Filed On 4/18/01 5:34pm ET ˇ SEC File 333-59182 ˇ Accession Number 1010549-1-175
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
4/18/01 Repipeline Com Inc SB-2 5:73 Securities Tran..Corp/FA
Registration of Securities by a Small-Business Issuer ˇ Form SB-2
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SB-2 Registration of Securities by a Small-Business 42 224K
Issuer
2: EX-10.1 George Thomas Bailey Employment Agreement 10 54K
3: EX-10.2 Langston Investments, Inc. Employment Agreement 10 53K
4: EX-10.3 Michael Craven Employment Agreement 10 52K
5: EX-23.1 Consent of Lloyd Ward 1 8K
SB-2 ˇ Registration of Securities by a Small-Business Issuer
Document Table of Contents
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D. C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
REPIPELINE.COM, INC.
(Name of Small Business Issuer as Specified in its charter)
DELAWARE 74-2960435
(State of Jurisdiction, Primary Standard Industrial, I.R.S. Employer
of Incorporation Classification Code Number, Identification
or Organization Number)
Suite 400
12377 Merit Drive
Dallas, Texas 75251
972-726-7473 EX 226
(ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF PRINCIPAL EXECUTIVE OFFICES)
Joseph F. Langston Jr.
Suite 400
12377 Merit Drive
Dallas, Texas 75251
972-726-7473 EX 226
(ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICES)
Copies of all communications, including all communications sent to the agent for
service, should be sent to :
Lloyd Ward
Ward & Vickers
Suite 5700
1717 Main Street
Dallas, Texas 75250
972-749-7789
Approximate date of proposed distribution and sale to the public: Any time after
the effective date of the Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [x]
1
[Enlarge/Download Table]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462 (c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER SHARE OFFERING PRICE FEE
----------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per
share......................... 34,766,618 shares N/A N/A $78.00
==========================================================================================================
(1) Based on the book value of $ $117,000 of the Registrant computed as of
December 31, 2000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT SPECIFICALLY STATING THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
The information in this prospectus is not complete and may be changed. The
corporation may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
2
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, DATED ____________. 2001
REpipeline.com, Inc.
34,766,618 Shares
DISTRIBUTED TO STOCKHOLDERS OF PHOTONICS CORPORATION
This Prospectus is being furnished in connection with the distribution (the
"Stock Distribution") to stockholders of Photonics Corporation, a California
corporation ("Photonics"), of common stock, par value $.001 per share ("Common
Stock"), of REpipeline.com, Inc., a Delaware corporation ("REpipeline.com" or
the "Company").
The shares of Common Stock will be distributed on the basis of one share of
Common Stock for each share of Photonics stock, without distinction between
classes, to holders of record of Photonics common stock and Photonics class A
stock at the close of business on _______, 2001 (the "Record Date"). No
consideration will be paid by Photonics 's stockholders for the Common Stock
received in the Stock Distribution.
There is not currently a public market for the Common Stock of
REpipeline.com. Application has been made to list the Common Stock on the NASDAQ
for the symbol "REPL."
RECIPIENTS OF COMMON STOCK IN THE STOCK DISTRIBUTION SHOULD NOTE THE
FACTORS DISCUSSED IN "RISK FACTORS" BEGINNING ON PAGE ___
------------------------
NO STOCKHOLDER APPROVAL OF THE STOCK DISTRIBUTION IS REQUIRED OR SOUGHT.
PHOTONICS IS NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT TO SEND
PHOTONICS A PROXY. YOU ARE FURTHER REQUESTED NOT TO SURRENDER ANY PHOTONICS
COMMON STOCK OR CLASS A STOCK CERTIFICATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
Questions relating to the Stock Distribution should be directed to Joseph
F. "Chip" Langston, Secretary of both REpipeline.com and Photonics Corporation,
Suite 400, 12377 Merit Drive, Dallas, Texas, 75251, telephone: (972) 726-7473 ex
226.
The date of this Prospectus is March 21, 2001
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TABLE OF CONTENTS
PAGE
----
PART I: INFORMATION REQUIRED IN PROSPECTUS
Item 1: Front and Outside Front Cover of Registration Statement
Item 2: Inside Front and Outside Back Cover Pages of
Registration Statement
Item 3: Summary Information 5
Table of Summary Information 5
Risk Factors 7
Reasons for the Stock Distribution 15
Manner of the Stock Distribution 15
Relationship between REpipeline and Photonics After
the Distribution 16
Certain Tax Matter 16
Indemnification Agreements 17
Expenses 18
Item 4: Use of Proceeds 18
Item 5: Determination of Offering Price 18
Item 6: Dilution 18
Item 7: Selling Shareholders 18
Item 8: Plan of Distribution 18
Item 9: Litigation Proceedings 18
Item 10: Director, Executive Officers, Promoters and Control Persons 19
Item 11: Security Ownership of Certain Beneficial Owners 21
Item 12: Description of Securities 22
Item 13: Interest and Named Experts and Counsel 22
Item 14: Disclosure of Commission Position on Indemnification 23
Item 15: Organization Within the Last Five Years 24
Item 16: Description of Business 24
Item 17: Management's Discussion and Analysis of Plan of Operation 25
Item 18: Description of Property 33
Item 19: Certain Relationships and Related Transactions 33
Item 20: Market for Common Equity and Related Stockholders Matters 34
Item 21: Executive Compensation 34
Item 22: Financial Statements 37
Item 23: Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure 39
PART II: INFORMATION NOT REQUIRED IN REGISTRATION STATEMENT
Item 24: Indemnification of Directors and Officers 39
Item 25: Other Expenses of Issuance and Distribution 40
Item 26: Recent Sales of Unregistered Securities 40
Item 27: Exhibits 40
Item 28: Undertakings 41
Signatures 42
4
Item 3:
FORWARD-LOOKING STATEMENTS
This Registration Statement contains statements that constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"), and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements
other than statements of historical facts included in this Prospectus are
forward-looking statements. Forward-looking statements are typically identified
by the words "believe," "expect," "anticipate," "intend," "estimate" and similar
expressions. Although such forward-looking statements (and the assumptions upon
which they are based) reflect REpipeline.com's current reasonable judgment
regarding the direction of its business, actual results will almost always vary,
sometimes materially. REpipeline.com undertakes no obligation to release
publicly any revisions to any such forward-looking statements to reflect events
or circumstances after the date hereof or to reflect the occurrence of
unanticipated results. The information contained in this Prospectus, including
without limitation the information under "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
identifies important factors that could affect actual results, and
REpipeline.com's forward-looking statements are expressly qualified in their
entirety by such factors.
SUMMARY OF CERTAIN INFORMATION
This summary is qualified by the more detailed information set forth
elsewhere in this Prospectus, which should be read in its entirety. When used
with reference to periods after the Stock Distribution (as defined below), the
terms the "Company" means REpipeline.com, Inc.
REPIPELINE.COM................ REpipeline.com, Inc. ("REpipeline.com") is a
Delaware Corporation.
MANAGEMENT.................... It is expected that all current senior
management of REpipeline.com who have
extensive experience in the business and
will be the management team of the new
company. For information regarding
employment agreements with certain senior
management of REpipeline.com.
STOCK DISTRIBUTION............ The distribution of REpipeline.com Common
Stock to stockholders of Photonics.
DISTRIBUTING COMPANY......... Photonics Corporation, a California
corporation ("Photonics ", symbol "PHOX").
STOCK DISTRIBUTION RATIO...... One share of Common Stock for each share of
Photonics common stock, and one share of
Common Stock for each share of Photonics
class A stock, held of record on the Record
Date.
RECORD DATE................... Close of business on ________, 2001.
5
STOCK DISTRIBUTION DATE....... Expected to be on or about ________, 2001.
On the Stock Distribution Date, the Stock
Distribution Agent will begin distributing
Common Stock certificates to stockholders of
Photonics. Photonics stockholders will not
be required to make any payment or to take
any other action in connection with the
Stock Distribution.
STOCKHOLDERS OF PHOTONICS WILL CONTINUE TO
OWN THEIR PHOTONICS COMMON STOCK AND
PHOTONICS CLASS A STOCK AND ARE NOT REQUIRED
TO, AND SHOULD NOT, SURRENDER CERTIFICATES
REPRESENTING SUCH STOCK.
See "The Stock Distribution -- Manner of the
Stock Distribution."
STOCK DISTRIBUTION AGENT...... Corporate Stock Transfer, Denver, Colorado
SHARES OUTSTANDING............ Approximately 34,766,618 shares of Common
Stock of Photonics will be outstanding on
the Record Date.
Approximately 34,766,618 shares of Common
Stock of REpipeline.com will be distributed
to Shareholders of Record.
RISK FACTORS.................. Stockholders should consider the factors
discussed under"Risk Factors."
TRADING MARKET................ Application has been made to list the Common
Stock on NASDAQ. It is not anticipated that
there will be "when issued" trading of the
Common Stock prior to the Stock Distribution
Date.
STOCK TICKER SYMBOL........... "PHOX" is the current symbol for Photonics
Corporation. REpipeline.com has applied for
the symbol of "REPL", however there is no
guarantee that the company will receive that
symbol.
TRANSFER AGENT AND
REGISTRAR..................... Corporate Stock Transfer, Denver, Colorado
FEDERAL INCOME TAX
CONSEQUENCES.................. Photonics has not received a ruling from the
Internal Revenue Service that the Stock
Distribution will be tax-free to Photonics
and its stockholders for federal income tax
purposes.
See "The Stock Distribution -- Certain
Federal Income Tax Aspects of the Stock
Distribution."
ANTI-TAKEOVER PROVISIONS...... Certain provisions of Delaware corporation
law and of REpipeline.com's certificate of
incorporation and bylaws may have the effect
of discouraging unsolicited takeover bids
from third parties. See "Anti-Takeover
Effects."
REPIPELINE.COM DIVIDEND POLICY... REpipeline.com does not expect to pay
dividends.
PRINCIPAL OFFICE OF REPIPELINE.COM..Suite 400, 12377 Merit Drive, Dallas, Texas
75142
6
RISK FACTORS
An investment in this Offering is highly speculative and involves a high degree
of risk. Prior to the purchase of any Units, a prospective investor should
carefully consider the following risk factors, as well as other information
contained in this Offering Circular, including the financial statements and
notes thereto contained elsewhere herein. The Units should not be purchased by
persons who cannot afford the loss of their entire investment. This Memorandum
contains certain forward-looking statements. Our actual results could differ
materially from the results anticipated in these forward-looking statements as a
result of certain of the factors set forth under "Risks Factors" and elsewhere
in this Memorandum.
FACTORS AFFECTING THE COMMON STOCK
No Prior Public Market; Possible Volatility of Stock Price. Application has been
made to list the Common Stock on the NASDAQ. However, there is no established
public trading market for the Common Stock, and there can be no assurance as to
the prices at which the Common Stock will trade after the Stock Distribution.
Until an orderly market develops (which will depend in part upon the extent to
which holders of Photonics Stock conclude that they wish to hold the Common
Stock received in the Stock Distribution), prices at which the Common Stock
trades may fluctuate significantly. Trading prices will be influenced by many
factors, including the depth and liquidity of the market for the Common Stock,
quarterly variations in operating results, announcements of new publications,
acquisitions or technological innovations by REpipeline.com or its competitors,
REpipeline.com's dividend policy, the possibility of future sales of Common
Stock by REpipeline.com or its significant stockholders, the operating and stock
price performance of other companies that investors may deem comparable to
REpipeline.com, changes in financial estimates by securities analysts, investor
perception of REpipeline.com and the prospects for its businesses, and general
economic and stock market conditions.
Certain Anti-Takeover Effects. Certain provisions of Delaware corporation law
and of REpipeline.com's Restated Certificate of Incorporation and Amended and
Restated Bylaws may inhibit changes in control of REpipeline.com not approved by
the Board and may have the effect of depriving stockholders of an opportunity to
receive a premium over the prevailing market price of the Common Stock in the
event of an attempted hostile takeover. These provisions include: (i) a
classified Board, (ii) a prohibition on stockholder action through written
consents, (iii) a requirement that special meetings of stockholders be called
only by the Board, (iv) advance notice requirements for stockholder proposals
and nominations, and (v) "blank check" preferred stock. See "Anti-Takeover
Effects." The existence of these provisions may adversely affect the
marketability and market price of the Common Stock. See also "--Factors Relating
to Taxation -- Covenants and Indemnities."
