U.S. Securities and Exchange Commission
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
PROSORCONS SPORTS & ENTERTAINMENT COMPANY
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(Name of Small Business Issuer in its charter)
DELAWARE 13-3976020
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(State of Incorporation) (I.R.S. Employer Identification No.)
505 Eighth Avenue, 6th Floor
New York, NY 10018
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(Address of principal executive offices) (Zip Code)
(516) 883-4518
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Issuer's Telephone Number
Securities to be registered pursuant to 12(b) of the Act: NONE
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Securities to be registered pursuant to 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
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(Title of Class)
1
TABLE OF CONTENTS
PART 1
ITEM 1. DESCRIPTION OF BUSINESS 3
RISK FACTORS 17
MANAGEMENT'S DISCUSSION OF
FINANCIAL CONDITION, CHANGES IN FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 22
ITEM 2. DESCRIPTION OF PROPERTY 26
ITEM 3. DIRECTORS, EXECUTIVE OFFICERS, PROMOTER
AND CONTROL PERSONS 26
ITEM 4. EXECUTIVE COMPENSATION 28
ITEM 5. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 29
ITEM 6. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 30
ITEM 7. DESCRIPTION OF SECURITIES 30
PART II
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 31
ITEM 2. LEGAL PROCEEDINGS 33
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS AND FINANCIAL DISCLOSURE 33
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES 33
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS 34
PART F/S
FINANCIAL STATEMENTS 35
PART III
ITEMS 1 & 2 INDEX TO AND DESCRIPTION OF EXHIBITS 62
2
ITEM 1. DESCRIPTION OF BUSINESS.
General Information
We were formed in Delaware on August 7, 1997 as a marketing company,
specializing in outdoor billboard advertising. We have the right to market,
worldwide, a patented mobile advertising display service, which utilizes the
Vital Sign (tm), a bicycle mounted billboard. We emerged from our
development stage at the end of our first fiscal year. We have never been a
party to any material reclassification, merger, consolidation, or purchase or
sale of a significant amount of assets not in the ordinary course of business,
except for the purchase of Pros or Cons Holding Company, Inc., and United
Outdoor, Inc., as outlined below. During our first two years of operation
we focused on marketing the Vital Sign concept. On August 1, 1999, we
purchased United Outdoor, Inc., a company focused on out of home advertising
with special emphasis on the entertainment industry, to enhance and augment
our outdoor advertising business. On September 1, 2000 we purchased ProsorCons
Holding Company, Inc., a development stage Internet company specializing in
the presentation of information regarding the off-field activities of athletes.
It was felt that our basis in advertising would give this acquisition a
firm basis in obtaining the advertising revenue it required to become
successful. We intend to focus our future growth on the Internet media, with
special emphasis on the Internet Entertainment Delivery Industry, specializing
in Sports related topics and ventures. To better reflect our anticipated
future business directions, we changed our name to PROSORCONS SPORTS &
ENTERTAINMENT COMPANY on January 5, 2001.
Our current mailing address is 2 Wakefield Avenue, Port Washington,
NY 11050; and its phone number is (516) 883-4518
Business (General)
We were formed as a marketing company that specializes in outdoor
billboard advertising. We also have the right to utilize the nations only
patent for the design and manufacture of a special billboard display unit
that mounts to the rear of any standard bicycle. We currently concentrate our
business efforts to providing billboard style advertising to an urban
audience through our subsidiary, United Outdoor, Inc. (United). United
Outdoor, Inc. operates our Out of Home Advertising Division.
On September 1, 2000, we purchased Pros or Cons Holding Company, Inc.
(Prosorcons). ProsorCons is a development stage corporation formed under
the laws of the State of New York on August 7, 2000. ProsorCons operates
under the trade name, ProsorCons.com. ProsorCons is an Internet-based sports
media company that will provide branded, interactive information and
programming as well as merchandise to sports enthusiasts worldwide. ProsorCons
will produce and distribute original interactive sports content, including
editorials and analysis, radio shows, contests, games, and fan clubs.
ProsorCons will also distribute a broad range of up-to-date news, photos,
audio clips and video clips obtained from leading sports news organizations,
as well as from today's athletes. All features on the site focus on off-the-
field news generated by athletes. ProsorCons operates our Internet
Technologies Division.
3
OUTDOOR ADVERTISING DIVISION
Business Development
Vital Sign, Inc. was formed as a marketing company that specializes
in outdoor billboard advertising. We focused our business on providing
billboard style advertising to an urban audience. Our niche in the market,
the upscale urban consumer, had positioned us as a significant billboard
company in New York's Harlem multi-million dollar outdoor advertising
community (figures courtesy of "Media Metrix").
In an attempt to expand the business to different audiences and
markets, we sought a merger with another billboard company, World Outdoor,
Inc. During a ninety (90) day due diligence period, we determined that the
proposed merger was not in our best interests and withdrew from the proposed
merger. Thereafter, World Outdoor attempted to take our customers and
succeeded in removing approximately $250,000 from our accounts. World
Outdoor had and has no assets, so an action for recovering damages was
discontinued (see, "Litigation").
United Outdoor, Inc., an outdoor advertising company with specific
concentration in the entertainment industry, was purchased on July 1, 1999,
to broaden our business base. This company had Gary Saunders and Garnet
Morris, our past CEO and past President, respectively, as owners of 2/3 of
its shares. The transaction was a straight cash purchase of a 66 2/3%
interest in United for $119,000. All outdoor advertising activity was
transferred to United, although some older contracts still bear the name of
the parent company.
United markets advertising space on transit vehicles and outdoor
advertising displays. As of July 30, 2000, United had exclusive agreements
with transit districts in Queens, New York City, to operate transit
advertising displays. Its product mix provides advertisers with significant
flexibility in their advertising programs and allows United to cross-sell
multiple products and leverages its design and production capabilities.
United has continuing existing business relationships with Fortune
500 companies such as Coca-Cola, Universal Music, Elektra Records, Sony
Entertainment, Columbia Records, Sean John, and Atlantic Records, all
accounting for approximately the same percentage of the companies business.
United has also established working relationships with major billboard
companies such as "Van Wagner, Inc.". The relationship with Van Wagner is
primarily a "rep" agency relationship, one in which United acts as salesman
for Van Wagner's urban billboards.
Business Activities
United markets advertising space on transit vehicles and outdoor
advertising displays, as well as traditional billboards, and other outdoor
sites. As of July 30, 2000, United had exclusive agreements with transit
districts in Queens, New York City, to operate transit advertising displays.
United's clients include Coca-Cola, Universal Music, Elektra Records,
Sony Entertainment Columbia Records, Sean John, and Atlantic Records, all
accounting for approximately the same percentage of the companies business.
They service these clients by locating and securing billboard locations,
creating billboard campaigns, printing the actual billboard, contracting
with licensed sign installation companies, maintaining the installed
billboard, and then finally contracting for the removal of these spectacular
style billboards. These services are performed by the staff from its New York
City base and the actual billboards are then posted in major urban markets.
These markets include but are not limited to New York City, Los Angeles,
Atlanta, and Miami.
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United also has the right to utilize the nations only patent for
the design and manufacture of a special billboard display unit that mounts
to the rear of any standard bicycle.
United's product mix provides advertisers with significant flexibility
in their advertising programs and allows United to cross-sell multiple
products and leverages its design and production capabilities.
Principal Products or Services and Their Market
We, through our subsidiary, United Outdoor, Inc., are an out-of-home
advertising company that markets advertising space primarily on transit
vehicles and outdoor advertising displays. As of July 30, 2000, we had
exclusive agreements with transit districts in Queens, New York City, to
operate transit advertising displays. United offers advertisers a wide range
of out-of-home advertising products, including transit advertising and outdoor
advertising displays. Its product mix provides advertisers with significant
flexibility in their advertising programs and allows United to cross-sell
multiple products and leverages its design and production capabilities.
Advertising is a cornerstone business whose enormity is difficult to
calculate. Advertising appears in all forms, in every segment of life.
From commonly held impressions like television commercials to subtle "product
placements", advertising is everywhere. Total advertising spending
across all media for 1999 as reported by "Competitive Media Reporting" is
$79.3 Billion (Seventy-Nine point Three Billion USD). Within this vast
industry, one of the recognized components is Out of Home advertising.
Total spending in out of home advertising is $17.2 Billion (Seven-Teen point
Two Billion USD). According to the 18th Annual "Veronis Suhler
Communications Industry Report" measuring public companies across all media,
out-of-home media has the highest metric (cash flow) of any of the media
segments at 40.8%.
Distribution Methods of the Products or Services
Marketing Plans & Products
Our overall business strategy, through our subsidiary, United, is to expand
upon our national presence to become a leader in the out-of-home advertising
industry. Our strategy is to increase revenues and improve our profitability
by delivering to local, regional and national advertisers efficient access
to one or multiple markets. The following are components of our strategy:
Develop Regional Operating Centers ("Hubs"). We seek to increase our
revenues profitability and operating efficiencies through our development
and use of regional operating centers, or hubs. In developing hubs, we seek
to establish an initial base of operations in a geographic region by
obtaining exclusive agreements with one or more significant out-of-home
advertising display providers. We then seek to expand our market presence by
bidding for contracts with other out-of-home advertising display providers in
the region and by expanding the range of products and services we offer
there. We believe our hub strategy results in revenue growth and cost savings
by enabling us to efficiently provide sales and administrative services to
several intra-regional markets from one strategically located operating base.
Obtain Additional Transit Advertising Agreements. We believe that, by obtaining
additional transit advertising agreements, we will increase our operating
efficiencies and geographic diversity and create additional bases from which
to achieve further market penetration. We expect increased revenue and
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profitability from the additional transit agreements to occur over time as
we implement our direct sales and product strategies.
Maintain a Large, Proactive Sales Force. We believe that our large, proactive
sales force that sells directly to local advertisers and, more traditionally,
to advertising agencies, enables us to increase display occupancy levels and
maximize our advertising rates. The sales force is motivated by an incentive-
based compensation program and supported by a network of experienced local
managers who operate under a centrally coordinated marketing plan. We believe
the size, quality and motivation of our sales force provide us a competitive
advantage.
Increase Revenues From Existing Display Space. We seek to increase
the revenue potential of our available transit and outdoor advertising
display inventory by offering innovative products and increasing the
percentage of time our display space is occupied. Innovative products we
offer include vinyl displays that are physically larger than traditional
advertisements. These vinyl displays offer customers greater impact while
providing us more revenue from a given display space. We seek to sell
advertising on our transit and outdoor displays by means of extended contracts,
which enable us to fill display space that would normally be vacant between
traditional advertising campaigns.
Selectively Pursue Acquisition Opportunities. We continuously evaluate
opportunities to enter new markets and increase our presence in existing
markets through the selective acquisition of out-of-home advertising
companies or assets. We intend to continue to focus our acquisition
efforts on expanding around our existing hubs and developing new hubs in
regions where attractive growth and consolidation opportunities exist.
Increase Inventory of Outdoor Displays. We expect to increase our market
penetration by acquiring or building additional outdoor displays in new and
existing markets. We believe that the resulting increase in inventory will
provide advertisers a greater variety of display alternatives and
leverage our existing sales design and production capabilities.
Attract New Advertisers Through Direct Local Sales. By selling directly to
local businesses not represented by advertising agencies, we seek to obtain
a larger share of the overall advertising expenditures in our markets and
broaden our customer base for out-of-home advertising. We dedicate substantial
resources to directly target local businesses whose advertising expenditures
may not typically include out-of-home advertising and introduce them to the
benefits of the medium. We offer comprehensive sales, marketing and creative
services that make it easier for these potential customers to purchase out-
of-home advertising.
6
Competitive Business Conditions and Competitive Position in the Industry and
Methods of Competition
United faces, in addition to competition from other forms of media,
including television, radio, newspapers and direct mail advertising,
competition in its markets from other outdoor advertising companies, some of
which may be larger and better capitalized than United. United also competes
with a wide variety of other out-of-home advertising media, the range and
diversity of which have increased substantially over the past several years
to include advertising displays in shopping centers, malls, airports,
stadiums, movie theaters and supermarkets, and on taxis, trains and buses.
United believes that its local orientation, including the maintenance of
local offices, has enabled it to compete successfully in its markets to date.
However, there can be no assurance that United will be able to continue to
compete successfully against current and future sources of outdoor
advertising competition and competition from other media or that the
competitive pressures faced by United will not adversely affect its
profitability or financial performance.
Sources and Availability of Raw Materials and the Names of Principal
Suppliers
Not applicable.
Dependence on One or a Few Major Customers
United has several major customers. Their clients include Coca-Cola,
Universal Music, Elektra Records, Sony Entertainment, Columbia Records, Sean
John, and Atlantic Records, all accounting for approximately the same
percentage of the Company's business. The loss of any one of these clients
will not have a material adverse effect on the Company's business.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or
Labor Contracts, Including Duration
Licenses
United has the rights to market, worldwide, a patented mobile
advertising display service, which utilizes the Vital Sign (tm), a bicycle
mounted billboard. The patent owner, Gary Saunders has licensed this patent
free of charge.
Other Intellectual Rights
No other patents, trademarks, licenses, franchises, concessions,
royalty agreements or labor contracts are used by United.
Need for Any Government Approval of Principal Products or Services
To the best of our knowledge, there are no special requirements for
government approval of its principal products or services, not generally
applicable to normal business operations.
7
Effect of Existing or Probable Governmental Regulations on the Business
The outdoor advertising business is subject to regulation by federal,
state and local governments. Federal law requires states, as a condition to
federal highway assistance, to restrict billboards on federally-aided primary
and interstate highways to commercial and industrial areas and imposes
certain additional size, spacing and other limitations on billboards. Some
states have adopted standards more restrictive than the federal requirements.
Local governments generally control billboards as part of their zoning
regulations, and some local governments prohibit construction of new
billboards and reconstruction of substantially damaged billboards or allow
new construction only to replace existing structures. In addition, some
jurisdictions including certain of those within United's markets) have
adopted amortization ordinances under which owners and operators of outdoor
advertising displays are required to remove existing structures at some
future date, often without condemnation proceeds being available. Federal and
corresponding state outdoor advertising statutes require payment of
compensation for removal by governmental order in some circumstances.
Ordinances requiring the removal of a billboard without compensation,
whether through amortization or otherwise, have been challenged in various
state and federal courts on both statutory and constitutional grounds, with
conflicting results. In addition, we are unable to predict what additional
regulation may be imposed on outdoor advertising in the future. Legislation
regulating the content of billboard advertisements has been introduced in
Congress from time to time in the past, although no laws which, in the
opinion of management, would materially and adversely affect our business
have been enacted to date. Changes in laws and regulations affecting outdoor
advertising at any level of government may have a material adverse
effect on our results of operations.
INTERNET TECHNOLOGIES DIVISION
Date And Manner Of Acquisition
On or about September 1, 2000 Anne Elkins and Robert Alini, residents of
the State of New York, exchanged 100% of the outstanding capital stock of
ProsorCons Holding Company, Inc., a corporation organized and operating under
the laws of the State of New York, for 4,000,000 shares of our common stock,
said stock having a par value of $0.001 per share plus 10,000,000 shares of
Preferred Convertible Voting Stock with no par value. As a result of the said
transaction, Elkins and Alini became the beneficial owner of the stock
exchanged, which comprises approximately 57% of the Company's outstanding
common stock, and 100% of the outstanding Preferred Stock. Prior to the
foregoing transaction, they had no relationship with the Company.
The transaction was structured to meet the tax free exchange provisions of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended, and
for accounting purposes, is expected to be treated as a reverse acquisition,
but not resulting in a pooling of interests. The securities were issued in
reliance on the exemptive provisions of Section 4(2) of the Securities Act
of 1933 (USA), as amended, and comparable state law provisions, based on
representations by the parties and as reflected in the stock exchange
agreement.
Description Of The Corporation Acquired
Pros or Cons Holding Company, Inc. organized under the laws of the State of
New York in August 2000, has never been a party to any material
8
reclassification, merger, consolidation, or purchase or sale of a significant
amount of assets not in the ordinary course of its business, except as stated
herein.
ProsorCons is an Internet-based sports and entertainment media company that
will provide branded, interactive information and programming as well as
merchandise to sports enthusiasts worldwide. Www.prosorcons.com, the
company's flagship web site, will feature comprehensive, in-depth coverage
of all major professional and college sports on a domestic and international
basis. ProsorCons maintains a comprehensive online retail segment featuring
our own unique merchandise and our faux memorabilia room. The Company is
emerging from its development phase, having created an entire product line
and web site based on the ProsorCons model. ProsorCons has already begun to
subscribe members and has an address on the world wide web at
"www.prosorcons.com".
Background Information
ProsorCons was conceived in December 1999 and began operating as an
unincorporated entity. It incorporated in New York August 7, 2000.
Initially, ProsorCons focused its development on market research. After an
initial 45 day research period, management confirmed the validity of the
business model and began negotiating with key personnel to develop the
business. Eden Studios, Inc. was retained as Web Designers, Robert Alini
was hired as President and Chief Technology Officer, Anne Elkins continues
in her role of Chief Executive Officer.
Business Development
Pros or Cons Holding Company, Inc., an internet based business, was acquired
by us on September 1, 2000. ProsorCons is an Internet-based sports media
company that provides branded, interactive information and programming as
well as merchandise to sports enthusiasts worldwide. ProsorCons produces and
distributes original, interactive sports content, including editorials and
analyses, radio shows, contests, games, and fan clubs. ProsorCons also
distributes a broad range of up-to-date news, photos, audio clips and video
clips obtained from other leading sports news organizations. The Company
utilizes news organizations that provide up-to-date general sports news and
information for all major professional and college sports 24 hours a day,
seven days a week, audio and video clips and color photographs, obtained
from strategic partners and a variety of leading sports news organizations
such as The Associated Press, CBS, Reuters and SportsTicker.
The company will operate as an "E-Zine", generating revenue from the
sale of advertising, sponsorships, merchandise, commerce links, and content
syndication. Eden Studios has completed designing a demo of the site that
can be viewed at www.prosorcons.com. Eden Studio designed the site utilizing
streaming media solutions, panoramic and interactive images, media encoding
and formatting, programming (for all applications): C++, Visual Basic,
Active/Java Server Pages (ASP/JSP), JAVA and JavaScript, HTML and DHTML,
Scala, Director, Shock Wave, Flash, etc. The design incorporated E-Commerce
and Database applications. Applied Theory will program and host the site at
an approximate cost of sixty thousand dollars per year. An exact cost
is impossible to calculate until the site is fully programmed and the exact
number of pages within the site is determined. As part of their hosting
responsibilities, Applied Theory is responsible for all security and managing
the programming end of the sites e-commerce activities.
9
Business Strategy:
ProsorCons overall business strategy is to aggressively promote the
ProsorCons.com brand worldwide in order to attract traffic and new users to
its Web site. Our strategy is to increase traffic to the web site thus
increasing our revenues and improve our profitability by delivering to local,
regional and national advertisers efficient access to one or multiple
markets. The following are components of our strategy:
Increase Unique Viewers on the Site. Management feels traffic will increase
by utilizing an aggressive promotional campaign capitalizing on the general
popularity of sports and tied to major sporting events, when, it is believed
by management, interest is peaked. Free banner and link exchanges will be
implemented maximizing advertising reach. It is anticipated that the
athletes themselves will continue to generate substantial interest by
creating off the field news. The site will capitalize on this fact by freely
distributing its content, the stories themselves, to major sports outlets,
thus drawing additional viewers to the site. Additional marketing plans
underway are a member subscription sign-up program focusing on college
campuses where Internet usership is highest and target demographics are
substantial.
Utilize a Large, Proactive Sales Force. We believe that by retaining an
advertising representative agency, commonly referred to as a "rep firm",
that sells directly to local advertisers and, more traditionally, to
advertising agencies, enables us to increase display levels and maximize
our advertising rates. Internal costs are reduced by eliminating the salary
expense of a large sales force. Advertiser hesitation regarding a new venue
is reduced to a minimum, as the product is being vended by their traditional
advertising agents. The outside sales force will be motivated by an
incentive-based compensation program, and supported by a network of
experienced managers who operate under our internally coordinated marketing
plan. We believe the size, quality and motivation of this type sales
arrangement provides us a competitive advantage.
Attract New Advertisers Through Direct Local Sales. By selling directly to
local businesses not represented by advertising agencies, we seek to obtain
a larger share of the overall advertising expenditures in our markets and
broaden our customer base for Internet advertising. We will dedicate
substantial resources to directly target local businesses whose advertising
expenditures may not typically include Internet advertising and introduce
them to the benefits of the medium. We will offer comprehensive sales,
marketing and creative services that may make it easier for these potential
customers to purchase Internet advertising.
Competitive Advantage. Management believes it will create a sustainable
competitive advantage by utilizing two (2) primary strategies:
Focus the content of the site exclusively on off the field news, both
pro or con, generated by sports thus occupying a niche within the sports/
entertainment industry that our market research has shown to be unfilled.
Seek exclusive content sharing arrangements with sports leagues, franchises,
and athletes deterring "copy-cat" competition and protecting our market
share.
10
Principal Products, Services and their Markets
ProsorCons is an Internet-based sports media company that will
provide branded, interactive information and programming as well as
merchandise to sports enthusiasts worldwide. ProsorCons plans to produce
and distribute original, interactive sports content, including editorials
and analyses, radio shows, contests, games, and fan clubs. ProsorCons will
also distributes a broad range of up-to-date news, photos, audio clips and
video clips obtained from other leading sports news organizations.
The Company's news organization will provide up-to-date general
sports news and information for all major professional and college sports 24
hours a day, seven days a week, audio and video clips and color photographs,
obtained from strategic partners and a variety of leading sports news
organizations such as The Associated Press, CBS, Reuters and SportsTicker.
It will also publish exclusive editorials and analyses from its in-house
staff of writers and editors and freelance sports journalists. ProsorCons
will package its information and programming to enable users to follow local
or regional team and event coverage, including team coverage from staff
writers located in strategic cities across the nation. It will host
monitored interactive chat sessions with sports superstars and personalities,
and experts on subjects such as sports memorabilia and fantasy leagues. The
Company will also host monitored forums dedicated to reporting exclusively
on off-the-field-news.
Prosorcons.com, the flagship Website, will feature comprehensive,
in-depth coverage of all major professional and college sports on a domestic
and international basis, including but not limited to Major League Baseball;
Minor League Baseball; National Football League; XFL; Canadian Football
League; College Hockey; National Hockey League; International Hockey
League; American Hockey League; National Basketball Association; College
Basketball; Women's National Basketball Association; American Basketball
League; Auto Racing; Olympic Sports; Boxing; Wrestling; Rugby; Cricket;
Skiing; Cycling; Soccer; Golf; Tennis; Health and Fitness; Volleyball; Horse
Racing; and Women's Sports. ProsorCons will maintain a comprehensive
online retail segment featuring our own unique merchandise and faux
memorabilia room.
