
Barrie Weiner
605 - 815 Hornby Street
Vancouver, BC V6Z 2E6 95,000 95,000 NIL NIL
Except as otherwise noted in this list, the named party
beneficially owns and has sole voting and investment power over
all shares or rights to these shares. The numbers in this table
assume that none of the selling stockholders sells shares of
common stock not being offered in this prospectus or purchases
additional shares of common stock, and assumes that all shares
offered are sold. The percentages are based on 4,500,000 shares
of common stock outstanding on the date hereof.
Other than Bram Solloway and Doreen Danvers, none of the selling
stockholders or their beneficial owners (a) has had a material
relationship with us other than as a stockholder at any time
within the past three years; or (b) has ever been an officer or
director of ourselves or any of our predecessors or affiliates.
Mr. Bram Solloway is the beneficial owner of Maxwell Capital
Corporation. Mr. Solloway was our Secretary and Treasurer during
the period November 1, 2001 to May 20, 2002. Doreen Danvers is
the mother of Robert Danvers. None of the selling stockholders
is a broker-dealer or an affiliate of a broker-dealer to our
knowledge.
9
PLAN OF DISTRIBUTION
The selling shareholders will offer and sell their shares at
prices between $0.04 and $0.05 per share until our shares are
quoted on the OTC Bulletin Board or a national securities
exchange and thereafter at prevailing market prices or privately
negotiated prices. Our common stock is presently not traded on
any market or securities exchange, although a market maker has
informed us of its interest to file an application for us to
become eligible for quotation on the OTC Bulletin Board. The
selling shareholders may sell our common stock in the over-the-
counter market, or on any securities exchange on which our common
stock is or becomes listed or traded, in negotiated transactions
or otherwise, at market prices existing at the time of sale, at
prices related to existing market prices, through Rule 144
transactions or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid
by the selling security holders in connection with sales of
securities. The shares will not be sold in an underwritten
public offering.
The selling security holders may sell the securities in one or
more of the following methods:
- in the "pink sheets" or in the over-the-counter market or on
such exchanges on which our shares may be listed from time-to-
time, in transactions which may include special offerings,
exchange distributions and/or secondary distributions,
pursuant to and in accordance with the rules of such
exchanges, including sales to underwriters who acquire the
shares for their own account and resell them in one or more
transactions or through brokers, acting as principal or
agent;
- in transactions other than on such exchanges or in the over-
the-counter market, or a combination of such transactions,
including sales through brokers, acting as principal or
agent, sales in privately negotiated transactions, or
dispositions for value by any selling security holder to its
partners or members, subject to rules relating to sales by
affiliates; or
- through the issuance of securities by issuers other than us,
convertible into, exchangeable for, or payable in our shares.
In making sales, brokers or dealers used by the selling security
holders may arrange for other brokers or dealers to participate.
The selling security holders and others through whom such
securities are sold may be underwriters within the meaning of
the Securities Act for the securities offered, and any profits
realized or commission received may be considered underwriting
compensation.
At the time a particular offer of the securities is made by or on
behalf of a selling security holder, to the extent required, a
prospectus is to be delivered. The prospectus will include the
number of shares of common stock being offered and the terms of
the offering, including the name or names of any underwriters,
dealers or agents, the purchase price paid by any underwriter for
the shares of common stock purchased from the selling security
holder, and any discounts, commissions or concessions allowed or
reallowed or paid to dealers, and the proposed selling price to
the public. In the event that shares of selling security holders
listed in this prospectus are transferred to other persons and
parties by way of gift, devise, pledge or other testamentary
transfer, we will file a prospectus supplement to identify the
new selling security holders.
We have told the selling security holders that the anti-
manipulative rules under the Securities Exchange Act of 1934,
including Regulation M, may apply to their sales in the market.
With certain exceptions, Regulation M precludes any selling
security holders, any affiliated purchasers and any broker-dealer
or other person who participates in the distribution from bidding
for or purchasing, or attempting to induce any person to bid for
or purchase any security which is the subject of the distribution
until the entire distribution is complete. Regulation M also
prohibits any bids or purchase made in order to stabilize the
price of a security in connection with an at the market offering
such as this offering. We have provided each of the selling
security holders with a copy of these rules. We have also told
the selling security holders of the need for delivery of copies
of this prospectus in connection with any sale of securities that
are registered by this prospectus. All of the foregoing may
affect the marketability of our common stock.
We are bearing all costs relating to the registration of the common
stock and will pay these costs from cash in priority to our
operating expenses. The selling stockholders, however, will pay
any commissions or other fees payable to brokers or dealers in
connection with any sale of the common stock.
10
Penny Stock Rules
We are subject to penny stock regulations under Rule 15g-9 under
the Securities Exchange Act. If a market for our common stock
ever develops, we will remain subject to this rules unless the
trading price of our common stock is not less than $5.00 per
share. The penny stock rules require a broker-dealer, prior to
transaction in a penny stock not otherwise exempt from the rules,
to deliver a standardized risk disclosure document that provides
information about penny stocks and the nature and level of risks
in the penny stock market. The broker-dealer must also provide
the customer with current bid and offer quotations for the penny
stock, the compensation of the broker-dealer and its salesperson
in the transaction, and, if the broker-dealer is the sole market
maker, the broker-dealer must disclose this fact and the broker-
dealer's presumed control over the market, and monthly account
statements showing the market value of each penny stock held in
the customer's account. In addition, broker-dealers who sell
these securities to persons other than established customers and
"accredited investors" must make a special written determination
that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction.
LEGAL PROCEEDINGS
We are not currently a party to any material litigation, nor to
the knowledge of management, is there any material litigation
threatened or contemplated against us.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names, positions and the ages of
our directors and executive officers. Directors are elected at
our annual meeting of stockholders and serve for a one year term
or until removed from office in accordance with our bylaws or
their successors are elected and qualify. Officers are appointed
by the board of directors and their terms of office are, except
to the extent governed by employment contract, at the direction
of the board of directors. Directors do not currently receive
any compensation for their services in acting as directors.
Director
Name Age Position Since
Robert Danvers 49 Chief Executive Officer, 2001
President and Director
Stephen Jackson 48 Secretary, Treasurer
and Director 2002
Robert Danvers, our founder, has served as the our President, Chief
Executive Officer, Secretary and Treasurer from August 30, 2001
to November 1, 2001 and thereafter to date as a director,
President and Chief Executive Officer. Since 1982, Mr. Danvers
has provided business consulting services to development
businesses and public reporting companies principally in the
field of financial management and business information systems.
For the preceding five years, Mr. Danvers has served as President
and a director of Danby Financial Management Corp. and Danby
Technologies Corporation. These businesses operate respectively
in the fields of financial management and information systems
consulting.
Mr.Robert Danvers may be considered a promoter within the meaning
of the federal securities laws.
Stephen Jackson has served as a director since April 12, 2002 and
our Secretary and Treasurer since May 20, 2002. Mr. Jackson has
been active in general consulting to business; private, corporate
and publicly reporting since 1980, He is a past director of the
British Columbia Taxi Association. He served during 2000 through
2002 as a director and President, Secretary and Treasurer of
Phoenix Star Ventures, Inc. (formerly wowtown.com, Inc.), a
Delaware reporting company trading on the OTC Bulletin Board,
involved at that time in establishing an Internet based local
resource guide. During the period 1995 through 1997, Mr. Jackson
served as Vice President Investor Relations for Athabaska Gold
Resources Ltd., a Canadian reporting company involved in mineral
exploration, then trading on
11
the Toronto Stock Exchange and Breckenridge Resources Ltd., a
Canadian reporting company involved in mineral exploration,
then trading on the Vancouver Stock Exchange. During 1998 and
1999 Mr. Jackson consulted for the Vancouver International Airport
Authority.
Officers of the company do not devote their full time and attention
to our affairs. We estimate that Mr. Danvers devotes
approximately 60% of his time to our business and Mr. Jackson
less than 20%. There are no family relationships between any of
our directors, executive officers and/or directors, nominees
therefore or significant employees.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding our
common stock beneficially owned as of the date of this
prospectus, by:
(i) each stockholder known by us to be the beneficial owner of
five (5%) percent or more of our outstanding common stock;
(ii) each of the our executive officers and directors;
and
(iii)all executive officers and directors as a group.
As at the date hereof, there were 4,500,000 shares of our common
stock issued and outstanding.
Name and Address of Amount and Nature of Percent
Beneficial Owner (1) Beneficial Owner (2) of Class
____________________ ____________________ ________
Robert Danvers
(3),(4),(5), 3,274,000 72.8%
Danby Technologies
Corporation 1, 180,000 26.2%
Chantal Trudeau 450,000 10.0%
Simon Danvers 450,000 10.0%
Nicholas Danvers 450,000 10.0%
Stephen Jackson 6,000 0.1%
All Executive Officers
and Directors as a
group (2 persons) 3,280,000 72.9%
_____________________
(1) Unless otherwise indicated the address of each of the
listed beneficial owners identified is 444 Columbia Street E,
New Westminster, BC V3L 3W9.
(2) Under securities law, a person is considered a beneficial
owner of a security if that person has or shares power to vote
or direct the voting of such security or the power to dispose of
such security. A person is also considered to be a beneficial
owner of any securities of which the person has a right to
acquire beneficial ownership within 60 days.
(3) Includes 450,000 common shares held in the name of Chantal
Trudeau. Robert Danvers is the spouse of Chantal Trudeau. Each
disclaims beneficial ownership of the shares beneficially owned
by the other.
(4) Includes 900,000 common shares held in the name of Danby
Investment Corp., a British Columbia corporation on behalf of
Simon Danvers as to 450,000 common shares and Nicholas Danvers as
to 450,000 common shares. Simon Danvers and Nicholas Danvers are
the minor children of Robert Danvers and Chantal Trudeau. Simon
Danvers and Nicholas Danvers shares are held in trust by Danby
Investment Corp. for their benefit. Robert Danvers is the
President and sole shareholder of Danby Investment Corp. and
disclaims beneficial ownership of the shares beneficially owned
by Simon Danvers and Nicholas Danvers. As trustee, Robert
Danvers has full direction and control of the shares held
beneficially for Simon Danvers and Nicholas Danvers.
(5) Includes 1,180,000 common shares held in the name of Danby
Technologies Corporation, a British Columbia corporation. Robert
Danvers is the President and sole shareholder of Danby Tech
nologies Corporation.
Change of Control
There are currently no arrangements known to us, which will or
in the future could, result in a change of control.
12
DESCRIPTION OF SECURITIES
General
The following description of our capital stock is a summary of
the material terms and is subject to and qualified in its
entirety by our articles of incorporation, our bylaws and Nevada
Law. Our authorized capital stock consists of 75,000,000 shares
consisting of two classes of stock as follows:
Common Stock
Our articles of incorporation authorize the issuance of
50,000,000 shares of common stock, par value $0.001. Each holder
of common stock is entitled to one vote for each share held on
all matters properly submitted to the stockholders for their
vote. Cumulative voting for the election of directors is not
permitted by the articles of incorporation.
Holders of outstanding shares of common stock are entitled to
such dividends as may be declared from time to time by the board
of directors out of legally available funds and, in the event of
liquidation, dissolution or winding up of the our affairs. In
the event that any of the aforementioned situations occur holders
are entitled to receive, ratably, our net assets available to
stockholders after distribution is made to the preferred
stockholders, if any, who are given preferred rights upon
liquidation. Holders of outstanding shares of common stock have
no preemptive, conversion or redemptive rights. To the extent
that additional shares of our common stock are issued, the
relative interests of then existing stockholders may be diluted.
As of the date of this prospectus, there were 4,500,000 shares
of our common stock issued and outstanding, held by thirty-one
(31) stockholders of record.