Shares Eligible for Future Sale. After consummation of the Stock Distribution,
approximately 34,766,618 shares of Common Stock will be outstanding,
substantially all of which held by persons other than "affiliates" of
REpipeline.com will be freely tradeable.
The shares of Common Stock held by "affiliates" of REpipeline.com will not be
tradeable in the absence of registration under the Securities Act or an
exemption therefrom, including the exemption contained in Rule 144 under the
Securities Act.
7
No prediction can be made as to the effect, if any, that future sales of shares,
or the availability of shares for future sale, will have on the market price of
the Common Stock prevailing from time to time. Sales of substantial amounts of
Common Stock (including shares issued upon the exercise of stock options), or
the perception that such sales could occur, could adversely affect prevailing
market prices for the Common Stock. If such sales reduce the market price of the
Common Stock, REpipeline.com's ability to raise additional capital in the equity
markets could be adversely affected.
FACTORS RELATING TO TAXATION
Tax Aspects of the Stock Distribution. Photonics has not applied for nor has it
received a favorable ruling with respect to the Stock Distribution from the IRS.
Actions or events subsequent to the Stock Distribution by REpipeline.com or
Photonics should not, in and of themselves, render the Stock Distribution
taxable, but under certain circumstances could cause the IRS to review the
circumstances as of the Stock Distribution Date. If the IRS ruling were
invalidated as a result of such review, the receipt of Common Stock in the Stock
Distribution could become taxable to the recipients as a dividend and/or a
corporate level gain could be recognized by Photonics , based on the amount by
which the fair market value of the Common Stock distributed in the Stock
Distribution exceeds Photonics 's basis in its REpipeline.com capital stock.
Covenants and Indemnities. REpipeline.com has agreed not to take (directly or
indirectly), and not to permit any of its subsidiaries to take (directly or
indirectly), any action (whether prior to, at the time of or after the Stock
Distribution) which would cause the Stock Distribution not to be tax free to
Photonics , its post-Stock Distribution subsidiaries and the stockholders of
Photonics under the provisions of Section 355 of the Code and to indemnify
Photonics for any adverse consequences suffered by it as a result of the breach
of such obligation by REpipeline.com.
EFFECT ON THE TRADING PRICES OF PHOTONICS STOCK
After the Stock Distribution, Photonics Stock will continue to be listed for
NASDAQ trading. Following the Stock Distribution, the trading prices of
Photonics Stock are expected to be lower than the trading prices of Photonics
Stock prior to the Stock Distribution. After the Stock Distribution, the
aggregate trading prices of a share of Photonics Stock and a share of Common
Stock may be less than, equal to or greater than the trading price of a share of
Photonics Stock prior to the Stock Distribution.
OTHER RISK FACTORS
Development Stage Company. We are in the development stage, and its proposed
operations are subject to all of the risks inherent in the establishment of a
new business enterprise, including the absence of an operating history. The
likelihood of our success must be considered in light of the problems, expenses,
difficulties, complications and delays frequently encountered in connection with
the formation of a new business, the development of new technology, and the
competitive environment in which we will operate. In order to achieve
profitability, we will need to successfully complete development of its
products, hire and manage additional staff for administrative, manufacturing and
sales related functions, establish internal accounting, inventory and cost
controls, market and sell products and effectively service clientele. We have
not yet faced the challenges of moving from a development stage company to an
operating company, and no assurances can be given as to when such transition
will take place or the likelihood of success in the transition.
8
Limited Operating History; Recent Losses; No Assurances of Profitability.
REpipeline.com was incorporated in 2000 and, to date, has not generated
revenues. Accordingly, we have a very limited operating history, which makes the
prediction of future results difficult or impossible. We have incurred
significant net losses since its inception of approximately of $ 869,000. As of
December 31, 2000, we have Shareholders' Equity of approximately $ 117,000. We
generally are unable to significantly reduce expenses in the short-term to
compensate for any unexpected revenue short fall. Accordingly, any significant
short fall of revenues in relation to our expectation would have an immediate
adverse effect on our business, financial conditions and results of operation.
There can be no assurance that we will be profitable in any future period and
recent operating results should not be considered indicative of future financial
performance. We are subject to the risk inherent in the operation of a new
business enterprise and there can be no assurance that we will be able to
successfully address these risks. See "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Need for Additional Capital. We will need additional capital to expand our
services into new geographic markets execute the roll up and consolidation
strategy, continue the development of new products and for other working capital
purposes. We will be required to raise additional capital in the future in order
to have sufficient funds to implement its business and marketing plans and to
meet anticipated growth. There can be no assurance that additional financing
will be available on acceptable terms, or at all. See "DESCRIPTION OF
SECURITIES"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
Projected Statements of Operations. The operating and financial information
contained in our projected financial data has been prepared by management based
upon its current estimates of our future performance. In addition, the projected
results are dependent on the successful implementation of management's growth
strategies and are based on hypothetical assumptions and events over which we
have only partial or no control.
The selection of assumptions underlying such projected information required the
exercise of judgment, and the projections are subject to uncertainty due to the
effects that economic, legislative, political or other changes may have on
future events.
Changes in the facts or circumstances underlying such assumptions could
materially affect the projections. Some assumptions inevitably will not
materialize. Unanticipated events and circumstances occurring subsequent to the
date of this Offering Circular may affect other assumptions. Therefore, the
actual results achieved during the projected periods will vary from the
forecasts and the variations may be material. To the extent that assumed events
do not materialize, actual results may vary substantially from the projected
results. As a result, no assurance can be made that we will achieve the
operating or financial results set forth in our financial projections.
No assurance can be given that the projected results will be achieved. There can
be no assurance that we will achieve profitable operations in the near future or
ever. See "Selected Financial Data."
No Dividends. We do not anticipate the payment of cash dividends on its Common
Stock in the foreseeable future. (See Description of Securities - Dividends)
Control by Present Stockholders. The existing shareholders will remain in a
position to elect virtually all the members of the Board of Directors and
otherwise exert significant influence over us. See "Principal Shareholders".
9
Dependence on Key Personnel. We are greatly dependent on the services and
efforts of its executive and operating officers especially Mr. Bailey, Mr.
Craven , and Mr. Langston. The loss of one or more of its executive and
operating officers could have a material adverse affect on our operations. See
"Management".
Expanding The Subscription Client Base. To date, we have launched our service
offering in a roll out in Dallas, Texas. As of January 15, 20001 the company has
secured thirty five subscribers for our services. We plan to increase our
marketing effort in the Dallas, Texas market and expand into other geographic
markets in 2001. There can be no assurance that we will be able to effectively
address evolving demands in its target markets or that customers in any such
markets will not purchase or otherwise choose to implement competing
technologies or products. Any material inability on the part of us to achieve
market acceptance of its products would have a material adverse affect on our
business, financial condition and results of operations.
Dependence on New Products and Rapidly Developing Technologies. Certain of our
products are new to the marketplace, while others are still under development.
Once the market for these products is more fully established, competitors may
develop and introduce products similar to our products and may be able to
implement or deploy competitive products which provide higher quality than our
systems or which can be provided at lower cost.
In addition, our systems are subject to rapid technological change and product
obsolescence. We have primarily focused on developing its technology and
products and believe that its future success will depend in part upon its
ability to develop and enhance its existing products and develop new products
and to meet such anticipated technological changes. To the extent products
developed by us are based upon anticipated changes, sales for such products may
be adversely affected if other technology becomes accepted in the industry. If
we do not successfully introduce new products or enhanced versions of its
current products in a timely manner, any competitive position we has or may
develop could be lost and our sales would be reduced.
There can be no assurance that we will be able to develop and introduce enhanced
or new products which satisfy a broad range of customer needs and achieve market
acceptance or that such development and introduction will occur without adverse
delays.
Risk of Product Defects. Products as complex as ours offers and intends to offer
may contain undetected errors or "bugs" when introduced or when new products or
versions are released.
Anticipated Continued Operating Losses. We incurred net losses of $829,0000
since inception, on a combined basis. We believes that its future profitability
and success will depend in large part on, among other things, its ability to
generate sufficient revenues from monthly subscription fees, revenue and margin
sharing for services purchased from strategic partners by its client base and
subscription fees for hosted applications services. Accordingly, we intend to
expend significant financial and management resources on the roll-out of its
service in new markets, site and content development, strategic relationships,
and technology and operating infrastructure. As a result, we expect to incur
significant additional losses and continued negative cash flow from operations
for the foreseeable future. There can be no assurance that our revenues will
increase or even continue at their current levels or that we will achieve or
maintain profitability or generate cash from operations in future periods. In
view of the rapidly evolving nature of our business and its limited operating
history, we believe that period-to-period comparisons of its operating results
are not meaningful and should not be relied upon as an indication of future
performance.
Future Capital needs; uncertainty of Additional Financing. We will require
substantial working capital to fund our business and we expect to use a
significant portion of that working capital to fund operating losses. We believe
that our existing capital resources will be insufficient to meet our presently
anticipated cash requirements. Thereafter, we may be required to raise
additional funds. No assurance can be given that we will not be required to
raise additional financing prior to such time. If additional funds are raised
through the issuance of equity securities, our stockholders may experience
significant dilution. Furthermore, there can be no assurance that additional
financing will be available when needed or that if available, such financing
will include terms favorable to our stockholders or us. If such financing is not
available when required or is not available on acceptable terms, we may be
unable to develop or enhance its services, take advantage of business
opportunities or respond to competitive pressures, any of which could have a
material adverse effect on our business, financial condition and results of
operations.
10
Unpredictability of Future Revenues; Fluctuations in Operating Results. As a
result of our limited operating history and the emerging nature of the
commercial real estate Internet service provider market in which we compete, we
are unable to accurately forecast its revenues. Our current and future expense
levels are based predominantly on its operating plans and estimates of future
revenues. While the operating cost structure is a function of the number of
subscribers there is some investment spending required to support the expansion
of our service offering. We may be unable to adjust spending in a timely manner
to compensate for any unexpected revenue shortfall. Accordingly, any significant
shortfall in revenues would likely have an immediate material adverse effect on
our business, financial condition and results of operations.
Further, we currently intend to increase its operating expenses to roll out its
service in new markets, to fund increased sales and marketing and customer
service operations and to further develop its technology infrastructure. To the
extent such expenses precede or are not subsequently followed by increased
revenues, our operating results will fluctuate and net anticipated losses in a
given quarter may be greater than expected.
We expect to experience significant fluctuations in its future operating results
due to a variety of factors, many of which are outside of our control. Factors
that may adversely affect our operating results include, but are not limited to,
our ability to retain existing business customers, attract new business
customers at a steady rate and maintain customer satisfaction, our ability to
maintain or increase current rates of sales productivity, the announcement or
introduction of new services by us or our competitors, the amount of traffic on
our online sites, the level of use of online services and client acceptance of
the Internet for services such as those offered by us, our ability to upgrade
and develop its systems and attract personnel in a timely and effective manner,
the amount and timing of operating costs and capital expenditures relating to
expansion of our business and infrastructure, technical difficulties, system
downtime or Internet brownouts, political or economic events affecting the
cities in which we operate and general economic conditions. Unfavorable changes
in any of the above factors could adversely affect our revenues, gross margins
and results of operations in future periods. Accordingly, we believe that
period-to-period comparisons of its results of operations should not be relied
upon as an indication of future performance. In addition, the results of any
quarterly period are not indicative of results to be expected for a full fiscal
year.
New and Uncertain Market; Unproven Market Acceptance. The markets for our
service have only recently begun to develop, are rapidly evolving and are
characterized by a number of entrants that have introduced or plan to introduce
similar services. As is typical in the case of a new and rapidly evolving
industry, demand and market acceptance for recently introduced services are
subject to a high level of uncertainty and risk. Because the markets for our
services are new and evolving, it is difficult to predict the size and future
growth rate, if any, of these markets. There can be no assurance that the
markets for our services will develop or that demand for our services will
emerge or become economically sustainable. If such businesses are unwilling to
pay for our service or retain the service, if the markets for our service
otherwise fail to develop or develop more slowly than anticipated, or if
business customer turnover rates are higher than projected by us, our business,
financial condition and results of operations will be materially and adversely
affected.