Site Features:
General Content:
ProsorCons is an Internet based business dedicated to reporting on the off
the field news that makes athletes celebrities. ProsorCons.com will be a
content driven site, focusing on stories about current or prior athletes
whose off the court exploits are newsworthy. The site will capitalize on the
fact that the public is as interested in what athletes do off the court as
they are in what they do on the court. ProsorCons.com is an E-Zine with a
twist: an evenhanded, news driven site. The balance is inherent in the name:
PROSorCONS. Some athletes are "PROS" and do considerable good. Unfortunately,
these stories usually go unnoticed. Other athletes are "CONS" and will
always be in trouble with the law. There will be no shortage of topical
news events from which to cull content. In addition to current stories, an
archive section will be established. Great athletes of the past will be
featured, again reporting on all of their off the court activities, both
pro and con. This evenhanded reporting will serve purposes beyond content.
By encouraging franchises to publicize the good deeds of their players,
ProsorCons.com builds relationships and goodwill with the teams, leagues,
and athletes. These relationships will help drive advertising revenue to the
site and also help encourage teams to establish commerce links. Guest
contributors will be recruited from popular sports commentators around the
world. Sports talk radio hosts, newspaper columnists, announcers, ex-
11
athletes and coaches are invited to take a stand on any relevant topic they
wish. Regular editorials delving behind the headlines into topical issues
and Guest hosts for "Chat Rooms" will be regular features.
Sources Of Content:
Content will be derived from a variety of sources. Business
relationships will be established with recognized news venues like AP/UPI,
Reuters, and other wire services. Newspapers from around the world will be
contracted with to provide content and their own particular local perspective.
A full-time staff will be devoted to searching the wire services newspapers,
and other news venues for stories of interest. Content sharing arrangements
with new media news sources such as "APB News.Com" will be established.
Independent sportswriters will be encouraged to submit stories that will be
cleared by our own news editors. Beyond these headlines, it is up to our
staff to develop these stories. Our goal is NOT to recompile these headlines
but to develop them as stories. It is one thing to report that (for
example) Ray Lewis was arrested for murder. It is another, far more
interesting, thing to provide the audience with a copy of the arrest report,
an analysis of the possible penalties, the team'reaction, a biography of the
defense attorney, Lewis' criminal history, his charitable history, other
Ravens arrest records, other Ravens charitable involvement's, and an
ongoing report of the progress of the case.
Individual franchises and leagues will be asked to submit stories of
their own. We project that most of the "good news" stories will
initially come directly from these sources but as relationships are developed,
more pro stories will come from within. Even as we take the news of
the pro from primary sources like individual franchises, they will also be
treated in an evenhanded in-depth manner.
However, initially, the level of coverage will depend on the
resources of ProsorCons. The aforementioned is dependent upon ProsorCons
receiving $1,000,000 in funding, either directly from the parent company, or
through a private placement. In the event that the said funds are not
available, or are available only over a one to two year period, growth plans
will have to be slowed, or curtailed.
Localization Of Content:
Sports are a national, if not global, obsession. However within
this national obsession lies a local fervor. In order to appeal to these
local interests, existing within the ProsorCons.com web site will be a
roster of every major league team, major college conference, and major
sports organization. Instead of clicking on a "Football" link, a viewer
can click on, lets say, the Dallas Cowboys. Here at the Cowboys page, the
viewer can get information, pro or con, about today's Cowboys, link to the
archives for information about Cowboys of the past, and get general
information about the franchise. The benefits of this localized approach
are significant. Using Football as the example, instead of one (1) football
page there are now thirty-one (31). This creates multiple advertising
opportunities and also allows the web site, not the ISP, to control the
flow of local advertising. Additionally, by simply tracking the viewer
within the site, the profiling of the viewer is more complete and the
database of profiled users is infinitely more valuable. The impact of this
application will be more fully amplified in particular subsections of this
plan. For example, the advertising section will discuss the impact of
thirty-one times (31x) more ad space to sell to potential football
advertisers. A sample listing of the hometowns follows:
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Professional Football:
Arizona Cardinals Detroit Lions New York Jets
Atlanta Falcons Green Bay Packers Oakland Raiders
Baltimore Ravens Indianapolis Colts Philadelphia Eagles
Buffalo Bills Jacksonville Jaguars Pittsburgh Steelers
Carolina Panthers Kansas City Chiefs San Diego Chargers
Chicago Bears Miami Dolphins San Francisco 49ers
Cincinnati Bengals Minnesota Vikings Seattle Seahawks
Cleveland Browns New England Patriots St. Louis Rams
Dallas Cowboys New Orleans Saints Tampa Bay Buccaneers
Denver Broncos New York Giants Tennessee Titans
Washington Redskins
Ongoing Series:
Since so much of the pro or con of sports is a developing, evolving
story, and because ProsorCons.com will rise above the headline approach of
reporting these stories, ongoing series will be a regular feature of the
site. The newsworthy headlines that are reported on will be developed so
that a level of depth and information is provided to the audience allowing
details not readily available elsewhere. Additionally, serial treatment of
topical issues will be developed. Reports on the NCAA's graduation rates
among scholarship athletes, steroid use, gambling, and other numerous dubious
subjects will be explored. Likewise, regular reports about charitable
involvement will be featured. What does the local "home run club" do with
their donations? How can the audience get involved? What athletes are
volunteering their time to what activities? The ability to cultivate these
story lines will create consistent repeat visitors to the site and also
make each average view of the site a longer experience. This will, of
course, have the dual benefit of creating viewer loyalty and enhancing
advertising rates through "stickiness".
Audience Polls:
A regular feature of ProsorCons.Com will be viewer polls. Viewers
will be asked to vote on an array of issues. "Pete Rose -- Pro or Con"?
Should NCAA Athletes get paid? Legal sports books -- Pro or Con? "Taunting"
penalties -- Pro or Con? By encouraging regular audience involvement the
site will continuously promote an interactive, loyal, feel and "brand"
itself. The goal is to always provide a reason for the viewer to visit,
not just wait for a headline event to remind someone to stop by.
Chat Rooms:
An outgrowth of the "polls", chat rooms will further allow members
to voice their opinions on any topic they want. Guest hosts will be a
regular feature of these chat rooms. By employing well known sports figures
to host the chat rooms, ProsorCons.com will develop chat room themes
similar to radio call-in shows. These guest hosts will also attract new
viewers to the page and expand the reach of the site. Monitoring of the
chat rooms will profile the audience even further. Since you must have a
member ID to use a chat room, an invaluable database will be built. Chat
rooms have proven remarkably popular as an Internet feature, one that
extends viewer time on a site, a spot where targeted advertising can be
easily sold, and a magnet to repeat viewers; ProsorCons.com will capitalize
on these benefits.
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Fan Clubs:
An extension of the polls and chat rooms will be member "Fan Clubs".
A 10% discount on ProsorCons merchandise will be offered to the audience
thus encouraging participation. The number and type of the clubs are only
limited by the audiences' creativity. As has been demonstrated by AOL's
Town Square, members will create more clubs and alliances than imaginable.
E-Greetings:
Want your voice heard? Want a message sent to a particular athlete?
Want to tell a friend about the site or send them a particular article?
Use a ProsorCons.com E-Greeting Card. These cards will be sent with the
ProsorCons logo on top with a personalized message inside. All mailings will
go through the ProsorCons postmaster to avoid unwanted associations and
legal ramifications. The site now has a voice. The number of E-Greetings
sent on any particular topic will make the recipient take notice of the
site. ProsorCons.com will build an identity with athletes, franchises, and
leagues. If 100,000 E-cards are sent to the NCAA complaining about their
St. Johns probe, they will notice. If the same 100,000 are cc'd to the St.
Johns University Athletic department, they too will notice. If a member
believes that their voice, opinion, and input are heard, they will continue
to participate. As proven by the fact that every newspaper has an editorial
response page, people love to voice their opinions. As proven by sports
radio call in shows, people love to argue over sports. ProsorCons.com
Polls, Chat Rooms, Fan Clubs, and E- Greetings gives an outlet to this
passion and keeps the audience coming back on a regular basis.
Personalized Home Page:
Members will have the opportunity to personalize their ProsorCons.com
experience. Any feature that you want to regularly return to can be put in
your personal home page and automatically seen when you sign on. The
personalized home page can be programmed so that it "pops up" whenever you
sign onto the Internet, nit just when you sign onto the web site. Again,
heightened profiling of the audience allows targeted advertising and
interaction plus ease of use generates repeat viewers.
Look And Feel:
Beyond what the site says, it is equally important how it says it.
The layout of the site must be easily navigable, and it must be entertaining.
"Eden Studios On-Line" has agreed to act as web designer. A part of this
responsibility includes updating the site so it stays fresh. The basic
layout of the site will include a headline event, a pro link, and a con link.
The regular features will exist within the links on the right hand side of
the page. For example, "hometowns" will exist within the side link "leagues".
A single click will take you to the league you want, a second click will
give you the teams in the league, a third click will bring you to your team
of interest. Of course you can always pre-program this link into your
ProsorCons.com Home Page. When you initially sign on, sound effects will
greet you. For example, "Play Ball" will sound when you sign on to the site.
"Lets get ready to rumble" when you link to a con story, "Gooaaal" when you
link to a pro story. The premise is to create an entertaining experience
that insures visits even when a headline story isn't breaking. Further
reinforcing this theme is the use of streaming video. Video highlights
and information will be made available on the featured athletes. This
segment will grow in popularity as technology becomes more accessible.
14
Market For Products
Target Audience:
ProsorCons.com is a free web site that will attract the casual and
hardcore sports fan. The audience of the site will be comprised primarily
of a demographic overwhelmingly represented by the 18-49 y/o male.
According to the United States Census Bureau, there are approximately 60
million members of this demographic. Additionally, casual and hard-core
sports fans exist within other demographics. If you allow that merely ten
percent (10%) of the following demographics are sports fans, the potential
audience of ProsorCons.com is in excess of 100 million. Additional
demographics to consider are men over 49 (approx. 15 million), women aged
18-49 (approx. 90 million) and teenagers aged 12 -17 (23 million). That is
approximately forty percent (40%) of the United States population, and this
survey only considered the United States.
The Internet is a global resource, sports is a global phenomenon,
and American sports figures are recognized all over the world. Since the
potential audience now becomes difficult to compute, all following
assumptions are based on U.S. demographic information only. Of course,
total population is not Internet population. One (1) in three (3) Americans
used the Internet in 1997, the latest year that the Census Bureau released
statistics. That translates to approximately 90 Million users in 1997, and
given the rate of population and Internet growth, today that number well
exceeds 100 million. Since approximately 40% of the U.S. population is
within the target demographic, we can safely assume that 40% of the Internet
population is within our demographic, or a potential audience of 40 million.
Research conducted by Media Metrix further supports these assumptions as
their findings indicate that approximately 38.5 % of males aged 18-49 uses
the Internet. This demographic, while the core audience, is only a segment
of the potential viewer.
Women's sports are among the fastest growing leisure activities in
the country. Women, as sports fans, are a growing market. Teenagers,
approximately twenty percent (20%) of the total population, whose familiarity
with computers and the Internet has the highest ratio, are overwhelmingly
drawn to controversial and non-traditional sports. Proof of this fact is
borne out by "Professional" wrestling ratings. Additionally, technology
allows the site to be multi-lingual at the touch of a button. Just as you
can walk into an ATM machine and have the machine ask you what language you
want to proceed in, so too can ProsorCons.com be translated. Initially,
this will allow the site to become known outside the United States.
Eventually, it will allow for global expansion as "ProsorCons.com - Europe",
"ProsorCons.com - Latin America", and "ProsorCons.com - Asia" are introduced.
American sports figures are global celebrities, as demonstrated by
the "Dream Team". Internationalization of sports is growing, as demonstrated
by MLB and the NBA playing games in Mexico and Japan and the World Cup
coming to the United States. Children all over the world grow up dreaming
of being a famous American athlete, as illustrations think San Pedro de
Marcoris for baseball and Eastern Europe for basketball. To ignore this
trend would be to miss out on the global accessibility provided by the
Internet, the "World Wide Web".
ProsorCons market opportunity is diversified across a number of
market segments, including multimedia, Internet, Radio, and a syndicated web/
TV presence. ProsorCons operates in a high growth environment. The Internet
is the fastest growing communication and/or entertainment medium in history
gathering over 50 Million viewers in 5 years in the United States alone.
Management believes ProsorCons is well positioned to take advantage of the
rapidly growing Internet market.
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The site in four (4) particular areas will generate revenue:
Advertising sales, merchandise sales, E-commerce links, and licensing fees.
Each area will be dealt with individually as follows. This area will focus on
a description of how each area will function in order to generate revenue.
Advertising sales:
The sale of advertising, primarily "banner ads" will comprise a
significant revenue source for the site. Our banner advertisements will
differ from the competition in several ways. Primarily, rather than
utilizing ordinary banners, we will utilize three-dimensional active
advertisements designed to enhance viewer attention and response rate. We
will also utilize our streaming video box as an advertising medium, also
differentiating us from the competition. Additionally, by capitalizing on
our approach to localizing content, we have created a local advertising
market heretofore unavailable. Management believes that significant
advertising revenue should be generated from the sale of local team page
sponsorships.
Merchandise:
ProsorCons.com will have several logos serving dual purposes. One
purpose will be to "brand" the site and create a unique identity. A second
purpose will be to include these logos on merchandise sold through the sites
"Clubhouse Store". By entering the Clubhouse, a viewer will be able to
select from a variety of logos and products to purchase. T-shirts,
sweatshirts, baseball caps, gym bags, and golf club covers are initially
planned. Using readily available technology, the viewer will be able to
superimpose any logo on any piece of merchandise and see what it will look
like prior to ordering. This will have the further benefit of extending the
viewers average visit, even if they don't make a purchase since shopping is
now an interactive experience. This "stickiness" also makes the Clubhouse
Store a valuable advertising spot. Ultimately, as Internet advertising
becomes more sophisticated, this stickiness will allow ProsorCons.com to
charge a higher CPM since the average viewer will be on the site for a longer
period.
E-Commerce Links:
Relationships with other commerce websites will be established
whereby ProsorCons.com will receive 5% from every sale made through our
link. Our commerce links will have a slightly different approach.
ProsorCons.com is currently developing proprietary software to run a moving
commerce link. Akin to screen savers, an image will float across the screen
that when clicked will change. In our model, a sports figure will be placed
on one side of the screen and an appropriate image on the other. For example,
a basketball player will shoot from one side of the screen to a hoop on the
other side. Inside the ball will appear the word "Nike". If the viewer
clicks on the ball he will be given the chance to link to the Nike website,
see a Nike commercial, or close the window and return to ProsorCons.com.
If the viewer chooses to leave the site he will be warned that he is leaving
the site and in order to return he must exit the Nike site.
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According to Forrester Research, revenue from online transaction was
$60 Billion in 1998 and projected at $226 Billion in 2000.
Sponsorships:
Advertisers will be given the opportunity to sponsor certain areas
within the site. A&E will be approached to sponsor a biography section on
featured athletes. The History Channel will be approached to sponsor our
archives. Sports Channel and/or Fox Sports will be approached to sponsor
our video highlight section.
Competitive Advantage:
As a small, streamlined, focused sports and entertainment company
ProsorCons has created certain competitive advantages for itself. One
significant competitive advantage was created by focusing the content of the
web-site exclusively on off the field news. All other major competitive
sports web sites concentrate their energy on game related information.
Through a commitment to reporting on a unique market niche, exclusive content
sharing arrangements with sports leagues, franchises, and athletes, and
making its content readily available to major sports news outlets, ProsorCons
will maintain its competitive advantage and reduce the possibility of copycat
sites.
Competitive Business Conditions, Competitive Position in the Industry, and
Methods of Competition:
ProsorCons uses an entirely different approach to sports information.
The exclusive focus on a unique market niche comprised entirely of off the
field news about athletes allows an advantage over more established sports
news venues that focus mainly on game related information. Our general
competition may include larger, better known, and better financed competitors
across all media outlets. However, Management feels that this focus gives
the site a differentiable niche, one which has no direct competition. A
discussion of the competitive environment, and the risks associated with
that Environment is discussed below.
RISK FACTORS
The securities we are offering are speculative in nature and involve a
degree of risk. You should purchase them only if you can afford to lose your
entire investment in us without a materially adverse impact on your standard
of living or financial security. Therefore, before any purchase you should
consider the following risk factors, as well as all other information set
forth in this prospectus.
FINANCIAL RISKS OF THE OFFERING
You May Lose Your Entire Investment, if We do not Operate Profitably.
If we do not operate successfully in the future, our business will
likely fail and you will lose your entire investment. We cannot give you any
assurances we will operate profitably in the future. We have a history of
marginal profitability operating losses, and lacking future profitable
operations, will need additional capital, which we have no assurance
17
whatsoever of being able to obtain. (See "Financial Statements",
"Management's Discussion And Analysis Of Financial Condition, Changes In
Financial Condition And Results Of Operations").
Your Investment may be Diluted due to Potential Future Sales Pursuant To
Rule 144.
Generally, under Rule 144, a person (or persons whose shares are
aggregated) who has satisfied a one year holding period may, under certain
circumstances, sell within any three month period a number of shares which
does not exceed the greater of one percent (1%) of the then outstanding
Common Stock or the average weekly trading volume during the four calendar
weeks prior to such sale. Rule 144 also permits, under certain
circumstances, the sale of shares without any quantity limitation by a
person who has not been an affiliate of ours for at least 90 days and who
has satisfied a one year holding period.
The holding period for all of our currently outstanding restricted
shares required by Rule 144 will expire during October of 2001, and after
that, the holders may periodically sell their Company securities, subject to
applicable volume limitations, restrictions on the manner of sale and
applicable reporting requirements (see "CERTAIN TRANSACTIONS").
There is no Trading Market for our Shares.
At present, there is no market for our securities, and there can be
no assurance that an established trading market or any public market will
develop in the future. In the event a market is developed, it may not be
able to be sustained, and it is entirely possible that you will not be able
to sell our securities at any price. In any event, any market we may develop
will, in all likelihood, be a substantially limited one.
You May Suffer Adverse Effects due to the Penny Stock Regulations.
Securities, generally, with a price $5.00 per share or less are
referred to as penny stock. These securities are unsuitable for you if you
have a low fixed incomes and limited net worth. As well, they are not
suitable if you are risk aversive or have income as your sole investment
objective. Investment broker/dealers must satisfy special sales practice
requirements, including making written suitability determinations regarding
any persons wishing to invest in penny stock; written consent of the
purchaser prior to purchasing penny stock; delivery of a disclosure
statement outlining the risks associated with penny stock prior to any
transaction; a written current bid and ask quotation and commissions to be
earned by the broker/dealer in the transaction; and monthly statements
stating the market value of any penny stock held in a portfolio. These
requirements, will likely limit you in any attempts you may make to sell
our stock.
BUSINESS RISKS
You May never Receive any Dividends from Us.
We have never paid dividends on our Common Stock in the past. We do
not anticipate paying dividends in the foreseeable future and intend to
devote earnings, if any, to the development of our business. The payment of
dividends in the future rests within the discretion of our Board of Directors
and will depend on the existence of substantial earnings, our financial
requirements, and other factors. Earnings, for the foreseeable future, are
expected to be retained to finance corporate business expansion.
18
We May Not Be Able To Compete Successfully In The Very Competitive Market.
We may face competition from competitors with significantly greater
financial, sales and marketing resources, larger customer bases, longer
operating histories, greater name recognition and more established
relationships with advertisers, content and application providers and/or
other strategic partners than we have. There can be no assurance that we
will be successful in achieving widespread acceptance of our products and
services before competitors offer services similar to our planned current
offerings, which might preclude or delay purchasing decisions by potential
customers. Widespread commercial acceptance of any of competitors'
products could significantly reduce the potential customer base for our
products and services, which could have a material adverse effect on our
business and financial results.
Dependence upon and Need for Key Personnel; Change in Control
Our success depends to a significant extent upon the efforts of senior
management personnel and a group of employees with long-standing industry
relationships and technical knowledge of our business and operations. The
loss of certain key members of senior management and the inability to replace
such member could have a material adverse effect on our business and
operations. Our success also will depend upon our ability to attract and
retain highly qualified and experienced management and technical personnel.
We face competition for such personnel from numerous other entities, many of
which have significantly greater resources than we do. We cannot assure you
that we will be successful in recruiting such personnel or that, if
recruited, such persons would succeed in establishing profitable operations
for our organization.
The effect of the issuance of Common Stock as discussed earlier may result
in the change in control our Company. There is no guarantee that the
controlling shareholders will retain all or any of our current management.
Should management be replaced, there is no guarantee that our current plans
and development will be continued. The value of your Common Stock may be
negatively impacted by any such change in management and control.
Rapid Technological Change and Risk of Obsolescence
The market for computer products is characterized by rapid technological
advances, evolving industry standards, changes in end user requirements and
frequent new product introductions and enhancements. The introduction of
products embodying new technologies and the emergence of new industry
standards could render our existing products and products currently under
development obsolete and unmarketable.
Our success will depend upon our ability to enhance our current products and
develop and successfully introduce and sell new products that keep pace with
technological developments and respond to evolving end user requirements. If
we do not anticipate or respond adequately to technological developments, end
user requirements, or significant delays in product development or
introduction, our competitive position in the marketplace could be damaged
and we could experience a decrease in revenues. We expect to increase the
use of additional external and internal resources in the near term to meet
these challenges. However, we can provide no assurance that we will be
successful in hiring, training and retaining qualified product development
personnel to meet our needs or that we will be successful in developing
and marketing new products or product enhancements on a timely basis. Any
failure to successfully develop and market new products and product
enhancements would have material adverse effect on our results of operations.
19
INTERNET ENVIRONMENT AND ASSOCIATED RISKS
Business Depends On The Growth Of The Internet
Our market is new and rapidly evolving. Our success is highly
dependent upon continued growth in the use of the Internet generally and, in
particular, as a medium for advertising, information services and commerce.
Internet usage may be inhibited for a number of reasons, such as: the Internet
infrastructure may not be able to support the demands placed on it, and its
performance and reliability may decline as usage grows, security and
authentication concerns with respect to the transmission over the Internet of
confidential information, such as credit card numbers, and attempts by
unauthorized computer users, so-called hackers, to penetrate online security
systems, privacy concerns, including those related to the ability of Web sites
to gather user information without the user's knowledge or consent, and the
lack of availability of cost-effective, high-speed services.
If Internet usage grows, the Internet infrastructure may not be able
to support the demands placed on it by this growth or its performance or
reliability may decline. In addition, Websites may from time to time
experience interruptions in service as a result of outages and other delays
occurring throughout the Internet network infrastructure. If these outages
or delays frequently occur in the future, Internet usage, as well as usage of
our Web sites, could be adversely affected.