Preferred Stock
Our articles of incorporation authorize the issuance of
25,000,000 shares of preferred stock, par value $0.001. Our
board of directors is authorized to issue the preferred stock
from time to time in series and is further authorized to
establish such series, to fix and determine the variations in the
relative rights and preferences as between series, to fix voting
rights, if any, for each series, and to allow for the conversion
of preferred stock into common stock. No preferred stock has
been issued by us.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus as having prepared
or certified any part of this prospectus or having given an
opinion upon the validity of the securities being registered or
upon other legal matters in connection with the registration or
offering of the common stock was employed on a contingency basis,
or had, or is to receive, in connection with the offering, a
substantial interest, direct or indirect, in the registrant or
any of its parents or subsidiaries. Nor was any such person
connected with the registrant or any of its parents or
subsidiaries as a promoter, managing or principal underwriter,
voting trustee, director, officer, or employee.
Adorno & Yoss, P.A., our independent legal counsel, has provided
an opinion on the legality of the issuance of the securities
being offered herein.
The financial statements included in this prospectus and
registration statement have been audited by Morgan & Company,
Chartered Accountants, to the extent and for the period set forth
in their report appearing elsewhere herein and in the
registration statement, and are included in reliance upon such
report given upon the authority of said firm as experts in
auditing and accounting.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Our directors and officers are indemnified as provided by the
Nevada Revised Statutes and our articles of incorporation and
bylaws. We have been advised that in the opinion of the
Securities and Exchange Commission indemnification for
liabilities arising under the Securities Act is against public
policy as expressed in the Securities Act, and is, therefore,
unenforceable.
13
In the event that a claim for indemnification against
such liabilities is asserted by one of our directors,
officers, or controlling persons in connection with the
securities being registered, we will, unless in the opinion of
our legal counsel the matter has been settled by controlling
precedent, submit the question of whether such indemnification is
against public policy to a court of appropriate jurisdiction. We
will then be governed by the court's decision.
ORGANIZATION WITHIN LAST FIVE YEARS
We were incorporated under the laws of the State of Nevada on
August 30, 2001, and are in the early developmental stage.
Effective October 3, 2001, we entered into an agreement to
acquire the prior development, designs and pilot implementation
of a virtual office system from Danby Technologies Corporation in
consideration for a purchase price of $60,000, due December 31,
2002 and a royalty on our net revenues from the system or
products or services which use the system. Royalties are
determined at the rate of 2% of net revenues until the amount
paid or payable aggregates $250,000 and thereafter, at the rate
of 1%. Management believes that this royalty rate is favorable
in relationship to the software licensing fees normally paid in
transactions of this sort.
In May 2002, we issued Danby Technologies Corporation and a
staff member an aggregate of 1,200,000 common shares in
settlement of the principal amount of $60,000 due under the terms
of the purchase agreement of October 3, 2001. Mr. Danvers, our
President, Chief Executive Officer and director beneficially owns
Danby Technologies Corporation. Since 1997, Danby Technologies
Corporation has provided computer and network system consulting
and development services and has undertaken internal development
of a number of software development projects. The virtual office
system is one of Danby Technologies Corporation's development
projects which include developments for the travel and
entertainment industries, labour and information management and
online accounting systems. Mr. Danvers has been our sole
promotor since inception.
Except as previously described, we have not been involved in any
bankruptcy, receivership or similar proceeding, nor have we been
involved in any material reclassification, merger, consolidation,
or purchase or sale of a significant amount of assets not in the
ordinary course of business.
DESCRIPTION OF BUSINESS
Business of Issuer
Our plan is to provide as our principal product, a "virtual
office" service for small and medium businesses for which we
would charge fees, including those for set up and for monthly
usage. We are currently in the development stage and have not
as yet engaged in revenue producing activities. Our current
objective is to complete development of our product including the
establishment of a commercial service and to market it.
We refer to our project as a "virtual office" or the virtual
office system and use the terms in our business description to
indicate our proposed service offering. A virtual office is
essentially a network computer system or server, similar to those
found in most business offices. These servers provide the
business with software applications, security, network
communications and a central data store. The distinguishing or
differing feature of a virtual office system is that instead of
the business establishing and maintaining its own network
computer system in its office, the applications, security,
communications and data store are maintained on our servers which
are physically located in our office. Customers share our
network computer system with other virtual office customers. The
virtual office is accessed securely by a businesses' properly
authorized employees, advisors and customers (we refer to these
as "users") via the Internet, using a simple Internet browser on
their computer workstation. Our virtual office system will not
require specialized software to be installed on the computer our
customer uses to access our system. We also refer to the term
"online" in our business description to indicate a service or
business process that is accessible via the Internet, 24 hours a
day.
A virtual office provides:
- A ready to use network computer system, complete with
common business software applications and features for full
operation of a business. A business can be set up and using its
virtual office in a little as 24 hours.
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- Management by the virtual office provider who is
responsible for maintenance, administration and software
upgrades and for providing uninterrupted service to users.
- User access to their virtual office at any time, from any
place where a users' computer has access to the Internet.
- Users with access to a central source for their business
data, files and communications and provides the ability for
users to work together and collaborate on projects or daily
tasks. Business can capture information centrally as it is
created and have it available to authorized persons in real
time.
- A businesses' management and its other users with the
ability to locate their business information quickly and
in the context of their work.
Management identified the virtual office as a service that
exhibits strong commercial potential for reasons including:
-the increasing availability and reducing cost of high-speed
Internet connections;
-the cost of deploying computer software and computer systems;
-the cost of maintaining computer systems and providing system
help;
-the trend toward employees working away from their primary
office;
-the cost of experienced system managers; and
-the large market represented by small and medium businesses.
The Virtual Office
To be successful and attract users, the business model that we
have created requires us to:
* develop and commercialize a system that is easy to use,
responsive, provides functionality customers are seeking and
is cost effective;
* provide assistance, training and support to our customers so
they are able to gain maximum benefit from our virtual office
system;
* provide a robust system capable of handling many
users simultaneously without affecting other users; and
* provide privacy and security for our customer's data
and their communications to and from our system.
We believe our ultimate success will be measured by the extent
our customers use our system and derive value from it. A summary
of the proposed features and infrastructure supporting the
virtual office and of our current development and future plans
follows.
Features
The proposed virtual office system is currently designed to
include the following capabilities or functionality:
-Email, calendar, address book, to-do lists and reminders
Each user will have fully enabled email including a personal name
and address book and the ability to use folders to categorize e-
mails, a personal to-do list and personal reminders. Calendars
allow for appointments and recurring meetings.
-Group calendar and schedule
Each user within a company will have the ability if permissions
have been granted to make appointments and meetings with other
members of the company and to determine available time, book
meeting rooms and other resources company-wide.
-Web site
We will host our customers' web site and Internet domain as an
integral part of their virtual office.
15
- -Data storage and access, document sharing, cut and paste
Each of our clients will be provided with disk storage space for
their data and business applications. Our virtual office will
provide the ability to segregate data in directory structures and
to have different permissions applied. Our system will provide
users with the ability to transfer data to and from our system to
their local machines and will also allow most of our client's
applications to share data through the system's clipboard.
- -Business productivity applications:
Each of our customers will be provided with a suite of business
productivity programs which integrate with the other features of
the virtual office. The following productivity application modules
will be offered:
Client and contact management - includes the ability
to maintain contacts throughout the business which are
accessible from a user's email and from other
productivity application modules. Provides businesses
with the ability to track contacts made via telephone,
email, include scanned in letters or other
correspondence, prepare client notes and maintain dis
cussions. The contact information is readily
accessible with views and reports and the ability to
search headings within the information maintained.
Document and resource management - provides a common
store, management, access control and the ability to
categorize and to view summaries and list of
documents. The document management application will
provide a review cycle including the notification of
reviewers, document versioning to segregate changes
and the ability to attach comments, review notes and
discussions to draft documents. Users will also have
the ability to develop and separately post documents
related to their business as resources such as policy
and procedures manuals, benefits manuals, marketing
materials reference materials, how-to information, and
just about any other file or information that a
business may use as a common resource. The resource
section of this module stores and provides easy access
to information in the manner of a corporate library.
Task and project management - includes the ability to
track projects and tasks throughout the business.
Reports and views will allow staff and management to
see the ongoing progress of work and for management to
track and assign tasks. This module will allow
detailed work requests to be tied to customer quotes
and files and to be available to the assigned staff
member in a view of work assignments and to managers
in views of completed and incomplete jobs or tasks.
Time, expense tracking and billing - working in
conjunction with our other modules, particularly the
task and project tracking, business will have the
ability to enable time tracking including time
associated with jobs and tasks. This module will
provide for approval of time records and the
association with a customer, job or internal task. It
will also allow expenses associated with customer work
and billings to be tracked, approved and ultimately
billed. Users can bill and track receipts based on
time, expense and job records developed. In addition
to printing of invoices, our users will be able to
send electronic invoices via email and automated
billing through direct charging to major charge cards.
All of our proposed productivity applications will be
integrated and have the ability to share information.
We will enable within these productivity applications,
the ability to control user access and the ability to
control creation, change or deletion of information in
our modules.
All productivity applications will be search-enabled
so users can search for relevant documents by headers
and by the content of the document or information
itself.
-Local printing
Users of the virtual office will be able to print to virtually any
local or network printer.
-Backup and security
Our system will provide security for our users' data and their
communication into and out of the virtual office. We will use
encryption for any communication between our servers
16
and client machines. To protect from system failures, we will provide
a data backups on a daily and weekly rotation. Clients will be able to
request additional backups of their data and offsite storage
through backups to CDROM.
- -Run user applications
Users will have the ability to run their existing Win32, Linux and
UNIX commercial software as part of their virtual office.
Businesses will be able to run their existing software within our
system and access such applications through most Internet browsers.
Applications we host for clients will be able to access all data
files maintained in our system, which the user is authorized to
access, or on a user's computer hard drive or shared hard drive.
We will establish support policies for user applications based on
our testing and on our client's needs. We envision supporting only
certain applications which would include a selection of the most
popular software applications.
- -Help desk, maintenance and upgrades
To enable our users to realize the benefits of our virtual office
system and to enable them to use all its features, we will provide
users with a web based help system and tutorial and access to our
help desk staff who can interact with users over the Internet
through our system to determine user issues and problems. We
expect to additionally provide context driven help on the main user
entry points in our productivity applications and to build a help
database providing general information on using the system,
frequently asked questions as well as providing a forum for
customers to contact our staff to resolve technical problems they
may encounter. We plan to include a general tutorial for first
time customers to familiarize them with the system and setting up
of their office.
Internal Systems
The virtual office is composed of three components or layers
which we describe as the hardware and operating system layer, the
middleware layer and the business processes layer.
Hardware and Operating System
Our virtual system will require network servers and operating
system software. We will also require internet connections and
an internal network. Our virtual office will require
approximately eight servers and will require networking and full
interoperation. The operating system layer is responsible for
all hardware and storage operations and for all network
communications and authentication of users. We use a combination
of servers running UNIX, Linux and Windows. We will require
licenses for the UNIX and Windows operating system software from
their respective suppliers. Operating system software is priced
per server with additional fees for each user. We are able to
acquire the operating system licenses readily without lead time,
in the normal course of business.
Middleware Software
On our servers, we run middleware software to provide
specialized functionality such as firewall, web management,
database, name services, security, mail and communications.
Middleware is the term we use to describe the system services and
development environment upon which our virtual office is
developed. Middleware is generally implemented as a software
server. We use a combination of public domain middleware for
which we pay no license fees and commercial middleware for which
we pay licensing fees which are generally priced per server with
additional fees for each user. We are able to acquire the
required middleware licenses readily without lead time, in the
normal course of business.
Business Processes
Our virtual office is developed and implemented in this layer.