Uncertain Acceptance and Maintenance of REpipeline.com Brand. We believe that
establishing and maintaining the REpipeline.com brand is critical to its efforts
to attract business customers to its site and build loyalty for its services.
There are relatively low barriers to entry for single solution providers in the
commercial real estate service market. If potential subscribers of our services
do not perceive the value in the "One Stop Shopping " Internet site and using
technology tools to improve their business then we will be unsuccessful in
promoting and maintaining its brand.
11
Risks Associated with Roll Out of REpipeline.com Service. Our future success
will depend to a significant extent on our ability, on our own and with
partners, to rapidly roll out its local online service in additional cities in
the United States and internationally. There can be no assurance that we will be
able to launch its service in additional markets in a cost-effective or timely
manner or in accordance with its planned schedule, or that any newly launched
service will achieve market acceptance. Any new service that is not favorably
received by local businesses or consumers could damage our reputation or the
REpipeline.com brand. Launching the REpipeline.com service will also require
significant additional expenses and will strain our management, financial and
operational resources.
Our failure to launch its service in new markets in a timely and cost effective
manner in accordance with its planned schedule or the lack of market acceptance
of new services will have a material adverse effect on our business, financial
condition and results of operations.
Competition
The competitive landscape is highly fragmented, undercapitalized and competition
has been in business for a limited amount of time. Due to the Internet's low
barriers to entry competition can enter the market with minimal capital and
expertise. It is our belief that the ease of entry into the market with a single
solution provides a competitive barrier in the long term if a portfolio of
services is offered at one Internet site. The competition can duplicate some of
our services but the scope of competition is considerably less for a commercial
real estate service company that offers value propositions to all of the
participants in the commercial real estate business community and a One Stop
Shopping Internet site.
The principal competitive factors in its markets include breadth of service
offering, offering services that have a high perceived value by the client, ease
of use, integrated service offerings, search capability and brand recognition.
There can be no assurance that we will be able to successfully compete against
its current or future competitors or that competition will not have a material
adverse effect on our business, financial condition and results of operations.
Furthermore, as a strategic response to changes in the competitive environment,
we may make certain pricing, service or marketing decisions or enter into
acquisitions or new ventures that could have a material adverse effect on our
business, financial condition and results of operations.
Risks Associated with Offering New Services. There can be no assurance that we
will be able to offer any new services in a cost-effective or timely manner or
that any such efforts would be successful. Furthermore, any new service launched
by us that is not favorably received by consumers could damage our reputation or
its brand name. Expansion of our services in this manner would also require
significant additional expenses and development and may strain our management,
financial and operational resources. Our inability to generate revenues from
such expanded services sufficient to offset their cost could have a material
adverse effect on our business, financial condition and results of operations.
Management Growth; Risks Associated with Expansion. . Our success depends to a
significant extent on the ability of its executive officers and other members of
senior management. The senior management team has extensive background in
technology, mergers and acquisitions, rapid growth companies and public
companies. To manage its growth, we must continue to implement and improve
operational, financial and management systems and hire and train additional
qualified personnel, including sales and marketing staff. There can be no
assurance that we will be able to manage its recent or any future expansions
successfully, and any failure by us to do so could have a material adverse
effect on our business, financial condition and results of operations. There
also can be no assurance that we will be able to sustain the rate of expansion
that it has experienced in the past.
Dependence on Increased Usage and Stability of the Internet and the Web. The
usage of the Web for services such as those offered by us will depend in
significant part on continued rapid growth in the number of companies and
individuals that adapt the Internet into their business activities. Because
usage of the Web as a source for information, products and services is a
relatively recent phenomenon, it is difficult to predict whether the number of
users drawn to the Web will continue to increase and whether any significant
market for usage of the Web for such purposes will continue to develop and
expand. There can be no assurance that Internet usage patterns will not decline
as the novelty of the medium recedes or that the quality of products and
services offered online will improve sufficiently to continue to support user
interest. Failure of the Web to stimulate user interest and be accessible to a
broad audience at moderate costs would jeopardize the markets for our local
online service.
12
Moreover, issues regarding the stability of the Internet's infrastructure remain
unresolved. The rapid rise in the number of Internet users and increased
transmission of audio, video, graphical and other multimedia content over the
Web has placed increasing strains on the Internet's communications and
transmission infrastructures. Continuation of such trends could lead to
significant deterioration in transmission speeds and reliability of the Web and
could reduce the usage of the Web by businesses and individuals. In addition, to
the extent that the Web continues to experience significant growth in the number
of users and level of use without corresponding increases and improvements in
the Internet infrastructure, there can be no assurance that the Internet will be
able to support the demands placed upon it by such continued growth.
Any failure of the Internet to support such increasing number of users due to
inadequate infrastructure or otherwise would seriously limit the development of
the Web as a viable source of local interactive content and services, which
could materially and adversely affect the acceptance of our services, which
would, in turn, materially and adversely affect our business, financial
condition and results of operations.
Susceptibility to General Economic Conditions. Our revenues and results of
operations will be subject to fluctuations based upon the general economic
conditions of the United States and other countries in which its integrated
services are offered. If there were to be a general economic downturn or a
recession in the United States or any other country in which our service is
provided, we expect the participants in the commercial real estate business
community will reduce their investment in technology and Internet based
commercial real estate services. In the event of such an economic downturn, our
business, financial condition and results of operations could be materially and
adversely affected.
Risks Associated with International Expansion. A key component of our strategy
is to expand our services into international markets. We anticipate that we will
establish partners in each country that will provide the local market expertise,
operating capital and knowledge of the financial markets. If the revenues
generated by these international operations are insufficient to offset the
expense of establishing and maintaining such operations, our business, financial
condition and results of operations will be materially and adversely affected.
It is our plans to assume an equity position in the international companies and
minimize our financial obligations and risk. There can be no assurance that our
partners or we will be able to successfully market or sell its services in these
international markets.
Capacity Constraints and System Disruptions. The satisfactory performance,
reliability and availability of our system are critical to attracting
subscribers and maintaining relationships with strategic partners. System
interruptions that result in the unavailability of our services or slower
response times for clients would reduce the number of subscribers and damage the
brand equity of the company. Any increase in system interruptions or slower
response times resulting from the foregoing factors could have a material
adverse effect on our business, financial condition and results of operations.
Liability for Online Content. We may face potential liability for defamation,
negligence, copyright, patent or trademark infringement and other claims based
on the nature and content of the materials that appear on our partners' or our
online sites. Such claims have been brought, and sometimes successfully pressed,
against online services. Although we carry general liability insurance, our
insurance may not cover claims of these types or may not be adequate to
indemnify us for any liability that may be imposed. Any imposition of liability,
particularly liability that is not covered by insurance or is in excess of
insurance coverage, could have a material adverse effect on our reputation and
its business, financial condition and results of operations.
13
Uncertain Protection of Intellectual Property; Risks of Third Party Licenses.
Effective trademark, service mark, copyright and trade secret protection may not
be available in every country in which our products and services are made
available online. We expect that it may license in the future, certain of its
proprietary rights, such as trademarks or copyrighted material, to third
parties. In addition, we expect that it may license in the future, certain
content, including trademarks and copyrighted material, from third parties.
While we attempt to ensure that the quality of its brand is maintained by such
licensees, there can be no assurance that such licensees will not take actions
that might materially adversely affect the value of our proprietary rights or
reputation, which could have a material adverse effect on our business,
financial condition and results of operations. There can be no assurance that
the steps taken by us to protect its proprietary rights will be adequate or that
third parties will not infringe or misappropriate our copyrights, trademarks,
trade dress and similar proprietary rights.
In addition, there can be no assurance that other parties will not assert
infringement claims against us. We may be subject to legal proceedings and
claims from time to time in the ordinary course of its business, including
claims of alleged infringement of the trademarks and other intellectual property
rights of third parties by us and its licensees. Such claims, even if not
meritorious, could result in the expenditure of significant financial and
managerial resources which could result in a material adverse effect on our
business, financial condition and results of operations.
Risks Associated with Regulatory Matters. We are subject to regulations
applicable to businesses generally and laws or regulations directly applicable
to access to online commerce. Although there are currently few laws and
regulations directly applicable to the Internet and commercial online services,
it is possible that a number of laws and regulations may be adopted with respect
to the Internet or commercial online services covering issues such as user
privacy, pricing, content, copyrights, distribution, antitrust and
characteristics and quality of products and services.
The adoption of any additional laws or regulations may decrease the growth of
the Internet or commercial online services, which could, in turn, decrease the
demand for our products and services and increase our cost of doing business, or
otherwise have a material adverse effect on our business, financial condition
and results of operations.
Moreover, the applicability to the Internet and commercial online services of
existing laws in various jurisdictions governing issues such as property
ownership, sales and other taxes, libel and personal privacy is uncertain and
may take years to resolve. For example, tax authorities in a number of states
are currently reviewing the appropriate tax treatment of companies engaged in
online commerce, and new state tax regulations may subject us to additional
state sales and income taxes. Any such new legislation or regulation, the
application of laws and regulations from jurisdictions whose laws do not
currently apply to our business, or the application of existing laws and
regulations to the Internet and commercial online services could have a material
adverse effect on our business, financial condition and results of operations.
Risks Associated with Potential Acquisitions. As part of its business strategy,
we may make acquisitions of, or significant investments in, complementary
companies, products or technologies. Any such future acquisitions would be
accompanied by the risks commonly encountered in acquisitions of companies. Such
risks include, among other things, the difficulty of assimilating the operations
and personnel of the acquired companies, the potential disruption of our ongoing
business, the diversion of resources from our existing businesses, sites and
technologies, the inability of management to maximize our financial and
strategic position through the successful incorporation of the acquired
technology into our products and services, additional expense associated with
amortization of acquired intangible assets, the maintenance of uniform
standards, controls, procedures and policies and the impairment of relationships
with employees and customers as a result of any integration of new management
personnel. There can be no assurance that we would be successful in overcoming
these risks or any other problems encountered with such acquisitions, and our
inability to overcome such risks could have a material adverse effect on its
business, financial condition and results of operations.
14
Security Risks. Although we have not in the past experienced attempts by
programmers or "hackers" to penetrate our network security, there can be no
assurance that such actions will not occur in the future. If successful, such
actions could have a material adverse effect on our business, financial
condition and results of operations. A party who is able to penetrate our
network security could misappropriate proprietary information or cause
interruptions in our Web site.
We may be required to expend significant capital and 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,
particularly as a means of conducting commercial transactions. Security breaches
or the inadvertent transmission of computer viruses could expose us to a risk of
loss or litigation and possible liability. There can be no assurance that
contractual provisions attempting to limit our liability in such areas will be
successful or enforceable, or that other parties will accept such contractual
provisions as part of our agreements, any of which could have a material adverse
effect on our business, results of operations and financial condition.
Risks Associated with Domain Names. We currently hold various Web domain names
relating to the commercial real estate service business, including the
"REpipeline.com" domain name. The acquisition and maintenance of domain names
generally is regulated by governmental agencies and their designees. For
example, in the United States, the National Science Foundation has appointed
Network Solutions, Inc. as the exclusive registrar for the ".com," ".net" and
".org" generic top-level domains.
The regulation of domain names in the United States and in foreign countries is
subject to change. Governing bodies may establish additional top-level domains,
appoint additional domain name registrars or modify the requirements for holding
domain names. As a result, there can be no assurance that we will be able to
acquire or maintain relevant domain names in all countries in which it conducts
business. Furthermore, the relationship between regulations governing domain
names and laws protecting trademarks and similar proprietary rights is unclear.
We, therefore, may be unable to prevent third parties from acquiring domain
names that are similar to, infringe upon or otherwise decrease the value of its
trademarks and other proprietary rights. Any such inability could have a
material adverse effect on our business, financial condition and results of
operations.
REASONS FOR THE STOCK DISTRIBUTION
Photonics believes that it is in the best interests of Photonics and its
stockholders to distribute the Common Stock to Photonics 's stockholders.
As a public company, REpipeline.com will be able to offer its employees
incentives that are more directly linked to the results of the business in which
they work.
The Stock Distribution makes possible future corporate financing for
REpipeline.com which otherwise would not be possible unless REpipeline.com were
separated from Photonics 's prior businesses and treated as a separate public
company.