Adoption Of The Internet As An Advertising Medium Is Uncertain
Our business, results of operations and financial condition would be
materially adversely affected if the Internet advertising market develops
more slowly than we expect or if we are unsuccessful in increasing our
advertising revenues. We will derive a substantial portion of our revenue from
the sale of advertisements on our Web site. Since the Internet advertising
market is new and rapidly evolving, we cannot yet gauge its effectiveness as
compared to traditional advertising media.
The adoption of Internet advertising, particularly by those entities
that have historically relied upon traditional media for advertising, requires
the acceptance of a new way of conducting business, exchanging information and
advertising products and services. Advertisers that have traditionally relied
upon other advertising media may be reluctant to advertise on the Internet.
These businesses may find Internet advertising to be less effective than
traditional advertising media for promoting their products and services. Many
potential advertisers have little or no experience using the Internet for
advertising purposes. Consequently, they may allocate only limited portions
of their advertising budgets to Internet advertising.
Advertisers may not advertise on our Web sites or may pay less for
advertising on our Web sites if they do not believe that they can reliably
measure the effectiveness of Internet advertising or the demographics of the
user viewing their advertisements. We use both internal measurements and
measurements provided to us by third parties. If these third parties are
unable to continue to provide these services, we would have to perform them
ourselves or obtain them from another provider. This could cause us to incur
additional costs or cause interruptions in our business while we are replacing
these services. In addition, we are implementing additional systems designed
to record demographic data on our users. If we do not implement these systems
successfully, we may not be able to accurately evaluate the demographic
characteristics of our users. Moreover, "filter" software programs that limit
or prevent advertising from being delivered to an Internet user's computer are
20
available. Widespread adoption of this software could adversely affect the
commercial viability of Internet advertising.
To the extent that minimum guaranteed impression levels are not met
ratably over the contract period, we defer recognition of the corresponding
pro-rata portion of the revenues related to such unfulfilled obligation until
the guaranteed impression levels are achieved. Advertising based on
impressions, or the number of times an advertisement is delivered to users,
comprises virtually all of our current revenues. To the extent that minimum
impression levels are not achieved for any reason, we may be required to
provide additional impressions after the contract term, which would reduce our
advertising inventory. Our revenues could be adversely affected if we are
unable to adapt to other Internet advertising pricing models that are adopted
as industry standard. It is difficult to predict which, if any, pricing
models for Internet advertising will emerge as the industry standard. This
makes it difficult to project our future advertising rates and revenues.
We May Not Be Able To Adapt As Internet Technologies And Customer Demands
Continue To Evolve
To be successful, we must adapt to rapidly changing Internet
technologies by continually enhancing our Web sites and introducing new
services to address our customers' changing demands. We could incur
substantial costs if we need to modify our services or infrastructure in order
to adapt to changes affecting providers of Internet services. Our business,
results of operations and financial condition could be materially adversely
affected if we incurred significant costs to adapt, or cannot adapt, to these
changes.
Concerns Regarding Security Of Transactions And Transmitting Confidential
Information Over The Internet
A significant barrier to electronic commerce and communications
is the secure transmission of confidential information over public networks.
We rely on encryption and authentication technology licensed from third
parties to provide the security and authentication necessary to effect
secure transmission of confidential information. We cannot assure you that
advances in computer capabilities, new discoveries in the field of
cryptography or other events or developments will not result in a compromise
or breach of the algorithms we will use to protect customer transaction data.
If any such compromise of our security were to occur it could have a material
adverse effect on our business, results of operations and financial
condition. If someone is able to circumvent our security measures, such
person could misappropriate proprietary information or cause interruptions in
our operations. We may be required to expend significant capital and other
resources to protect against the threat of such security breaches or to
alleviate problems caused by such breaches. Concerns over the security of
Internet transactions and the privacy of users may also inhibit the growth of
the Internet generally, and the Web in particular, especially as a means of
conducting commercial transactions. To the extent that our activities or the
activities of third party contractors involve the storage and transmission of
proprietary information, such as credit card numbers, security breaches could
expose us to a risk of loss or litigation and possible liability. We cannot
assure you that our security measures will prevent security breaches or that
failure to prevent such security breaches would not have a material adverse
effect on our business, results of operations and financial condition.
For all of the reasons stated above, and others set forth in this prospectus,
our securities involve a high degree of risk. If you are considering an
investment in these securities, you should be aware of these and other factors
set forth in this prospectus. You should only purchase these securities if
you can afford a total loss of your investment.
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION, CHANGES IN
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis relate to factors which have
affected the financial condition and results of our operations for its years
ended December 31, 1998, December 31, 1999, and the quarter ended October 31,
2000.
We were formed in Delaware on August 7, 1997 as a marketing company,
specializing in outdoor billboard advertising. We have the right to market,
worldwide, a patented mobile advertising display service, which utilizes the
Vital Sign (tm),a bicycle mounted billboard. We emerged from our development
stage at the end of our first fiscal year. During our first two years of
operation we focused on marketing the Vital Sign concept. On August 1, 1999,
we purchased United Outdoor, Inc., a company focused on outdoor advertising
with special emphasis on the entertainment industry, to enhance and augment
our outdoor advertising business.
On September 1, 2000 we purchased ProsorCons Holding Company, Inc., a
development stage Internet company specializing in the presentation of
off-field activities of athletes. It was felt that our basis in advertising
would give this acquisition a firm basis in obtaining the advertising revenue
it required to become successful.
We intend to focus our future growth on the Internet media, with special
emphasis on the Internet Entertainment Delivery Industry, specializing in
Sports related topics and ventures. To better reflect our anticipated future
business directions, we changed our name to PROSORCONS SPORTS & ENTERTAINMENT
COMPANY on January 5, 2001.
Discussion of Financial Information
The data discussed and presented here is derived from the audited
statements for the fiscal years ended July 31, 2000 and July 31, 1999; and the
quarter ended October 31, 2000 and October 31, 1999.
Operating revenues decreased by $187,964 (33%) for the quarter ended October
31, 2000 as compared to the quarter ended October 31, 1999. The main reason
for the decrease was the restructuring of our business to an Internet
Entertainment delivery system. In the fiscal year ended July 31, 2000
Revenues were $1,585,594 as compared to $1,279,227 for the year ended July 31,
1999.
Gross profit for the first quarter of 2000 decreased to $47,063, from
$126,696 for quarter ended October 31, 1999. Gross profit for the year ended
July 31, 2000 was $506,807 as compared to $509,502 for the previous fiscal
year.
General and administrative expenses were $63,353 for the quarter ended October
31, 2000, compared to $115,476 for the same period in 1999. This large
decrease in general and administrative expenses for the period in 2000 is
mostly due to a general effort by management to make the company more
efficient. The relative ration of expenses to total expenses remained
roughly the same. For the fiscal year ended July 31, 2000, the general and
administrative expenses were $461,915 as compared to $872,628 for the
preceding fiscal year. The Company feels that over the ensuing years, its
growth and expansion will largely be attributable to the efforts and expenses
22
incurred during the fiscal year ended July 31, 2000, in restructuring and
refocusing the company.
The net loss for the quarter ended October 31, 2000 was $1,981 or $0.001 per
share based on 7,000,000 shares outstanding, as compared to a profit for the
first quarter of 1999 of $5,037, or $0.001 per share. The net loss for the
period is primarily attributed to insufficient level of revenue generated by
the Company, and its refocus of time and funds in developing its Internet
operations. For the year ended July 31, 2000, the net profit was $20,147,
as compared to ($643,206) for the previous year.
On October 31, 2000, the cash and investment certificate position of the
Company was $23,443. Current assets on October 31, 2000 were $296,800. The
cash and investment certificate position of the Company was $11,502 on July
31, 2000 as compared to $17,01745 on July 31, 1999. Current assets, as a
whole, doubled from $122,855 on July 31, 1999 to $292,320 on July 31, 2000.
Liquidity
We believe that we have the cash funds and necessary liquidity to meet the
needs of the company over the next year. Our current primary business is
Vital Sign's billboard advertising business, and the operation of this
business at historic levels will cover our needs, with respect to cash and
liquidity needs, over the next 12 month period.
However, to fully maximize the potential presented by our strategy of
integrating our traditional operations with Internet applications, and fully
developing our corporate growth strategy for ProsorCons, we believe that
approximately $4,000,000 will need to be raised. It is projected that these
funds will be utilized during a one year period. In the event only part of
the fund are raised, then those funds will be allocated to our online
business. The money will likely be raised through private placements of
shares or a secondary offering. In the event the funds are not raised, we
will continue with our sales activities and, management believes, meet our
liquidity demands. The funds, as noted above, are for increased activity and
sales, not for primary liquidity demands.
Sources and Availability of Raw Materials and the Names of Principal Suppliers
ProsorCons services are not reliant on the availability of raw materials, but,
rather, involve the development of computer applications. Sources of all
materials, Internet services, and equipment are readily available from a large
number of suppliers, none of which would be difficult to replace.
Dependence on One or a Few Major Customers
No customer of ProsorCons accounts for more than 5% of its business.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or
Labor Contracts, Including Duration
Other Intellectual Rights
ProsorCons has the rights to utilize the Internet domain name "prosorcons.
com" and uses the mark throughout the world. Additionally, the company is
developing proprietary logos, trademarks, and service marks, all of
which will be protected to the full extent allowed by intellectual property
laws.
23
Need for Any Government Approval of Principal Products or Services
To the best of ProsorCons management's knowledge, there are no special
requirements for government approval of its principal products or services,
not generally applicable to normal business operations.
Effect of Existing or Probable Governmental Regulations on the Business
The law relating to the liability of Internet on-line services
companies for information carried on, stored on, or disseminated through
their network is unsettled, even with the recent enactment of the Digital
Millennium Copyright Act. While no one has ever filed a claim against
ProsorCons.com relating to information carried on, stored on, or
disseminated through their network, someone may file a claim of that type
in the future and may be successful in imposing liability on us. If that
happens, we may have to spend significant amounts of money to defend
ourselves against these claims and, if we are not successful in our
defense, the amount of damages that we will have to pay may be significant.
Any costs that we incur as a result of defending these claims or the amount
of liability that we may suffer if our defense is not successful could
materially adversely affect our business, financial condition and results
of operations. If, as the law in this area develops, we become liable for
information carried on, stored on, or disseminated through our network, we
may decide to take actions to reduce our exposure to this type of liability.
This may require us to spend significant amounts of money for new equipment
and may also require us to discontinue offering some of our products or
services.
Due to the increasing popularity and use of the Internet, it is
possible that additional laws and regulations may be adopted with respect
to the Internet, covering issues such as: content; privacy; access to some
types of content by minors; pricing; bulk e-mail or "spam;" encryption
standards; consumer protection; electronic commerce; taxation; copyright
infringement; and other intellectual property issues.
We cannot predict the impact, if any, that any future regulatory
changes or developments may have on our business, financial condition, and
results of operations. Changes in the regulatory environment relating to the
Internet access industry, including regulatory changes that directly or
indirectly affect telecommunication costs or increase the likelihood or
scope of competition from regional telephone companies or others, could have
a material adverse effect on our business, financial condition and results
of operations.
Costs and Effects of Compliance with Federal, State and Local Environmental
Laws
ProsorCons is not aware of any expenses directly attributable to
compliance with federal, state or local environment laws or regulations.
Number of Total Employees and Number of Full Time Employee
ProsorCons has 4 full time employees, and no part time employees.
24
Equipment
The fixed assets of ProsorCons, as valued for accounting purposes,
have a depreciated book value of $9,550, and an non-depreciated book value
of $55,000. The assets are principally comprised of computers, computer
equipment, and software, along with office furniture.
ADDITIONAL INFORMATION REGARDING PROSORCONS SPORTS & ENTERTAINMENT COMPANY
Investment Policies
We have no investment policies with respect to investments in real
estate or interests in real estate or investments in real estate mortgages,
or in other securities of other corporations.
Litigation.
We are not a party to any material litigation.
Operating Subsidiaries of the Registrant
The Company has two operating subsidiaries, United Outdoor, Inc.
and ProsorCons Holding Company, Inc. United Outdoor, Inc., is an out-of-
home advertising company that markets advertising space primarily on
transit vehicles and outdoor advertising displays. ProsorCons. is an
Internet-based sports media company that provides branded, interactive
information and programming as well as merchandise to sports enthusiasts
worldwide.
Estimate of the Amount Spent During Each of the Last Two Fiscal Years on
Research and Development Activities, and if Applicable the Extent to Which
the Cost of Such Activities are Borne Directly by Customers
During the past year, management believes ProsorCons spent
approximately $100,000 on R&D: none of which will be directly borne by
customers, but all of which will be indirectly borne by the customer as
reflected in the price of the products of and a portion of which will be
allocated to the amortized cost of development.
During the past two years we spent approximately $25,000 on R&D for
advertising related product development, all of which will be borne by the
customer as reflected in the price of our products.
Costs and Effects of Compliance with Federal, State and Local Environmental
Laws
We are not aware of any expenses directly attributable to compliance
with federal, state or local environment laws or regulations.
Number of Total Employees and Number of Full Time Employee
We currently have 10 full time employees, and no part time employees, of
which 6 work for United.
25
Statements contained in this Prospectus as to the contents of any contract
or other document are not necessarily complete, and in each instance we
refer you to the copy of such contract filed as an exhibit to the
Registration Statement. You may inspect The Registration Statement and all
of its exhibits without charge at the Public Reference Section of the
Commission in its Washington, DC. office. You may obtain copies of all or
any part of the Registration Statement from the Commission at prescribed
rates, and may view them at the S.E.C.'s Web Site, whose address is
http://www.sec.gov. We will provide you with Copies of the Registration
Statement and the attached Exhibits without charge upon written or oral
request addressed to Mr. Robert Elkins; 2 Wakefield Avenue Port Washington,
NY 11050, or by calling (516) 883-4518.
We currently do not furnish our stockholders with annual reports on Form
10-KSB containing financial statements certified by our independent public
accountants and quarterly reports on Form 10-QSB containing unaudited
financial information for the first three quarters of each fiscal year.
However, commencing with the filing of this registration statement, such
reports will be furnished, as will all filings requires by the Securities
Act of 1933, as amended, and the Exchange Act of 1934, as amended.
ITEM 2 DESCRIPTION OF PROPERTY.
We currently rent approximately 2,500 square feet for our staff, and the
staff of our subsidiaries, at 505 Eighth Avenue in New York.
Management is of the opinion that its current facilities are
adequate for its immediate needs. As the Company's business increases,
additional facilities will be required, however the current facilities are
expected to suffice until after December 31, 2001.
ITEM 3. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES.
The following table sets forth the names, positions and ages of the
executive officers and directors of the Company. Directors will be elected
at the Company's annual meeting of shareholders and serve for one year or
until their successors are elected and qualify. Officers are elected by
the Board and their terms of office are, except to the extent governed by
employment contract, at the discretion of the Board.
First Elected
Name Age or Appointed/Term Position
Anne Elkins 34 September 1, 2000 Chief Executive Officer/
President, United
Robert Alini 45 September 1, 2000 President/Chief
Technology Officer/
President,ProsorCons
Todd Wenner 37 September 1, 2000 Secretary/Executive
Vice-President
26
Biographies of Directors, Officers and Director Nominees
ANNE ELKINS: Chief Executive Officer, ultimately responsible for all
facets of the Company's operation. Her attention will be focused on Media
Relations and Advertising Sales. Prior to this position Ms. Elkins was the
Senior Vice-President MediaCom, Inc. She has been a MediaCom employee since
1990, an Executive since 1996, and Management since 1992. In these various
high-level positions, Anne has supervised, planned, and implemented the
national television broadcast campaigns of several fortune five hundred
multi-million dollar clients. Clients for whom Anne is the Executive
include Glaxco Smith-Kline, Reebok, Warner Brothers, and Hasbro. As
executive Anne has controlling input over the flow of approximately nine
hundred million dollars ($900,000,000.00) in media investment. She had an
integral part in the creation, planning, and implemention of innovative
media buying strategies for the College Bowl Alliance and "Survivor".
Anne is a recognized influence in the National Broadcast Market. The
magnitude of this position allows a great influence into the budget and
planning of these clients entire media plan.
ROBERT ALINI, President, and Chief Technology Officer, Mr. Alini will be
responsible for coordinating and maintaining an integrated effort between
Eden Studios and Applied Theory. He will also be responsible for the
management of all daily operations. Prior to this position Robert has been
the Director of Operations at API since November 2000. In his capacity as
Director of Operations, Robert is responsible for the coordination of all
departmental operations for an electronics company that manufactures semi-
conductors. In addition to these management responsibilities, Robert is the
computer network administrator for the company. He has been involved with
computer systems architecture and integration for over 10 years. As systems
administrator Robert is responsible for all network client server functions
including Internet access, security, and routing.
TODD WENNER, Executive Vice-President/Secretary, is responsible for
maintaining all corporate protocols and advising on all major financial
matters. Prior to this position Mr. Wenner was Vice President of Sterling
American Property, the private equity real estate fund company affiliate of
Sterling Equities, Inc., a position he held for three years. Todd was also
a partner in this company's private equity funds. Todd was involved in the
sourcing, underwriting, negotiation, acquisition, funding and management of
over $300 million worth of properties for such funds.
Family Relationships.
None of the Directors, Officers, or significant employees of the Registrant
or its Subsidiary are related or affiliates.
Involvement in Certain Legal Proceedings.
During the past five years no current director, person nominated to
become a director, executive officer, promoter or control person of the
Company or its Subsidiary has been a party to or the subject of:
(1) Any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the time of
the bankruptcy or within two years prior to that time;
27
(2) Any conviction in a criminal proceeding or has been subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) Any order, judgment, or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoying, barring suspending or otherwise limiting his
involvement in any type of business, securities or banking activities;
and
(4) Been found by a court of competent jurisdiction (in a civil action),
the Commission or the Commodity Futures Trading Commission to have violated
a federal or state securities or commodities law, and the judgment has not
been reversed, suspended, or vacated.
ITEM 4. REMUNERATION OF DIRECTORS AND OFFICERS.
SUMMARY COMPENSATION TABLE
The following table sets forth information relating to the compensation
paid by us in each of the last three fiscal years to: (i) its
Chief Executive Officer; and (ii) each of its executive officers whose
annual compensation exceeded $100,000 during this period.
Name and
Principal Fiscal Other Annual LTIP All Other
Position Year Salary Bonus Compensation Options/(#) Payouts Compensation
______________________________________________________________________________
Anne Elkins 2000 52,000 0 0 0 0 0
Chief
Executive
Officer
Gary Saunders* 2000 80,000 0 0 0 0 (1)
Chief
Executive
Officer 2000 80,000 0 0 0 0 0
1998 80,000 0 0 0 0 0
Garnet
Morris** 2000 80,000 0 0 0 0 (1)
President 2000 80,000 0 0 0 0 0
1998 80,000 0 0 0 0 0
_________________
*Mr. Saunders resigned his position on September 1, 2000.
*Mr. Morris resigned his position on September 1, 2000.
(1) Mr. Saunders, and Garnet Morris, the President of Vital Signs, Inc.,
who resigned on September 1, 2000, each received $58,355 on the purchase
United Outdoors, Inc. by the Company.
28
ITEM 5. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
CERTAIN SECURITY HOLDERS.
PRINCIPAL STOCKHOLDERS
As of January 1, 2001, the following persons, including any "group",
are, based on information available to the Company, beneficial owners of
more than five percent of the Company's common stock:
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
Common Stock Anne Elkins 1,000,000 14.28%
Port Washington, NY Record and Beneficial
11050 Owner
Common Stock Alini Family Trust 1,500,000 21.4%
Levittown, NY Record and Beneficial
Owner
Common Stock Eden Studios, Inc. 1,000,000 14.28%
Tampa, FL Record and Beneficial
Owner
Common Stock Gary Saunders 800,000 11.42%
Freeport, NY Record and Beneficial
Owner
Common Stock Garnet Morris 500,000 7.14%
New York, NY Record and Beneficial
Owner
Security Ownership of Management
As of the date of this document, the following table discloses, as to each
class of equity securities of the Company or any of its parents or
subsidiaries other than directors' qualifying shares, beneficially owned by
all directors and nominees, the names of each executive officer (as defined
in Item 402[a][2] of Securities and Exchange Commission regulation S-B),
and directors and executive officers of the Company as a group, the total
number of shares beneficially owned and the percent of class so owned. Of
the number of shares shown, the associated footnotes indicate the amount of
shares with respect to which such persons have the right to acquire
beneficial ownership as specified in Securities and Exchange Commission
Rule 13(d)(1).
29
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
Common Stock Anne Elkins 1,000,000 14.28%
Port Washington, NY Record and Beneficial
11050 Owner
Common Stock Robert Alini 1,500,000 21.4%
Levittown, NY Record and Beneficial
Owner
Common Stock Todd Wenner 100,000 1.4%
Morristown, NJ Record and Beneficial
Owner
_____________________________________________________________________________
ITEM 6. INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.
The following information pertains to all transaction during the last two
year, or proposed transactions, to which the Company was or is to be a party,
in which any of the following persons had or is to have a direct or indirect
material interest: any director or executive officer of the Company: any
nominee for election as a director; any principal security holder listed
below; and, any member of the immediate family (including spouse, parents,
children, siblings, and in-laws) of any of the foregoing persons.
Relationship Nature of Interest Amount of Fiscal
Name to Company in the Transaction Interest Year
Ending
Anne Elkins CEO Recipient of Shares (1) 2001
Robert Alini President Recipient of Shares (1) 2001
Gary Saunders CEO (2) Owner of Shares Sold (3) 2000
Garnet Morris President (2) Owner of Shares Sold (3) 2000
Todd Wenner Secretary Recipient of Shares (4) 2000
(1) Anne Elkins received 1,000,000 common shares and Robert Alini received
1,500,000 of our common shares and 5,000,000 preferred non-convertible
voting shares in our Preferred Stock as compensation on the purchase of
ProsorCons Holding Company, Inc.
(2) Gary Saunders and Garnet Morris resigned on September 1, 2000.
(3) Gary Saunders and Garnet Morris each received $58,355 for their 2/3
interest in United Outdoors, Inc. on August 1, 2000, when the Company
purchased United.
(4) Todd Wenner received 100,000 shares as compensation on the purchase of
ProsorCons Holding Company, Inc.
ITEM 7. DESCRIPTION OF SECURITIES.
COMMON STOCK
We are authorized to issue 50,000,000 shares of Common Stock, with a par
value of $0.001. Immediately prior to this offering 7 Million shares of
Common Stock were outstanding and held of record by approximately two
hundred (200) persons as of February 1, 2001. The holders of Common Stock
have one vote per share on all matters (including election of directors)
without provision for cumulative voting. Thus, holders of more than fifty
percent (50%) of the shares voting for the election of directors can elect
all of the directors, if they choose to do so. The Common Stock currently
is not redeemable and has no conversion or preemptive rights. The Common
30
Stock currently outstanding is (and the Shares being issued pursuant to this
prospectus will be) validly issued, fully paid and non-assessable.