There are no additional licensing fees or charges applicable to
our own development. Where we include modules or programs in our
virtual office which others have written, we may be required to
pay licensing or royalty fees to the author of such program or
module. We will also develop and implement our internal
management information system in this layer, consisting of system
sign-up and tracking of client installations, change orders,
service calls, customization requests, other services and overall
usage of the system. Our management information system will need
to provide real-time information on the status of client orders
and system usage and provide automated billing and accounting.
Current and Planned Development
In September, 2001, we entered into an agreement to acquire the
prior development, designs and
17
pilot implementation of a virtual office system from Danby
Technologies Corporation, a company owned by Robert Danvers.
Danby Technologies developed the initial implementation of the
virtual office over the period of approximately two years from the
Fall of 1999 through to our acquisition in September, 2001 at a cost
of $60,000. Under the terms of our agreement, we paid Danby
Technologies $60,000 to reimburse these costs. Reimbursed costs
do not include any affiliate fees, charges or mark-ups.
The pilot of the virtual office is currently installed on Danby
Technologies' servers. We share their servers, under the terms
of an engagement with them. Our part time technical staff are
also provided currently under this engagement. For the provision
of their servers, network and internet access and for the
provision of part-time technical services (one staff member for
approximately 20 hours per month) we pay Danby Technologies the
sum of $3,000 per month. We are able to install our pilot or our
commercial virtual office system, when completed, on our own
equipment at such time as it is acquired.
In October 2001, we incorporated a wholly-owned British Columbia
corporation for future Canadian marketing and to provide us with
the ability to operate a physical business presence to conduct
our testing and further development work. We anticipate we will
operate the first commercial installation of our virtual office
from our subsidiary's premises in New Westminster, British Colum
bia, Canada.
Subsequent to the acquisition described above, management and
our part time staff have continued to implement our business plan.
We have focused our resources to test and improve the design, fea-
tures and implementation of the virtual office system. Our
testing has been assisted by some clients of Danby Financial
Management Corp. and Danby Technologies Corporation, companies
controlled by our President, who have participated informally
with us to test our pilot system's capabilities. Other than as
noted above, we pay no fees for any participants in such tests.
Our testing and development has focused on:
- testing various commercial software applications for their
ability to operate in our virtual office;
- developing and testing the prototype business
productivity applications; and
- testing the use of the pilot system by different
companies.
We believe that both our testing and additional research have
provided validation for our designs and development approach and
have also provided us with essential information to enhance our
commercial development plan including:
- better determination of the commercial software applications
that we will support and that a customer can run in their virtual
office;
- a better approach for the development of our business
productivity applications; and
- new commercial software which will enable us to better
maintain segregation and privacy for our customers' data
and to shield their activities from view by other
customers who share the virtual office.
As a result of this work, we are currently upgrading our pilot
and our server software. Our staff will recommence testing after
the update is completed.
Our business plan can be summarized in four principal categories
as outlined below. We estimate the development period required
to complete a commercial implementation of the virtual office
would be four months at an estimated cost of $184,200. At
present we do not have sufficient funds to engage additional
employees or contractors and to proceed with our development
plan. Continuation of development and ultimately the marketing
of our proposed product is conditional upon our obtaining
additional funding.
We have set forth estimates of the costs and time frame to
complete the elements of our business plan under Plan of
Operation which immediately follows this discussion.
1. Virtual Office System
We currently have a pilot implementation of our virtual office
and have developed designs for its commercialization. Our
existing pilot currently comprises the principal functionality of
the virtual
18
office system, as outlined above. However, it is not complete
and it is not a commercial installation. We will need
to undertake additional development including:
- rewriting the software for the business productivity
application modules which we described in detail under
the subheading titled Features;
- developing our help system;
- conducting the related interoperation and testing of
these functions and modules; and
- training staff to provide support to customers.
We will also need to install the components of our virtual
office system on production or commercial network servers, when
acquired.
2. Internal Systems
We currently have no hardware of our own, and have not yet
acquired any operating system or middleware software licenses.
However, we currently rent a shared Internet connected network
system from Danby Technologies Corporation to provide the
hardware, software and middleware layers in which we operate our
current development and test operations. Our business plan calls
for us to acquire our own network servers and to undertake
additional work to install the operating system and middleware
software and to conduct related interoperation and testing.
We have not as yet developed our internal management information
system for the virtual office. We will need to undertake
additional development including design, software writing,
testing and training staff in its use.
3. Development of Web Site and Virtual Office Demonstration
For marketing of our service, our plan includes the development
of a web site and web-based demonstration of our virtual office
system. Our web site will incorporate information about
ourselves and our products and services. The demonstration will
allow potential customers the ability to tryout the features and
usability of our virtual office prior to purchasing.
We have not commenced development of these components. We plan
to outsource the development of the web site to a firm with
expertise in designing web sites and have identified companies
that have the capability to complete this development. We have
not as yet identified the environment or method for developing
the system demonstration, nor have we identified companies or
individuals that have the ability to complete such a system
demonstration.
4. Marketing of the Virtual Office
Our objective will be to commence marketing upon completion of
development of the virtual office system, internal systems, web
site and demonstration system. Our marketing strategy is pro
posed to be directed toward small and medium sized businesses
located in the U.S. or Canada with the following attributes:
* employees and contractors working away from the office;
* home office market; and
* rapidly growing and start-up enterprises requiring
scalable computer systems.
We plan to outsource the development of our marketing, including
the development of logos, art and design work for our brochures
and web site. We also expect to outsource our marketing
functions for the launch of our virtual office and ongoing
marketing functions for the foreseeable future. We believe an
independent marketing team, paid under a fair commission program
with channels for reporting customer contacts will provide the
best value and allow our management to concentrate on developing
and managing the virtual office system. We have established a
wholly-owned subsidiary in Canada for marketing in that country.
Revenue Sources
The successful implementation of our business model will enable
us to generate revenues from:
-setup or implementation fees;
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-monthly system fees;
-monthly system usage fees;
-consulting and training fees; and
-customizing fees;
Intellectual Property
We currently plan to market our product as the Infotec
Virtual Office although we have not yet applied for such a
registered trademark and there is no assurances that such mark
would be available that we would be granted such mark. We have
obtained the right to use the Internet domain names
www.infotecbusinesssystem.com, infotecbusinessstrategies.com and
infoteconlineoffice.com. We do not have and cannot acquire any
property rights in an Internet address.
To protect our rights to intellectual property, we will rely on
a combination of trademark, copyright law, trade secret
protection, and confidentially agreements although we do not have
confidentiality agreements signed in every instance.
Our virtual office system requires some commercial computer
software written and owned by others for which we are required to
pay licensing fees.
Competition
We will compete with numerous providers of online or Internet
accessible business applications and services companies, many of
which have far greater financial and other resources than we do.
Many of these companies have established histories and
relationships in providing online applications or systems that
enable them to attract talent, marketing support, the interest of
decision makers and financing. Moreover, proven track records
are of paramount consideration in selecting vendors.
We plan to compete through the development of an integrated,
fully managed and easy to use virtual office as a complete
online system for small and medium businesses. We also plan to
aggressively market the virtual office through successful
marketers.
While our management team has significant business experience,
we, as a company, have no proven track record in the online
services industry. There is no assurance that we will be able to
successfully complete development of a commercial system or
compete in this industry.
Government Regulations
Due to the increasing popularity and use of the Internet, it is
possible that a number of laws and regulations may be adopted
with respect to the Internet generally, covering issues such as
user privacy, pricing, and characteristics and quality of
products and services. Similarly, the growth and development of
the market for Internet commerce may prompt calls for more
stringent consumer protection laws that may impose additional
burdens on those companies conducting business over the Internet.
The adoption of any such laws or regulations may decrease the
growth of commerce over the Internet, increase our cost of doing
business or otherwise have a harmful effect on our business.
Currently, governmental regulations have not materially
restricted the use or expansion of the Internet. However, the
legal and regulatory environment that pertains to the Internet is
uncertain and may change. New and existing laws may cover issues
that include:
* Sales and other taxes;
* User privacy;
* Pricing controls;
* Characteristics and quality of products and services;
* Consumer protection;
* Cross-border commerce;
* Libel and defamation;
* Copyright, trademark and patent infringement; and
* Other claims based on the nature and content of Internet
materials.
These new laws may impact our ability to develop and market our
virtual office system in accordance with our business plan.
20
We may have to qualify to do business in other jurisdictions.
If we commence our virtual office business, we anticipate that
our sales and our customers will be in multiple states and
foreign countries. As our customers may be resident in such
states and foreign countries, such jurisdictions may claim that
we are required to qualify to do business as a foreign company in
each such state and foreign country. Failure to qualify as a
foreign company in a jurisdiction where required, could subject
us to fines, penalties or other prosecutions.
Research and Development Expenditures
We have not expended any money on research and development. We
have however spent $60,000 on expenses associated with the
acquisition of prior development costs and plan to expend in the
next 12 month period the sum of $184,200 on expenses associated
with the development of our proposed virtual office system.
We expect to continue to develop our virtual office system and
expect to devote a significant proportion of our revenues and
capital funds to developing enhancements to our virtual office
system and maintaining our competitive positioning.
Environmental Regulations
We are not aware of any environmental laws that will be
applicable to the operation of our business.
Employees
We currently have no full-time employees, one part-time employee
and one part-time contractor. Mr. Robert Danvers, our President
and Chief Executive Officer is a part-time employee. Mr. Tim
Sproule, a consultant with Danby Technologies Corporation and
available to us under the terms of our engagement with them, is a
part-time consultant. As prospects and circumstances warrant, we
will engage additional full-time and part-time employees, as well
as consultants, to perform required services.
PLAN OF OPERATION
Current Operation Development
In furtherance of our business model:
- In October 2001, we acquired the prior development and pilot
implementation of the virtual office from Danby Technologies
Corporation, a company controlled by our founder and
President. Danby Technologies Corporation developed the
original plans and pilot implementation over a period of
approximately two years prior to our acquisition.
- In October 2001, we organized a wholly-owned British
Columbia, Canada corporation to enable us to conduct our
development and to service the Canadian market after
commercialization of our virtual office system. We have
additionally rented office space from Danby Technologies
Corporation since October 2001 for our testing and ultimately
for marketing in Canada.
- We have engaged Mr. Tim Sproule through our engagement of
Danby Technologies Corporation, on a part-time basis since
October 2001 to provide computer and system services on a
monthly basis and to act as our technical consultant. Mr.
Sproule is a computer system specialist with extensive
experience with system management, programming and develop
ment. As a consultant, Mr. Sproule has managed large UNIX
based distributed systems and played a key role in project
developments.
- In October, 2001, we engaged Danby Technologies Corporation
to provide an Internet accessible server-based system. This
hardware, network infrastructure and internet connectivity
has enabled us to maintain our pilot implementation of the
virtual office system and continue development and testing.
- Stephen Jackson joined as a member of our board of directors
in April 2002. Mr. Jackson is
21
a businessman, engaged in
providing business consulting to private and public companies
since 1980.
Since our acquisition of prior development, pilot and designs,
we have continued to progress our development plan focusing on
continued testing in a live business environment with multiple
users. We have also updated our designs for a commercial virtual
office system. Our testing the scale-up and usability of the
virtual office system has confirmed development issues and
provided opportunities for improving our proposed product. We
are currently upgrading our pilot system to incorporate new
software and designs. Our objective with these upgrades are to
provide better segregation of our customers' data; to ensure
privacy of our users activities; and to improve administration of
user identities and system permissions. We will test the
upgraded pilot to confirm it meets these objectives.
Our plan of operations for the twelve months following the date
of this registration statement is to complete the following
objectives within the time period specified, subject to our
obtaining funding for the development and marketing of our
virtual office system:
* Complete development of the virtual office system;
* Complete development of our internal systems;
* Complete development of our web and demonstration site;
and
* Market our virtual office system;
To accomplish our objectives, we will need to undertake
significant development work and will accordingly need to hire
additional employees, contractors and further, engage consultants
to enable us to undertake marketing. Progress in development and
the hiring of additional staff is conditional upon our obtaining
financing.