MANNER OF THE STOCK DISTRIBUTION
On the Stock Distribution Date (as hereinafter defined), Photonics will
distribute (the "Stock Distribution") 100% of the outstanding common stock, par
value $.001 per share, of REpipeline.com ("Common Stock"), on the basis of one
share of Common Stock for each share of Photonics common stock. As of the close
of business on the Record Date (as hereinafter defined) there is approximately
34,766,618 common shares, and no preferred shares outstanding.
15
Commencing with the Stock Distribution Date, REpipeline.com will operate as
a separate public company. REpipeline.com's principal executive offices are
located at Suite 400, 12377 Merit Drive, Dallas, Texas, 75251
Holders of record of Photonics Common Stock and Photonics Class A Stock at
the close of business on the Record Date will be entitled to receive shares of
Common Stock without paying any consideration for them. HOLDERS OF PHOTONICS
COMMON STOCK AND PHOTONICS CLASS A STOCK WILL CONTINUE TO OWN THEIR SHARES OF
PHOTONICS STOCK FOLLOWING THE STOCK DISTRIBUTION AND ARE NOT REQUIRED TO, AND
SHOULD NOT, SURRENDER THE CERTIFICATES REPRESENTING THEIR PHOTONICS STOCK.
No rights of dissent or appraisal exist with regard to the Stock
Distribution under Delaware law.
Certificates representing shares of Common Stock will be mailed by the
Stock Distribution Agent to record holders of Photonics Stock. It is anticipated
that such mailing will commence on or about _________, 2001.
Holders of options to purchase Photonics Stock, but that are not exercised
prior to the Record Date (whether because then not yet exercisable or because
the holder chooses not to exercise them) will not receive upon any exercise
subsequent to the Record Date any shares of Common Stock. Instead, the numbers
of shares of Photonics Stock subject to, and the exercise prices of, such
options will be adjusted to proportionate to that of REpipeline.com, Inc.
RELATIONSHIP BETWEEN REPIPELINE.COM AND PHOTONICS AFTER THE STOCK DISTRIBUTION
Subsequent to the Stock Distribution, REpipeline.com will operate as a
separate public company. Photonics will have no continuing relationship with
REpipeline.com, other than as to provide assistance in connection with
REpipeline.com's preparation of its tax returns for periods ending on or prior
to December 31, 2001, and in connection with REpipeline.com's other tax matters
for such periods, if so requested by REpipeline.com. However, the
indemnification obligations of each to the other will remain in effect. See "
Indemnification and Hold Harmless Agreements" and " -- Certain Tax Matters."
Immediately following the Stock Distribution, all five of REpipeline.com's five
directors will also be members of Photonics 's Board of Directors. See
"Management -- Board of Directors."
CERTAIN TAX MATTERS
REpipeline.com agrees that after the Stock Distribution it will not take
(directly or indirectly), or permit any of its subsidiaries to take (directly or
indirectly), any action that would increase the tax liability of any of the
companies included in the Photonics affiliated group for any period ending at or
prior to or including the consummation of the Stock Distribution.
Photonics has not received a ruling from the Internal Revenue Service (the
"IRS") that for federal income tax purposes (i) Photonics will not recognize
gain or loss on the Stock Distribution, (ii) Photonics stockholders will not
recognize gain or loss (and no amount will otherwise be included in their
income) on their receipt of REpipeline.com Common Stock in the Stock
Distribution, (iii) the basis of the REpipeline.com Common Stock received by
each holder of Photonics Stock will be determined by allocating such holder's
tax basis in such Photonics Stock immediately before the Stock Distribution
between such Photonics Stock and REpipeline.com Common Stock based on the
relative fair market values of each immediately after the Stock Distribution,
and (iv) the holding period of the REpipeline.com Common Stock received in the
Stock Distribution will include the holding period of the Photonics Stock on
which such REpipeline.com Common Stock was distributed, provided that such
Photonics Stock is held as a capital asset on the Stock Distribution Date. As
soon as practicable after trading in REpipeline.com Common Stock has commenced,
Photonics intends to make available to its stockholders information regarding
allocation of the basis between REpipeline.com Common Stock and Photonics Stock.
16
The description above addresses only the generally applicable material
federal income tax consequences of the Stock Distribution. It does not address
all federal income tax consequences that may apply to particular stockholders
nor any foreign, state or local tax consequences. Photonics 's stockholders are
urged to consult their own tax advisors regarding the particular tax
consequences of their receipt of REpipeline.com Common Stock in the Stock
Distribution.
The federal income tax consequences described above could be affected by
events subsequent to the Stock Distribution. See "Risk Factors - Factors
Relating to Taxation -- Tax Aspects of the Stock Distribution."
INDEMNIFICATION AGREEMENTS
REpipeline.com Indemnification Provisions for Benefit of Photonics.
REpipeline.com agrees to indemnify, defend and hold harmless Photonics, its
post-Stock Distribution subsidiaries, its and their directors, officers,
employees and agents, and any person who or which because of a relationship to
Photonics or one of its subsidiaries at the time of or prior to the Stock
Distribution would be liable (jointly and severally or otherwise) with respect
to liabilities of Photonics or of any subsidiary of Photonics, from and against
any adverse consequences asserted against or imposed upon or incurred by any of
them resulting from, relating to, or by reason of:
(i) any liability arising out of the operations, acts, omissions or
status of REpipeline.com or any of its subsidiaries;
(ii) any breach by REpipeline.com of any covenant of REpipeline.com
(iii) any untrue or allegedly untrue statement of material fact
contained in any of the foregoing or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or alleged
untrue statement or such omission or alleged omission relates to REpipeline.com
or any of its subsidiaries or their respective affiliates (other than Photonics
or any post-Stock Distribution Photonics subsidiary).
Notwithstanding the foregoing, in no event is REpipeline.com obligated to
indemnify, defend or hold harmless with respect to any adverse consequences from
and against which Photonics has agreed to indemnify, defend and hold harmless
REpipeline.com and its subsidiaries and its and their directors, officers,
employees and agents.
17
EXPENSES
Photonics will bear its costs and expenses (including legal fees and expenses)
incurred in connection with this transaction contemplated thereby and
REpipeline.com will bear its costs and expenses (including legal fees and
expenses) incurred in connection with this transaction contemplated thereby.
Item 4: Use of Proceeds
NONE
Item 5: Determination of Offering Price
NONE
Item 6: Dilution
NONE
Item 7: Selling Shareholders
NONE
Item 8: Plan of Distribution
We are registering the shares of common stock on behalf of the current
shareholders of Photonics Corporation. Photonics will pay all costs, expenses
and fees in connection with this registration. Photonics will not receive any of
the proceeds from the distribution of these shares.
Item 9: Litigation Proceedings
In July 2000, REpipeline acquired the assets and certain liabilities of
Realestate4sale.com (RE4S). One of the assets REpipeline did not acquire was a
claim by the company against Doug Fonteno. Prior to his displacement from RE4S
on April 1, 2000, Mr. Fonteno made numerous non-interest bearing advances to
himself and several entities controlled by him totaling approximately $ 183,906.
Previously, on April 28, 2000, the Board of Directors of Realestate4sale.com had
voted to expunge all shares of RE4S owned by Mr. Fonteno, his family members
and/or affiliated companies, which were issued for inadequate consideration and
lacked proper approval by the Board of Directors of RE4S. These shares, totaling
3,909,267. These expunged shares are held in treasury by a wholly owned nominee
corporation to be reissued in the future to outsiders for corporate financing of
the Company and /or acquisition.
For financial statement purposes, these advances have been written off as
uncollectable in the accompanying financial statements. In July 2000, the
RealEstate4Sale.com (RE4S) filed legal action to claim and retrieve the
$183,906. Any amount received in the future will be recorded as income in that
period. Management does not believe the outcome of its lawsuit with RE4S founder
will have an adverse effect on the Company's financial position, operating
results or cash flows.
There were several lawsuits and judgments against Photonics Corporation at the
time of the merger. There maybe several more in regard to certain disputed
payables. The Company reserved over 2 million shares to serve as payment against
these disputed payables. The Management believes this is adequate accrual, and
that these existing and future claims will have no adverse effect on the
operations of the Company.
18
Item 10: Director, Executive Officers, Promoters and Control Persons
NAME TERM AGE POSITION WITH THE COMPANY
---- ----- --- -------------------------
T. James Vaughn 3 Yrs 56 Chairman of the Board, Director
G. Thomas Bailey 3 Yrs 51 President, CEO, Director
Michael Craven 3 Yrs. 40 VP, Sales & Business Development
Joseph F. Langston 3 Yrs 48 VP, Chief Financial Office, Director
James T. Koo 3 Yrs 59 Director
James Vaughan - Chairman of the Board of Directors, is 56 years of age. Mr.
Vaughan has 30 years of experience in retailing and consulting. Most recently
Mr. Vaughan has been the owner of J. Vaughan Consulting LLC. A boutique
consulting agent dealing with one major National account and several start up
companies in the B2B Internet area. Prior to that Mr. Vaughan was Vice President
of development for a division of Tandy Corp. Mr. Vaughan was National Vice
President of stores for Computer City a 110-store chain with revenues in excess
of $2 billion. Mr. Vaughan was co-founder and Sr. Vice president of Pace
Membership Warehouse, a $3 billion warehouse club. Mr. Vaughan was founder,
President and CEO of Med-club a retailer of medical devices and products to
medical professionals and consumers. Mr. Vaughan is experienced in start up
companies and has successfully raised the capital to bring two of his own to
market as well as assisting in several others. His knowledge of venture funding,
I.P.O's, and the capital markets are extensive.
George Thomas Bailey - President and CEO/Director is 51 years of age. Mr. Bailey
has 30 years of experience in the consumer products, technology, software
development, distribution and healthcare Industries. His consumer product career
was with Fortune 500 companies, General Foods, Sara Lee and PepsiCo in Senior
Management, General Management and Marketing Positions. He held the position of
Vice President of Strategic Planning for FoxMeyer Health Corp. a $6 Billion
Health Care Distribution and Technology Company. He was the President and Chief
Operating Officer for Health Streams Technology a publicly traded start up
technology company that developed and marketed software applications, wide area
networking services, outsourcing and integration services to the healthcare
vertical segment. He held the position of President and CEO for NECCO, a roll up
and consolidation of environmental companies.
Earlier in his career he was a real estate broker and building contractor in the
state of Florida. Most recently he was a consultant that advised companies on
strategic planning, operations planning, technology, business process
re-engineering and e-commerce. Mr. Bailey's experiences and skills are in brand
management classical marketing, software development, mergers and acquisitions,
business restructuring, start up and rapid growth companies and general
management.
He earned his undergraduate degree from Florida State University and a MBA from
the University of Florida. Upon graduation from Florida State University Mr.
Bailey was a professional athlete with the Philadelphia Eagles in the National
Football league for five years.
19
Michael Craven - Vice President of Sales & Business Development, is 40 years of
age. Mr. Craven has over 15 years of experience in sales, marketing and business
management. Mr. Craven was most recently the President & CEO of Hebel
South-Central; a U.S. subsidiary of the worldwide German based Hebel AG. Mr.
Craven was responsible for all aspects of this start-up company involved in the
introduction and development of a new structural system for use in the U.S.
commercial design and construction industry. Hebel ultimately merged with
Matrix; a division of J.A. Jones, Inc. Prior to that Mr. Craven was the
Executive Vice President of Materials Marketing Corporation responsible for all
U.S. commercial sales and operations. Mr. Craven not only has experience with
start-up operations but also with the sales and marketing development of a
completely new technology and industry. Mr. Craven has extensive experience in
the area of developing and managing high performance sales organizations
particularly within complex selling environments. Mr. Craven is a veteran of the
U.S. Navy where he earned numerous awards and commendations for his outstanding
leadership skills.
Chip Langston - Chief Financial Officer/Director, is 48 years of age. Mr.
Langston has over 20 years experience as a Chief Finance Officer for various
public companies, including Trans-Western Exploration and Search Exploration.
The last three and one-half years Mr. Langston has worked with small and medium
companies overseeing securities filings, registration documents and raising
capital. He is experienced in all aspects of the requirements to become a public
entity, as well as led in raising capital through the public markets and
institutional investors.