In the event of liquidation of our assets, holders of Common Stock will
share equally in any balance of our assets available for distribution to
them after satisfaction of creditors and the holders of our senior
securities. We may pay dividends, in cash or in securities or other
property when and as declared by the board of directors from funds legally
available therefore, but has paid no cash dividends on its Common Stock.
Our articles of incorporation and amendments thereto do permit all or a
designated voting group of shareholders to be entitled to cumulate their
votes for directors. As of the date of this memorandum, there have not
been such rights actually granted to any group of shareholders. Such rights
could be granted in the future.
DIVIDENDS
The payment, by us of any other dividends in the future rests within the
discretion of our Board of Directors and will depend, among other things,
upon our earnings, capital requirements and financial condition, as well as
other relevant factors. We have not paid any dividends since our inception;
however, we may pay dividends if business operations permit.
ADDITIONAL INFORMATION
The foregoing statements are a summary of the rights and privileges of the
holders of our Common Stock. It does not purport to be complete and is
subject to the provisions of the corporate by laws of the State of Delaware,
the Securities Act of 1933, as amended, and to the terms of the Company's
Articles of Incorporation and By Laws. The foregoing statements are
qualified in their entirety by such references.
PREFERRED STOCK
We are authorized to issue 10,000,000 shares of preferred stock. All has
been issued as non-convertible voting shares, with a liquidation value of
$10,000,000, and is held by Robert Alini and Anne Elkins.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
There is currently no public trading market for our common stock. As of
January 1, 2001 there were approximately 200 shareholders of record of our
common stock.
There are currently no outstanding warrants or options to purchase any of
our stock, nor is there any security agreement, securities or any other
rights outstanding that are convertible into shares of our common stock.
31
Generally, under Rule 144, a person (or persons whose shares are aggregated)
who has satisfied a one year holding period may, under certain circumstances,
sell within any three month period a number of shares which does not exceed
the greater of one percent (1%) of the then outstanding Common Stock or the
average weekly trading volume during the four calendar weeks prior to such
sale. Rule 144 also permits, under certain circumstances, the sale of
shares without any quantity limitation by a person who has not been an
affiliate of the Company for at least 90 days and who has satisfied a one
year holding period.
There are 7 shareholders holding 4 million shares which will be eligible
for sale in January of 2002, pursuant to fulfilling the terms as set down in
Rule 144.
The transfer agent for the Company's Capital Stock is Continental Stock
Transfer Company of New York, located at 2 Broadway, New York, New York.
We have never paid cash dividends on our common stock. We presently intend
to retain future earnings, if any, to finance the expansion of our business
and we do not anticipate that any cash dividends will be paid in the
foreseeable future. The future dividend policy will depend on our earnings,
capital requirements, expansion plans, financial condition and other
relevant factors. Declaration and payment of future dividends, if any, will
be at the sole discretion of the board of directors.
PENNY STOCK
Until our shares qualify for inclusion in the NASDAQ system, there will
continue to be no trading market for our shares. As a result, an investor
may find it more difficult or impossible to dispose of, or to obtain
accurate quotations as to the price of the securities offered.
Effective August 11, 1993, the Securities and Exchange Commission adopted
Rule 15g-9, which established the definition of a penny stock, for purposes
relevant to us, as any equity security that has a market price of less than
$5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a penny stock,
unless exempt, the rules require: (i) that a broker or dealer approve a
person's account for transactions in penny stocks; and (ii) the broker or
dealer receive from the investor a written agreement regarding the
transaction, setting forth the identity and quantity of the penny stock to
be purchased. In order to approve a person's account for transactions in
penny stocks, the broker or dealer must (i) obtain financial information and
investment experience, and objectives of the person; and (ii) make a
reasonable determination that the transactions in penny stocks are suitable
for that person and that person has sufficient knowledge and experience in
financial matters to be capable of evaluating the risks of transactions in
penny stocks. The broker or dealer must also deliver, prior to any
transaction in a penny stock, a disclosure schedule prepared by the
Commission relating to the penny stock market, which, in highlight form, (i)
sets forth the basis on which the broker or dealer made the suitability
determination; and (ii) that the broker or dealer received a signed,
written agreement from the investor prior to the transaction. Disclosure
also has to be made about the risks of investing in penny stock in both
public offerings and in secondary trading, and about commissions payable to
both the broker-dealer and the registered representative, current quotations
for the securities and the rights and remedies available to an investor in
cases of fraud in penny stock transactions. Finally, monthly statements have
to be sent disclosing recent price information for the penny stock held in
the account and information on the limited market in penny stocks.
32
ITEM 2. LEGAL PROCEEDINGS.
We are not a party to any material legal proceeding, nor is any officer,
director or affiliate a party adverse to us in any legal proceeding.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
ITEMS 4. RECENT SALES OF UNREGISTERED SECURITIES.
Between September 1997 and June 1998, we issued a total of 486,500 shares of
our common stock to 154 investors for a total purchase price of $973,000 or
$2.00 per share. This financing was completed under Rule 504 of Regulation
D of the Securities Act.
On September 1, 2000 we issued 4,000,000 shares in exchange for all the
outstanding shares in ProsorCons Holding Company, Inc. Anne Elkins and
Robert Alini, who became our CEO and President, respectively, received
2,000,000 each. Each also received 5,000,000 voting non-convertible shares
in our preferred Stock. Reliance was placed on Section 4(2) of the Securities
Act for exemption from registration in that all were sophisticated
investors. The table below discloses the full consideration received by
each shareholder for his shares in ProsorCons Holding Company, Inc.:
Shareholder # of Shares Address
Alini Family Trust
(Robert Alini Trustee) 1.5million shares 1 Fox Lane
Levittown NY 11571
Eden Studios
(attn.: Matt Melnick) 1 million shares 2307 West Azeele Street
Tampa FL 33609
Anne Elkins 1 million shares 2 Wakefield Avenue
Port Washington, NY 11050
Todd Wenner 100,000 shares 230 Park Avenue, 10th Floor
New York, NY 10017
Paul Esteva 100,000 shares 399 East 71st Street
New York, NY 10017
Victoria Lopez 100,000 shares 75-12 Springfield Boulevard
Bayside, NY 11364
Robert Elkins 200,000 shares 2 Wakefield Avenue
Port Washington, NY 11050
In October, 2000, 8,500 shares were sold to 6 individual investors for
$17,000 by private placement. The shares were exempt from registration in
reliance on Section 4(2) of the Securities Act of 1933, in that all were
sophisticated investors. The Table below discloses the relevant information
about each investor:
33
Shareholder # of Shares Address
Thomas Koster 1,000 11A Linden Street
Massapequa, NY 11758
David & Shari
Koster 2,500 15 Holly Drive
Sayville, NY 11782
Diana Ladner 750 36 Meeting Lane
Hicksville, NY
Christopher
Roccotagliata 1,250 61 Sycamore Lane
Levittown, NY 11756
Melissa Lishner 500 18-65 211th Street
Bayside, NY 11361
Dean Pitz 2,500 1 Fox Lane
Levittown, NY 11571
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware Business Corporation Act permits the indemnification of
directors, employees, officers and agents of Delaware corporations. Our
Articles of Incorporation and Bylaws provide that we shall indemnify our
directors and officers to the fullest extent permitted by the Corporation
Act. 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 have been informed 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.
34
PART F/S
Following are our audited financial statements for the years ended July 31,
2000 and 1999, including the independent auditor's report, the balance sheets
as of July 31, 2000 and 1999 and the related statements of operations in
shareholders' equity and cash flows for the years then ended, and our
unaudited balance sheet as of October 31, 2000, with the related
consolidated statements of operations, stockholders' equity, and cash
flows for the three months ended October 30, 2000 and 1999.
35
Vital Sign, Inc. and its Subsidiaries
Consolidated Financial Statements and
Independent Auditor's Report
for the Fiscal Years ended July 31, 2000 and 1999
36
Vital Sign, Inc. and its Subsidiaries
Consolidated Financial Statements
for the Fiscal Years ended July 31, 2000 and 1999
TABLE OF CONTENTS
__________________________________________________________________
Consolidated Financial Statements:
Independent Auditor's Report ................................F 3
Consolidated Balance Sheets ................................F 4
Consolidated Statements of Operations and
Retained Earnings (Deficit) .................................F 5
Consolidated Statements of Stockholder's Equity .............F 6
Consolidated Statements of Cash Flows .......................F 7
Consolidated Statement of Expenses F 8
Notes to Consolidated Financial Statements ..................F 9
_________________________________________________________________
37
Al Amir, CPA, LLC.
205-07 Hillside Avenue Direct) 718-464-7717
Suite 27 Fax) 718-464-7717
Jamaica, NY 07024
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Shareholders of Vital Sign, Inc.
We have audited the accompanying consolidated balance sheets of Vital Sign,
Inc. and its subsidiaries as of July 31, 2000 and July 31, 1999, and the
related consolidated statement of operations and retained
earnings (deficit), consolidated statement of stockholders' equity and
consolidated statement of cash flows for the years then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Vital Sign, Inc. and its subsidiaries at July 31, 2000 and July 31,
1999, and the results of its operations and its cash flow for the
fiscal years ended July 31, 2000 and July 31,l999 in conformity with
generally accepted accounting principles.
/s/Al Amir CPA/s/
_______________________
Al Amir, CPA, LLC.
November 2, 2000
Jamaica, NY
38
Vital Sign, Inc. and Subsidiary
Consolidated Balance Sheet
July 31, 2000 and July 31, 1999
ASSETS 2000 1999
Current Assets:
Cash and Cash Equivalents $11,602 $17,017
Accounts Receivable - Net 80,140 45,373
Due from Vital Marketing Group, Inc. 12,000
103,741 62,390
Property and Equipment, net of
accumulated of $5,541 9,560 8,517
and $2,880 respectively
Goodwill, net of amortization of
$5,836 110,875
Loans to Officers 68,143 51,948
$292,320 $122,855
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Accounts Payable $384,459 $257,980
Due to Customers 33,000 75,000
Loan Payable to Bank-
under Line of Credit - 15,947
Payroll Taxes Payable 108,093 63,403
Other Current Liabilities 2,040 680
$527,592 $413,010
Stockholders' Deficiency:
Common Stock, par value $0.0001 309 309
50,000,000 authorized, and
3,069,200 issued as of July 31, 1999
and July 31, 2000
Additional Paid in Capital 626,835 608,835
Deficit (879,151) (899,298)
(252,008) (290,155)
Minority interest in subsidiary 16,736 -
(235,272) (290,155)
$292,320 $122,855
See Accompanying Notes to Consolidated Financial Statements.
39
Vital Sign, Inc. and Subsidiary
Consolidated Statement of Operations
July 31, 2000 and July 31, 1999
2000 1999
REVENUES $1,585,594 $1,279,227
COST OF SERVICES 1,078,787 769,725
GROSS PROFIT 506,807 509,502
Operating Expenses 461,915 873,628
INCOME (LOSS) FROM OPERATIONS BEFORE
OTHER INCOME, MINORITY INTEREST, AND
EXTRAORDINARY ITEM 44,892 (364,126)
OTHER INCOME AND EXPENSE
Interest Income 314 986
Interest Expense (8,324) (3,453)
INCOME BEFORE MINORITY INTEREST AND
EXTRAORDINARY ITEM 36,883 (366,593)
MINORITY INTEREST IN NET INCOME OF SUBSIDIARY (16,736) -
EXTRAORDINARY ITEM- LOSS RESULTING FROM
FAILED MERGER - (276,613)
NET INCOME (LOSS) 20,147 (643,206)
Earnings Per Share $0.01 ($0.21)
See Accompanying Notes to Consolidated Financial Statements.
40
Vital Sign, Inc. and Subsidiary
Consolidated Statement of Stockholders'
Equity and Retained Earnings
For the Years Ended July 31, 1999 and 2000
Common Stock Additional- Retained Total
Number of Shares Common Paid-in- Earnings Minority Stockholders'
Outstanding Stock Capital (Deficit) Interest Equity
Balance,
July 31,
1998 2,966,750 297 352,947 $(256,092) $97,152
Shares
Issued 102,450 12 255,888 255,900
Net
Income
(Loss) (643,206) (643,206)
Balance,
July 31,
1999 3,069,200 309 608,835 (899,298) (290,155)
Shares
Issued 0 18,000 18,000
Minority
interest
in net
income of
subsidiary 16,736 16,736
Net
Income 20,147 20,147
Balance,
July 31,
2000 3,069,200 $309 $626,835 (879,151)16,736 $(235,272)
See Accompanying Notes to Consolidated Financial Statements.
41
Vital Sign, Inc. and Subsidiary
Consolidated Statement of Cash Flows
July 31, 2000 and July 31, 1999
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $36,883 $(643,206)
Adjustment to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 2,661 1,920
Amortization of goodwill 5,836 -
Changes in operating assets and liabilities
Accounts receivable (34,767) (26,468)
Receivable from officers (16,195) (58,949)
Due from Vital Marketing Group (12,000)
Receivable from Vital Vision - 142,830
Accounts payable 126,479 213,348
Payroll taxes payable 44,690 43,536
Note payable under line of credit (15,947) (7,461)
Due to customers (42,000) 75,000
Other current liabilities 1,360 -
Net cash used in operating activities 97,000 (259,450)
CASH FLOWS FROM INVESTING ACTIVITIES
Write-off of start-up cost - 2,533
Purchase of equipment (3,705) -
Purchase of subsidiary (116,710)
Net cash provided (used) by investing
activities (120,415) 2,533
CASH FLOWS FROM FINANCING ACTIVITIES
Additional Contributions of paid-in-
capital from shareholders 18,000 255,900
Net cash provided (used) by financing activities 18,000 255,900
NET DECREASE IN CASH AND CASH EQUIVALENTS (5,415) (1,017)
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR 17,017 18,034
CASH AND CASH EQUIVALENTS
END OF YEAR 11,602 17,017
See Accompanying Notes to Consolidated Financial Statements.
42
Vital Sign, Inc. and Subsidiary
Consolidated Supporting Schedule
July 31, 2000 and July 31, 1999
2000 1999
Operating Expenses:
Accounting $6,679 $13,514
Amortization of Good Will 5,836 -
Auto and Truck Expense 5,891 20,451
Bad Debts 8,508 280,006
Bank Charges 2,562 1,402
Cleaning and Repairs 1,725 5,813
Communication 16,679 28,824
Computer Expense 1,624 3,659
Consulting 78,696 33,600
Contributions - 2,000
Corporate Filing Fees 1,830 5,110
Corporate Taxes 2,660 680
Depreciation 2,661 1,920
Employee Benefits - 4,800
Insurance 9,347 4,851
Legal Fees 985 123,506
Meals and Entertainment 20,221 26,135
Messenger Service - 1,388
Miscellaneous 6,846 2,124
Office Expenses & Supplies 23,508 4,868
Officers' Compensation 93,569 86,161
Payroll Taxes, Penalties and Interest 29,278 32,273
Postage and Delivery 5,769 10,806
Private Placement - 14,021
Professional Development 1,900 3,100
Rent 41,324 28,481
Salaries 69,698 109,342
Security Deposit Forfeiture - 2,200
Travel 19,250 17,022
Utilities 4,870 5,571
$461,915 $873,628
See Accompanying Notes to Consolidated Financial Statements.
43
Vital Sign, Inc. and Subsidiary
Notes to Consolidated Financial Statements
For the Years Ended July 31, 1999 and 2000
1. Description of Business and Basis of Presentation
Vital Sign, Inc. ("Vital" or "Company") was incorporated in Delaware on
August 7, 1997 as a marketing company, specializing in outdoor billboard
advertising. Vital Sign, Inc. has the rights to market, worldwide, a
patented mobile advertising service, which utilizes the Vital Sign, a
bicycle mounted billboard Vital Sign, Inc. has the rights to market worldwide
a patented mobile advertising service, which utilizes the Vital Sign, a
bicycle mounted billboard.
On August 1, 1999, Vital purchased a 2/3 interest in United Outdoor, Inc.,
a Delaware Company formed in July, 1999, for the sum of $116,710. United
Outdoor, Inc.'s business focuses on outdoor advertising with special
emphasis on the entertainment industry. All Vital's advertising business
was transferred to United Outdoor, Inc., and, as a result, the parent
company became a holding company with one operating subsidiary. Contracts
which had previously been Vital's were still credited as business of Vital,
but the contracts were administered by United Outdoor. As a result, the
financial statements are presented on a consolidated basis, as United
Outdoor has become the sole operating company, with the parent company
simply a holding company with no assets except its interest in United Outdoor.
2. Summary of Significant Accounting Policies
a) Goodwill
Goodwill represents the excess of the cost of the Company's interest in the
Subsidiary over the fair value of a proportionate share of its net
liabilities at the date of acquisition. Goodwill is being amortized on the
straight line method over 20 years.
b) Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiary, United Outdoor, Inc., after elimination of all material
intercompany accounts and transactions.
c) Allowance for Doubtful Accounts
It is the policy of management to review the outstanding accounts
receivable at year end, as well as the bad debt write-offs experienced in
the past, and establish an allowance for doubtful accounts for uncollectable
amounts. The allowance for doubtful accounts is $121,228 and $113,593 at
July 31, 1999 and 2000, respectively.
d) Accounting Method & Revenue, Expense Recognition
Income and expenses are recorded on the accrual basis.
e) Depreciation
Depreciation is computed by using the straight-line method over the
estimated useful lives of the assets.
44
Vital Sign, Inc. and Subsidiary
Notes to Consolidated Financial Statements
For the Years Ended July 31, 1999 and 2000
2. Summary of Significant Accounting Policies-continued
f) Income Taxes
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due less tax benefit
of net operating loss carryovers.
g) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
h) Financial Instruments and Risk Concentration
Financial instruments which potentially subject the Companies to
concentration of credit risk are cash balances in banks. The Companies keep
their cash balances with high quality financial institutions which are
federally insured although daily bank balances may exceed limits of federal
insurance. Management believes that no significant concentration of credit
risk exists with respect to those cash balances.
i) Reclassifications
Certain accounts in the prior-year financial statements have been
reclassified for comparative purposes to conform with the presentation in
the current-year financial statements.
j) Advertising Costs
Advertising costs are expensed in the period incurred and production costs
are expensed when the first advertising is distributed.
k) Principle of Consolidation
The consolidated balance sheet for the period ended July 31, 2000 includes
the accounts of Vital Sign, Inc. and its subsidiary. Where United Outdoor
was formed in July, 1999, the balance sheet for July 31, 1999 and the
associated financial statements represent only Vital Sign, Inc. Given the
date of Incorporation of United Outdoor, Inc., and the date it was purchased
by Vital Sign, Inc. (August 1, 1999), no pro forma data for the 1999 fiscal
year was presented or deemed necessary. All significant inter company
transactions have been eliminated.
3. Related Party Transactions
The 2/3 interest in United Outdoor, Inc., purchased by Vital on August 1,
1999, for the sum of $116,710, was purchased from Gary Saunders and Garnet
Morris, The CEO and President of Vital, respectively.
45
Vital Sign, Inc. and Subsidiary
Notes to Consolidated Financial Statements
For the Years Ended July 31, 1999 and 2000
Vital Vision is a commonly owned affiliate that has ceased conducting
business in July 1999. The Company paid $172,327 on behalf of Vital Vision
pursuant to a licensing agreement whereby Vital Vision sold the company's
products as agent for Vital Sign. Management has determined that the balance
is not collectible and the Company has charged the receivable to bad debt
expense.
The Company has incurred on behalf of Vital Marketing, Inc., (in which the
management of the Company holds an ownership interest) expenses totaling
$12,000 in fiscal year 2000 in relation to the preparation of the outdoor
advertisement products. This amount remains unpaid.
Consulting fees totaling $7,692 were paid to a company substantially owned
by a shareholder of the Company.
4. Loans to Officers
The loan receivable from officers is non-interest bearing with no set terms
of repayment.
5. Line of Credit
The Company had a $25,000 line of credit with a bank available for working
capital on which it had drawn $15,947 as of July 31, 1999. The line carried
an interest rate of 10%. In August 1999 the balance was paid in full and the
account was closed.
6. Income Taxes
No provisions have been set up for income taxes due to net operating loss
carryovers from previous years.
The net operating loss carryovers available for future years for Vital
Sign, Inc. is approximately $879,000 expiring from fiscal year ending
July 31, 1999 through July 31, 2019.
7. Extraordinary Item
In July 1999, the Company and World Outdoor Corporation ("World"), pursuant
to a proposed merger, operated together from the premises of World. During
this period, World collected customer receivables that were the property of
the Company totaling $276,613. Prior to consummation of the merger,
management and the Board of Directors determined that the transaction would
not be in the best interest of the shareholders. Accordingly, the Company
ended its relationship with World. As a result of these events, the Company
suffered a loss of $276,613.
This relationship was the subject of litigation by World against the
Company and cross litigation by the Company against World. As World's case
was, in management's opinion, meritless, and World had no assets from which
the Company could recoup its losses, both sides discontinued their actions.
46
Vital Sign, Inc. and Subsidiary
Notes to Consolidated Financial Statements
For the Years Ended July 31, 1999 and 2000
8. Commitments and Comments
The Company leases its executive office facilities under a non-cancelable
five-year operating lease. The lease terminates in February 28, 2003.
Remaining minimum lease payments through February 28, 2003 are as
follows:
For fiscal year end 7/31/2001 $31,494
For fiscal year end 7/31/2002 $32,589
For remaining period through February 28, 2003 $19,390
9. Income Taxes
The Company account for its income taxes using Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, which
requires recognition of deferred tax liabilities and assets for expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method income taxes are provided for
the tax effects of transactions reported in the financial statements and
consist of taxes currently due plus deferred taxes related primarily to
differences between the bases of certain assets and liabilities for
financial and tax reporting. The deferred taxes represent the future tax
return consequences of those differences, which will either be taxable
when the assets and liabilities are recovered or settled.
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes for operating losses that are available to offset future taxable
income.
10. Common and Preferred Stocks
The Company is authorized to issue 50,000,000 common shares at $ 0.0001
par value share and, as of July 31, 2000, 3,069,200 voting common shares
are issued and outstanding.
11. Earnings Per Shares
Earnings (Loss) per share are calculated using the weighted-average number
of common shares outstanding and common shares equivalents.
12. Net Operating Loss Carry-Forward
The Company has accumulated net operating loss in the amount of $ 879,151
as of July 31, 2000 which can be used to offset taxable income and such
carry forward tax benefits expire on year 2014.