The projected time to complete each of the elements of our plan
of operations and its anticipated cost are discussed below:
1.Complete Development of Virtual Office System
We are currently testing and upgrading the pilot virtual office
system however we require additional design, programming and
testing to develop a commercial version of our virtual office
system. The principal focus of this development includes
extensive software development to write the software for the
business productivity applications and development of the help
and user support systems. We anticipate this development could
be completed within a four month period after we obtain funding.
We anticipate that the development costs will be approximately
$60,000 and will consist primarily of payments to consultants for
programming and software development services and the cost of
help desk training and staff management.
2.Complete Development of Our Network Infrastructure
We anticipate that upgrading of our network system and Internet
infrastructure, including additional security features and the
development of our internal management information system to be
completed over a three month period during the development of the
virtual office at a budgeted cost of $12,500. To complete our
infrastructure for commercial operations, we estimate software
licensing costs of approximately $29,700 will be required. We
also anticipate that costs for the acquisition of additional
equipment, prepayments for high speed internet connection
services and other costs including fees for the development and
implementation of this infrastructure will be approximately
$62,000.
3.Complete Development of Web and Demonstration Site
We plan to commence development of our web site and web-based
system demonstration during the final month of the virtual office
development program. Provided funds are available, we anticipate
that this component could be completed in a period of less than
45 days. We anticipate development costs will be approximately
$20,000.
4.Marketing
We plan to undertake the development of a logo and other art
and to develop a look and feel for our brochures and web site and
which we will incorporate into an advertising and marketing campaign
once the development of our virtual office system and web site
are approaching completion. We anticipate that initial marketing
expenses, including travel for the first year will be
approximately $75,000. We anticipate that the marketing
materials and campaign would be designed by an outside marketing
consulting firm.
Employees and Consultants
We currently have no full-time employees, one part-time employee,
Mr. Robert Danvers, our President and Chief Executive Officer and
one part-time contractor, Mr. Tim Sproule, who is available to us
under our engagement with Danby Technologies Corporation. Our
full-time employee and consulting positions are not expected to
exceed six persons in the near future, including Mr. Robert
Danvers, our President, a technical and systems manager, an
administration assistant, a senior programmer and two technical
support staff. We will contract with other consultants for
specialized development to the extent required. The cost of
employees or consultants over the next twelve months has been
estimated as $106,000. The estimated cost of employees or
consultants engaged in development and marketing has been
included in the estimates contained within other items of this
plan.
Working Capital Requirements
In addition to the above, we will incur additional expenses on
account of overhead and administration. These costs will include
fees payable for rent, office expenses, travel, legal and
accounting services. We anticipate spending approximately
$44,000 on these expenditures over the next twelve months. In
addition to the amounts noted above, we are seeking an additional
amount of funding aggregating approximately $50,000 for
unalocated working capital.
Results of Operations
We have not yet engaged in any revenue-producing activities,nor
are we a party to any binding agreements that will generate
revenues. Due to our lack of revenue-production to date, and our
lack of contractual commitments to generate revenue, there is no
basis at this time for investors to make an informed
determination as to the prospects for our future success. For
similar reasons, our auditors have included in their report
covering our financial statements for the period from
incorporation to April 30, 2002, that there is substantial doubt
about our ability to continue as a going concern.
For the period from incorporation August 30, 2001 through April
30,2002 we incurred a deficit of $92,438. Our principal areas of
expenditure during the period were for prior development costs of
$60,000, rent and occupancy costs of $10,500, system rental of
$10,308 and technical subcontracts of $10,308. As at April 30,
2002, we had a working capital deficit of $85,438.
Through April 30, 2002, we funded our operations through a
combination of supplier finance and the sale of our equity
securities. In October 2001, we completed the sale of 2,100,000
shares of common stock for proceeds to us of $7,000. The sale
of these shares was effected off-shore, pursuant to SEC rules,
regulations and interpretations, including Regulation S.
Subsequent to April 30, 2002 we completed the sale of an additional
1,200,000 shares of common stock resulting in net proceeds to us
of $60,000 and settled the $60,000 debt due to Danby Technologies
Corporation under the terms of the October 3, 2001 purchase
agreement by the issuance of 1,200,000 shares of our common
stock. The sale of these shares was effected off-shore, pursuant
to SEC rules, regulations and interpretations, including
Regulation S. At July 31, 2002 our working capital position was
approximately $12,600.
Financial Plan & Operation
Our plan as outlined above anticipates we will spend approximately
$437,300 over the next twelve month period pursuing our stated
plan of operations. Of these expenditures, we anticipate that
approximately $287,000 will be spent within the next six month
period.
The funds available to us currently are insufficient to carry out
our plan of operations and complete our development program and,
as we will be unable to generate revenues until such time as
development is completed, we will require additional financing in
order to pursue our plan of operations and our business plan. We
believe that the funds currently available will enable us to pay
the costs of this offering.
Our financial plan requires us to seek additional capital in the
private and/or public equity markets.
23
This additional capital may be provided by the sale of equity or
debt securities, or through the issuance of debt instruments. If we
receive additional funds through the issuance of equity securities,
however, our existing stockholders may experience significant
dilution. If we issue new securities, they may contain certain
rights, preferences or privileges that are senior to those of our
common stock. Moreover, we may not be successful in obtaining
additional financing when needed or on terms favorable to our
stockholders. As we have no commitments from any third parties
to provide additional equity or debt funding, we cannot provide
any assurance that we will be successful in attaining such
additional funding.
Our current operations are budgeted at approximately $5,800 per
month or a total of $70,000 over the next twelve month period.
In the absence of third-party funding, we expect to obtain
interim funding for our current level of operations through a
combination of supplier finance, principally from Danby
Technologies Corporation and from loans or advances from our
management, affiliates and existing stockholders. Where we
determine that the available funding is insufficient to maintain
our current operations, we will reduce our expenditures
accordingly. We estimate that in the absence of the costs for
our office, shared network computers and part-time technical
services, our budget over the next twelve month period would not
exceed $16,000. We expect our management, affiliates and current
stockholders would support this minimum budget over the next
twelve month period. Although management has indicated a
willingness to provide additional financing for such limited
operations, we have no written commitments for funding and
accordingly we can provide no assurances that additional funding,
as required, will be available to us or be available to us upon
acceptable terms. If we receive no additional funding, we will
eventually have to cease operations.
We anticipate incurring continuing operating losses for the
foreseeable future. We base this expectation, in part, on the
fact that we will incur substantial operating expenses in
completing our development program and do not anticipate earning
any revenues until after development is completed and marketing
has commenced. Our future financial results are also uncertain
due to a number of factors, some of which are outside our
control. These factors include, but are not limited to:
(a) our ability to develop a commercially marketable
virtual office system with the features and functionality
sought by our potential customers;
(b) our ability to successfully market our virtual
office system to potential customers;
(c) our ability to charge fees for use of our virtual
office system that will enable us to generate revenues
that exceed our operating costs; and
(d) the introduction and availability of competing
services.
As a result of the material uncertainties discussed above
regarding our financial position and our ability to carry out our
business plan and market our proposed service, persons who cannot
afford a complete loss of their investment should not purchase
our securities.
We believe the above discussion contains a number of forward-
looking statements. Our actual results and our actual plan of
operations may differ materially from what is stated above.
Factors which may cause our actual results or our actual plan of
operations to vary include, among other things, decisions of our
board of directors not to pursue a specific course of action
based on its reassessment of the facts or new facts, changes in
the application hosting business or general economic conditions
and those other factors identified in this prospectus.
DESCRIPTION OF PROPERTY
We do not own or lease any real property. Our principal
executive offices are located in property of Danby Technologies
Corporation, a company controlled by Mr. Robert Danvers, our
President and a director, at 444 Columbia Street E., New
Westminster, B.C. V3L 3W9. Our telephone number is (604) 777-
1707. We pay on a month to month arrangement since October,
2001, for our office rent at this location at a rate of US$1,500
per month.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as set forth below, there have been no material
transactions, series of similar transactions, currently proposed
24
transactions, or series of similar transactions, to which we are
or will be a party, in which the amount involved exceeded $60,000
and in which any of our directors or executive officers, any
security holder who is known by us to own of record or
beneficially more than five percent of our common stock, any
promoter, or any member of the immediate family of any of the
foregoing persons, had a material interest.
Mr. Robert Danvers may be considered a promoter within the
meaning of the federal securities laws.
During the year ended April 30. 2002:
We acquired from Danby Technologies Corporation, a company
owned and controlled by Robert Danvers, the prior
development, designs and implementations for a virtual
office system for the reimbursement of $60,000 of Danby
Technologies Corporation's prior out of pocket development
expenses and a royalty on future sales of 2%, to an
aggregate $250,000 and thereafter at the rate of 1% of net
revenues.
We issued 2,100,000 common shares in a private transaction
at the price of $0.00333 per share to Mr. Robert Danvers,
Mr. Danvers spouse, Chantal Trudeau and their minor
children Nicholas and Simon Danvers for an aggregate
consideration of $7,000.
We rented our office premise for our British Columbia
subsidiary and our executive offices from Danby
Technologies Corporation at the rate of $1,500 per month
on a month to month basis. In the period from
incorporation to April 30, 2002, we incurred rental
charges aggregating $10,500 of which the outstanding
balance was $7,971 at April 30, 2002.
We engaged Danby Technologies Corporation as contractor to
provide us with a shared internet enabled network system
for deploying and testing our development and to provide
professional staff to maintain our implementation and
undertake development. Fees of $3,000 per month are based
on fees Danby Technologies Corporation charges other firms
for comparable services. In the period from incorporation
to April 30, 2002, we incurred fees related to systems and
professional fees aggregating $20,616 of which the
outstanding balance was $20,616 at April 30, 2002.
Danby Technologies Corporation, advanced various operating
expenses on our behalf, the outstanding balance of which
was $70 at April 30, 2002.
Danby Financial Management Corp., a company controlled by
Robert Danvers, advanced various operating expenses on our
behalf, the outstanding balance of which was nil at April
30, 2002.
Subsequent to the year ended April 30. 2002:
We issued 1,200,000 common shares to Danby Technologies
Corporation and a member of their staff in settlement of
the principal amount of $60,000 due Danby Technologies
Corporation under the October 3, 2001 purchase agreement.
At this time we have not formulated any corporate policies for
entering into transactions with affiliated parties.
Members of our management team are not employed by us on a full-
time basis. They are involved in other business activities and
may, in the future become involved in other businesses. If a
specific business opportunity becomes available, such persons may
face a conflict in selecting between our business and their other
business interests. We do not have and do not intend in the
future to formulate a policy for the resolution of such
conflicts. We currently have no agreements with members of our
management team. We have not determined when an employment
agreement would be entered into with Robert Danvers, our
President however we have determined to review entering into an
agreement after a public market for our common shares develops.
25
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
No Public Market for Common Stock
There is presently no public market for our common stock. We
anticipate applying for trading of our common stock on the OTC
Bulletin Board upon the effectiveness of the registration
statement of which this prospectus forms a part. However, we can
provide no assurance that our shares will be traded on the
bulletin board or, if traded, that a public market will
materialize.
We understand that, in 2003, subject to approval of the
Securities and Exchange Commission, The NASDAQ Stock Market
intends to phase out the OTC Bulletin Board, and replace it with
the Bulletin Board Exchange or BBX. As proposed, the BBX
will include an electronic trading system to allow order
negotiation and automatic execution. The NASDAQ Stock Market has
indicated its belief that the BBX will bring increased speed and
reliability to trade execution, as well as improve the overall
transparency of the marketplace. Specific criteria for listing
on the BBX have not yet been announced, and the BBX may provide
for listing criteria which we do not meet. If the OTC Bulletin
Board is phased out and we do not meet the criteria established
by the BBX, there may be no transparent market on which our
securities may be included. In that event, investors may have
difficulty buying and selling our securities and the market for
our securities may be adversely affected thereby.