James T. Koo - Director, is 59 years of age. Mr. Koo has over 30+ years in the
electronics industry, most recently has been an unpaid consultant to the Company
from June 23, 1999 to the merger with REpipeline.com on November 28, 2000. He
served as the President and member of the Board of DTC since 1994, CEO,
President and member of the Board of Photonics Corp. since 1996. From 1992 to
1994 he was a Vice President of Qume Corporation and General Manager of DTC Data
Technology Corporation, then a wholly owned subsidiary of Qume Corporation.
Prior to joining DTC, from 1984 until April 1992, Mr. Koo was with
Mosel-Vitelic, a developer and manufacturer of memory integrated circuits. There
he held several positions including Senior Vice President of Engineering,
Operations, Marketing, Marketing and Sales of Taiwan Operations, and other
management positions.
Each director is elected for a period of one year at the Company's annual
meeting of stockholders and serves until his successor is duly elected by a
majority of stockholders. Officers are elected by and serve at the discretion of
the Board of Directors. Each Director currently receives no cash compensation in
connection with attending meetings of the Board of Directors.
Board Committees and Meetings
The Board has an Audit Committee and a Compensation Committee. The Audit
Committee meets with the Company's independent auditors at least annually to
review the results of the annual audit and discuss the financial statements;
recommends to the Board the independent auditors to be retained; and receives
and considers the accountants' comments as to controls, adequacy of staff and
management performance and procedures in connection with audit and financial
controls.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate.
The Board of Directors will receive reimbursement of expenses for their direct
out of pocket expenses incurred in fulfilling their duties and responsibilities,
as well as stock opinions.
20
Item 11: Security Ownership of Certain Beneficial Owners
Securities Ownership of Principal Stockholders
The following table sets forth the Common Stock of the Company's Common Stock
beneficially owned by each person who is known by the Company to be the
beneficial owner of more than five percent of the Common Stock as of December
31, 2000.
Outstanding
-----------
Beneficial Owner Beneficially Percent
Acquisition Subsidiary ** Owned Owned (1)
------------------------- ------------ ---------
James Vaughan 703,560 2.02%
Chairman of the Board
Thomas Bailey 2,253,334 6.48%
President/Director
Joseph Langston 2,120,526 (2) 6.10%
C.F.O./Director
Michael Craven 1,073,850 3.09%
Vice President
James T. Koo 858,475 2.47%
Director
Dale Sparrow 3,032,705 (3) 8.72%
David S. Lee 1,475,360 4.24%
Other Shareholders 23,247,808 66.87%
--------------------------------------------------------------------------------
34,766,618 (4) 100.00%
Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Except as indicated by footnote, and subject
to community property laws where applicable, the persons named in the table
above have sole voting and investment power with respect to all Common and
Preferred Stock and options or warrants to purchase stock. For the six months
ended December 31, 2000, Mr. Bailey, Langston and Craven received shares of
common stock in lieu of cash compensation of 744,444 shares, 311,598 and 242,778
respectively.
1) No options have been earned, or warrants issued as of December 31, 2000.
2) Langston Family Limited Partnership holds Langston ownership interest.
3) The Company has the right, but not the obligation to pay Mr. Sparrow in
cash instead of stock. The Company has informed Mr. Sparrow of its desire to
exercise this right. As of December 31, 2000, there has been no conclusion of
this matter.
4) There are 73,339,364 shares issued. An Acquisition and Finance subsidiary
has 38,572,745 shares (Treasury Shares). These shares are not outstanding, and
therefore are not reflected in Earnings (Loss) Per Share. The shares in the
acquisition subsidiary are to be used for all subsequent share issuances
including financing and acquisitions, until full utilized. The net effect is
there are 34,766,618 shares both issued and outstanding.
21
Item 12: Description of Securities
Our authorized capital stock consists of 200,000,000 shares of common
stock, $0.001 par value and 5,0000,000 shares of preferred stock, $0.001 par
value.
COMMON STOCK: As of December 31, 2000, there were 37,766,618 shares of common
stock outstanding, assuming the conversion of our preferred stock into common
stock. As of December 31, 2000, there are no shares of common stock subject to
the exercise of outstanding options. The holders of common stock are entitled to
one vote per share on all matters to be voted on by the stockholders. All
outstanding shares of common stock are fully paid and non-assessable, and the
shares of common stock to be issued on completion of this offering will be fully
paid and non-assessable.
PREFERRED STOCK: There are 50,000,000 shares of preferred stock authorized and
no shares are outstanding. At present, we have no plans to issue any shares of
preferred stock.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW
Certificate of Incorporation and Bylaws. Our Bylaws provide that all
stockholder actions must be effected either at a duly called meeting or by
consent in writing. Further, provisions of the Bylaws provide that the
stockholders may amend the Bylaws or certain provisions of the Certificate of
Incorporation with the affirmative vote of 50% of the capital stock.
Delaware Takeover Statute. We are subject to Section 203 of the Delaware
General Corporation Law, or DGCL, Section 203 which regulates corporate
acquisitions, prevents certain Delaware corporations from engaging, under
certain circumstances in a "business combination" with any "interested
stockholder" for three years following the date that such stockholder becomes an
interested stockholder. Section 203 defines an "interested stockholder" as any
entity or person beneficially owning fifteen percent (15%) or more of the
outstanding voting stock and any entity or person affiliated with or controlling
or controlled by such entity or person. A Delaware corporation may "opt out" of
DGCL. Section 203 with an express provision in its original certificate of
incorporation or an express provision in its certificate of incorporation or
by-laws resulting from amendments approved by the holders of at least a majority
of the corporation's outstanding voting shares. We have not "opted out" of the
provisions of DGCL Section 203.
TRANSFER AGENT AND REGISTRAR for the common stock is Corporate Stock Transfer,
Denver, CO.
Item 13: Interest and Named Experts and Counsel
The financial statements of Photonics as of December 31, 1999 included in the
Photonic's Annual Report on Form 10-K/A for the year ended December 31, 1999 are
attached hereto as Appendix C and have been incorporated by reference herein in
reliance upon the report of Turner Stone & Company, Dallas, Texas, independent
certified public accountants. The report of Turner Stone & Company covering the
December 31, 1999 financial statements contains an explanatory paragraph that
states that the Company's recurring losses from operations and accumulated
deficit raise substantial doubt about the entity's ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of that uncertainty. Such financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing. For legal matter
are passed upon for Photonics by Lloyd Ward of the law firm of Vickers and Ward,
Dallas, Texas.
22
Item 14: Disclosure of Commission Position on Indemnification
Our corporation is organized under the laws of the State of Delaware.
Section 145 of the DGCL, in general, empowers a Delaware corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any lawsuit or proceeding (other than an action by or in the right of that
corporation) due to the fact that such person is or was a director, officer,
employee or agent of that corporation, or is or was serving at the request of
that corporation as a director, officer, employee or agent of another
corporation or entity.
A corporation is also allowed, in advance of the final disposition of a lawsuit
or proceeding, to pay the expenses (including attorneys' fees) incurred by any
officer, director, employee or agent in defending the action, as long as the
person undertakes to repay this amount if it is ultimately determined that he or
she is not entitled to be indemnified by the corporation. In addition, Delaware
law allows a corporation to indemnify these persons against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by any of them in connection with the lawsuit or proceeding
if (a) he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation, and
(b) with respect to any criminal action or proceeding, had no reasonable cause
to believe his or her conduct was unlawful.
A Delaware corporation also can indemnify its officers and directors in an
action by or in the right of the corporation to procure a judgment in its favor
under the same conditions, except that judicial approval is needed to indemnify
any officer or director who is adjudged to be liable to the corporation. Where
an officer or director is successful on the merits or otherwise in the defense
of any such action, the corporation must indemnify him or her against the
expenses (including attorneys' fees) which he or she actually and reasonably
incurred in connection with this action. The indemnification provided by
Delaware law is not deemed to be exclusive of any other rights to which an
officer or director may be entitled under any corporation's own organizational
documents, agreements or otherwise.
As permitted by Section 145 of the DGCL, Article VI of our restated
certificate of incorporation provides that we will indemnify each person who is
or was our director, officer, employee or agent (including the heirs, executors,
administrators or estate of these individuals) or is or was serving at our
request as a director, officer, employee or agent of another entity, to the
fullest extent that the law permits. This indemnification is exclusive of any
other rights to which any of these individuals otherwise may be entitled. The
indemnification also continues after a person ceases to be a director, officer,
employee or agent of our company and inures to the benefit of the heirs,
executors and administrators of these individuals. Expenses (including
attorneys' fees) incurred in defending any lawsuit or proceeding are also paid
by us in advance of the final disposition of these lawsuits or proceedings after
we receive an undertaking from the indemnified person to repay this amount if it
is ultimately determined that he or she is not entitled to be indemnified by us.
Article VI further provides that our directors are not personally liable to us
or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of his or her duty of loyalty
to us or our stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL (which deals with unlawful dividends or stock purchases
or redemptions), or (iv) for any transaction from which he or she derived an
improper personal benefit. Our By-laws also provide that, to the fullest extent
permitted by law, we will indemnify any person who is a party or otherwise
involved in any proceeding because of the fact that he or she is or was a
director or officer of our company or was serving at our request.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to any of these foregoing provisions, or otherwise, we have been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
23
Item 15: Organization Within the Last Five Years: Photonics Corporation, the
parent company
Photonics Corporation was formed in 1986, and for over 14 years conducted
business in the area of manufacturing and wholesaling computer primarily in the
name of Data Technology Corporation. Over the past several years Photonics
suffered significant operating losses totaling over $45 million. Therefore,
effective December 31, 1999, Photonics sold off Data Technology Corporation to
management for $ 75,000. On November 28, 2000, Photonics acquired REpipeline,
Inc., a Texas corporation, into its wholly owned subsidiary REpipeline.com,
Inc., a Delaware corporation, by issuing shares of common stock in Photonics
equal to 85% of the combined company.
Photonics d.b.a. Data Technology resulted from the merger of Photonics
Corporation and DTC Data Technology Corporation in 1996. The Company marketed
IDE, I/O, BIOS upgrade, and SCSI products for IBM compatible PCs to Value Added
Resellers (VARs), and System integrators through distribution and retailers for
the upgrade after market. Integrated Device Electronics ("IDE"), and Input and
Output ("I/O") adapters connect between a PC's central processing unit and the
storage devices such as floppy and hard disks, CD-drives and other peripheral
devices such as printers, scanners, and digital cameras. The IDE I/O add on card
business has declined to less than $50 million dollars per year as newer PCs
have these functions built in on the mother boards and seldom need additional
add on cards. The BIOS upgrade allows older machines to access large disks
and/or be Y2K compliant. While the Y2K market was strong for 1999, it died after
the New Year 2000. Small Computer System Interface (SCSI) controller, due to its
high performance, and high connectivity, is the controller of choice for
high-end personal computers, engineering workstations, Internet and enterprise
file servers. The market is about $1 billion and is dominated by Adaptec with
over 70% of the market share. After a flat year in 1998, this market resumes its
growth at double-digit rate.
Substantially all of DTC's products are manufactured by companies located in the
Far East. One time up to 90% of the Company's products requirements were
produced in China by Broadsino Computer Development, Ltd. Of Hong Kong. However,
Broadsino filed for bankruptcy during 1999.
Patents and Licenses
During the fiscal year ended December 31, 1998 Ingram-Micro accounted for
approximately 47% of net sales with D&H Distribution accounted for approximately
21% of net sales. However, Ingram Micro terminated its relationship with the
Company due to low level of sales of the Company's products.
As of December 31, 1999 DTC employed 2 full time employees. James T. Koo, the
former CEO works as a non-paid consultant for orderly winding down the business
and selling of the Company as well as technical support of the current products
sold.
To reduce expenses, the Company has moved from a 15,000 square foot facility in
San Jose, Ca. to a 2,200 square foot building in Sunnyvale, California in Aug
1998.
Insight Electronics Distribution, Danka Financial, Bay Alarm, and Innovative
Vanguard, are former vendors and a sales representative of the Company, all have
filed legal claims against the Company. Due to financial difficulties, the
Company did not have the legal resources to defend itself. Several of these
cases are pending, while two (Bay Alarm and Innovative Vanguard) default
judgments have been issued against the Company.
Because the Company no longer carries director and officers insurance, all
directors and officers have resigned as of June 1999, except the Corporate
Secretary.