47
Vital Sign, Inc. and Subsidiary
Notes to Consolidated Financial Statements
For the Years Ended July 31, 1999 and 2000
13. Subsequent Events
On September 1, 2000, the Company purchased ProsorCons Holding Company, Inc.,
a corporation formed under the laws of the State of New York on August 7,
2000. ProsorCons operates under the trade name, ProsorCons.com. ProsorCons
is an Internet-based sports media company that will provide branded,
interactive information and programming as well as merchandise through its
web site.
48
VITAL SIGN, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 1, 2000 TO OCTOBER 31, 2000
49
VITAL SIGN, INC. AND SUBSIDIARY
QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 1, 2000 TO OCTOBER 31, 2000
Contents Page
Reviewing Accountant's Report 1
Financial Statements:
Consolidated Balance Sheet 2
Consolidated Statement of Operations 3
Consolidated Statement of Stockholders' Equity and
Retained Earnings 4
Consolidated Statement of Cash Flows 5
Supplementary Information:
Notes to Consolidated Financial Statements 6-10
Consolidated Supporting Schedule 11
50
LAWRENCE S. FISCHER, CPA
92 DOSORIS LANE
GLEN COVE, NEW YORK 11542
516-674-0385
To The Board of Directors
We have reviewed the accompanying consolidated balance sheet of Vital Sign,
Inc. and Subsidiary of October 31, 2000, and the related consolidated
statements of operations, stockholders' equity and retained earnings, and
cash flows for the quarter then ended, in accordance with Statements on
Standards for Accounting and Review Services issued by the American
Institute of Certified Public Accountants. All information included in
these financial statements is the representation of the management of Vital
Sign, Inc. and Subsidiary.
A review consists principally of inquiries of company personnel and
analytical procedures applied to financial data. It is substantially less
in scope than an audit in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the consolidated financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements in
order for them to be in conformity with generally accepted accounting
principles.
Our review was made for the purpose of expressing limited assurance that
there are no material modifications that should be made to the consolidated
financial statements in order for them to be in conformity with generally
accepted accounting principles. The information included in the accompanying
consolidated schedule of operating expenses is presented only for
supplementary analysis purposes. Such information has been subjected to
the inquiry and analytical procedures applied in the review of the basic
consolidated financial statements, and we are not aware of any material
modifications that should be made to it.
/s/Lawrence S. Fischer
Lawrence S. Fischer, CPA
February 12, 2001
51
Vital Sign, Inc. and Subsidiary
Consolidated Balance Sheet
For the Periods Ending July 31, 2000
and October 31, 2000
October 31 July 31
2000 2000
ASSETS
Current Assets:
Cash and Cash Equivalents $23,433 $11,602
Accounts Receivable - Net 74,175 80,140
Due from Vital Marketing Group, Inc. 12,000 12,000
109,608 103,741
Property and Equipment, net of
accumulated of $5,541 and
$2,880 respectively 9,560 9,560
Goodwill, net of amortization
of $1,385 109,489 110,875
Loans to Officers 68,143 68,143
$296,800 $292,320
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Accounts Payable $ 86,460 $384,459
Due to Customers 33,000 33,000
Loan Payable to Bank-
under Line of Credit - -
Payroll Taxes Payable 109,940 108,093
Other Current Liabilities 2,040 2,040
$231,440 $527,592
Stockholders' Deficiency:
Common Stock, par value $0.001 715 309
50,000,000 authorized, and
3,076,700 issued as of July
31, 2000 and October 31, 2000
Additional Paid in Capital 929,042 626,835
Deficit (881,133) (879,151)
48,624 (252,008)
Minority interest in subsidiary 16,736 16,736
65,360
$296,800 $292,320
See Accompanying Notes to Consolidated Financial Statements.
52
Vital Sign, Inc. and Subsidiary
Consolidated Statement of Operations
For the Periods Ending July 31, 2000
and October 31, 1999
October 31 October 31
2000 1999
REVENUES $108,435 $396,398
COST OF SERVICES 47,063 269,696
GROSS PROFIT 61,372 126,702
Operating Expenses 63,353 115,478
INCOME (LOSS) FROM OPERATIONS BEFORE
OTHER INCOME, MINORITY INTEREST, AND
EXTRAORDINARY ITEM (1981) 11,224
OTHER INCOME AND EXPENSE
Interest Income - 78
Interest Expense - (2,081)
INCOME BEFORE MINORITY INTEREST AND
EXTRAORDINARY ITEM (1981) 9,221
MINORITY INTEREST IN NET INCOME OF
SUBSIDIARY (4,184)
EXTRAORDINARY ITEM- LOSS RESULTING FROM
FAILED MERGER - -
NET INCOME (LOSS) (1981) 5,037
Earnings Per Share $0.01 $0.01
See Accompanying Notes to Consolidated Financial Statements.
53
VITAL SIGN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND DEFICIT
FOR THE QUARTER ENDED OCTOBER 31, 2000
Common Stock
Number of Additional Total
Shares Common Paid-in Minority Stockholders'
Outstanding Stock Capital Deficit Interest Equity
Balance,
July
31, 2000 3,069,200 $ 309 $ 626,835 $(879,152) $ 16,736 $ (235,272)
Shares
Issued 4,055,000 406 302,207 0 0 302,613
Net Loss 0 0 0 (1,981) 0 (1,981)
Balance,
October
31, 2000 7,124,200 $ 715 $ 929,042 $(881,133) $ 16,736 $ 65,360
See Accompanying Notes to Consolidated Financial Statements.
54
Vital Sign, Inc. and Subsidiary
Consolidated Statement of Cash Flows
For the Periods Ending October 31, 2000
and October 31, 1999
October 31 October 31
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net Profit (loss) $(1,981) $ 9,221
Adjustment to reconcile net income (loss) to net
cash
provided by operating activities:
Depreciation - 665
Amortization of goodwill 1,386 1,459
Changes in operating assets and liabilities
Accounts receivable 5,965 ( 8,692)
Receivable from officers - ( 4,048)
Due from Vital Marketing Group - ( 3,000)
Receivable from Vital Vision - -
Accounts payable (297,999) 31,620
Payroll taxes payable 1,847 11,172
Note payable under line of credit - ( 3,987)
Due to customers - (10,500)
Other current liabilities - 340
Net cash used in operating activities (290,782) 24,250
CASH FLOWS FROM INVESTING ACTIVITIES
Write-off of start-up cost - -
Purchase of equipment - ( 926)
Purchase of subsidiary - ( 29,178)
Net cash provided (used) by investing
activities - ( 30,104)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of Common Stock 406 -
Additional Contributions of paid-
in-capital from shareholders 302,207 4,500
Net cash provided (used) by financing
activities 302,613 4,500
NET INCREASE IN CASH AND CASH EQUIVALENTS 11,831 (1,354)
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR 11,602 4,254
CASH AND CASH EQUIVALENTS
END OF PERIOD 23,433 2,900
55
See Accompanying Notes to Consolidated Financial Statements.
Vital Sign, Inc. and Subsidiary
Consolidated Supporting Schedule
For the Periods Ending October 31, 2000
and October 31, 1999
October 31 October 31
2000 1999
Operating Expenses:
Accounting $4,054 $1,670
Amortization of Good Will 1,386 1,459
Auto and Truck Expense 935 1,473
Bad Debts - 2,127
Bank Charges 213 640
Cleaning and Repairs 232 431
Communication 1,218 4,170
Computer Expense 89 406
Consulting 36,700 19,674
Contributions - -
Corporate Filing Fees - 457
Corporate Taxes - 665
Depreciation - 665
Employee Benefits - -
Insurance - 2,337
Legal Fees 500 246
Meals and Entertainment - 5,055
Messenger Service - -
Miscellaneous 2,058 1,711
Office Expenses & Supplies 604 5,877
Officers' Compensation 11,617 23,392
Payroll Taxes, Penalties and Interest 846 7,320
Postage and Delivery - 1,442
Private Placement - -
Professional Development - 475
Rent - 10,331
Research and Development - 17,424
Salaries 2,770 -
Security Deposit Forfeiture - 4,812
Travel 131 1,218
$63,353 $115,477
See Accompanying Notes to Consolidated Financial Statements.
56
VITAL SIGN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED OCTOBER 31, 2000
Note 1 - Description of Business and Basis of Presentation
Vital Sign, Inc. ("Vital" or "the Company") was incorporated in Delaware on
August 7, 1997 as a marketing company, specializing in outdoor billboard
advertising. Vital Sign, Inc. has the rights to market, worldwide, a
patented mobile advertising service, which utilizes the Vital Sign, a
bicycle mounted billboard.
On August 1, 1999, Vital purchased a 2/3 interest in United Outdoor, Inc.,
a Delaware company formed in July, 1999, for the sum of $116,710. United
Outdoor, Inc.'s business focuses on outdoor advertising with special emphasis
on the entertainment industry. All Vital's advertising business was
transferred to United Outdoor, Inc., and, as a result, the parent company
became a holding company with one operating subsidiary. The contracts which
had previously belonged to Vital were still credited as business of Vital,
but the contracts were administered by United Outdoor.
On September 1, 2000, the Company purchased ProsorCons Holding Company,
Inc., a corporation formed under the laws of the State of New York on August
7, 2000. ProsorCons operates under the trade name, ProsorCons.com.
ProsorCons is an Internet-based sports media company that will provide
branded, interactive information and programming as well as merchandise
through its web site.
Note 2 - Summary of Significant Accounting Policies
Goodwill
Goodwill represents the excess of the cost of the Company's interest in the
Subsidiary over the fair value of a proportionate share of its net
liabilities at the date of acquisition. Goodwill is being amortized on the
straight-line method over 20 years.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, United Outdoor, Inc. and ProsorCons Holding Company,
Inc., after elimination of all material intercompany accounts and
transactions.
57
VITAL SIGN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED OCTOBER 31, 2000
Note 2 - Summary of Significant Accounting Policies (cont'd).
Allowance for Doubtful Accounts
It is the policy of management to review the outstanding accounts receivable
at year end, as well as the bad debt write-offs experienced in the past, and
establish an allowance for doubtful accounts for uncollectible amounts. The
allowance for doubtful accounts was $121,228 and $113,593 at July 31, 1999
and 2000, respectively. No adjustment has been made for the period ended
October 31, 2000.
Accounting Method - Revenue, Expense Recognition
Income and expenses are recorded on the accrual basis.
Depreciation
Depreciation is computed by using the straight-line method over the
estimated useful lives of the assets.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due less tax benefit
of net operating loss carryovers.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
58
VITAL SIGN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED OCTOBER 31, 2000
Note 2 - Summary of Significant Accounting Policies (cont'd).
Financial Instruments and Risk Concentration
Financial instruments which potentially subject the Companies to
concentration of credit risk are cash balances in banks. The Companies keep
their cash balances with high quality financial institutions which are
federally insured although daily bank balances may exceed limits of federal
insurance. Management believes that no significant concentration of credit
risk exists with respect to those cash
balances.
1) Advertising Costs
Advertising costs are expensed in the period incurred and production costs
are expensed when the first advertising is distributed.
Note 3 - Related Party Transactions
The 2/3 interest in United Outdoor, Inc., purchased by Vital on August 1,
1999, for the sum $116,710, was purchased from Gary Saunders and Garnet
Morris, the CEO and President of Vital, respectively.
Vital Vision is a commonly owned affiliate that has ceased conducting
business in July 1999. The Company paid $172,327 on behalf of Vital Vision
pursuant to a licensing agreement whereby Vital Vision sold the company's
products as agent for Vital Sign. Management has determined that the
balance is not collectible and the Company has charged the receivable to bad
debt expense.
The Company has incurred on behalf of Vital Marketing, Inc., (in which the
management of the Company holds an ownership interest) expenses totaling
$12,000 in fiscal year 2000 in relation to the preparation of the outdoor
advertisement products. This amount remains unpaid.
Note 4 - Loans to Officers
The loan receivable from officers is non-interest bearing with no set terms
of repayment.
59
VITAL SIGN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED OCTOBER 31, 2000
Note 5 - Income Taxes
No provisions have been set up for income taxes due to net operating loss
carryovers from previous years.
The net operating loss carryovers available for future years for Vital Sign,
Inc. and Subsidiaries is approximately $881,000 expiring from fiscal year
ending July 31, 2000 through July 31, 2019.
The Company's account for its income taxes using Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, which
requires recognition of deferred tax liabilities and assets for expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method income taxes are provided for
the tax effects of transactions reported in the financial statements and
consist of taxes currently due plus deferred taxes related primarily to
differences between the bases of certain assets and liabilities for financial
and tax reporting. The deferred taxes represent the future tax return
consequences of those differences, which will either be taxable when the
assets and liabilities are recovered or settled.
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes for operating losses that are available to offset future taxable income.
Note 6 - Extraordinary Item
In July 1999, the Company and World Outdoor Corporation ("World"), pursuant
to a proposed merger, operated together from the premises of World. During
this period, World collected customer receivables that were the property of
the Company totaling $276,613. Prior to consummation of the merger,
management and the Board of Directors determined that the transaction
would not be in the best interest of the shareholders. Accordingly, the
Company ended its relationship with World. As a result of these events, the
Company suffered a loss of $276,613.
This relationship was the subject of litigation by World against the Company
and cross litigation by the Company against World. As World's case was, in
management's opinion, meritless, and World has no assets from which the
Company could recoup its losses, both sides discontinued their actions.
60
VITAL SIGN, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED OCTOBER 31, 2000
Note 7 - Common and Preferred Stocks
The Company is authorized to issue 40,000,000 common shares at $0.001 par
value share and 10,000,000 preferred shares with a par value of $0.001, and,
as of October 31, 2000, 7,124,200 voting common shares and no convertible
preferred shares are issued and outstanding.
Note 8 - Earnings Per Shares
Earnings (Loss) per share are calculated using the weighted-average number
of common shares outstanding and common shares equivalents.
Note 9 - Subsequent Events
On January 5, 2001 the Company name of Vital Sign, Inc. was legally changed
to Prosorcons Sports & Entertainment Company.
61
PART III
ITEM 1. INDEX TO EXHIBITS:
Exhibit Description of Documents
------- ------------------------
3.1 Articles of Incorporation, as amended 65
3.2 By-Laws. 68
10.2 Share Purchase Agreement between Vital Signs,
Inc. and Anne Elkins and Robert Alini 83
17.1 Letter of Resignation, dated September 1, 2000,
from Gary Saunders and Garnet Morris 107
21 Subsidiaries of the Registrant 108
23.1 Consent of Al Amir, CPA. 109
23.2 Consent of Lawrence Fischer 110
27 Financial Data Schedule 118
99.1 Patent License Agreement 111
99.2 Patent for Vital Sign 117
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, PROSORCONS SPORTS & ENTERTAINMENT COMPANY has caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized at Port Washington, New York on February 27, 2001.
PROSORCONS SPORTS & ENTERTAINMENT COMPANY
By: /s/ Anne Elkins
- -----------------------------------
Anne Elkins, Chief Executive
Officer
By: /s/ Robert Alini
- -----------------------------------
Robert Alini, President
Date: February 27, 2001
62
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63
February 27, 2000. Registration Number:
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2054910SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
PROSORCONS SPORTS & ENTERTAINMENT COMPANY
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EXHIBITS Volume 1
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505 Eighth Avenue, 6th Floor
New York, NY 10018
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Exhibit 3.1
Articles of Incorporation, and First Amendment
STATE OF DELAWARE
DIVISIONS OF CORPORATIONS
FILED 09:00 AM 08/07/1997
971264091-2779546
CERTIFICATE OF INCORPORATION
OF
Vital Sign, Inc.
FIRST: The name of this corporation is Vital Sign, Inc.
SECOND. Its registered office in the State is to be 1ocated at 1313 N.
Market Street, Wilmington, DE 19801-1151, County of New Castle. The
registered agent in charge thereof is The Company Corporation, address
same as above.
THIRD: The name of the business and the objects and purposes proposed
to be transacted, promoted and carried on, are to do any or all the
things herein mentioned as fully and to the same extent as natural
persons might or could do, and in any part of the world, viz.:
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The amount of the total authorized capital stock of this
corporation 15 divided into 50,000,000 shares of stock at .0001/par
value.
FIFTH: The name and mailing address of the incorporator is as follows:
Regina Cephas, 1313 N. Market St., Wilmington, DE 198O1-1151
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SIXTH: The Directors shall have power to make and to alter or amend
the By-Laws; to fix the amount to be reserved as working capital, and
to authorize and cause to be executed, mortgages and liens without
limit as to the amount, upon the property and franchise of the
Corporation. With the consent in writing, and pursuant to a vote of
the holders of a majority of the capital stock issued and outstanding,
the Directors shall have the authority to dispose, in any manner, of
the whole property of this corporation. The By-Laws shall determine
whether and to what extent the accounts and books of this corporation,
or any of them shall be open to the inspection of the stockholder; and
no stockholder shall have any right of inspecting any account, or book
or document of this Corporation, except as conferred by the law of the
By-Laws or by resolution of the stockholders. The stockholders and
directors shall have power to hold their meetings and keep the books,
documents and papers of the Corporation outside of the State of Delaware,
at such places as may be from time to time designated by the By-Laws or
by resolution of the stockholders or directors, except as otherwise
required by the laws of Delaware.
SEVENTH: Directors of the corporation shall not be liable to either
the corporation or its stockholders for monetary damages for a breach
of fiduciary duties unless the breach involves: (1)a directors duty of
loyalty to the corporation or its stockholders; (2) acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law; (3) liability for un1awful payments of dividends or
unlawful stock purchase or redemption by the corporation; or (4) a
transaction from which the director derived an improper personal
benefit.
I, THE UNDERSIGNED, for the purpose of forming a Corporation under the
laws of the State Of Delaware, do make, file and record this
Certificate and do certify that the facts herein are true: and I have
accordingly hereunto set my hand.
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DATED: August 7, 1997
/s/Regina Cephas/s/
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State of Delaware
Secretary of State
DIVISION OF CORPORATIONS
Filed 09:01 AM 01/03/2001
010003966-2779546
STATE of DELAWARE
CERTIFICATE of AMENDMENT of
CERTIFICATE of INCORPORATION
First: That at a meeting of the Board of Directors of Vital Sign, Inc.
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment
to be advisable and calling a meeting of the stockholders of said
corporation for consideration thereof. The resolution setting forth
the proposed amendment is as follows:
Resolved, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "1" so that as amended,
said Article shall be and read as follows:
That the new name of the corporation shall be "ProsorCons Sports
& Entertainment Company".
Second: That thereafter, pursuant to resolution of its Board of Directors,
a special meeting of the stockholders of said corporation was duly called
and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary
number of shares as required by statute were voted in favor of the amendment.
Third: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
Fourth: That the capital of said corporation shall not be reduced under
or by reason of said amendment.
BY: /s/ Robert Elkins
(Authorized Officer)
NAME: Robert Elkins
(Type or Print)
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Exhibit 3.2
By-Laws
CORPORATE RECORDS
OF
VITAL SIGN, INC.
INCORPORATED UNDER THE LAWS
OF THE
STATE OF DELAWARE
By-Laws
ARTICLE I - OFFICES
Section 1. The registered office of the corporation shall
be at
13l N. Market Street
Wilmington, DE 19801-1151
The registered agent in charge thereof shall be:
Regina Cephas
Section 2. The corporation may also have offices at such other
places as the Board of Directors may from time to time appoint or the
business of the corporation may require.
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ARTICLE II - SEAL
Section 1. The corporate seal shall have inscribed thereon the name
of the corporation, the year of its organization and the words
"Corporate Seal, Delaware".
ARTICLE III - STOCKHOLDERS' MEETINGS
Section 1. Meetings of stockholders shall be held at the registered
office of the corporation in this state or at such place, either
within or without this state, as may be selected from time to time by
the Board of Directors.
Section 2. Annual Meetings: The annual meeting of the stockholders
shall be held on the 1st Monday of August in each year if not a legal
holiday, and if a legal holiday, then on the next secular day
following at 9 o'clock A.M., when they shall elect a Board of
Directors and transact such other business as may properly be brought
before the meeting. If the annual meeting for election of directors
is not held on the date designated therefor, the directors shall cause
the meeting to be held as soon thereafter as convenient.
Section 3. Election of Directors: Elections of the directors of the
corporation be by written ballot.
Section 4. Special Meetings: Special meetings of the stockholders
may be called at any time by the President, or the Board of Directors,
or stockholders entitled to cast at least one-fifth of the votes which
all stockholders are entitled to cast at the particular meeting. At
any time, upon written request of any person or persons who have duly
called a special meeting, it shall be the duty of the Secretary to fix
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the date of the meeting, to be held not more than sixty days after
receipt of the request, and to give due notice thereof. If the
Secretary shall neglect or refuse to fix the date of the meeting and
give notice thereof, the person or persons calling the meeting may do
so.
Business transacted at all special meetings shall be confined to the
objects stated in the call and matters germane thereto, unless all
stockholders entitled to vote are present and consent.
Written notice of a special meeting of stockholders stating the time
and place and object thereof, shall be given to each stockholder
entitled to vote thereat at least _______ days before such meeting,
unless a greater period of notice is required by statute in a
particular case.
Section 5. Quorum: A majority of the outstanding shares of the
corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than a
majority of the outstanding shares entitled to vote is represented at
a meeting, a majority of the shares so represented may adjourn the
meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the
meeting as originally noticed. The stockholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
Section 6. Proxies: Each stockholder entitled to vote at a meeting
of stockholders or to express consent or dissent to corporate action
in writing without a meeting may authorize another person or persons
to act for him by proxy, but no such proxy shall be voted or acted
upon after three years from its date, unless the proxy provides for a
longer period. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A proxy
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may be made irrevocable regardless of whether the interest with which
it is coupled is an interest in the stock itself or an interest in the
corporation generally. All proxies shall be filed with the Secretary
of the meeting before being voted upon.
Section 7. Notice of Meetings: Whenever stockholders are required
or permitted to take any action at a meeting, a written notice of the
meeting shall be given which shall state the place, date and hour of
the meeting, and, in the case of a special meeting, the purpose or
purposes for which the meeting is called. Unless otherwise provided by
law, written notice of any meeting shall be given not less than ten nor
more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting.
Section 8. Consent in Lieu of Meetings: Any action required to be
taken at any annual or special meeting of stockholders or a
corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting
forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
Section 9. List of Stockholders: The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least ten
days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of
shares registered in the name of each stockholder. No share of stock
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upon which any installment is due and unpaid shall be voted at any
meeting. The list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
ARTICLE IV - DIRECTORS
Section 1. The business and affairs of this corporation shall be
managed by its Board of Directors, _________ in number. The directors
need not be residents of this state or stockholders in the
corporation. They shall be elected by the stockholders at
the annual meeting of stockholders of the corporation, and each
director shall be elected for the term of one year, and until his
successor shall be elected and shall qualify or until his earlier
resignation or removal.