Holders of Our Common Stock
As of the date of this registration statement, we had thirty-one
(31) registered stockholders.
Rule 144 Shares
A total of 3,300,000 shares of our common stock will be
available for resale to the public after October 6, 2003,
(2,094,000 shares), April 12, 2004 (6,000 shares) and May 13,
2004 (1,200,000 shares) in accordance with the volume and trading
limitations of Rule 144 of the Act. In general, under Rule 144
as currently in effect, a person who has beneficially owned
shares of a company's common stock for at least one year is
entitled to sell within any three month period a number of shares
that does not exceed the greater of:
1. 1% of the number of shares of our common stock then
outstanding which, in our case, will equal approximately
45,000 shares as of the date of this prospectus; or
2. the average weekly trading volume of our common stock during
the four calendar weeks preceding the filing of a notice on
form 144 with respect to the sale.
Sales under Rule 144 are also subject to manner of sale provisions
and notice requirements and to the availability of current public
information about us.
Under Rule 144(k),a person who is not one of our affiliates at any
time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least 2
years, is entitled to sell shares without complying with the
manner of sale, public information, volume limitation or notice
provisions of Rule 144.
As of the date of this prospectus, persons who are our affiliates
hold 3,280,000 shares that may be sold pursuant to Rule 144
after October 6, 2003, April 12, 2004 and May 13, 2004.
Stock Option Grants
To date, we have not granted any stock options.
Registration Rights
We have not granted registration rights to the selling stockholders
or to any other persons.
Dividends
There are no restrictions in our articles of incorporation or
bylaws that prevent us from declaring dividends. The Nevada
Revised Statutes, however, do prohibit us from declaring
dividends where,
26
after giving effect to the distribution of the dividend:
1.we would not be able to pay our debts as they become due
in the usual course of business; or
2.our total assets would be less than the sum of our
total liabilities plus the amount that would be needed to
satisfy the rights of stockholders who have preferential
rights superior to those receiving the distribution.
We have not declared any dividends, and we do not plan to
declare any dividends in the foreseeable future.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information relating to all
compensation awarded to, earned by or paid by us during each of
the preceding three fiscal years to: (a) all individuals serving
as our Chief Executive Officer in the fiscal year ended April 30,
2002; and (b) each of our executive officers who earned more than
$100,000 during the fiscal year ended April 30, 2002:
Other Securities
Annual Underlying All
Name and Fiscal Compen- Options/ LTIP Other
Principal Position Year Salary Bonus sation SARs (#)Payouts
Compensation
Robert Danvers 2002 - - - - - -
President, CEO
Stephen Jackson 2002 - - - - - -
Secretary, Treasurer
Option Grants in Last Fiscal Year
We did not grant any stock options to the executive officers
during our most recent fiscal year ended April 30, 2002. We have
also not granted any stock options to executive officers since
April 30, 2002.
Compensation of Directors
There are no standard arrangements pursuant to which directors
are compensated for any services provided as director. No
additional amounts are payable to directors for committee
participation or special assignments performed for and on our
behalf through to April 30, 2002.
Employment Contracts and Termination of Employment
and Change-in-Control Arrangements
There are no employment contracts, compensatory plans or
arrangements, including payments to be received from us, with
respect to any of our directors or executive officers which would
in any way result in payments to any such person because of his
or her resignation, retirement or other termination of employment
with us, any change in control of us, or a change in the person's
responsibilities following such a change in control.
27
FINANCIAL STATEMENTS
Page
Independent Auditors' Report F-2
Consolidated Financial Statements
Consolidated Balance Sheet F-3
Consolidated Statement of Operations F-4
Consolidated Statement of Cash Flows F-5
Consolidated Statement of Stockholders' Deficiency F-6
Notes to the Consolidated Financial Statements F-7 - F-10
28
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2002
(Stated in U.S. Dollars)
AUDITORS' REPORT
To the Shareholders
Infotec Business Systems, Inc.
(A development stage company)
We have audited the consolidated balance sheet of Infotec
Business Systems, Inc. (a development stage company) as at
April 30, 2002 and the consolidated statements of
operations, cash flows, and stockholders' deficiency for the
period from August 30, 2001 (date of inception) to April 30,
2002. These consolidated financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with United States
generally accepted auditing standards. Those standards
require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are
free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements
present fairly, in all material respects, the financial
position of the Company as at April 30, 2002 and the results
of its operations and cash flows for the period from August
30, 2001 (date of inception) to April 30, 2002 in accordance
with United States generally accepted accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. The Company is in the development stage and will
need additional working capital for its planned activity,
which raises substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these
matters are described in Note 1(c). These consolidated
financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Vancouver, B.C. "Morgan & Company"
May 27, 2002 Chartered Accountants
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
APRIL 30, 2002
(Stated in U.S. Dollars)
ASSETS
Current
Cash $ 2,066
Amounts receivable 2,094
Prepaid expenses 633
------
$ 4,793
------
LIABILITIES
Current
Accounts payable - related company $ 90,227
Accounts payable - other 4
------
90,231
------
STOCKHOLDERS' DEFICIENCY
Capital Stock
Authorized:
50,000,000 common shares, par value $0.001 per share
25,000,000 preferred shares, par value $0.001 per
share
Issued and outstanding:
2,100,000 common shares at April 30, 2002 2,100
Additional paid-in capital 4,900
Deficit Accumulated During The Development Stage (92,438)
-------
(85,438)
-------
$ 4,793
-------
Nature Of Operations (Note 1)
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD FROM AUGUST 30, 2001 (DATE OF INCEPTION) TO APRIL 30,2002
(Stated in U.S. Dollars)
- ---------------------------------------------------------------
Expenses
Office and miscellaneous $ 1,322
Rent and occupancy 10,500
Equipment rental 10,308
Software development costs 70,308
-------
Loss For The Period $(92,438)
-------
Basic Loss Per Share $ (0.05)
-------
Weighted Average Number Of Shares Outstanding 1,745,679
---------
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD FROM AUGUST 30, 2001 (DATE OF INCEPTION) TO APRIL 30,2002
(Stated in U.S. Dollars)
Cash Flows From Operating Activities
Loss for the period $ (92,438)
Changes in non-cash working capital balances related
to operations:
Prepaid expenses (633)
Amounts receivable (2,094)
Accounts payable - related company 90,227
Accounts payable - other 4
------
(4,934)
------
Cash Flows From Financing Activity
Issuance of share capital 7,000
------
Increase In Cash During The Period 2,066
Cash, Beginning Of Period -
------------
Cash, End Of Period $ 2,066
-----------
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
APRIL 30, 2002
(Stated in U.S. Dollars)
ADDITIONAL
COMMON STOCK PAID-IN
SHARES AMOUNT CAPITAL DEFICIT TOTAL
October 2002 -
Issued for cash 2,100,000 $ 2,100 $ 4,9008 $(92,438) $ (85,438)
Balance, April 30, 2,100,000 $ 2,100 $ 4,9008 $(92,438) $ (85,438)
2002
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2002
(Stated in U.S. Dollars)
1.NATURE OF OPERATIONS
a)Organization
The Company was incorporated in the State of Nevada,
U.S.A. on August 30, 2001. The Company's wholly owned
subsidiary, Infotec Business Strategies, Inc., was
incorporated under the laws of the Province of British
Columbia on October 1, 2001.
b)Development Stage Activities
The Company is engaged in the development of internet
accessible ("online") systems for conducting business
processes in real time. The development is currently
focused on a "virtual office" system for small and
medium businesses which provides remote users with
access via a web browser to their software
applications, corporate data storage and integrated
business applications for contact management, time and
project management, and client management.
The Company is in the development stage; therefore,
recovery of its assets is dependent upon future events,
the outcome of which is indeterminable. In addition,
successful completion of Infotec Business Systems,
Inc.'s development program and its transition,
ultimately to the attainment of profitable operations
is dependent upon obtaining adequate financing to
fulfil its development activities and achieve a level
of sales adequate to support its cost structure.
c)Going Concern
The Company will need additional working capital to be
successful in its planned development activities and to
service its current liabilities for the coming year,
and, therefore, continuation of the Company as a going
concern is dependent upon obtaining the additional
working capital necessary to accomplish its objective.
Management has developed a strategy, which it believes
will accomplish this objective, and is presently
engaged in seeking various sources of additional
working capital including equity funding through a
private placement and long term financing.
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2002
(Stated in U.S. Dollars)
2.SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of the Company has
been prepared in accordance with generally accepted
accounting principles in the United States. Because a
precise determination of many assets and liabilities is
dependent upon future events, the preparation of
consolidated financial statements for a period
necessarily involves the use of estimates which have been
made using careful judgement.
The consolidated financial statements have, in
management's opinion, been properly prepared within
reasonable limits of materiality, and within the
framework of the significant accounting policies
summarized below:
a)Consolidation
These consolidated financial statements include the
accounts of the Company and its wholly owned Canadian
subsidiary, Infotec Business Strategies, Inc.
b)Software Development Costs
Software development costs are charged to expense as
incurred unless the development project meets the
criteria under United States generally accepted
accounting principles for capitalization.
Capitalization of software development costs begins
upon the establishment of technological feasibility and
ceases when the product is available for general
release. The Company has no capitalized software
development costs at April 30, 2002.
c)Development Stage Company
The Company is a development stage company as defined
in the Statements of Financial Accounting Standards No.
7. The Company is devoting substantially all of its
present efforts to establish a new business and none of
its planned principal operations have commenced. All
losses accumulated since inception have been considered
as part of the Company's development stage activities.
d)Income Taxes
The Company has adopted Statement of Financial
Accounting Standards No. 109 - "Accounting For Income
Taxes" (SFAS 109). This standard requires the use of
an asset and liability approach for financial
accounting and reporting on income taxes. If it is
more likely than not that some portion, or all if a
deferred tax asset, will not be realized, a valuation
allowance is recognized.
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2002
(Stated in U.S. Dollars)
2.SIGNIFICANT ACCOUNTING POLICIES (Continued)
e)Foreign Currency Translation
The operations of the Company's subsidiary, Infotec
Business Strategies, Inc., are located in Vancouver,
Canada and its functional currency is the Canadian
dollar. The consolidated financial statements have
been translated using the current method whereby the
assets and liabilities are translated at the year end
exchange rate, capital accounts at the historical
exchange rate, and revenues and expenses at the average
exchange rate for the period.
f)Financial Instruments
The Company's financial instruments consist of cash,
amounts receivable, prepaid expenses and accounts
payable.
Unless otherwise noted, it is management's opinion that
this Company is not exposed to significant interest or
credit risks arising from these financial instruments.
The fair value of these financial instruments
approximate their carrying values, unless otherwise
noted.
g)Basic Loss Per Share
Basic loss per share is calculated using the weighted
average number of common shares outstanding during the
period.
3.COMMITMENT
Pursuant to a purchase agreement dated October 3, 2001,
the Company acquired computer software development costs
for the consideration of $60,000, and a royalty of 2% on
the net sales revenue of any product or service that uses
all or any portion of the software until the amount paid
totals $250,000, after which the royalty drops to 1%.
The royalty is payable quarterly following the first
commercial sale of products or services.
The software development costs were acquired from Danby
Technologies Corporation ("Danby"), a company controlled
by a majority shareholder, and was recorded at Danby's
historical cost base.
INFOTEC BUSINESS SYSTEMS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2002
(Stated in U.S. Dollars)
4.RELATED PARTY TRANSACTIONS
During the period, the Company entered into transactions
(recorded at exchange values) with related parties as
follows:
i)The Company engages Danby Technologies Corporation to
provide a shared internet enabled network system for
deploying and testing, and to provide professional
staff to maintain implementation and undertake
development. In the period from inception to April 30,
2002, the Company has incurred fees related to systems
rental aggregating $20,616.
ii) The Company rents its office premise from Danby
Technologies Corporation at the rate of $1,500 per
month on a month to month basis. In the period from
inception to April 30, 2002, the Company has incurred
rental charges aggregating $10,500.