Item 16: Description of Business: REPipeline.com - the Company
REPIPELINE.COM, Inc. was founded in July 2000 to be an online line service
provider to the commercial real estate business community vertical industry
segment. We will aggregate a portfolio of services that are currently offered on
multiple Internet sites and introduce new services that are not currently
offered on the Internet. Our business model is unique in that commercial real
estate brokers will be provided a platform to access a portfolio of bundle
services at REpipeline's "One Stop Shopping" site. Where other Internet and off
line solution providers provide "one solution" REpipeline's added value is in
providing a suite of solutions for the exchange of information, documents and
ordering of services with other participants in the commercial real estate
business community. The company's primary client will be the commercial real
estate Broker with the secondary clients among the other 29 company categories
that participate in the commercial real estate business.
24
REpipeline has developed proprietary technology on its Internet site and its
management team has extensive experience in technology, connecting a business
community with a network strategy, and expanding a technology platform and
customer base through acquisitions. We believe that there is an excellent
business opportunity to consolidate private Internet companies and build a
world-class company in a short period of time. REpipeline is rolling out its
services in Dallas, Texas and has finalized a reverse merger and is preparing to
build the company through an aggressive acquisition plan that leverages their
publicly traded stock.
Item 17: Management's Discussion and Analysis of Plan of Operation
Industry Overview
Commercial real estate industry is fragmented in terms of companies and business
processes
The commercial real estate industry is dominated by small and mid size
companies. The commercial Real Brokerage segment has 80% of the companies with
eleven or less broker/agents per company. The professional service providers
i.e. attorney, architects and title insurance are small and mid size companies.
Companies such as space planners who are vendors that service the property
management segment are small to mid size local private companies.
In processing a commercial real estate business deal there are multiple steps in
the process for one single transaction. For example the contract execution for
leasing office space has thirteen process steps that involves, five different
companies and thirteen different individuals.
The commercial real estate industry and services markets are large and growing
markets.
The commercial real estate industry is a major factor in the U.S economy.
Commercial property sales exceed $200 Billion annually and leasing transactions
are $200 Billion. In addition to a huge volume of direct activity related to the
buying, selling and leasing of property, indirect services provided to the
industry by vendors of all types add countless incremental transactions Spending
on building out new commercial space was over $46 Billion, $12 Billion was spent
on new office furniture and there is $10 Billion spent annually on tenant
services. REpipeline provides online services for posting RFP's and the ordering
of services and products for the commercial real estate transaction.
REpipeline's monthly subscription based service has excellent revenue
opportunity.
REpipline subscription client universe is in excess of 6 million subscribers
with an annual dollar volume of $1.5 billion. The online electronic signature
contract signing services offered by REpipeline has a potential annual market
size of $200 million for leasing transactions and $2 0 million for sales
transactions. The Internet hosted applications market for commercial real estate
brokers is $ 720 million and is expected to grow very rapidly.
25
Void in the Internet space for an aggregation of single solutions and an
integrator of off line Services.
The Internet market for commercial real estate as outlined by Banc of America
Securities Chris Hartung research report has three key vertical hubs; Service
built around the broker, financing and property management. REpipeline agrees
with this analysis, however feels there are two additional vertical hubs that
are emerging; transaction and document management and tenant support services.
REpipeline's business model will integrate these hubs except for the financial
vertical hub into one operating platform. There are currently off line services
used by the commercial real estate broker that are not available by commercial
real estate Internet services companies. Services such as ordering of property
sign age, preparation of bound and printed brochures and contract signing and
execution will be part of REpipeline portfolio of services offered on the
Internet operating system.
REpipeline's proprietary market research has identified a unique gap in the
services market and has designed its services to fill the void currently in the
market.
The industry suffers from poor information and document flows. The company
engaged Crescent Research, an independent market research firm to identify the
needs and desires of the commercial real estate broker. REpipeline has designed
its products and services to fill the gap in the market for what is needed and
what is currently being delivered. The market research outlined that personal
communications is a critical element to the business process. The commercial
real estate industry involves a multitude of participants who continuously
engage in a broad range of activities relating to managing property, operations,
conducting transactions, collaborating on projects and exchanging information.
The market research confirmed that connecting the commercial real estate
business community to exchange information, documents and the ordering of
services presents a solid value proposition.
The most important marketing tools employed by the commercial broker are word of
mouth advertising, property sign age and direct mail and e-mail. The most
important steps in the total business process are discussing listing on the
phone, preparation of marking brochures and contract preparation.
The market research was very definitive on the optimal business solutions that
would set the base for a successful commercial real estate services company; a
one stop shopping Internet site that aggregates the multiple services on the
Internet and integrating services currently not offered on the Internet into one
operating system. The ideal commercial real estate Internet service company
needs to improve on the exchange of information, contracts and the ordering of
services with the commercial real estate business community. The competition in
the market today is not offering a `One stop shopping" Internet site that
provides solutions for improving the exchange of information, documents and the
ordering of services.
The commercial real estate business community is a personalized one on one
business relationship. The solutions the commercial real estate brokers are
seeking are not primarily centered on improving a transaction cost but rather
improving their relationship with the customer and speed in the transaction
process.
The Business Opportunity:
Connect the commercial real estate business community; market a suite of
services and a consolidation strategy for Internet service companies.
The technology of the Internet provides a platform that could significantly
enhance the transaction process and the flow of information between companies in
the transaction. The Internet until recently has focused on the sale of products
and has now is moving towards the supply side ordering of services. The
opportunity that is emerging on the Internet is to connect white-collar workers
through a single platform to perform tasks within transactions that cross
company lines. The Internet offers a single technology platform and protocol
that small and large companies can use to exchange information, documents and
the ordering of services.
A One Stop Shopping Internet site that provides solutions to commercial brokers
and property managers for ease of use and save time in executing a transaction.
The market research clearly defined the gap in the Internet market space and
REpipeline will capitalize on the void.
The Internet has seen significant changes in the last six months. The promise of
IPO's has now turned to the closing down of many Internet companies and the
search for cash infusion. Single solution Internet companies will find it
difficult to succeed on the Internet and companies that provide a bundle of
solutions with one back end cost structure will be the companies who succeed in
the future.
26
Since the exit strategies of Internet companies has been narrowed private
Internet companies are selling below the valuations of 7 x trailing 12 month
revenue and 100 x unique site visitors per month that existed in 1999. The
commercial real estate Internet service industry fits the model for a
consolidation play. Fragmented industry, pipeline full of single solution
acquisitions, inexperienced management and low risk acquisition integration.
Business strategies will capitalize on the market needs, tailored marketing,
state of the industry, speed in execution and reducing risk.
Market a "One Stop Shopping" Internet based service center for the commercial
real estate business community. The product and services have been developed
based on the market needs for commercial real estate brokers and property
mangers. REpipeline will execute one technology platform and integrate acquired
products and services in the base technology platform.
Tailor the marketing strategies to geographic markets. The commercial real
estate industry is a localized business. Commercial brokers in Dallas Texas are
focused Dallas and brokers in Atlanta are focused on Atlanta. REpipline will
acquire geographic companies and market their trademarks and services with one
back end cost structure.
This strategy has been successfully in the consumer products industry and
REpipeline will deploy this Same type of approach in marketing its services.
Buy and build strategy and consolidate Internet based commercial real estate
service companies. The Internet offers an opportunity to acquire companies to
expand the geographic presence of REpipeline, acquire customer bases, cross sell
new products and services into acquired customers bases and leverage cost
structures. The Internet is stocked with commercial real estate single solutions
suppliers searching for an exit strategy.
Acquire software and source codes to expand the Internet applications solutions.
We will acquire software industry specific software applications such as
property management software. In acquiring the software we will secure the
source code which will allow us to modify and change the software on our
timetables and not an outside vendors and also reduced the cost of goods by not
having to pay license fees.
This business strategy will allow us to accelerate the time to market for
software development and reduce the risk for acquiring companies for technology
whose business model and plan does not fit the strategic direction of
REpipeline.
Technology platform will be open, scalable and easily integrate remote
applications
The technology platform will Windows NT and utilize SQL server as database. The
company will be integrating remote software applications into the centralized
operating system and will utilize Cytrix and Microsoft terminal server to
seamlessly integrate these applications into the REpipeline operating system.
Customer acquisition plan is focused, concentrates on centralized buying points,
acquiring customer bases and customer training on the use of the Internet
REpipeline will roll out the companies services on a city-by-city basis. The
company has built a 200,000 Yellow page database for participants in the
commercial real estate business community. This database will be used to send
out direct mail announcements and e-mails to build awareness and trial for the
REpipeline services.
27
The Sales Strategy will concentrate on centralized buying points. There are
1000's of local and national trade associations as well as franchise groups that
can promote REpipeline services through their network. Trade shows offer a
excellent opportunity to acquire new clients. The national association of
realtors trade show draws 22,000 potential clients and ICSC the international
commercial shopping centers convention had 25,000 participants. A key strategy
is to acquire the customer bases in the buy and build strategy and cross sell
new services into the new customer base. Education and training on the use of
the Internet for the commercial real estate business community is a major
opportunity. REpipeline will conduct local education seminars open to the public
on the opportunities on the Internet and available solutions. In affect
REpipeline wants to establish its services as the Internet with training wheels.
Products and Services have been developed and will be acquired based on market
needs. The primary platform for the products and services is a bundle of
services offered at one Internet site. The products and services strategy is
being built around four key foundations: Improving the way information and
documents are exchanged, ordering of services and hosted software applications.
Information exchange is the foundation for the business process in commercial
real estate. REpipeline will offer proprietary e-mail broadcast systems that
will communicate marketing documents to 100, of brokers and clients at the same
time. The company will introduce an industry first RFP exchange for tenant
services. Commercial real estate is a local business and REpipeline "My
Pipeline" will offer local news content and local prospecting information. The
Pipeline Yellow Pages has 200,000 plus companies that participants in the
commercial real estate business community can and advertise and promote their
company to a closed business community. Real estate requires one on one
communications and REpipeline will introduce on line computer conferencing as an
integrated solution in its One Stop Shopping solution.
Document exchange and contract signing is a major activity in the commercial
real estate business community. The lease segment of the industry is the largest
users of contracts and property managers and commercial real estate brokers can
utilize REpipeline's on line electronic signature solution, project management
tracking for the contract process and storage of contracts.
Improve the efficiency of ordering services and products. REpipeline's clients
can order on line at REpipeline's Internet site, property sign age, local market
reports and prepare bound and printed brochures that can be delivered to their
office or a clients office within two hours.
Deliver a virtual office desktop to the commercial real estate broker.
REpipeline will bundle its business services with hosted software applications
into one virtual desktop. REpipeline has acquired the software and source code
for the settlement and closing process and office accounting package for the
commercial real estate office and title insurance company. The company plans to
acquire the source software and source code for five other vertical industry
applications.
The management team has skills and experiences in building business communities,
technology, rapid growth companies and commercial real estate. The management
team has training and experience with Fortune 500 companies such as PepsiCo,
Sara Lee, Fox Meyer Health Corp and General Foods, start up's and rapid growth
companies. Software development and network strategies. The team has extensive
experience in new product development and building a successful company from a
concept developed from market driven research. Mergers and acquisitions are a
key skill required in a consolidation strategy. The management team has acquired
and integrated over 52 companies in three difference consolidation transactions.
Members of the management team have formal training in business process
re-engineering, commercial real estate and construction industry experience as
well as public company experience.
Revenue Streams
Revenue streams will be driven from: Monthly subscription fees of $22.95,
overrides for the purchase of products ands services, electronic contract
signing and storage and a monthly fee for using hosted applications.
Industry Overview
The Internet market for the commercial real estate industry has five vertical
hubs: (1) Services built around the brokerage industry or commercial Broker, (2)
transaction & document management,(3) financing, (4) tenant support and
(5)property management. There are competitors offering only single solutions in
the Brokerage vertical hub. The transaction and document management hub pertains
to online platforms which facilitate contract distribution, collaboration and
execution. This space is emerging; however no one currently offers an end-to-end
solution that is legally binding. The financing hub has multiple companies
offering commercial mortgages on the Internet. While the volume of products and
services sold to new tenants occupying new lease space exceeds $10 Billion
annually, there are no Internet or other market places that bring decision
makers and vendors together in a formal bid format.