Section 2. Regular Meetings: Regular meetings of the Board shall
be held without notice
At the registered office of the corporation, or
at such other time and place as shall be determined by the Board.
Section 3. Special Meetings: Special Meetings of the Board may be
called by the President on ______ days notice to each director, either
personally or by mail or by telegram; special meetings shall be called
by the President or Secretary in like manner and on like notice on the
written request of a majority of the directors in office.
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Section 4. Quorum: A majority of the total number of directors
shall constitute a quorum for the transaction of business.
Section 5. Consent in Lieu of Meeting: Any action required or
permitted to be taken at any meeting of the Board of Directors, or of
any committee thereof, may be taken without a meeting if all members
of the Board of (sic) committee, as the case may be, consent thereto
on writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee. The Board of Directors may
hold its meetings, and have an office or offices, outside of this
state.
Section 6. Conference Telephone: One or more Directors may
participate in a meeting of the Board, or a committee of the Board or
of the stockholders, by means of conference telephone or similar
communications equipment by means of which all persons participating
in the meeting can hear each other; participation in this manner shall
constitute presence in person at such meeting.
Section 7. Compensation: Directors as such, shall not receive nay
stated salary for their services, but by resolution of the Board, a
fixed sum and expenses of attendance at each regular or special
meeting of the Board PROVIDED, that nothing herein contained shall be
construed to preclude any director from serving the corporation in any
other capacity and receiving compensation therefor.
Section 8. Removal: Any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors, except that
when cumulative voting is permitted, if less than the entire Board is to
be removed, no director may be removed without cause if the votes cast
against his removal would be sufficient to elect him if then cumulatively
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voted at an election of the entire Board of Directors, or, if there be
classes of directors, at an election of the class of directors of which
he is a part.
ARTICLE V OFFICERS
Section 1. The executive officers of the corporation shall be chosen
by the directors and shall be a President, Secretary and Treasurer.
The Board of Directors may also choose a Chairman, one or more Vice
Presidents and such other officers as it shall deem necessary. Any
number of offices may be held by the same person.
Section 2. Salaries: Salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
Section 3. Term of Office: The officers of the corporation shall
hold office for one year and until their successors are chosen and
have qualified. Any officer or agent elected or appointed by the
Board may be removed by the Board of Directors whenever in its
judgment the best interest of the corporation will be served thereby.
Section 4. President: The President shall be the chief executive
officer of the corporation; he shall preside at all meetings of the
stockholders and directors; he shall have general and active
management of the business of the corporation, shall see that all
orders and resolutions of the Board are carried into effect, subject,
however, to the right of the directors to delegate any specific
powers, except such as may be by statute exclusively conferred on the
President, to any other officer or officers of the corporation. He
shall execute bonds, mortgages and other contracts requiring a seal,
under the seal of the corporation. He shall be EX-OFFICI a member of
all committees, and shall have the general power and duties of
supervision and management usually vested in the office of President
of a corporation.
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Section 5. Secretary: The Secretary shall attend all sessions of
the Board and all meetings of the stockholders and act as clerk
thereof, and record all the votes of the corporation and the minutes
of all its transactions in a book to be kept for that purpose, and shall
perform like duties for all committees of the Board of Directors when
required. He shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors or
President, and under whose supervision he shall be. He shall keep in
safe custody the corporate seal of the corporation, and when authorized
by the Board, affix the same to any instrument requiring it.
Section 6. Treasurer: The Treasurer shall have custody of the
corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the
corporation, and shall keep the moneys of the corporation in separate
account to the credit of the corporation. He shall disburse the funds
of the corporation as may be ordered by the Board, taking proper
vouchers for such disbursements, and shall render to the President and
directors, at the regular meetings of the Board, or whenever they may
require it, an account of all his transactions as Treasurer and of the
financial condition of the corporation.
ARTICLE VI VACANCIES
Section 1. Any vacancy occurring in any office of the corporation by
death, resignation, removal or otherwise, shall be filled by the Board
of Directors. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, although not less than
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a quorum, or by a sole remaining director. If at any time, by reason
of death or resignation or other cause, the corporation should have no
directors in office, then any officer ar (sic) any stockholder or an
executor, administrator, trustee or guardian of a stockholder, or
other fiduciary entrusted with like responsibility for the person or
estate of stockholder, may call a special meeting of stockholders in
accordance with the provisions of these By-Laws.
Section 2. Resignations Effective at Future Date: When one or more
directors shall resign from the Board, effective at a future date, a
majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall
become effective.
ARTICLE V11 - CORPORATE RECORDS
Section 1. Any stockholder of record, in person or by attorney or
other agent, shall, upon written demand under oath stating the purpose
thereof, have the right during the usual hours for business to inspect
for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or
extracts therefrom. A proper purpose shall mean a purpose reasonably
related to such person's interest as a stockholder. In every instance
where an attorney or other agent shall be the person who seeks the
right to inspection, the demand under oath shall be accompanied by a
power of attorney or such other writing which authorizes the attorney
or other agent to so act on behalf of the stockholder. The demand
under oath shall be directed to the corporation at its registered
office in this state or at its principal place of business.
ARTICLE VIII - STOCK CERTIFICATES, DIVIDENDS, ETC.
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Section 1. The stock certificates of the corporation shall be
numbered and registered in the share ledger and transfer books of the
corporation as they are issued. They shall bear the corporate seal
and shall be signed by the
Section 2. Transfers: Transfers of shares shall be on the books of
the corporation upon surrender of the certificates therefor, endorsed
by the person named in the certificate or by attorney, lawfully
constituted in writing. transfer shall be made which is inconsistent
with law.
Section 3. Lost Certificate: The corporation may issue a new
certificate of stock in the place of any certificate theretofore
signed by it, alleged to have been lost, stolen or destroyed, and the
corporation may require the owner of the lost, stolen or destroyed
certificate, or his legal representative to give the corporation a
bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any
such certificate or the issuance of such new certificate.
Section 4. Record Date: In order that the corporation may
determine the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or the express
consent to corporate action in writing without a meeting, or entitled
to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action.
If no record date is fixed:
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(a) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given,
or if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
(b) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is necessary, shall be the day
on which the first written consent is expressed.
(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
(d) A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix
a new record date for the adjourned meeting.
Section 5. Dividends: The Board of Directors may declare and pay
dividends upon the outstanding shares of the corporation from time to
time and to such extent as they deem advisable, in the manner and upon
the terms and conditions provided by the statute and the Certificate
of Incorporation.
Section 6. Reserves: Before payment of any dividend there may be
set aside out of the net profits of the corporation such sum or sums
as the directors, from time to time, in their absolute discretion,
think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of
the corporation, or for such other purpose as the directors shall
think conducive to the interests of the corporation, and the directors
may abolish any such reserve in the manner in which it was created.
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ARTICLE IX - MISCELLANEOUS PROVISIONS
Section 1. Checks: All checks or demands for money and
notes of the corporation shall be signed by such officer or officers
as the Board of Directors may from time to time designate.
Section 2. Fiscal Year: The fiscal year shall begin on
the first day of August.
Section 3. Notice: Whenever written notice is required
to be given to any person, it may be given to such person1 either
personally or by sending a copy thereof through the mail, or by
telegram, charges prepaid, to his address appearing on the books of
the corporation, or supplied by him to the corporation for the purpose
of notice. If the notice is sent by mail or by telegraph, it shall be
deemed to have been given to the person entitled thereto when
deposited in the United States mail or with a telegraph office for
transmission to such person. Such notice shall specify the place, day
and hour of the meeting and, in the case of a special meeting of
stockholders, the general nature of the business to be transacted.
Section 4. Waiver of Notice: Whenever any written notice is
required by statute, or by the Certificate or the By-Laws of this
corporation a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such
notice. Except in the case of a special meeting of stockholders,
neither the business to be transacted at nor the purpose of the
meeting need be specified in the waiver of notice of such meeting.
Attendance of a person either in person or by proxy, at any meeting
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shall constitute a waiver of notice of such meeting, except where a
person attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting was not lawfully
called or convened.
Section 5. Disallowed Compensation: Any payments made to an
officer or employee of the corporation such as a salary, commission,
bonus, interest, rent, travel or entertainment expense incurred by
him, which shall be disallowed in whole or in part as a deductible
expense by the Internal Revenue Service, shall be reimbursed by such
officer or employee to the corporation to the full extent of such
disallowance. It shall be the duty of the directors, as a Board, to
enforce payment of each such amount disallowed. In lieu of payment by
the officer or employee, subject to the determination of the
directors, proportionate amounts may be withheld from his future
compensation payments until the amount owed to the corporation has
been recovered.
Section 6. Resignations: Any director or other officer may resign
at anytime, such resignation to be in writing, and to take effect from
the time of its receipt by the corporation, unless some time be fixed
in the resignation and then from that date. The acceptance of a
resignation shall not be required to make it effective.
ARTICLE X - ANNUAL STATEMENT
Section 1. The President and Board of Directors shall present at
each annual meeting a full and complete statement of the business and
affairs of the corporation for the preceding year. Such statement
shall be prepared and presented in whatever manner the Board of
Directors shall deem advisable and need not be verified by a certified
public accountant.
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ARTICLE XI - AMENDMENTS
Section 1. These By-Laws may be amended or repealed by the vote of
stockholders entitled to cast at least a majority of the votes which
all stockholders are entitled to cast thereon, at any regular or
special meeting of the stockholders, duly convened after notice to the
stockholders of that purpose.
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Exhibit 10.2
Share Purchase Agreement
STOCK PURCHASE AGREEMENT
MEMORANDUM OF AGREEMENT made as of the ___ day of July, 2000,
BETWEEN:
Robert Elkins for and on Behalf of all Sellers
(hereinafter collectively called the "Sellers")
OF THE FIRST PART
A N D:
Vital Sign, Inc.
a corporation incorporated under the laws of the State of Delaware
(hereinafter called the "Purchaser")
OF THE SECOND PART
WHEREAS, the Sellers control and represent all of the authorized issued and
outstanding shares of capital stock (there being no other securities) of
________________________________, Inc as listed hereinabove, (herein
referred to as the "Corporation), and;
WHEREAS, the Purchaser desires to acquire all of the outstanding
shares of the Corporation's Common Stock, and;
AND WHEREAS, the parties hereto agree that this transaction is to
be structured and completed in compliance with all requirements of Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, THIS AGREEMENT WITNESSETH THAT, in consideration of
the covenants, agreements, warranties, and payments herein set out and
provided for, the parties hereby respectively covenant and agree as follows.
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ARTICLE 1.00 - DEFINED TERMS
1.1 When used herein or in any amendments hereto, the following terms
shall have the following meanings respectively.
"Agreement" means this agreement and all schedules attached to this agreement.
The term includes each case where it may be supplemented or amended from time
to time. The expressions "hereof", "herein", "hereto", "Hereunder", "hereby"
and similar expressions refer to this agreement, and "Article", "section"
and "subsection" mean and refer to the specified Article, section, and
subsection of this agreement.
"Books and records" means the accounting books of original entry including
the general ledger, record of cash receipts and disbursements, purchase
journal and banking records.
"Business" means the business presently and heretofore carried on by the
Corporation, and all operations, customers, accounts, goodwill, knowledge and
anything of tangible value as related to the Corporation.
"Business day" means a day other than a Saturday, Sunday or a day that is a
statutory holiday.
"Closing" means the closing of the transaction for purchase and sale
contemplated herein.
"Closing Date" or "Date of Closing" means July 29, 2000 or such other date as
may be mutually agreed upon in writing by the parties hereto.
"Closing Financial Statements" has the meaning ascribed to it in section 4.1.1.
"Common Shares" means the issued and outstanding common shares in the
capital of the Corporation.
"Corporation" means the companies listed hereinabove as the Sellers.
"EBIT" means net earnings before income taxes, as determined by the auditors,
in accordance with GAAP.
"Exchange Shares" mean the shares payable to Seller in the Purchase Price as
shown in Exhibit "A" attached hereto.
"Financial statements" means, collectively, the Closing Financial Statements
defined hereinabove.
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"Intercompany Transactions" means, collectively, all transactions of any nature
between the Corporation and any Person associated with or related to the
Corporation or otherwise not dealing with the Corporation on an arms-length
basis.
"GAAP" means generally accepted accounting principles in the United States, as
appropriate and as in effect from time to time, consistently applied.
"NASDAQ" means the National Association of Securities Dealers and Quotations.
"Non Arm's Length Person" means any shareholder director, officer, employee,
affiliate, or associate (as defined in the Securities Act of 1933, as amended)
of the Corporation. This term includes any one or more of the Sellers or
any other Person who does not deal at arm's length with the Corporation or
any one or more of the Sellers within the meaning of such concept as used in
the Income Tax Act (USA).
"Person" includes an individual, a corporation, a joint venture, a
partnership, a trust or trustee, any unincorporated organization, an
association, or any other entity (including any governmental, administrative,
or regulatory authority).
"Permitted Liens" means, at any time, such Liens as the Purchaser may agree,
in writing, shall constitute a Permitted Lien for the purpose of this
Agreement.
"Preferred Shares" mean, preferred non-convertible voting shares in the
capital of the Purchaser.
"Purchased Shares" shall have the meaning attributed thereto in section 3.1
hereof.
"Requirements of Law" means, as to any Person, the certificate of incorporation
and by-laws or other organizational, governing documents of such Person. This
term includes any law, treaty, regulation or rule, or determination of an
arbitrator or a court or other governmental authority or agency, in each
case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Rule 144" means rule 144 of the United States Securities and Exchange
Commission.
"SEC" means the Securities and Exchange Commission of the United States.
"Sellers" shall mean, specifically for purposes of this agreement and
identifying the parties thereto, all of the shareholders of the Corporation.
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"Subsidiary", in relation to any body corporate, means any corporation of which
issued and outstanding securities are held, other than by way of security only,
by such body corporate, and includes any corporation in like relation to a
Subsidiary.
'this agreement", "this agreement", "herein", "hereto", "hereunder", "hereof"
and similar expressions refer to the within agreement and not to any particular
portion thereof, and include the schedules referred to in Article 2.00.
"Time of Closing" means two o'clock in the afternoon on the Closing Date.
ARTICLE 2.00 - SCHEDULES
2.1 The following schedules, at time of closing, shall be delivered and
attached to and incorporated in this Agreement by reference and deemed to
be part hereof:
Schedule 4.2.1 - Financial Statements of Corporation
Schedule 4.2.6 - Corporation's Shareholders
Schedule 4.2.22 - Outstanding Obligations of Corporation
Schedule 4.2.23 - Leases of Corporation
Schedule 4.2.26 - Insurance Policies of Corporation
Schedule 4.2.34 - Accounts List of Corporation
Schedule 5.2.1 - Financial Statements of Purchaser
Schedule 5.2.7 - Outstanding Rights to Securities of
Purchaser
Schedule 5.2.22 - Outstanding Obligations of Purchaser
Schedule 5.2.33 - Accounts List of Purchaser
Schedule 5.2.37 - Shareholder Credit Facility to Purchaser
Schedule 6.2.4 - Power of Attorney
Schedule 9.9 - Indemnification Agreement
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ARTICLE 3.00 - PURCHASE AND SALE
3.1 Subject to the terms and conditions hereof, the Sellers hereby agree to
sell, assign, and transfer to the Purchaser the total number of common
shares of the Corporation ("the Purchased Shares"). The Purchaser covenants
and agrees to purchase from the Sellers the Purchased Shares for an amount
equal in the aggregate to the Purchase Price as set forth in Exhibit "A" on
the terms and conditions specified in Exhibit "A".
3.2 The Purchase Price shall be paid in the manner set forth in Exhibit
"A" attached hereto.
3.3 The Sellers hereby represent, warrant, covenant, and
acknowledge the following.
3.3(A) The Purchased Shares is being transferred without registration under
the provisions of Section 5 of the Act.
3.3(B) All of the Purchased Shares will bear legends restricting the
transfer, sale, conveyance, and hypothecation within the jurisdictional
boundaries of the United States. This provision is exclusive of when such
Exchange Shares are registered under the provisions of Section 5 of the act
and under applicable state and provincial securities laws. Moreover, an
opinion of legal counsel may be provided by the Purchaser to certify that
such registration is not required as a result of applicable exemptions
therefrom.
3.3(C) The Sellers shall not transfer any of the Exchanged Shares except in
compliance with all applicable laws.
3.3(D) The Sellers are acquiring the Exchanged Shares for their own account,
for investment purposes only and not with a view to further sale or
distribution, except as permitted by law.
3.3(E) The Sellers have made themselves fully and completely familiar with all
aspects of the Purchaser's business, operations, and financial statements,
as filed with the SEC.
3.4 The Purchaser hereby represents, warrants, covenants and acknowledges
the following.
3.4(A) The Exchange Shares are being transferred without Registration under
the provisions of Section 5 of the Securities Exchange Act of 1934, as
amended (the "Act") or Delaware Blue Sky Law.
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3.4(B) All of the Exchange Shares will bear legends restricting the transfer,
sale, conveyance, and hypothecation within the jurisdictional boundaries of
the United States. This provision is exclusive of when such Exchange Shares
are registered under the provisions of Section 5 of the act and under
applicable state and provincial securities laws. Moreover, an opinion of
legal counsel may be provided by the Purchaser to certify that such
registration is not required as a result of applicable exemptions therefrom.
3.4(C) The Purchaser shall not transfer any of the Purchased Shares except
in compliance with all applicable laws.
3.4(D) The Purchaser is acquiring the Purchased Shares for its own account,
for investment purposes only and not with a view to further sale or
distribution.
3.4.1 The Purchaser has executed certain certificates and warranties under
separate documents that shall be incorporated herein as if set forth in this
document and which bear the same date as this Agreement.
3.4.2 Except as described herein, the Purchaser has no other, outstanding
securities of any class or of any kind or character. There are no
outstanding subscriptions, options, warrants, or other agreements or
commitments obligating the Purchaser to issue or sell any additional shares
or options or rights with respect thereto or any securities convertible into
any shares of Stock of any class.
3.5 The Purchase Price shall be paid and satisfied in full by the delivery
of the issued Exchange Shares at the Times of Closing.
3.6 The certificates representing the shares being exchanged shall each
bear the following legend:
"THESE SHARES HAVE NEITHER BEEN REGISTERED WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR WITH
THE SECURITIES REGULATORY AUTHORITIES OF ANY STATE,
PROVINCE, OR NATIONAL AUTHORITY). CONSEQUENTLY, THESE
SHARES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS THEY ARE FIRST REGISTERED UNDER
APPLICABLE STATE, PROVINCIAL AND FEDERAL SECURITIES LAWS
OR THE TRANSACTION'S EXEMPTION THEREFROM IS
DEMONSTRATED TO THE FULL SATISFACTION OF THE
CORPORATON'S LEGAL COUNSEL."
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ARTICLE 4.00 - COVENANTS, REPRESENTATIONS, AND WARRANTIES OF
AND THE CORPORATION
4.1 The Shareholders of the Seller hereby covenant, represent, and
warrant, and the Seller, jointly and severally, represent to the best of
their knowledge, as follows:
4.2.1 Delivered at Closing, warranted to be true and correct to the best
knowledge of the Sellers, and made a part hereof as Schedule 4.2.1 are the
following:
(A) Unaudited balance sheet of the Corporation to be acquired as of March 31,
1999, with the related statement of operations and unaudited statement of cash
flow for the period ending March 31, 1999 (such balance sheets, statements of
operations, and other statements are referred to herein as the "Corporation's
Financial Statements").
4.2.2 Corporation has been duly incorporated and organized and is validly
subsisting and in good standing under the laws of the United States.
4.2.3 Corporation has the corporate power to own or lease its property and
carry on the Business. The Corporation is duly qualified as a corporation
to do business under the laws of the United States being the only
jurisdictions in which the nature of its business or the property owned or
leased by it makes such qualification necessary.
4.2.4 At Time of Closing, the authorized capital of the Corporation shall
be represented in a separate certificate which shall be incorporated herein
by reference as consistent with all other documents executed on this date.
4.2.5 At Time of Closing, the authorized capital of the said corporation
shall be duly and validly allotted and issued and outstanding as fully paid
and non-assessable and beneficially owned by the Sellers.
4.2.6 All of the Purchased Shares are owned by the shareholders of the
Corporation as the beneficial owners of record as listed at Schedule 4.2.6.
Such listed shareholders have good and marketable title thereto, free and
clear of all mortgages, liens, charges, security interests, adverse claims,
pledges, encumbrances, and demands whatsoever. This provision includes
voting trusts, shareholders' agreements, options, or other agreements of
any kind. The Sellers represent that said listed shareholders have the
absolute right to transfer the Purchased Shares, and they shall be enjoyed
by the Purchaser free from any interruption or disturbance subject only to
the terms and conditions herein.
4.2.7 The Corporation owns no shares in the capital of any other
corporation and has not agreed to acquire any subsidiary or any shares of
the capital of any other corporation or to acquire or lease any other
business operations.
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4.2.8 No person, firm, or corporation has any agreement, option, or any
right or privilege (whether by law, pre-emptive, or contractual) for the
purchase, subscription, allotment, or issuance of either any of the
authorized stock in the capital of the Corporation or of any securities of
the Corporation. This provision includes convertible securities, warrants,
and convertible obligations of any nature.
4.2.9 Except with respect to product warranties provided by the Corporation
in the ordinary course of business, the Corporation is not a party to or
bound to any person, firm, or corporation. This provision includes any
agreement of guarantee, indemnification, assumption, endorsement, or any
other like commitment of obligations or liabilities (contingent or otherwise)
or indebtedness of any person, firm, or corporation.
4.2.10 There are not now, nor will there be on Closing, any material claims
or potential or contingent claims against the Corporation for product
liability in respect of goods manufactured and/or sold by the Corporation.
4.2.11 The Corporation's Financial Statements have been prepared in
accordance with GAAP and present fairly to include:
4.2.11(A) all the assets, liabilities (whether accrued, absolute,
contingent, or otherwise), and the financial condition of the Corporation as
at the respective dates of the Corporation's Financial Statements; and
4.2.11(B) the sales, earnings, and results of the operations of the
Corporation during the periods covered by the Corporation's Financial
Statements.
4.2.12 The corporate records and minute books of the Corporation contain
complete and accurate minutes of all meetings of and copies of all by-laws
and resolutions passed by the directors and shareholders of the Corporation
since the incorporation of the Corporation. All such meetings have been duly
called and held. The share certificate book with register of shareholders,
register of transfers, register of directors, and other corporate registers
of the Corporation are complete and accurate in all material respects.
4.2.13 The Business has been carried on in the ordinary course since
______________. Since then, there has been no change in the business
operations, affairs, or condition of the Corporation, financial or otherwise.