5.SUBSEQUENT EVENTS
a)Subsequent to April 30, 2002, the Company entered into
a debt settlement agreement whereby it settled the
$60,000 arising from the purchase of software
development costs by the issuance of 1,200,000 common
shares at a price of $0.05 per share.
b)Subsequent to April 30, 2002, the Company completed a
private placement of 1,200,000 common shares at $0.05
per share, resulting in proceeds to the Company of
$60,000.
AVAILABLE INFORMATION
Availability of Additional Information
We have filed a registration statement on form SB-2 under the
Securities Act of 1933 with the Securities and Exchange
Commission with respect to the shares of our common stock offered
through this prospectus. This prospectus is filed as a part of
that registration statement and does not contain all of the
information contained in the registration statement and exhibits.
Statements contained in the registration statement are summaries
of the material terms of the referenced contracts, agreements or
documents and are not necessarily complete. In each instance, we
refer you to the copy of the contracts or other documents filed
as exhibits to this registration statement, and the statements we
have made in this prospectus are qualified in their entirety by
reference to the referenced contracts, agreements or documents.
The registration statement, including all exhibits, may be
inspected without charge at the SEC's Public Reference Room at
450 Fifth Street, N.W. Washington, D.C. 20549. Copies of these
materials may also be obtained from the SEC's Public Reference at
450 Fifth Street, N.W., Room 1024, Washington D.C. 20549, upon
the payment of prescribed fees. You may obtain information on
the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
The registration statement, including all exhibits, has been
filed with the SEC through the Electronic Data Gathering,
Analysis and Retrieval system. Following the effective date of
the registration statement, we will become subject to the
reporting requirements of the Exchange Act and in accordance with
these requirements, will file annual, quarterly and special
reports, and other information with the SEC. We also intend to
furnish our stockholders with annual reports containing audited
financial statements and other periodic reports as we think
appropriate or as may be required by law. This registration
statement and other filings made by us with the SEC through its
Electronic Data Gathering, Analysis and Retrieval Systems are
publicly available through the SEC's site on the World Wide Web
located at http//www.sec.gov.
REPORTS TO SECURITY HOLDERS
We will voluntarily send a report annually to stockholders
including our annual audited financial statements.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Nevada General Corporation Law permits the indemnification of
directors, employees, officers and agents of Nevada corporations.
Our articles of incorporation and bylaws provide that we indem
nify our directors and officers to the fullest extent permitted
by the Nevada General Corporation Law. Insofar as
indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us
pursuant to the foregoing provisions, we are advised that, in the
opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
As authorized by the Nevada General Corporation Law, our
articles of incorporation provide that none of our directors
shall be personally liable to us or our shareholders for monetary
damages for breach of fiduciary duty as a director, except
liability for:
- acts or omissions which involve intentional misconduct, fraud
or a knowing violation of law; or
- the payment of dividends in violation of the Nevada Revised
Statutes.
This provision limits our rights and the rights of our shareholders
to recover monetary damages against a director for breach of the
fiduciary duty of care except in the situations described above.
This provision does not limit our rights or the rights of any
shareholder to seek injunctive relief or rescission if a director
breaches his duty of care. These provisions will not alter the
liability of directors under federal securities laws.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated costs of this offering are as follows:
Securities and Exchange Commission registration fee$ 5.52
Federal Taxes NIL
State Taxes and Fees NIL
Transfer Agent Fees 1,000.00
Accounting fees and expenses 10,000.00
Legal fees and expenses 15,000.00
Blue Sky fees and expenses 2,000.00
Miscellaneous NIL
_______
Total $ 28,005.52
_________
All amounts are estimates other than the Commission's registration fee.
We are paying all expenses of the offering listed above. No
portion of these expenses will be borne by the selling
stockholders. The selling stockholders, however, will pay any
other expenses incurred in selling their common stock, including
any brokerage commissions or costs of sale.
RECENT SALES OF UNREGISTERED SECURITIES
We issued 2,100,000 shares of common stock on October 11, 2001 to
Mr. Robert Danvers, Mrs. Chantal Trudeau and their minor
children. Mr. Danvers is our President and a director. Mrs.
Trudeau is the spouse of Mr. Danvers. These shares were issued
pursuant to Section 4(2) of the Securities Act of 1933 at a price
of $0.00333 per share, for total proceeds of $7,000. The
2,100,000 shares of
II-1
common stock are restricted shares as defined in the Securities
Act. Mr. Danvers and Mrs. Trudeau were knowledgeable,
had access to all relevant information in relation
to the company and had the financial capacity to sustain an
investment in the company.
On May 13, 2002, we converted liabilities amounting to $60,000
through the issuance of 1,200,000 shares, at a price of $0.05 per
share, to 2 persons (one of whom was an affiliate). These shares
were issued pursuant to Regulation S of the Securities Act. Each
creditor represented to us that he was a non-U.S. person as
defined in Regulation S. We did not engage in a distribution of
this offering in the United States. Each creditor represented
his intention to acquire the securities for investment only and
not with a view toward distribution. Each creditor represented
to us that he will resell such securities only in accordance with
the provisions of Regulation S, pursuant to registration under
the Act, or pursuant to an available exemption from registration
and agrees not to engage in hedging transactions with regard to
such securities unless in compliance with the Act. Appropriate
legends were affixed to the stock certificate issued to each
purchaser in accordance with Regulation S. The creditors had
access to financial and other information about us and were
afforded the opportunity to ask questions concerning our
operations and the terms of the debt conversion. No registration
rights were granted to any of the purchasers.
We completed an offering of 1,200,000 shares of our common stock
at a price of $0.05 per share to a total of 25 purchasers on May 14,
2002. The total amount received from this offering was $60,000.
We completed the offering pursuant to Regulation S of the
Securities Act. Each purchaser represented to us that he was a
non-U.S. person as defined in Regulation S. We did not engage in
a distribution of this offering in the United States. Each
purchaser represented his intention to acquire the securities for
investment only and not with a view toward distribution. Each
purchaser represented to us that he will resell such securities
only in accordance with the provisions of Regulation S, pursuant
to registration under the Act, or pursuant to an available
exemption from registration and agrees not to engage in hedging
transactions with regard to such securities unless in compliance
with the Act. Appropriate legends were affixed to the stock
certificate issued to each purchaser in accordance with
Regulation S. Each investor was given adequate access to
sufficient information about us to make an informed investment
decision. None of the securities were sold through an
underwriter and accordingly, there were no underwriting discounts
or commissions involved. No registration rights were granted to
any of the purchasers.
We did not utilize an underwriter for any of the foregoing. Other
than the securities mentioned or referenced above, we have not
issued or sold any securities since incorporation.
EXHIBITS
Number Description of exhibit
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
4.1 Regulation S Securities Subscription Agreement (2)
5.1 Opinion of Adorno & Yoss, P.A., with consent to use (to be
supplied by amendment)
10.1 Purchase Agreement with Danby Technologies Corporation (2)
10.2 Debt Settlement Agreement with Danby Technologies Corporation (1)
10.3 Services Engagement with Danby Technologies Corporation (2)
21 Subsidiaries of the Issuer (1)
23.1 Consent of Morgan and Company, Chartered Accountants (2)
23.2 Consent of Adorno & Yoss, P.A. (See Exhibit 5.1)
_______________________
II-2
(1) Incorporated by reference, filed with the corresponding
exhibit number as an exhibit to the company's
Registration Statement on Form SB-2 filed with the Securities
and Exchange Commission on June 17, 2002.
(2) Filed herewith.
UNDERTAKINGS
The undersigned registrant hereby undertakes:
1. To file, during any period in which we offer or sell
securities, a post-effective amendment to this registration
statement:
(i)To include any prospectus required by Section
10(a)(3)of the Securities Act;
(ii) To reflect in the prospectus any
facts or events which, individually or together,
represent a fundamental change in the information in
the registration statement, and Notwithstanding the
foregoing, and increase or decrease in volumes of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end
of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to rule 424(b) if, in the
aggregate, the changes in the volume and price
represent no more than a 20% change in the maximum
aggregate offering price set forth in the Calculation
of Registration Fee table in the effective
registration statement; and
(iii) To include any additional or changed
material information on the plan of distribution.
2. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered herein, 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 hereby which
remain unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and
controlling persons pursuant to the provisions above, or
otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is,
therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities, other than the payment by us of expenses incurred or
paid by one of our directors, officers, or controlling persons in
the successful defense of any action, suit or proceeding, is
asserted by one of our directors, officers, or controlling person
sin connection with the securities being registered, we will,
unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification is against
public policy as expressed in the Securities Act, and we will be
governed by the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
SB-2 and authorized this amendment to the registration statement
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New Westminster, British Columbia,
Canada, on August 15, 2002.
Infotec Business Systems, Inc.
(Registrant)
By: _________________________________
/s/Robert Danvers
President
II-3
In accordance with the requirements of the Securities Act of
1933, this amendment to the registration statement has been
signed by the following persons in the capacities and on the
dates stated.
Signature Title Date
__________________________ President,Chief
Executive August 15, 2002
/s/Robert Danvers Officer and Director
(Principal Executive,
Financial and
Accounting Officer)
Secretary,
Treasurer and
________________________________Director August 15, 2002
/s/Stephen Jackson
II-4
Exhibits
4.1 Regulation S Securities Subscription Agreement
INFOTEC BUSINESS SYSTEMS, INC.
REGULATION S SECURITIES SUBSCRIPTION AGREEMENT
This Regulation S Securities Subscription Agreement is executed in reliance
upon the transaction exemption afforded by Regulation S ("Regulation S") as
promulgated by the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended ("1933 Act").
THE SECURITIES SUBSCRIBED TO HEREBY HAVE NOT BEEN REGISTERED UNDER THE
1933 ACT AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S.
PERSONS (AS HEREINAFTER DEFINED) UNLESS THE SECURITIES ARE REGISTERED
UNDER THE 1933 ACT, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE 1933 ACT IS AVAILABLE.
HEDGING TRANSACTIONS IN THESE SECURITIES MAY NOT BE CONDUCTED
EXCEPT IN COMPLIANCE WITH THE 1933 ACT.
This Agreement has been executed by the undersigned ("Subscriber"), a non-
U.S. person (as hereinafter defined), in connection with the issuance of an
aggregate of 1,200,000 Shares (as hereinafter defined) of INFOTEC BUSINESS
SYSTEMS, INC., a Nevada corporation (the "Issuer") which is a "Category (3)
Issuer" within the meaning of given in Regulation S.
The Issuer is offering up to 1,200,000 Shares at a purchase price of U.S.
$0.05 per Share (the "Offering"). Prior to commencement of the Offering, there
were 2,100,000 shares of the Issuer's Common Stock issued and outstanding. At
the completion of this Offering, assuming the Offering is fully subscribed for
and the Issuer issues 1,200,000 shares of Common Stock for a certain debt, there
will be 4,500,000 shares of the Issuer's Common Stock issued and outstanding of
which the Offering would comprise 26.67% thereof.
The undersigned Subscriber hereby represents and warrants to and agrees
with the Issuer as follows:
1. Agreement to Subscribe: Purchase Price.
(a) Subscription. The undersigned Subscriber hereby agrees to pur
chase from the Issuer ______________ Shares. The Shares are sometimes
hereinafter referred to as the "Securities".
(b) Form of Payment. Subscriber hereby tenders the sum of
U.S.$________, or $0.05 per Share, payable to Infotec Business Systems, Inc., in
full payment of the purchase price for the Shares.
2. Subscriber Representations; Access to Information; Independent
Investigation.