28
The Internet market currently only offers single solution sites for business
services and commercial real estate software applications. REpipeline will be an
integrator of Internet based business services into one site and an aggregator
of industry specific and personal software applications. A key piece to the "One
Stop" operating system Internet site is to convert traditional off line services
to Internet based services. REpipeline's business model is built around
integrated business services and software applications for the brokerage
vertical hub while taking a first market position in the document management and
tenant services hubs.
The industry revenue as reported by the Bureau of Economic Analysis was $222.4
Billion in annual commercial property sales and $200 Billion for lease. It is
estimated by REpipeline that the commercial real estate business community
processes 15-20 Billion transactions annually.
The annual revenue opportunity for REpipeline's subscription based services is
$1.5 billion, $240 million for online electronic contract signing and storage
and $720 million for hosted commercial real estate vertical software
applications.
The commercial real estate business community is comprised of Real Estate
Brokers, Lessees, Property Managers, Attorneys, Contractors, Office
Furniture/Space Planners and many other industry related companies. The Real
Estate Brokerage industry, as reported by the U.S. Census Bureau, consists of
740,000 Real Estate Brokers/Agents. There are 29 other company categories in
addition to the commercial real estate Brokers that comprise the commercial real
estate pipeline. REpipeline will provide services that create value to these
other 29 company categories bring REpipeline's total prospective client universe
is approximately 5 to 7 million.
REpipeline will focus its services and technology solutions on the small and
mid-size company market. In the commercial real estate brokerage market the
small and mid-size companies represent 80% of the market. The overall small and
mid-size company market spends $57 billion annually on technology and it is
forecasted that this segment will spend $3.8 billion for ASP services in 2003.
Market Research
The company engaged Crescent Research, an Independent market research firm to
identify the needs and desires of the commercial real estate broker. REpipeline
has designed its product and services to fill the gap in the market for what is
needed and what is currently being delivered.
There is high Internet penetration for commercial brokers with 84% using the
Internet. However 41% of the 250 sample did not visit a commercial real estate
site during the last seven days. This indicates that there is a value
proposition problem with the current Internet sites. The commercial real estate
broker number one marketing tool is word of mouth discussions, followed by
property sign age and targeted e-mail and direct mail pieces. What this infers
is the business process is very personalized and this must be taken in
consideration in the development of products and services. REpipeline services
have been developed to capitalize on the three key marketing tools.
The most important activities in the business process are; discussing listings
on the phone, preparing brochures and collateral and managing proposals and
contracts. REpipeline is introducing on line computer conferencing to maintain
the one on one discussions, a services that allows the broker to prepared bound
and printed brochures and the on line electronics signing of contracts on line.
29
Broker spend 33% of their time gathering information. The Internet currently
compounds this problem with single site solutions. REpipeline "One stop
shopping" Internet will deliver convenience and ease of use the commercial
brokers as its value proposition.
Internet sites not meeting clients needs.
The opportunity in the market. Currently 41% of the brokers have not visited an
commercial real estate Internet site in the last seven days. The 250 sample
group were asked a series of questions on the what an ideal Internet based
commercial real estate company services would deliver in solutions and benefits.
The results of the research reflected a 5.3 rating for delivery for the current
commercial real estate internet sites and the ideal internet based commercial
real estate services company rating was 6.9. This is a 1.6 gap or 30% and
REpipeline has developed its products and services based on filling the 1.6 gap.
A concept test was preformed to determine the optimal position for an Internet
based commercial real estate Services Company. Concepts were written for various
competitive positioning to determine the market appeal. The clear winner in the
concept test was a one stop shopping Internet site. REpipeline is using this
umbrellas positioning in its business model and has integrated the services
required to position REpipeline as the ideal services company.
Competitive Analysis
As many as 90 Internet sites have been identified with some feature that
could be viewed as potential competitors of REpipeline. There is not a
competitor focusing on the "One Stop Shopping" model and the improvement of
transactions. REpipeline will be the first Internet Company to introduce the
contract execution and a suite of hosted application software. Competitors that
have been analyzed are involved in some way with the marketing of property, the
dissemination of market information. The competitors can be categorized into
three segments.
3. Market information providers that provide restricted access to large
databases of self generated information for a fee (Co-star and Realty
IQ)
4. Online property listing services that provide Internet bulletin board
posting for property. (Loop Net, PropertyFirst, and Realcentric)
5. Project management tools for a specific process in the commercial real
estate transaction (REapplications and My Contracts)
Market Information Providers:
Competitors in this segment have in essence moved their offline proprietary
databases online without leveraging the advantages offered by the Internet.
Access to data from these firms is restricted to paid subscribers. These
companies focus on providing local specific lease information about tenants such
as terms of the lease to target a tenant as a prospect and availability of
space. This information is used to prospect for clients and search for lease
space for tenant clients. The information to populate the database is gathered
through phone calls to brokers and leasing agents. The criticism from the market
about these companies is the data is outdated and the accuracy is questioned.
30
Co-star: Co-star provides office lease information and other services for
brokers / tenant reps. Co-star has migrated from a publisher of market data to
using the Internet for clients to access its services. Its data collectors
gather information through 1.8 million phone calls to property owners and
brokers for aggregation into their database. The users of these products are
often critical of the accuracy of the data in the Co-star reports. Co-star is a
public company and has made several acquisitions of local research companies
that offered the same services as Co-star. Co-star consolidates the local
company under their trademark, which has had some resistance from their users
because they feel real estate is a local business and they want to deal with a
local company.
In acquiring these companies Co-star has not leveraged the cost structures. The
data gathering function of the business is a major cost component and cannot be
consolidated. In effect the back-end cost structure is the same and there is a
new delivery vehicle to the client, the Internet. The most recent earnings
report for Co-star was $30 million in revenue and a $15 million loss in
earnings.
Realty IQ: Realty IQ is a direct competitor to Co-star and provides the same
services. Realty IQ has leveraged the Internet far greater than Co-star. They
have expanded their business primarily through the Internet and have used a
penetration pricing strategy.
The pricing model for Realty IQ is $21.95 @ month per user compared to Co-star's
$700-$1,000 per month per office. Realty IQ is backed by Front Line capital and
acquired the leasing database of Cushman Wakefield properties. Realty IQ gathers
the information in same process as Co-star and has 200 researchers calling
brokers and property managers for information on property that is posted into
the database.
Online property listing services:
These companies provide the ability to post a property at an Internet site. The
driving force behind this service was to have a multiple listing service like
the residential housing market. The problem with this position is the
residential market is a different market than the commercial real estate market.
The commercial real estate market is an investment driven decision process and
the residential market has a different type buyer that is driven by emotion.
Commercial real estate brokers in reality do not market properties but rather
cultivate long-term business relationship with clients. Residential buyers
frequent the Internet to search for homes where as the commercial property buyer
is not a frequent visitor to the Internet, and instead views the process like
dealing with an investment banker or stockbroker. Consequently the online
property listing services do not draw buyers to their sites. The online property
listing services are used by the broker as a digital bulletin board for a
specific property. In discussions on the phone with a potential buyer the broker
will refer the buyer to an online property-listing site to view the property
specifications. In effect the Internet site is another form of a flyer.
REpipeline uses the information the broker posts at its site as the digital
flyer that the broker can e-mail broadcast to hundreds of clients and brokers in
minutes.
The online property listing services sites do not charge for posting property at
their site. The industry is very fragmented - there are 75 online listing
services companies. These companies have high penetration with the broker
community and low perceived value. The online property listing services
companies will be discussed in the acquisition strategy as a building block to
acquire customer bases.
LoopNet: LoopNet provides free listings to brokers for property leasing and
sales. Its revenue model is based on website hosting and advertising fees. Some
referred services are offered including loan origination, attorneys and
appraisals. LoopNet's ownership includes major real estate brokerage companies.
It is REpipeline's understanding that LoopNet's charter will not allow them to
charge the large real estate brokerage investors for posting listings at their
site. LoopNet is considered by many in the industry to provide data of "less
than top quality" that is frequently out of date.
Property First: PropertyFirst is focused on the property-for-sale market and has
recently expanded into the property-for-lease market. Property First targets the
broker as their client. They charge a membership fee for access to premium
services such as Buyer match and PropertyPush but provides few ancillary
services aside from listings. After an extended trial period, PropertyFirst
intends to charge for listings. To date PropertFirst is not charging for
listings and will be prevented doing from so until LoopNet takes that step.
31
RealCentric: RealCentric business model focuses on the tenant and property
owners. In effect it by passes the commercial broker/ tenant rep. They offer
listings for office space for lease and a vendor directory for use by tenants in
completing transactions. RealCentric charges a basic monthly fee to property
owners for listing and fees to vendors for being listed on the site.
Project management tools for a specific process in the commercial real estate
transaction:
These companies provide an organized systematic process for the management of a
project in the commercial real estate transaction. The commercial real estate
transaction requires the exchange of documents and the management of time lines
to meet the transaction deadlines. For example, a broker for client A needs
foundation inspections on a building. He has the inspection completed. Pre
Internet he would have sent this to the broker for client B and broker B would
then circulated to the other parties in the transaction.
Now with the Intent this report is put into a file at a secured web site so that
all parties involved with the transaction can view the report. This centralized
Internet storage and access system is connecting the document flow from the real
estate business community for a real estate transaction.
The contract abstracting system provides the broker with notice of key
activities and dates. This process is common in the leasing industry and is
called lease abstracting. The broker is sent notification of a critical date in
and lease prior to the event happening.
REapplications: REapplications has been a software applications provider and
recently established an Internet site. Their application provides management
tools to manage a real estate sale or lease transaction. The Internet single
solution connects the real estate business community and provides project
management tools for multiple company representatives involved in the
transaction. REapplications charges a monthly fee for the use of the project
management hosted application.
MyContracts: My Contracts provides contract management services to multiple
industries, one of the industries they specialize in is the real-estate
industry. Their clients post their contracts at MyContracts site and My
Contracts solution manages a tickler files on terms and conditions of the
contract along with critical dates and financial obligations. Their pricing
model is $2.00 @month per contract with a $30.00 minimum. My Contracts does not
provide an electronic signature contract solution or the audit trail in the
contract execution transaction.
Competitive Differentiation Market
REpipeline has positioned itself with a broader yet more focused solution than
its competitors. The market research points out the void in the Internet space
and the need for a One Stop Shopping solutions that aggregates the single
solutions on the Internet as well integrating offline services into a One Stop
Shopping Internet site. The market research conducted by Crescent Research
clearly outlined the optimal competitive positioning. The market research
outlines a 1.6 gap (30%) in what the market wants from a commercial real estate
Internet service company and what is currently being delivered. A positioning
analysis was conducted to determine the optimal positioning for REpipeline. The
"One Stop Shopping " positioning had a substantially higher appeal than the
Co-star and LoopNet's positioning. The research determined the top marketing
vehicles and most important activities in the commercial real estate business
process. Property sign age and target e-mail are important to the marketing
campaign as well as word of mouth (computer conferencing).
The important activities in the business process, discussing listings on the
phone (computer conferencing), preparing brochures and collateral (bound and
printed brochures) and preparing and managing contracts (contract management)
are services that REpipeline is offering that the competition is not.
Competitive Differentiation Business Model
REpipeline four points of differentiation vs. the competition that will ensure
that REpipeline is a successful company.
32
6. Superior value proposition to the competition with a `One Stop
Shopping " Internet service site. REpipeline is introducing new
services the market needs and that the competition is currently not
delivering. REpipeline's business model is built around the broker and
includes the commercial real estate business community, which the
competition is not concentrating on.
7. Experienced management team in capitalizing on market opportunities,
rapid growth companies, and previous experience in connecting a
business community with technology and mergers and acquisition
background.
8. Building a company rather than restructuring an existing one. Co-star
is a public Company and is experiencing the problems of going from a
traditional business as an off line publisher of market research to a
company that leverages the Internet it its business model.
REpipeline's management team has previously gone through this and it
is more effective to allocate resources against building a company
than restructuring one.
9. REpipeline will be a public company and this offers opportunities that
the majority of its competition does not have. Commercial real estate
Internet service companies have limited exit strategies and REpipeline
can capitalize on this with acquiring these companies with public
equity and to build the company. The valuation of these private
companies is well below their previous levels and REpipeline can build
the size and scope of the company in a short period of time. In
addition the public equity presents opportunities to acquire software
and source codes from private application companies. The majority of
the competition must use cash to build their company and this will put
them at a competitive disadvantage with REpipeline's business model
Item 18: Description of Property
We do not own any property, nor do we have any plans to won any property in
the future. We are currently leasing office Suite 400, 12377 Merit Drive,
Dallas, Texas, 75142. The suite consist of 4,900 square feet of office space.