This provision includes changes arising as a result of any legislative or
regulatory change, revocation of any license or right to do business, fire,
explosion, accident, casualty, labor trouble, flood, drought, riot, storm,
condemnation, act of God, or otherwise. This provision excludes changes
occurring in the ordinary course of business, which changes have not
materially aversely affected and will not materially aversely affect the
organization, business, properties, prospects, and financial condition of
the Corporation or the ability of the Corporation to carry on Business.
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4.2.14 The books and records, financial and otherwise, of the Corporation
fairly and correctly set out and disclose, in all material respects, the
financial position and result of operations of the Corporation as at the
date hereof. All material, financial transactions of the Corporation are
accurately recorded in such books and records.
4.2.15 Execution of this Agreement by the Sellers and delivery of the
Agreement by them to the Purchaser and their performance hereunder has been
duly authorized. No further action is necessary on the part of the Sellers
to make this agreement valid and binding in accordance with its terms upon
the Sellers.
4.2.16 The execution and the consummation of this transaction for purchase
and sale contemplated by this Agreement will not result in a breach of any
term or provision of or constitute any default under the constituting
documents, by-laws, or resolutions of the Corporation. This provision
includes any indenture, agreement, instrument, license, permit, or
understanding to which the Corporation or any one or more of the Sellers is
a party or by which any one or more of them is bound. Nor will the
consummation of this transaction accelerate any commitment or obligation of
the Corporation or result in the creation of any lien or encumbrance upon
any of the assets or property of the Corporation.
4.2.17 This agreement and the consummation of the transactions contemplated
hereby will not result in the violation of any law or regulation or any
applicable order of any court, arbitrator, or governmental authority having
jurisdiction over the Corporation, the Sellers, or their respective
properties or businesses.
4.2.18 No consent, authorization, license, franchise, permit, approval, or
order of any court, governmental agency or body, of any lessor, or of any
person is required for the acquisition by the Purchaser of the Purchased
Shares, including completion of any of the other transactions contemplated
hereby. This provision also includes the continuance of any rights of the
Corporation pursuant to any agreement affecting its assets or the Business
following closing.
4.2.19 The Corporation will not, prior to the Closing Date, hire any new
employees, terminate any employee, or increase the salary or remuneration
of any employee except in the normal course of business.
4.2.20 The aggregate amount of salaries, pension, bonuses, rents, or other
remuneration of any nature paid or payable by the Corporation, subsequent to
the execution of this Agreement and up to the Time of Closing, will be made
only at the regular rates heretofore paid.
4.2.21 No capital expenditures, except in the ordinary course of business,
will be made or authorized by the Corporation after the date hereof and up
to the Time of Closing without the prior written consent of the Purchaser.
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4.2.22 Annexed hereto as Schedule 4.2.22 is a complete list of all
outstanding bonds, debentures, mortgages, notes or other evidence of
indebtedness or other security instruments of the Corporation. None of
which are presently in default, and the Corporation is not under any
agreement to and shall not create or issue any bonds, debentures, mortgages,
notes, or other evidence of indebtedness or other security agreements from
the date hereof until Closing without the written consent of the Purchaser.
4.2.23 The Corporation is not a party to any lease or agreement in the
nature of a lease, whether as lessor or lessee, except those leases described
in Schedule 4.2.23 hereto. The schedule specifies the parties to each of
such leases, their dates of execution and expiry dates, any options to renew,
any consents required, the locations of any leased lands and premises, and
the rental payable thereunder. Each of such leases is in good standing and
in full force and effect without amendment thereto, and the Corporation is
not in breach of any of the covenants, conditions, or agreements contained
in each such lease. There are no consents required from or on behalf of any
persons to the transaction contemplated by this Agreement.
4.2.24 The Corporation is not a party to any conditional sales contract,
hire-purchase agreement, or other title retention agreement.
4.2.25 The Corporation is not, and will not be at the Time of Closing,
a party to any agreement to acquire or to acquire any beneficial interest
in any real or immovable property.
4.2.26 The Corporation maintains appropriate policies of insurance, given
the nature of the Business, and such insurance coverage will be continued
in full force and effect to and including the Date of Closing. The
Corporation is not in default with respect to any of the provisions
contained in any such insurance policy, and it has not failed to give any
notice or present any claim under any such insurance policy in due and
timely fashion. Schedule 4.2.26 hereto lists all insurance policies of the
Corporation, specifying the insurance company, insurance agent, policy
number, type of coverage, and amount of coverage.
4.2.27 There are no actions, suits, or proceedings, including product
warranty claims, pending or threatened against or affecting the Corporation,
at law or in equity or before or by any federal, provincial, municipal, or
other governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign. The Sellers are not aware of any
existing ground on which any such action, suit, or proceeding might be
commenced with any reasonable likelihood of success.
4.2.28 Except for agreements, contracts, and commitments in the ordinary
course of business, the Corporation is not a party to any outstanding
agreement, contract, or commitment, whether written or oral.
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4.2.29 All vacation pay, bonuses, commissions, and other emoluments are
accurately reflected and have been accrued in the books of account of the
Corporation.
4.2.30 The Corporation is and at Closing will be in substantial compliance
in all jurisdictions in which it employs persons, with legislation governing
hours of work, termination and severance pay, vacation pay and similar
employee rights, the Worker's Compensation Act, and all such similar
statutes.
4.2.31 The uses of the real properties owned or leased by the Corporation
referred to in this agreement or the schedules hereto are not in material
breach of any statute, by-law, ordinance, regulation, covenant, restriction,
or official plan.
4.2.32 The Corporation owns, possesses, and has a good and marketable title
to its undertaking, property, and assets, being free and clear of any and
all mortgages, liens, pledges, charges, security interests, encumbrances,
actions, claims, or demands of any nature whatsoever or howsoever arising
except as listed at Schedule 4.2.22; the purchase price is based on and
directly correlates to the net tangible worth (being assets less liabilities)
of the Corporation.
4.2.33 The conduct of the Business does not infringe upon the patents,
trade marks, trade names, or copyrights (domestic or foreign) of any other
person, firm, or corporation.
4.2.34 Annexed hereto as Schedule 4.2.34 is a true and complete list
showing the name of each bank, trust company, or similar institution in
which the Corporation has accounts or safe deposit boxes and the names of
all persons authorized to draw thereon or to have access thereto.
4.2.35 The Corporation is conducting the Business in compliance with all
applicable laws, rules and regulations of each jurisdiction in which the
Business is carried on, is not in breach of any such laws, rules or
regulations, except for breaches which in the aggregate are immaterial.
Also the Corporation is duly licensed, registered, or qualified in each
jurisdiction in which it owns or leases property or carries on the Business.
"To enable the business to be carried on as now conducted and its
property and assets to be owned, leased, and operated, all such licenses,
registrations and qualifications are valid and subsisting and in good
standing. None of the same will be canceled or amended by virtue of the
transaction for purchase and sale provided for herein.
4.2.36 All facilities and equipment owned and used by the Corporation in
connection with the Business are in good operating condition and are in a
state of good repair and maintenance.
4.2.37 There are not now any loans or other indebtedness outstanding between
the Corporation and the Sellers or either any current or former directors,
93
officers, shareholders, or employees of the Corporation or any Non Arms
Length Persons. This provision is exclusive of normal salaries, bonuses,
fringe benefits, and the obligation to reimburse for expense incurred on
behalf of the Corporation in the normal course of business or otherwise
disclosed in the Corporation's Financial Statements.
4.2.38 To the best of the Sellers' knowledge, there are no liabilities of the
Corporation of any kind whatsoever, whether or not accrued and whether or not
determined or determinable, in respect of which the Corporation or the
Purchaser may become liable before, on, or after the Closing. This
provision is exclusive of liabilities disclosed on, reflected in, or provided
for in the Financial Statements or incurred in the ordinary course of
business. This provision is also exclusive of those liabilities attributable
to the period from the Corporation's Financial Statements to the actual time
of Closing and are not materially adverse, individually or in the aggregate,
to the Business, operations, affairs or financial condition of the Corporation.
4.2.39 There is not now nor will there be at the Time of Closing any
application pending for the issuance of articles of amendment to the
originating documents of the Corporation.
4.2.40 The Corporation is not in default in the filing of any corporate
return or report that may be required under any federal, provincial and/or
municipal law or regulation.
4.2.41 The Corporation has duly and timely filed all tax returns required
and has paid all taxes and installments of taxes which are due and payable.
This provision includes all assessments, reassessments, and all other taxes,
governmental charges, penalties, interest, and fines due and payable by it
on or before the date hereof. The income tax liability of the corporation
has been not reviewed or determined by the IRS or the applicable State for
all fiscal years up to and including the fiscal year to date. Adequate
provision has been made for taxes payable for the current period of which
tax returns are not yet required to be filed. There are no agreements,
waivers, or other arrangements providing for an extension of time with
respect to the filing of any tax return by, or payment of any tax,
governmental charge, or deficiency against the Corporation in respect of
taxes, governmental charges, or assessments, asserted by such authority.
The Corporation has withheld from each payment made to any of its officers,
directors, employees, former directors, officers, and employees the amount
of all taxes, including but not limited to income tax, and other deductions
required to be withheld therefrom. The Corporation has paid the same to the
proper tax or other receiving officers within the time required under the
applicable tax legislation.
4.2.42 The Sellers have no information or knowledge of any facts relating
to the Sellers, the Business, the Corporation, or the Purchased Shares
which, if known to the Purchaser, might reasonably be expected to deter
the Purchaser from completing the transaction of purchase and sale herein
contemplated.
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4.2.43 The Corporation shall prepare and file all documents necessary to
achieve regulatory approval from all regulatory agencies by which it is
subject.
ARTICLE 5.00 - REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER
5.1 The Purchaser covenants, represents, and warrants as follows and
acknowledges that the Sellers are relying upon such covenants,
representations, warranties, and covenants in connection with the sale by
the Sellers of the Purchased Shares.
5.2.1 Delivered at Closing, warranted to be true and correct to the best
knowledge of the Purchaser, and made a part hereof as Schedule 5.2.1 are
the following: All balance sheets, statements of operations, and other
statements (referred to herein as the "Purchaser's Financial Statements").
5.2.2 Purchaser has been duly incorporated and organized and is validly
subsisting and in good standing under the laws of Delaware.
5.2.3 Purchaser has the corporate power to own or lease its property and
carry on the Business. The Corporation is duly qualified as a corporation
to do business under the laws of Delaware, being the only jurisdiction in
which the nature of its business or the property owned or leased by it makes
such qualification necessary.
5.2.4 At time of Closing, the authorized capital of the Purchaser shall
consist of that represented in its most recently filed 10Q as on file with
the SEC.
5.2.5 At time of Closing, the authorized issued capital of the Purchaser
shall be duly and validly allotted and issued and outstanding as fully paid
and non-assessable and beneficially owned by the Purchaser.
5.2.6 The Purchaser has no subsidiaries and owns no shares in the capital
of any other corporation and has not agreed to acquire any subsidiary or any
shares of the capital of any other corporation or to acquire or lease any
other business operations other than has already been disclosed to the public.
5.2.7 Except as listed at Schedule 5.2.7, no person, firm, or corporation
has any agreement, option, or any right or privilege (whether by law,
pre-emptive, or contractual) for the purchase, subscription, allotment, or
issuance of either any of the authorized stock in the capital or any
securities of the Purchaser other than as disclosed in filings with the SEC.
5.2.8 The Purchaser is not a party to or bound to any person, firm, or
corporation. This provision includes any agreement of guarantee,
indemnification, assumption, endorsement, or any other like commitment of
obligations or liabilities (contingent or otherwise) or indebtedness of any
95
person, firm, or corporation, other than as set forth in filings with the
SEC.
5.2.9 There are not now, nor will there be on Closing, any material claims
or potential or contingent claims against the Purchaser for product
liability.
5.2.10 The Purchaser's Financial Statements have been prepared in
accordance with GAAP and present fairly to include:
(A) all the assets, liabilities (whether accrued, absolute, contingent,
or otherwise), and the financial condition of the Purchaser as at the
respective dates of the Purchaser's Financial Statements, and;
(B) the sales, earnings, and results of operations during the periods
covered by the Corporation's Financial Statements.
5.2.11 The corporate records and minute books of the Purchaser contain
complete and accurate minutes of all meetings of and copies of all by-laws
and resolutions passed by the directors and shareholders of the Purchaser
since the incorporation of the Purchaser. All such meetings have been duly
called and held. The share certificate book with register of shareholders,
register of transfers, register of directors, and other corporate registers
of the Purchaser are complete and accurate in all material respects and
have been made available to Seller.
5.2.12 The Purchaser does not have an active business or operations other
than as disclosed in filings with the SEC.
5.2.13 The Purchaser has no inventory other than as disclosed in filings
with the SEC.
5.2.14 The books and records, financial and otherwise, of the Purchaser
fairly and correctly set out and disclose, in all material respects, the
financial position and result of operations of the Purchaser as at the date
hereof. All material, financial transactions of the Purchaser are accurately
recorded in such books and records.
5.2.15 The execution and delivery of this Agreement by the Purchaser as
well as the performance by the Purchaser hereunder have been duly authorized.
No further action will be necessary on the part of the Purchaser to make
this Agreement valid and binding in accordance with its terms upon the
Purchaser.
5.2.16 The execution and the consummation of this transaction for purchase
and sale contemplated by this Agreement will not result in a breach of any
term or provision of or constitute any default under the constituting
documents, by-laws, or resolutions of the Purchaser. This provision
includes any indenture, agreement, instrument, license, permit, or under
standing to which the Purchaser is a party or by which any one or more of
them is bound. Nor will the consummation of this transaction accelerate any
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commitment or obligation of the Purchaser or result in the creation of any
lien or encumbrance upon any of the assets or property of the Purchaser.
5.2.17 This agreement and the consummation of the transactions contemplated
hereby will not result in the violation of any law or regulation or any
applicable order of any court, arbitrator, or governmental authority having
jurisdiction over the Purchaser.
5.2.18 No consent, authorization, license, franchise, permit, approval,
or order of any court, governmental agency or body, of any lessor, or of any
person is required for the acquisition by the Purchaser of the Purchased
Shares, including completion of any of the other transactions contemplated
hereby. This provision also includes the continuance of any rights of the
Purchaser pursuant to any agreement affecting its assets or the Business
following closing.
5.2.19 The Purchaser will not, prior to the Closing Date, hire any new
employees, terminate any employee, or increase the salary or remuneration
of any employee except in the normal course of business.
5.2.20 The aggregate amount of salaries, pension, bonuses, rents, or other
remuneration of any nature paid or payable by the Purchaser, subsequent to
the execution of this Agreement and up to the Time of Closing, will be made
only at the regular rates heretofore paid.
5.2.21 No capital expenditures, except in the ordinary course of business,
will be made or authorized by the Purchaser after the date hereof and up to
the Time of Closing without the prior written consent of the Seller.
5.2.22 Annexed hereto as Schedule 5.2.22 is a complete list of all
outstanding bonds, debentures, mortgages, notes or other evidence of
indebtedness or other security instruments of the Purchaser. None of
which are presently in default, and the Purchaser is not under any agreement
to and shall not create or issue any bonds, debentures, mortgages, notes,
or other evidence of indebtedness or other security agreements from the date
hereof until Closing without the written consent of the Seller.
5.2.23 The Purchaser is not a party to any lease or agreement in the nature
of a lease, whether as lessor or lessee, except as disclosed as filings
with the SEC.
5.2.24 The Purchaser is not a party to any conditional sales contract,
hire-purchase agreement, or other title retention agreement.
5.2.25 The Purchaser is not, and will not be at the Time of Closing, a
party to any agreement to acquire or to acquire any beneficial interest in
any real or immovable property.
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5.2.26 The Purchaser does not maintain any insurance policies, except
Directors and Officers Liability, and Products and Professional Liability,
except as provided in SEC filings.
5.2.27 There are no actions, suits, or proceedings, including product
warranty claims, pending or threatened against or affecting the Purchaser,
at law or in equity or before or by any federal, provincial, municipal, or
other governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign. The Purchaser is not aware of any
existing ground on which any such action, suit, or proceeding might be
commenced with any reasonable likelihood of success.
5.2.28 Except for agreements, contracts, and commitments in the ordinary
course of business, the Corporation is not a party to any outstanding
agreement, contract, or commitment, whether written or oral.
5.2.29 All vacation pay, bonuses, commissions, and other emoluments are
accurately reflected and have been accrued in the books of account of the
Purchaser.
5.2.30 The Purchaser is and at Closing will be in substantial compliance
in all jurisdictions in which it employs persons, with legislation
governing hours of work, termination and severance pay, vacation pay and
similar employee rights, the Worker's Compensation Act, and all such similar
statutes.
5.2.31 The Purchaser does not lease any real property other than as
disclosed in its filings with the SEC.
5.2.32 The Purchaser owns, possesses, and has a good and marketable title
to its undertaking, property, and assets, being free and clear of any and
all mortgages, liens, pledges, charges, security interests, encumbrances,
actions, claims, or demands of any nature whatsoever or howsoever arising.
5.2.33 The conduct of business does not infringe upon the patents, trade
marks, trade names, or copyrights (domestic or foreign) of any other person,
firm, or corporation.
5.2.34 Annexed hereto as Schedule 5.2.33 is a true and complete list
showing the name of each bank, trust company, or similar institution in
which the Purchaser has accounts or safe deposit boxes and the names of all
persons authorized to draw thereon or to have access thereto or in the
alternative that information has been made available for Seller to review.
5.2.35 The Purchaser exists in compliance with all applicable laws, rules
and regulations of each jurisdiction in which the Business is carried on,
is not in breach of any such laws, rules or regulations, except for breaches
in the aggregate that are immaterial. Also the Purchaser is duly licensed,
registered, or qualified in each jurisdiction in which it owns or leases
property or carries on the Business. To enable the business to be carried
98
on as now conducted and its property and assets to be owned, leased, and
operated, all such licenses, registrations and qualifications are valid and
subsisting and in good standing. None of the same will be canceled or
amended by virtue of the transaction for purchase and sale provided for
herein.
5.2.36 All facilities and equipment owned or used by the Purchaser are in
good operating condition and are in a state of good repair and maintenance.
5.2.37 Except as specified at Schedule 5.2.37, there are not any loans or
other indebtedness outstanding between the Purchaser and either the Sellers
or either any current or former directors, officers, shareholders, or
employees of the Purchaser or any Non Arms Length Persons. This provision
is exclusive of normal salaries, bonuses, fringe benefits, and the obligation
to reimburse for expense incurred on behalf of the Purchaser in the normal
course of business.
5.2.38 There are no liabilities of the Purchaser of any kind whatsoever,
whether or not accrued and whether or not determined or determinable, in
respect of which the Purchaser may become liable before, on, or after the
Closing. This provision is exclusive of liabilities disclosed on, reflected
in, or provided for in the Financial Statements or incurred in the ordinary
course of business. This provision is also exclusive of those liabilities
attributable to the period from the Purchaser's Financial Statements to the
actual time of Closing and are not materially adverse, individually or in
the aggregate, to the Business, operations, affairs or financial condition
of the Purchaser.
5.2.39 There is not now nor will there be at the Time of closing any
application pending for the issuance of articles of amendment to the
originating documents of the Purchaser.
5.2.40 The Purchaser is not in default in the filing of any corporate
return or report that may be required under any federal, provincial and/or
municipal law or regulation.
5.2.41 The Purchaser has duly and timely filed or has pending all tax
returns required and has paid all taxes and installments of taxes which
are due and payable. This provision includes all assessments, reassessments,
and all other taxes, governmental charges, penalties, interest, and fines
due and payable by it on or before the date hereof. The income tax liability
of the Purchaser has been not reviewed or determined by the IRS or the
applicable State for all fiscal years up to and including the fiscal year
to date.
5.2.42 The Purchaser has no information or knowledge of any facts relating
to the Purchaser which if known to the Sellers might reasonably be expected
to deter the Sellers from completing the transaction and sale herein
contemplated.
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ARTICLE 6.00 - COVENANTS OF THE SELLERS
6.1 The Sellers covenant and agree with the Purchaser that on or before
the Closing Date they will do or cause to be done the following.
6.2.1 Take all necessary steps and proceedings required for all of the
Purchased Shares to be duly and regularly transferred to the Purchaser.
6.2.2 Until the time of Closing, continue to operate the business of the
Corporation prudently and in such a manner as to preserve and maintain the
goodwill of the Corporation.
6.2.3 All necessary corporate actions and proceedings by the Purchaser
shall have been taken to permit the due execution and delivery of this
Agreement and the valid transfer of the Purchased Shares to the Purchaser.
ARTICLE 7.00 - COVENANTS OF THE PURCHASER
7.1 The Purchaser covenants and agrees with the Sellers that, on or
before the Closing Date, it will do or cause to be done the following.
7.2.1 All necessary corporate actions and proceedings by the Purchaser
shall have been taken to permit the due execution and delivery of this
Agreement and the valid transfer of the Exchange Shares to the Sellers.
7.2.2 Provide the Sellers, at least four (4) days prior to the Closing
Date, all documents necessary to be attached to the closing certificates
previously forwarded to Seller with said documents numbered and appended
to the closing certificates in a manner to permanently memorialize all
documents provided to Purchaser by Seller.
7.2.3 Cause such board of director's seat to be made available to Seller
as specified in Exhibit "A".
7.2.4 Up to the Time of Closing, continue to operate the businesses of
the Purchaser prudently and in such a manner as to preserve and maintain
the goodwill of the Purchaser.
ARTICLE 8.00 - SURVIVAL OF COVENANTS, REPRESENTATIONS AND
WARRANTIES
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8.1 The covenants, representations, and warranties of the Sellers
contained in this Agreement and contained in any document or certificate
given pursuant hereto shall survive the Closing herein. Notwithstanding
Closing, this survival is inclusive of any investigation made by or on
behalf of the Purchaser and shall continue in full force and effect for
the benefit of the Purchaser following the Closing Date.
8.2 The covenants, representations and warranties of the Purchaser
contained in this Agreement and contained in any document or certificate
given pursuant hereto shall survive the Closing herein. Notwithstanding
Closing, this survival is inclusive of any investigation made by or on
behalf of the Sellers and shall continue in full force and effect for the
benefit of the Sellers following the Closing Date.
ARTICLE 9.00 - CONDITIONS OF CLOSING
9.1 The sale and purchase of the Purchase Shares is subject to the
following terms and conditions, each of which is hereby declared to be for
the exclusive benefit of the Purchaser to be fulfilled and performed at or
prior to the time of Closing.
9.2 The covenants, representations, and warranties of the Sellers
contained in this Agreement or any schedule hereto or certificate or other
document delivered or given to the Purchaser pursuant to this Agreement,
including without limitation the representations and warranties contained
in Article 4.00, shall be true and correct on and as of the Closing Date
with the same force and effect as if they had been made as of the date
hereof, each and every one of which is hereby deemed to be a condition.