(a) Offshore Transaction. Subscriber represents and warrants to Issuer as
follows:
(i) Subscriber is not a U.S. person (whenever such term is used herein, it
shall have the meaning given in Regulation S).
(ii) At the time Subscriber's buy order originated, Subscriber was
outside of the United States as of the date of the execution and delivery
of this Agreement.
(iii) Subscriber is acquiring the Shares for its own account and
not on behalf of any U.S. person, and the sale has not been pre-arranged
with a purchaser in the United States.
(iv) Each distributor participating in the offering of the Shares, if
any, has agreed in writing that all offers and sales of the Shares prior to
the expiration of a period commencing on the date the Subscriber's
subscription is accepted by the Issuer and ending one year thereafter (the
"Restricted Period"), shall only be made in compliance with the safe harbor
contained in Regulation S, pursuant to registration of Shares under the
1933 Act or pursuant to an exemption from registration.
(v) Subscriber represents and warrants and hereby agrees that all
offers and sales of any of the Securities prior to the expiration of the
Restricted Period shall only be made in compliance with the safe harbor
contained in Regulation S, pursuant to registration of securities under the
1933 Act or pursuant to an exemption from registration, and all offers and
sales after the Restricted Period shall be made only pursuant to such a
registration or to such exemption from registration.
(vi) Subscriber represents and warrants and hereby agrees not to
engage in hedging transactions with regard to the Securities unless in
compliance with the 1933 Act.
(vii) All offering documents received by Subscriber include
statements to the effect that the Securities have not been registered under
the 1933 Act and may not be offered or sold in the United States or to or
for the account or benefit of a U.S. person (other than distributors as
defined in Regulation S) during the Restricted Period unless the Securities
are registered under the 1933 Act or an exemption from the registration
requirements is available. The certificate(s) evidencing the Shares will
contain a legend to such effect.
(viii) Subscriber acknowledges that the purchase of the Securities
involves a high degree of risk and affirms that it can bear the economic
risk of acquiring the Shares, including the total loss of its investment.
(ix) Subscriber understands that the Securities are being offered and
sold to it in reliance on specific exemptions from registration
requirements of federal and state securities laws and that the Issuer is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgements and undertakings of Subscriber set forth
herein in order to determine the applicability of such exemptions and the
suitability of Subscriber to acquire the Securities.
(x) Subscriber is sufficiently experienced in financial and business
matters to be capable of evaluating the merits and risks of its investment
in the Securities, and to make an informed decision relating thereto.
(xi) In evaluating this investment, Subscriber has consulted its own
investment and/or legal and/or tax advisors and has satisfied himself or
herself as to the full observance of the laws of his or her jurisdiction in
connection with any invitation to subscribe for the Shares and/or any use
of this Agreement, including the legal requirements within his/her
jurisdiction for the purchase of the Shares; any foreign exchange
restrictions applicable to such purchase; any governmental or other
consents that may need to be obtained; and the income tax and other tax
consequences, if any, that may be relevant to the purchase, holding,
redemption, sale, or transfer of the Shares.
(xii) Subscriber acknowledges that, in the view of the SEC, the
statutory exemption claimed for this transaction would not be present if
the offering of Shares, although in technical compliance with Regulation S,
is part of a plan or scheme to evade the registration provisions of the
1933 Act. Subscriber is acquiring the Shares for investment purposes and
has no present intention to sell any of the Securities in the United States
or to a U.S. person or for the account or benefit of a U.S. person, either
now or promptly after the expiration of the Restricted Period.
(xiii) Subscriber is not an underwriter of, or dealer in, the Secu
rities; and Subscriber is not participating, pursuant to contractual
agreement, in the distribution of the Securities.
(xiv) If Subscriber is purchasing the Shares subscribed for hereby
in representative or fiducuiary capacity, the representations and
warranties of this Regulation S Securities Subscription Agreement shall be
deemed to have been made on behalf of the person or persons for whom
Subscriber is so purchasing.
(xv) The foregoing representations and warranties are true and
accurate as of the date hereof, shall be true and accurate as of the date
of the acceptance by the Issuer of Subscriber's subscription and shall
survive thereafter. If Subscriber has knowledge, prior to the acceptance
of its Regulation S Securities Subscription Agreement that any such
representations and warranties shall not be true and accurate in any
respect, the Subscriber, prior to such acceptance, will give written notice
of such fact specifying which representations and warranties are not true
and accurate and the reasons therefor.
(b) Registration Under the Securities Exchange Act of 1934. Subscriber
acknowledges that none of the Issuer's securities are registered under Section
12(g) of the Securities Exchange Act of 1934 (the "1934 Act") and, accordingly,
it is not obligated to file periodic reports with the Securities and Exchange
Commission pursuant to the 1934 Act. Subscriber understands that the Issuer
intends to file an appropriate Registration Statement with the Securities and
Exchange Commission under Section 12(g) of the 1934 Act and, thereafter, it is
anticipated that the Issuer will become a reporting company.
(c) Independent Investigation Access. Subscriber acknowledges that Subscriber,
in making the decision to purchase the Shares subscribed for, has relied upon
independent investigations made by it and Subscriber's representatives, if any,
and Subscriber and such representatives, if any, have been given access and the
opportunity, prior to any sale to it, to examine all material books and records
of the Issuer, all material contracts and documents relating to this offering
and an opportunity to ask questions of, and to receive answers from Issuer or
any person acting on its behalf concerning the terms and conditions of this
offering. Subscriber and its advisors, if any, have been furnished with access
to all publicly available materials relating to the business, finances and
operations of the Issuer and materials relating to the offer and sale of the
Shares which have been requested. Subscriber and its advisors, if any, have
received complete and satisfactory answers to any such inquiries.
(d) No Government Recommendation or Approval. Subscriber understands that no
federal or state agency has made or will make any finding or determination
relating to the fairness of an investment in the Securities, or has passed or
made, or will pass on or make, any recommendation or endorsement of the
Securities.
(e) Entity Purchases. If Subscriber is a partnership, corporation or trust,
the person executing this Regulation S Securities Subscription Agreement on its
behalf represents and warrants that:
(i) He, she or it has made due inquiry to determine the truth
fulness of the representations and warranties made pursuant to this Regulation
S Securities Subscription Agreement; and that
(ii) He, she or it is duly authorized (if the undersigned is a
trust, by the Trust Agreement) to make this investment and to enter into and
execute this Regulation S Securities Subscription Agreement on behalf of such
entity.
(f) Market for Securities. Subscriber acknowledges that no market for the
Shares presently exists and none may develop in the future and accordingly Sub
scriber may not be able to liquidate its investment.
3. Issuer Representations.
(a) Reporting Company Status. The Issuer is a non-reporting issuer as defined
by Rule 902 of Regulation S.
(b) Offshore Transaction. The Issuer has not offered these Securities to any
person in the United States or to any U.S. person or for the account or benefit
of any U.S. person.
(c) No Directed Selling Efforts. In regard to this transaction, the Issuer has
not conducted any "directed selling efforts" as that term is defined in Rule 902
of Regulation S, nor has the Issuer conducted any general solicitation relating
to the offer and the sale of the Securities to persons resident with the Unites
States or elsewhere.
4. Expiration of Restricted Period. The transaction restriction in
connection with this offshore offer and sale restrict the Subscriber from
offering and selling to U.S. persons or for the account or benefit of a U.S.
person for a one-year period. In the event that multiple subscriptions are
accepted by the Issuer, each separate subscription agreement shall be deemed to
be a separate offering under Regulation S, and the restrictive period shall
begin for each transaction separately on the date payment is made for that
specific transaction.
5. Exemption: Reliance on Representations. Subscriber understands that
the issuance of the Shares is not being registered under the 1933 Act, and that
the Issuer is relying on the rules governing offers and sales made outside the
United States pursuant to Regulation S. Rules 901 through 903 of Regulation S
govern this transaction.
6. Terms of Subscription and Stock Delivery Instructions. Subscriber
acknowledges and agrees with the Issuer that:
(a) No Minimum for Offering. this Offering is not subject to any minimum
subscription;
(b) Use of Proceeds. that pending acceptance of this Regulation S Securities
Subscription Agreement by the Issuer, all funds paid hereunder shall be depos
ited by the Issuer and immediately available to the Issuer and that in the event
this Regulation S Securities Subscription Agreement is not accepted or is
accepted only in part, the amounts so paid in excess of the accepted amount
shall constitute a non-interest bearing demand loan of Subscriber to the Issuer;
and
(b) Issuance of Certificates. certificates evidencing the Shares shall be
delivered to the Subscriber when practical following acceptance of this
Agreement by the Issuer and clearance of the funds evidencing the purchase price
for the Shares.
7. Conditions to the Issuer's Obligation to Sell. Subscriber understands that
Issuer's obligation to deliver the Shares is conditioned upon (a) the receipt
and acceptance by the Issuer of this Regulation S Securities Subscription
Agreement for all of the Shares subscribed to and (b) the Issuer's receipt of
the purchase price in cleared United States Dollars. The Issuer reserves the
right in its complete discretion to reject this Regulation S Securities
Subscription Agreement.
8. Entire Agreement. This Regulation S Securities Subscription Agreement
constitutes the entire Agreement among the parties hereof with respect to the
subject matter hereof and supersedes any and all prior or contemporaneous
representations, warranties, agreements and understandings in connection
therewith. This Regulation S Securities Subscription Agreement may be amended
only by a writing executed by all parties hereto.
9. Representations by British Columbia Residents. If Subscriber is a
resident of Canada, Subscriber represents to the Company that Subscriber is a
resident of the Province of British Columbia and Subscriber is (Residents of
British Columbia must circle one, as appropriate, and add the name of the
senior officer or director of the Issuer):
(a) a spouse, parent, brother, sister or child of __________________, a
senior officer or director of the Issuer;
(b) a close friend or business associate of ______________________, a
senior officer or director of the Issuer; or
(c) a company, all of the voting securities of which are beneficially
owned by one or more of a spouse, parent, brother, sister, child or close
personal friend or business associate of ____________________, a senior officer
or director of the Issuer.
Dated this ______ day of ________________
___________________________________
Subscriber Signature
___________________________________
Subscriber Name
___________________________________
Address
___________________________________
City, Province, Postal Code
The share certificate(s) should be made out and entered into the corporate
records, as follows (if different than above):
___________________________________
Registered Name
___________________________________
Address
___________________________________
City, Province, Postal Code
THE FOREGOING REGULATION S SECURITIES SUBSCRIPTION IS
HEREBY ACCEPTED:
( ) In Full; ( ) Partial allocation:
________________________________ Shares, on this ______ day of
______________, 2002.
INFOTEC BUSINESS SYSTEMS, INC.
By: ________________________________
Name:______________________________
Its:_________________________________
EXHIBIT
10.1 Purchase Agreement with Danby Technologies Corporation
PURCHASE AGREEMENT
This Agreement made this 3rd day of October, 2001.
BETWEEN:
INFOTEC BUSINESS SYSTEMS, INC., a
Nevada corporation having its registered
office at 50 West Liberty, Suite 880,
Reno Nevada 89501
(hereinafter referred to as the "Purchaser")
OF THE FIRST PART
AND:
DANBY TECHNOLOGIES CORPORATION,
a British Columbia corporation having its
business office at 444 Columbia Street
E., New Westminster, BC V3L 3W9
(hereinafter referred to as the "Vendor")
OF THE SECOND PART
WHEREAS the Vendor has developed a design and plan for a
basic online office system as is described more particularly in
Schedule "A" (the "Basic Online System") including associated methods
and know-how for the implementation and operation of the Basic Online
System and has developed a test implementation of its Basic Online System
and a business plan for the further development and commercialization of
the Basic Online System (collectively known as the "System").
AND WHEREAS the Vendor is unable to fund further development and
commercialization of the Basic Online System and is desirous of seeing the
System in commercial operation.
AND WHEREAS the Vendor wishes to sell and the Purchaser wishes to
purchase the System.
NOW THEREFORE this Agreement witnesses that in consideration of the
premises, and of the mutual covenants and agreements herein contained and
other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged the parties hereto have agreed to and do hereby agree
as follows:
1. PURCHASE AND SALE OF ASSETS
1.01 Upon the terms and subject to the conditions hereof, the Purchaser agrees
to purchase, and the Vendor agrees to sell, assign and transfer to the
Purchaser the System.
1.02 The parties shall, enter into such further agreements and execute any and
all documents as may be necessary and reasonably required to ensure that
ownership of the System vests and remains with the Purchaser.
2. PURCHASE PRICE
2.01 The Vendor agrees to sell and the Purchaser agrees to purchase the System
from the Vendor for the following consideration:
(a) payment of the sum of SIXTY THOUSAND DOLLARS ($60,000) payable on or
before December 31, 2002 without interest thereon; and
(b) royalty of TWO (2%) PERCENT calculated on the Net Sales Revenue (as
defined in Schedule "B" hereto) of any product or service that uses all
or any portion of the System until the amount so paid or payable hereby
totals TWO HUNDRED FIFTY THOUSAND ($250,000) DOLLARS, after which time,
the royalty shall be calculated as ONE (1%) PERCENT (the "Royalty").
2.02 The Royalty shall be paid quarterly in arrears following the first
commercial sale of products or services based on the System.
3. CLOSING
3.01 The closing of the transaction of sale and purchase hereunder will take
place on October 3rd, 2001 at the business offices of Danby Technologies
Corporation at 444 Columbia Street E., New Westminster, British Columbia at
1:00 p.m. (the "Closing Date").
3.02 The parties agree that closing under Section 3.01 hereof shall be
conditional on the receipt by the Vendor of the following documentation:
(a) Certificate of Officer as set out in Schedule "C" hereto;
which shall be fully executed and in force.
4. REPRESENTATIONS AND WARRANTIES
4.01 The Vendor represents and warrants to the Purchaser
(and acknowledges that the Purchaser has relied upon such
representations and warranties in entering into this Agreement) that
except as disclosed herein:
(a) the Vendor has the power and capacity to own and dispose
of the assets and to enter into this Agreement and to carry out
its terms to the full extent;
(b) there are no actions, suits, judgments, litigation proceedings
or investigations outstanding, pending or to the knowledge of the
Vendor threatened against the System, nor does the Vendor know or
have any reasonable grounds or know of any basis for any such actions,
suits, litigation proceedings or investigations;
(c) the execution and delivery of this Agreement and the completion
of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Vendor,
and this Agreement constitutes a legal,
2
valid and binding obligation of the Vendor enforceable against the
Vendor in accordance with its terms except as may be limited by laws
of general application effecting the rights of creditors and by general
principals of equity;
(d) the Vendor warrants and represents that the Vendor has good and
marketable title to the System and the System is free and clear of all
liens, mortgages, charges, pledges, security interests, encumbrances or
other claims whatsoever, other than leases and encumbrances disclosed
herein;
(e) neither the execution nor delivery of this Agreement nor the
completion of the transactions contemplated hereby shall violate any of
the terms and provisions of any order, decree, statute, by-law or
regulation agreement, covenant or restriction applicable to the Vendor;
and (f) the Vendor represents and warrants to the Purchaser and
acknowledges that the Purchaser has relied upon same that the Vendor
owns and has full and clear title to the System.
4.02 The Purchaser represents and warrants to the Vendor (and acknowledges
that the Purchaser has relied upon such representations and warranties in
entering into this Agreement) that except as disclosed herein:
(a) the Purchaser is duly organized, existing, in good standing and
has the power, authority, and capacity to enter into this Agreement
and to carry out the transactions contemplated by this Agreement,
all of which have been duly and validly authorized by all requisite
corporate proceedings.
4.03 From the date hereof until the closing the Vendor shall diligently and
in the manner of a prudent businessperson in the ordinary course of business
and will use its best efforts to preserve the System.
4.04 The Purchaser represents and warrants (and acknowledges
that the Purchaser has relied upon such representations and
warranties in entering into this Agreement) that it will use its best
efforts to develop and commercialize the System.
5. INDEMNIFICATION CLAUSE
5.01 The Vendor covenants and agrees to indemnify and hold
harmless the Purchaser from and against:
(a) any and all losses, damages or deficiencies resulting from any
misrepresentation, breach of warranty or non-fulfilment of any
covenant on the part of the Vendor under this Agreement or from any
misrepresentation or omission from any certificate or other
instrument, furnished or to be furnished from the Purchaser
hereunder; and
(b) all actions, suits, proceedings, demands, assessments, judgments,
costs and legal and other expenses incidental to any of the foregoing,
the cause of action, subject matter, or basis of which arose prior to
the execution of this Agreement, and the Purchaser may, on notice in
writing to the Vendor, settle such claims and make any payment in
relation thereof as the Purchaser sees fit.
5.02 The Purchaser covenants and agrees to indemnify and hold harmless the
Vendor from and against:
(a) any and all losses, damages or deficiencies resulting from any
misrepresentation, breach of warranty or non-fulfilment of any covenant
on the part of the Purchaser under this Agreement, or from any
misrepresentation in or omission from any certificate or other
instrument, furnished or to be furnished from the Purchaser hereunder
;and
(b) all actions, suits, proceedings, demands, assessments, judgments,
costs and legal and other expenses incidental to any of the foregoing,
the cause of action, subject matter, or basis of which arose after the
execution of this Agreement, and the Vendor may, on notice in writing
to the Purchaser, settle such claims and make any payment in relation
thereof as the Vendor sees fit.
6. FAILURE TO PERFORM
6.01 Where Purchaser fails to pay any amounts due by virtue
of Section 2 of this Agreement, the Purchaser agrees to pay the Vendor
interest thereon at the annual rate of seven (7%) percentum on the
outstanding balance unpaid until such time as such outstanding balance is
fully paid.
7. ASSIGNMENT
7.01 The Purchaser acknowledges and agrees that the Vendor may assign,
mortgage, encumber, sell or otherwise transfer or dispose of its interest
or interests hereunder to others (the "Assignees") without the consent of
the Purchaser, provided however that the Purchaser shall be notified of
any such assignment as is applicable for the Purchaser to discharge its
obligations hereunder and the Purchaser further acknowledges and agrees
that it shall not assign, sell, mortgage or otherwise transfer or dispose
of its interest or interests hereunder without the Vendor's prior written
consent.
8. CURRENCY
8.01 For the purposes of this Agreement, all amounts represented herein are
expressed in the functional currency of the United States of America and all
references to dollar or currency amounts shall be read as references to the
currency of the United States of America.
9. NOTICE
9.01 Notice to either party may be made and shall be deemed delivered and
received when sent by first class mail or hand delivered to the following
address:
For the Vendor:
444 Columbia Street E.
New Westminster, BC V3L 3W9
For the Purchaser:
50 West Liberty, Suite 880
Reno, Nevada 89501
10. SURVIVAL
10.01 Notwithstanding any enquiry or investigation by the Purchaser, the
representation and warranties of the Vendor contained in this Agreement
shall survive its closing of the transactions contemplated by this
Agreement and shall continue in full force for the benefit of the Purchaser
thereafter.
11. ENTIRE AGREEMENT
11.01 This Agreement constitutes the entire agreement between the parties
hereto relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties and there are no general or
specific warranties, representations or other agreements by or among the
parties in connection with the entering into of this agreement or the
subject matter thereof except as specifically set forth herein.
12. SEVERABILITY
12.01 If any provisions of this Agreement are held unenforceable or invalid
by a Court of competent jurisdiction, the parties hereto acknowledge and
agree that the enforceability or validity of the remaining provisions shall
not be affected thereby.
13. JURISDICTION
13.01 This Agreement shall be governed by and in construed accordance with
the laws of the Province of British Columbia and the parties hereto hereby
submit to the jurisdiction of the Courts of the Province of British Columbia.
14. TIME OF THE ESSENCE
14.01 Time shall be of the essence in this Agreement.
15. ENUREMENT
15.01 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
IN WITNESS WHEREOF THE PARTIES have hereunto set their hands and Corporate
Seals, duly attested to be the hands of their properly authorized officers
in their behalf on the day and year first above written.
Signed for on behalf of
INFOTEC BUSINESS SYSTEMS, INC.
By its authorized signatory
Per:
/s/Robert Danvers, President
Signed for on behalf of
DANBY TECHNOLOGIES CORPORATION
By its authorized signatory
Per:
/s/Robert Danvers, President
SCHEDULE "A"
To Purchase Agreement of
October 3, 2001
Basic Online Office System
The basic online office system enables users as
individuals and as members of a company wide group
to access a common office computer network over the
internet. The basic online office system is currently
in beta testing and includes:
Email, calendar and address book
To do lists and reminders
Group calendar and schedule
Document sharing
Company web site
Productivity Applications
Follow-me Printing
Data Storage
Data Access
Help Desk Support
Maintenance and upgrades
Security
Backup
Available upgrade features
Fax Services
Online Windows and UNIX Applications
Backup Copies
Dedicated Servers
The system designed to run on a combination of UNIX
and Windows servers and middleware from companies
such as IBM, Lotus and Tarantella, Inc. and requires
programmers and systems maintenance staff knowledgable
in theses products to implement and operate the system.
10.3 Services Engagement
Danby Technologies Corporation
444 COLUMBIA ST. E., NEW WESTMINSTER, B.C. V3L 3W9
TELEPHONE (604) 777-1707 FACSIMILE (604) 777-8801
SYSTEM SOLUTION SPECIALISTS
INFOTEC BUSINESS SYSTEMS, INC October 3, 2001
INFOTEC BUSINESS STRATEGIES, INC
Suite 880 - 50 West Liberty Street
RENO, NV 89501
Dear Sirs:
RE: ENGAGEMENT
This letter will confirm our engagement to provide your firm
with the following:
1. office facilities within our premises at 444 Columbia
Street E., New Westminster, BC V3L 3W9 with sufficient desk
space for three staff members;
2. network systems and related hardware, software,
Internet connectivity and interoperation to run and
continue development of your virtual office; and
3. professional staff to provide technical advice,
programming assistance, systems administration that you
may require to further the development of your virtual
office system.
Our rates for such shall be:
1. $1,500 U.S. monthly in advance for each month in which we
provide office facilities;
2. $1,500 U.S. monthly in advance for each month in which
we provide networked systems; and
2. $1,500 U.S. or such greater amount as shall be
authorized by you, monthly in arrears for each month in
which we provide professional staff for the development
and maintenance of your system.
We confirm that this agreement is on a month to month basis and
that it is renewable automatically each month unless cancelled
by either party hereto with 30 days notice in writing to the
respective party.
We confirm that professional services under this engagement
shall be charged at the rate of $80 U.S. per hour. Other
professional fees will be charged at our then current rate for
professional services rendered.
Thank you for your attention to this matter.
Yours truly,
DANBY TECHNOLOGIES CORPORATION
______________________________________
/s/ROBERT I. DANVERS, President
23.1 Auditor's Consent
MORGAN & COMPANY
INDEPENDENT AUDITORS' CONSENT
We consent to the use in the amended Registration Statement of
Infotec Business Systems, Inc. on Form SB-2 of our Auditors'
Report, dated May 27, 2002, on the consolidated balance sheet of
Infotec Business Systems, Inc. as at April 30, 2002, and the
related consolidated statement of operations, consolidated
statement of cash flows and consolidated statement of
stockholders' equity for the period from inception on August 30,
2001 to April 30, 2002.
In addition, we consent to the reference to us under the heading
"Interests Of Named Experts And Counsel" in the Registration
Statement.
Vancouver, Canada /s/"Morgan & Company"
August 16, 2002 Chartered Accountants