9.3 The Sellers shall provide at the time of Closing a certificate,
dated the Closing Date, to the effect that the covenants, representations,
and warranties of the Sellers contained herein are true and correct on and
as of the Closing Date, with the same force and effect as though made on and
as of such date, provided that the acceptance of such certificate and the
closing of the transaction herein provided for shall not be a waiver of the
said covenants, representations, and warranties, which shall continue in
full force and effect as provided herein.
9.4 The Sellers shall have complied with all covenants and agreements
herein agreed to be performed or caused to be performed by them.
9.5 At the Closing Date, there shall have been no material adverse
change in the affairs, assets, liabilities, financial condition, or
business of the Corporation from that shown on or reflected in the Financial
Statements.
101
9.6 Any consent, authorization, license, franchise, permit, approval, or
order of any court or governmental agency or regulatory body required for
the acquisition by the Purchaser of the Purchased Shares shall have been
obtained.
9.7 The Purchaser shall provide at the time of Closing a certificate,
dated the Closing Date, to the effect that the covenants, representations,
and warranties of the Purchaser contained herein are true and correct on
and as of the Closing Date. This certificate shall have the same force and
effect as though made on and as of such date provided that the acceptance
of such certificate and the closing of the transaction herein provided for
shall not be a waiver of the said covenants, representations, and warranties
which shall continue in full force and effect as provided herein.
9.8 The Purchaser shall have complied with all covenants and agreements
herein agreed to be performed or caused to be performed by it.
9.9 The parties shall execute and deliver an indemnification agreement
to be annexed hereto as Schedule 9.9.
9.10 The parties shall not close and complete this transaction unless
both Sellers and Purchaser have signed a written acknowledgement that the
exchange of shares between them does not create a taxable event for either
party.
9.11 The parties hereby agree that the scheduled closing shall be
conditional upon shareholder approval by the shareholders of both companies.
ARTICLE 10.00-CLOSING ARRANGEMENTS
10.1 The closing is scheduled to take place on April 30, 2000 and at the
Time of Closing at such offices as are agreed to in writing among the
parties hereto at least 24 hours prior to the said Closing.
10.2 At the Time of Closing and upon fulfillment of all the conditions
set out in this Agreement, which have not been waived in writing by the
Sellers or the Purchaser, the Sellers shall deliver to the Purchaser proper
certificates for all the Purchased Shares.
ARTICLE 11.00-NOTICE
11.1 Any notice or other document to be given by any party hereto to any
other party shall be in writing and may be given by personal delivery or by
registered mail. Any notice directed to any party shall be addressed to
it as follows:
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To the Purchaser:
_______________________, Inc.
71 Stony Hill Road
Second Floor
Bethel, Connecticut 06801
To the Sellers and the Corporation:
Peter Markus, Esq.
71 Stony Hill Road
Second Floor
Bethel, Connecticut 06801
11.2 Any notice or other document aforesaid, if delivered, shall be deemed
to have been given or made on the date on which it was delivered or, if
mailed, shall be deemed to have been given and received on the fourth (4th)
business day following the date on which it was mailed. Provided that if
there exists at the time of mailing of a notice hereunder or within four (4)
business days thereafter a labor dispute or other event which would affect
the normal delivery of the notice by an express or postal service, then such
notice will only be effective if actually delivered.
11.3 The parties hereto may change any address for notices hereunder,
from time to time, by notice given in accordance with the foregoing.
ARTICLE 12.00 - GENERAL
12.1 Time shall be of the essence of this Agreement.
12.2 This Agreement may be executed in one or more counterparts, each of
which when so executed shall constitute an original, and all of which
together shall constitute one and the same agreement.
12.3 This Agreement, including the schedules hereto, constitutes the
entire agreement between the parties hereto. There are not and shall not
be any verbal statements, representations, warranties, undertakings, or
agreements between the parties, and this Agreement may not be amended or
modified in any respect except by written instrument signed by the parties
hereto.
12.4 This Agreement shall be construed and enforced in accordance with
and the rights of the parties shall be governed by the laws of the State of
New York. Any and all disputes arising under this Agreement, whether as to
interpretation, performance or otherwise, shall be subject to the exclusive
jurisdiction of the Courts of the State of New York. Each of the parties
103
hereto irrevocably submits to the jurisdiction of the Courts of the State of
New York.
12.5 The headings used herein are inserted for convenience of reference
only and shall not affect the construction of or interpretation of this
Agreement.
12.6 Except as otherwise set out in this Agreement, each of the parties
hereto shall pay all of its own costs and expenses of the transaction of
purchase and sale, including all fees and expenses of its accountants,
counsel, and officers.
12.7 In the event that any Article or section of this Agreement is held
to be invalid or unenforceable by a court of competent jurisdiction, such
invalidity or unenforceability shall not affect the remainder of the
provisions hereof. Any such part shall be fully severable, and this
Agreement shall be construed and enforced as if such invalid or
unenforceable part had not been inserted herein. The parties hereby agree
that they would have signed this Agreement without such invalid or
unenforceable part included herein.
12.8 In this Agreement, words importing the singular number only include
the plural and vice versa; words importing the masculine gender include
the feminine and vice versa.
12.9 This Agreement shall enure to the benefit of and be binding upon
the parties hereto and their respective heirs, legal personal
representatives, successors, and permitted assigns.
12.10 Where the date either for the expiration of any time period or for
the closing of anything hereunder expires or falls upon a day which is not a
Business Day, the time so limited extends to and the thing shall be done on
the day next following that is a Business Day.
12.11 The parties hereto agree that no disclosure or public announcement
with respect to this Agreement, or any of the transactions contemplated by
this Agreement, shall be made by any party hereto without the prior written
consent of the other parties hereto.
104
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
SIGNED, SEALED AND DELIVERED )
in the presence of ) _____________________________
) SELLER
)
) _____________________________
) SELLER
)
)
)
) _____________________________
) PURCHASER
)
105
Exhibit "A"
The Purchase Compensation for the Sellers shall be 4,000,000 (four million)
shares of common stock in the Purchaser, not subject to any stock split, to
be paid at closing. An additional 10,000,000 preferred voting non-
convertible shares of stock which shall not be subject to any stock split,
shall be paid to the Sellers at closing.
As further consideration for the transaction contemplated herein, the board
of Directors and officers of the Purchaser shall resign their positions
immediately upon voting for and the nominees of the Seller for the said
positions, and said officers and directors shall tender their resignations
at the time of closing.
Prior to closing the Board of Directors shall pass a resolution effecting
a ____ for 1 reverse split of the shares of the Purchaser, said split not
to affect the shares issued to the Sellers herein.
In addition, the Purchaser shall provide a minimum of $3,500,000 of working
capital to ________________________, Inc., as follows:
1) Within 7 days of the first day of active trading on any stock
exchange, $250,000.
2) Within 14 days of the first day of active trading on any stock
exchange, $250,000.
3) Within 30 days of the first day of active trading on any stock
exchange, $500,000.
4) Within 180 days of the first day of active trading on any stock
exchange, $2.5 million.
All amounts mentioned herein are cumulative, for a total amount of $3.5
million. The issuance of shares pursuant any subscription agreements prior
to the commencement of trading shall be deemed working capital provided by
the Purchaser. The remaining capital may be raised by the sale of
Purchaser's securities, so long as the sale price per share on any
private placement is approved by the Sellers.
In the event the Purchaser does not provide the Seller with the
abovementioned funds then the Seller shall have the right to request to
have its business spun out as a separately traded public entity, with the
Purchaser retaining a 4% interest in the Seller, said interest to be
given, by way of dividend, to the holder of stock as of September 31, 2000,
said dividend to be issued on a parri passu basis. In any event, the Seller
may demand it be spun out after one year, with the Purchaser to retain a
15% interest in the Company spun out, said interest to be given by way of
dividend to the shareholders of the purchaser.
106
Exhibit 17.1
Resignation of Directors
I Gary Saunders hereby tender my resignation as Officer and Director
of Vital Sign, Inc., effective September 1, 2000.
/s/ Gary Saunders
Dated September 1, 2000
I Garnet Morris hereby tender my resignation as Officer and Director
of Vital Sign, Inc., effective September 1, 2000.
/s/ Garnet Morris
Dated: September 1, 2000
107
Exhibit 21
Subsidiaries of the Registrant
ProsorCons Holding Company
108
Exhibit 23.1
Consent of Al Amir, CPA
February 27, 2001
Securities and Exchange Commission
Washington, D.C. 20549
RE: ProsorCons Sports & Entertainment Company
Gentlemen:
We have audited the balance sheet and accompanying statements of the
Registrant, as found in this Registration Statement for the 1999 and 2000
fiscal years, ending on July 31, and consent to the Auditor's reports,
statements, and notes being filed with the Registration Statement of which
this exhibit forms a part, and with any amendment thereto.
This accounting firm hereby consents to the filing of this
consent as an exhibit to the Registration Statement.
/s/Al Amir CPA/s/
_______________________
Al Amir, CPA, LLC.
February 27, 2001
Jamaica, NY
109
Exhibit 23.1
Consent of Lawrence S. Fischer, CPA
February 12, 2001
Securities and Exchange Commission
Washington, D.C. 20549
RE: ProsorCons Sports & Entertainment Company
Gentlemen:
We have reviewed the balance sheet and accompanying statements of the
Registrant, as found in this Registration Statement for the quarter
ending on October 31, 2000 and consent to the Auditor's reports, statements,
and notes being filed with the Registration Statement of which this exhibit
forms a part, and with any amendment thereto.
This accounting firm hereby consents to the filing of this
consent as an exhibit to the Registration Statement.
/s/Lawrence S. Fischer
Lawrence S. Fischer, CPA
February 12, 2001
Jamaica, NY
110
Exhibit 99.1
EXCLUSIVE LICENSING AGREEMENT
This Exclusive Licensing Agreement (hereafter referred to as the
"Agreement") is entered into by and between Vital Visions, Inc.
("Vital Visions"), a Delaware corporation, having its principal place
of business at 505 Eighth Avenue, New York, New York, and Vital Sign,
Inc. ("Vital Sign"), a Delaware corporation, having its principal place
of business at 505 Eighth Avenue, New York, New York, to be effective
as of the 1st day of June, 1998.
WITNESSETH
WHEREAS, Vital Visions is the developer and holder of the trademark in
the patents for the design of an outdoor advertising billboard and
related apparatus to be employed with two and three wheel vehicles,
such as bicycles, tricycles, mopeds, motorcycles, etc., known as Vital
Signs (tm); and
WHEREAS, Vital Sign is a marketing company specializing in outdoor
billboard advertising and has working agreements with a fleet of
bicycle messengers in the New York City area;
NOW, THEREFORE, for and in exchange for and in consideration of the
mutual promises, premises and covenants herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto expressly agree as follows:
1) DEFINITIONS
The term "billboard" or "billboard unit," when used in this Agreement,
shall mean both the back and front advertising surface areas of each
VitalSign (tm). The term "face," as used in the Agreement, refers to
either the back or front of each billboard unit, as applicable. Each
VitalSign (tm) comprises both of back face and a front face.
2. GRANT OF LICENSE
Vital Visions hereby grants to Vital Sign an exclusive, worldwide right
and license to use, market, advertise and franchise the VitalSign (tm)
technology in connection with selling or offering to sell outdoor
billboard advertising on VitalSign (tm) billboard faces.
111
3) TERM
This Agreement will commence on the 4th day of June, 1998, and will
continue until the 4th day of June, 2003 (the "Termination Date"). This
Agreement will automatically terminate on the 4th day of June, 2003,
unless the Parties hereto agree in writing to extend the Term of this
Agreement, or the Agreement is terminated in accordance with the
provisions of paragraph 9.2 herein.
4) TERRITORY
The territory covered by the Agreement shall be worldwide for the
period of the Term.
5) PAYMENT AND FEES
5.1 License Fee. As partial consideration for the rights granted
under this Agreement, Vital sign agrees to pay to Vital Visions a fee
of $7,000 per month (the "Monthly Fee"). In addition to the foregoing
Monthly Fee, Vital Sign agrees to pay to Vital Visions a continuing
royalty of five percent (5%) of the Gross Revenues derived directly
from Vital Sign's sales of advertising employing the VitalSigns (tm)
technology (the "Continuing Royalty"). (The Monthly Fee and
hereinafter as the "License Fee").
5.2 Usage Fee. In addition to the foregoing License Fee, Vital Sign
shall pay to Vital Visions the sum of fifty dollars ($50.00) for each
and every billboard face for which advertising space is sold directly
by Vital Sign (the "Usage Fee").
5.3 Franchise Fee. In the event that Vital Sign elects to franchise
the VitalSigns (tm) technology in any locations within the territory, Vital
Sign shall pay to Vital Visions a total of five percent (5%) of the
fees or other revenues paid to Vital Sign by each franchisee (the
"Franchise Fee").
5.3 Payment. The License Fee, the Usage Fee, and the Franchise Fee
are due and payable to Vital Vision on the first (1st) business day of
each month of the Term.
5.4 Cost and Expenses. Vital Sign shall be solely responsible for
the full payment of all payroll, marketing and advertising costs and
expenses incurred as a result of or in connection with the advertising
and marketing of
112
VitalSigns (tm). In the event of any advancement of expenses or other
funds by Vital Visions to Vital Sign for such costs and expenses, which
funds may be advanced at the sole discretion of Vital Visions, Vital
Sign shall promptly repay to Vital Visions any funds so advanced by
Vital Visions.
6) CONFIDENTIALITY AND NONDISCLOSURE
In connection with its performance hereunder, Vital Sign acknowledges
that it may have access to Vital Vision's trade secrets, trademarks,
patents and other confidential information, and other secret or
confidential matters relating to VitalSigns (tm) patent and technology.
Accordingly, Vital Sign hereby agrees to maintain any of Vital Vision's
trade secrets, trademarks, patents, and other confidential information,
and other secret or confidential matters relating to VitalSigns (tm), in
strict confidence, and to use the same only in accordance with this
Agreement. To the extent that Vital Visions, in the exercise of its
rights under this Agreement, may gain access to trade secrets,
trademarks, patents, or other confidential information relating to
Vital Sign's business, Vital Visions hereby agrees to maintain any such
information in accordance with this Agreement.
7) INDEPENDENT CONTRACTORS
It is expressly agreed that Vital Sign and Vital Visions are acting
hereunder as independent contractors and under no circumstances shall
this Agreement be deemed or otherwise construed to constitute or in any
way create a joint venture or partnership between the Parties.
8) WARRANTIES
8.1 Vital Visions hereby warranties and represents that it is the
sole and exclusive owner of the VitalSigns (tm) patent and trademark and
that the patent and trademark are free from any encumbrances or other
restrictions on alienability or transfer.
8.2 Vital Visions makes and Vital Sign receives no warranty express
or implied of merchantability and/or fitness for a particular purpose.
The Parties agree that Vital Visions shall have no liability for
consequential, exemplary or incidental damages to Vital Sign or any of
its customers of franchisees for breach of any such warranties.
113
9) TERMINATION
9.1 This Agreement will terminate in accordance with paragraph 3 of
this Agreement or as otherwise expressly provided in paragraph 9.2
herein.
9.2 In the event of or failure by either Party materially to perform
any of the material terms, covenants or provisions of this Agreement,
the defaulting Party shall have fourteen (14) days after the giving of
written notice of default via Certified U.S. Mail by the aggrieved
Party to cure such default. If such default is not substantially cured
within the said fourteen-(14) day period, the aggrieved Party shall
have the right, at its option, to cancel and terminate the Agreement
prior to the Termination Date. Notwithstanding the foregoing, any
funds due and payable to Vital Visions prior to termination pursuant
paragraph 9.2 shall remain due and payable.
10) RECORDS AND INSPECTION
Vital Sign shall maintain or cause to be maintained true and correct
set of records pertaining to, inter alia, the collection of franchise
fees, and gross revenues relating to VitalSigns (tm) advertising sales and
the calculation of the Licensing Fee and the Franchise Fee. During the
Term of this Agreement and for a period of two (2) years thereafter,
Vital Sign agrees to permit a Certified Public Accountant ("CPA"),
selected and paid for by Vital Visions, to have access during ordinary
business hours to such records as are maintained by Vital Sign as may
be necessary, in the opinion of such CPA, to determine the correctness
of the calculation of Gross Revenues and the License and Franchise
Fees.
11) PROPRIETARY RIGHTS
11.1 Vital Sign expressly agrees that the ownership of all applicable
copyrights, trade secrets, patents, trademarks and other intellectual
property rights in VitalSigns (tm) and the VitalSigns (tm) technology shall
remain vested in Vital Vision. The Parties also agree that any
advertising copy, artwork of billboard designs affixed to or created in
connection with advertising for or upon a VitalSigns (tm) billboard face
shall not, merely because of its use in connection with the VitalSigns (tm)
billboard, become the
114
Property of Vital Visions.
11.2 Vital Sign shall not remove Vital Vision's copyright, trademark
or patent notices, restricted rights legends or any other notices from
any VitalSigns (tm) billboard faces.
12) ASSIGNABILITY
This Agreement may not be assigned by the either Party hereto without
the prior written consent of the other Party.
13) ADDITIONAL PROVISIONS
13.1 Severability. In the event that any portion of the Agreement
is declared void by any court or tribunal of competent jurisdiction
then, in that event, that portion shall be deemed severed from this
Agreement, and the remaining portions hereof shall remain in full force
and effect.
13.2 Entire Agreement. This Agreement constitutes the entire
agreement between the Parties with respect to the subject matter hereof
and supersedes all previous proposals, both oral and written
negotiations, representations, commitments, writings and other
communications between the Parties. This Agreement may not be modified
except by a writing signed by a duly authorized representative of each
of the parties.
13.3 No Representations. Vital Sign may not make any contracts or
commitments on behalf of Vital Visions regarding VitalSigns (tm) other than
those authorized by the Agreement or by Vital Visions in writing.
Vital Sign expressly agrees to indemnify and hold harmless Vital
Visions from any claims, liabilities, expenses, and costs, including
attorney's fees, arising from the breach of any of its obligations
under this Section 13.3.
13.4 Force Majeure. No party shall be liable or be deemed to be in
default for any delay or failure in performance under this Agreement
resulting from acts of God, or any causes beyond the reasonable control
of the Parties.
13.5 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of New York, without regard to
any conflicts of law provisions.
13.6 Waiver. The waiver or failure of any Party to exercise in any
respect any right provided for herein shall not be deemed a waiver of
any further right hereunder.
115
IN WITNESS WHEREOF, the Parties have executed this Agreement as of
the date hereof.
VITAL VISIONS, INC.
By: _____________________________
/s/Gary C. Saunders/s/,
President, Vital Visions, Inc.
VITAL SIGN, INC.
By: _____________________________
/s/Garnet E. Morris,/s/
President, Vital Sign, Inc.
116
Exhibit 99.2
FILING RECEIPT FOR TRADEMARK APPLICATION
Jan 6, 1998
Receipt on the DATE OF FILING of the application for registration and
filing fees is acknowledged for the mark identified below. The DATE OF
FILING s contingent upon the collection of any payment made by check or
draft. Your application will be considered in the order to which it
was received and you will he notified at to the examination thereof.
Action on the merits should be expected from the Patent and Trademark
Office in approximately 06 months from the filing date. When inquiring
about this application, include the SERIAL NUMBER, DATE OF FILING,
OWNER NAME, and MARK.
VITAL VISIONS INC
11 PENN PLZ 5TH FLR ATTORNEY
NEW YORK NY 10001 REFERENCE NUMBER
PLEASE REVIEW THE ACCURACY OF THE FILING RECEIPT DATA.
A request for correction to the filing receipt should be submitted
within 30 days to the following address: ASSISTANT COMMISSIONER FOR
TRADEMARKS, 2900 CRYSTAL DRIVE, ARLINGTON, VIRGINIA 22202-3513. The
correspondence should be marked to the attention of the Office if
Trademark Program Control. The Patent and Trademark Office will
review the request and make corrections when appropriate.
SERIAL NUMBER: 75/385966
FILING DATE: Nov 6, 1997
REGISTER: Principal
LAW OFFICE: 104
MARK: VITALSIGN
MARK TYPE (S): Trademark; Service Mark
DRAWING TYPE: Words, letters, or numbers in typed form
FILING BASIS: Sect. 1 (a) (Use in Commerce)
OWNER: Vital Visions, Inc. (DELAWARE, Corporation)
11 Penn Plaza
5th Floor
New York,, NEW YORK 10001
FOR: Non-luminous non-mechanical metal sign
INT. CLASS: 006
FIRST USE: Apr 1, 1997 USE IN COMMERCE: April 1, 1997
FOR: Agency for the sale of advertising time and space
INT. CLASS: 035
FIRST USE: Apr 1, 1997 USE IN COMMERCE: April 1, 1997
ALL OF THE GOODS/SERVICES IN EACH CLASS ARE LISTED
_______________________________________________________________________
117
Exhibit 27
Financial Data Schedule
[ARTICLE] 5
[PERIOD-TYPE] YEAR YEAR 3-MOS
[FISCAL-YEAR-END] JUL-31-2000 JUL-31-1999 JUL-31-2001
[PERIOD-END] JUL-31-2000 JUL-31-1999 OCT-31-2000
[CASH] 11,602 17,017 23,433
[SECURITIES] 0 0 0
[RECEIVABLES] 80,140 45,373 74,175
[ALLOWANCES] 0 0 0
[INVENTORY] 0 0 0
[CURRENT-ASSETS] 103,741 62,390 109,608
[PP&E] 15,101 11,397 15,101
[DEPRECIATION] 5,541 2,880 5,541
[TOTAL-ASSETS] 292,320 122,855 296,800
[CURRENT-LIABILITIES] 527,592 413,010 231,440
[BONDS] 0 0 0
[PREFERRED-MANDATORY] 0 0 0
[PREFERRED] 0 0 0
[COMMON] 309 309 715
[OTHER-SE] 292,011 122,546 296,085
[TOTAL-LIABILITY-AND-EQUITY] 292,320 122,855 296,800
[SALES] 1,585,594 1,279,227 108,435
[TOTAL-REVENUES] 1,585,594 1,279,227 108,435
[CGS] 1,078,787 769,725 47,063
[TOTAL-COSTS] 1,078,787 769,725 47,063
[OTHER-EXPENSES] 461,915 873,628 63,353
[LOSS-PROVISION] 0 0 0
[INTEREST-EXPENSE] 8,324 3,453 0
[INCOME-PRETAX] 36,883 (366,393) (1,981)
[INCOME-TAX] 0 0 0
[INCOME-CONTINUING] 0 0 0
[DISCONTINUED] 0 0 0
[EXTRAORDINARY] 0 (276,613) 0
[CHANGES] 0 0 0
[NET-INCOME] 20,147 (643,206) (1,981)
[EPS-BASIC] 0.01 (.21) (0.01)
[EPS-DILUTED] 0.01 (0.21) (0.01)
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