Our rent is $5,000 per month, and our lease expires on December 31, 2001.
Item 19: Certain Relationships and Related Transactions
Note George Thomas Bailey's Employment Agreement discussed in Item 21:
Executive Compensation.
33
Item 20: Market for Common Equity and Related Stockholders Matters
Historical Market Price Data for the Common Stock of Photonics Corporation
The following table sets forth the range of high and low closing sales prices
for Photonics Common Stock for the periods indicated:
High Low
---- ---
Fiscal- Year Ended December 31, 1997
Fourth Quarter $0.312 $0.312
Fiscal Year Ended December 31, 1998
First Quarter $0.50 $0.50
Second Quarter $0.625 $0.625
Third Quarter $0.343 $0.343
Fourth Quarter $0.312 $0.312
Fiscal Year Ending December 31, 1999
First Quarter $0.218 $0.218
Second Quarter $0.187 $0.187
Third Quarter $0.20 $0.20
Fourth Quarter $0.25 $0.218
Fiscal Year Ending December 31, 2000
First Quarter $1.00 $0.750
Second Quarter $0.50 $0.500
Third Quarter $0.30 $0.062
Fourth Quarter $0.375 $0.062
Item 21: Executive Compensation
Remuneration of Officers; Employment Agreements
Compensation Philosophy
We operate in a highly competitive and rapidly changing high technology
industry. The goals of the compensation program are to align compensation with
our newly revised business objectives and the performances of the employees, to
enable us to attract, retain and reward executive officers and other key
personnel who contribute to the long-term success of the Company, and to
motivate them to enhance long-term shareholder value. Key elements of this
philosophy are:
10. Total compensation should be sufficiently competitive with other
companies in similar or related industries so that we can attract and
retain qualified personnel.
11. We desires to maintain annual incentive opportunities sufficient to
provide motivation to achieve specific operating goals and to generate
rewards that bring total compensation to competitive levels.
12. We desires to provide significant equity-based performance based
incentives for executives and other key employees to ensure that they
are motivated over the long-term to respond to business challenges and
opportunities as owners and not just as employees.
13. Industry benchmark reports were used from PriceWaterHouseCoopers,
VentureOne and Spencer Stuart to develop the executive compensation
plans. The plans have been developed to position the compensation
packages in the 50% to 70% percentile for base salary, bonus and
equity compensation. The industries that were used were the
consolidation industry and Internet start up companies.
34
Base Salary The Committee annually reviews each executive officer's base salary.
When reviewing base salaries, the Committee considers individual and corporate
performance, levels of responsibility, prior experience, breadth of knowledge
and competitive pay practices.
Long-Term Incentives Our long-term incentive program consists of the Stock
Option Plans set out herein above, as amended from time to time. The stock
option program utilizes vesting periods (generally three to four years) to
encourage key employees to continue in the employ of the Company. Through option
grants, executives receive equity incentives to build long-term shareholder
value. Grants are made at 100% of fair market value on the date of the grant.
Executives receive value from these grants only if our common stock appreciates
in the long term. The size of option grants is determined by the Company's
philosophy of linking executive compensation with shareholder interests.
Stock Option Plan The 2000 Incentive Stock Option (ISO) plan provides options to
purchase common stock, may be granted only to employees of the company and its
subsidiaries. The Outside Director Stock Option Plan provides for the issuance
of stock options to the outside directors.
Bailey Employment Agreement
Effective as June 10, 2000, the REP entered into an employment agreement with
Mr. Thomas Bailey, the President and Chief Executive Officer of the REP. The
agreement provides for the Company to employ Mr. Bailey for a base salary of
$225,000. The agreement provides for annual bonus payments as determined by the
Board of directors and severance payment for termination without cause in an
amount of equal to twelve (12) months of salary and any bonus paid for during
the previous twelve (12) months. In the event in a change of ownership by virtue
of a merger or acquisition, where by the net effect is a change in Bailey's
title, responsibility or pay structure, Bailey would have the option to accept
such change or elect to exercise the severance option for termination without
cause. Mr. Bailey along with Mr. Langston and Mr. Craven are eligible for a
qualified and non-qualified stock option plan. See follow page.
Compensation of the Executive Officers
The following sets forth information in tabular form regarding compensation for
the Company's Chief Executive Officer and other executive officers.
Annual Compensation
Name and --------------------------
Principal Position Year Salary Bonus
------------------ ---- ------ -----
Mr. Thomas Bailey 2000 $225,000 --
President and Chief
Executive Officer
Mr. Chip Langston 2000 $165,000 --
Chief Financial
Officer
Mr. Michael Craven 2000 $135,000 --
Vice President Sales
& Business Development
Salaries are annualized for a full year and the Board of Directors will
determine annual bonus. The CEO position annual bonus potential is 100% of
salary, the CFO is 60% of salary and the Vice President of Sales and Business
Development is 50% of salary.
Mr. Langston compensation is paid to Langston Investments, Inc.
35
The following table sets forth certain information regarding non-statutory stock
options for REP stock granted during 2000 as part of the employment agreements
for the employees listed below. These options will be assumed by Photonics as
part of the acquisition of REP and will be converted to Photonics stock.
Qualified Stock Option Plan
Number of
Securities
Underlying
Name Options Exercise Price Grant Date
---- ---------- -------------- ----------
Mr. Thomas Bailey------ 500,000 $.10 June 1, 2000
Mr. Chip Langston------ 375,000* $.10 June 1, 2000
Mr. Michael Craven----- 325,000 $.10 June 1, 2000
*Mr. Langston's options are held by The Langston Family Limited Partnership.
The qualified stock option plan will vest at thirty three percent (33%) on an
annual basis for three years with an exercise price of $.10. The stock options
exercise time period is five years.
Non Qualified Stock Option Plan Bailey, Langston and Craven
The non-qualified stock option plan for each executive has three performance
targets. The Executive is only eligible to exercise the stock options when a
performance target is met. The stock options are for a period of ten (10) years
at an exercise price of $.10.
Number of
Securities Performance Targets
Underlying Exercise -------------------
Name Options Price Target One Target Two Target Three
---- ---------- -------- ---------- ---------- ------------
Mr. Thomas Bailey---- 14,708,078 $.10 7,354,039 3,677,019 3,677,019
Mr. Chip Langston---- 1,500,000 $.10 700,000 400,000 400,000
Mr. Michael Craven--- 1,300,000 $.10 625,000 325,000 325,000
Performance Targets
The performance targets for the Executives are designed to maintain continuity
in the management team and link the equity opportunity to increasing shareholder
value.
Mr. Bailey's stock option plan requires him to rescind and return to the company
performance target number one if he resigns from the company prior to one year
of service. Performance target number two requires Mr. Bailey to raise capital
to support the growth of the Company and performance target number three is
based on building the company infrastructure to support the growth of the
company and acquisition targets.
Mr. Langston's stock option plan requires him to serve one year of service to
receive performance target number one. To qualify for performance target number
two Mr. Langston must exceed cash management objectives and for performance
target number three meet acquisition targets
Mr. Craven's stock option plan requires him to serve one year of service to
receive performance target number one. In order to qualify for performance
target number two he must achieve a subscriber sign up target and for
performance target number three he must surpass the sign up objectives for the
ASP business.
36
Item 22: Financial Statements
Combined Financials of Photonics Corporation and REpipeline.com, Inc. The
unaudited pro forma of the combined financial statements of Photonic and REP for
the six months ended June 30, 2000, and twelve months ended December 31, 2000,
give effect to the merger as if it had occurred on January 1, 2000.
Photonics Corporation
/REpipeline.com, Inc.
Combined Balance Sheet
(Amounts in thousands)
Combined
June 30 December 31
2000 2000
(Unaudited) (Unaudited)
----------- -----------
Assets
Current Assets:
Cash and cash equivalents 89 39
Accounts Receivable less reserves 0 0
Prepaid expenses and other current assets 0 0
Total current assets 89 39
Furniture and equipment, net 8 8
Other Assets 116 285
Total Assets 200 332
Liabilities and shareholders equity
(deficiency)
Current Liabilities:
Accounts payable (1) 59 59
Accrued liabilities (2) 19 3
Due to Related Parties (3) 32 108
Other 0 45
Total current liabilities 111 214
Common stock 73 73
Treasury stock
Capital subscription 50,557 51,443
Accumulated deficit (51,151) (51,409)
Total shareholders' equity (deficiency) 90 117
Total liabilities and shareholders' equity 200 332
37
Photonics Corporation
/ REpipeline.com, Inc.
Combined Statements of Operations
(Amounts in thousands, except per share data)
Six months Twelve months
ended ended
June 30, December 31,
2000 2000
(Unaudited) (Unaudited)
------------- -------------
REVENUES:
Net Product Sales 0 0
Cost of Revenues 0 0
Gross Profit 0 0
OPERATING EXPENSES:
Web Site Development $ 86 $ 141
Marketing and Promotion 29 49
Compensation & Benefits 62 128
General & Administrative 291 498
Depreciation & Amortization
Total operating expense 469 815
Income (loss) from operations $ (469) $ (815)
OTHER INCOME (EXPENSE):
Interest income 0 0
Interest expense 0 0
Other Income 0 0
Other expense (54) (54)
Total other income (expense) (54) (54)
Provision for taxes 0 0
Net income (loss) $ (511) $ (869)
Net income (loss) per share (.03) (.04)
Common Stock used in per share calculation 34,766,618 34,766,618
38
Item 23: Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
None
PART II : INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") empowers a
Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. A
corporation may, in advance of the final disposition of any civil, criminal,
administrative or investigative action, suit or proceeding, pay the expenses
(including attorneys' fees) incurred by any officer, director, employee or agent
in defending such action, provided that the director or officer undertakes to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the corporation. A corporation may indemnify such
person against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
A Delaware corporation may indemnify officers and directors in an action by
or in the right of the corporation to procure a judgment in its favor under the
same conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him or
her against the expenses (including attorneys' fees) which he or she actually
and reasonably incurred in connection therewith. The indemnification provided is
not deemed to be exclusive of any other rights to which an officer or director
may be entitled under any corporation's by-law
In accordance with Section 145 of the DGCL, Article VI of the Company's
Restated Certificate of Incorporation (the "Certificate") provides that the
Company shall indemnify each person who is or was a director, officer, employee
or agent of the Company (including the heirs, executors, administrators or
estate of such person) or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, to the fullest extent permitted. The
indemnification provided by the Certificate shall not be deemed exclusive of any
other rights to which any of those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person. Expenses (including attorneys' fees) incurred in defending a
civil, criminal, administrative or investigative action, suit or proceeding
shall be paid by the Company in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of the
indemnified person to repay such amount if it shall ultimately be determined
that he or she is not entitled to be indemnified by the Company. Article VI of
the Certificate further provides that a director of the Company shall not be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit. The
By-laws of the Company provide that, to the fullest extent permitted by
applicable law, the Company shall indemnify any person who is a party or
otherwise involved in any proceeding by reason of the fact that such person is
or was a director or officer of the Company or was serving at the request of the
Company.
39
Item 25: Other Expenses of Issuance and Distribution
The following table sets forth the Company's estimates (other than of the
SEC registration fee) of the expenses in connection with the issuance and
distribution of the shares of common stock being registered:
SEC registration fee ................... $ 250.00
Legal fees and expenses ................ $ 32,000.00
Accounting fees and expenses ........... $ 0.00
Miscellaneous expenses ................. $ 1,896.99
-----------
Total: ................................. $ 34,146.99
estimated
Item 26: Recent Sales of Unregistered Securities
None
Item 27: Exhibits
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
5.1 Opinion of Lloyd Ward of Vickers and Ward, Dallas, Texas
10.1 George Thomas Bailey Employment Agreement
10.2 Langston Investments, Inc. (Joseph F. Langston Jr.) Employment
Agreement
10.3 Michael Craven Employment Agreement
40
Item 28: Undertakings
(a) The undersigned registrant hereby undertakes:
(i) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(ii) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein.
(b) insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective by the Securities and
Exchange Commission.
(2) For the purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
AVAILABLE INFORMATION
Photonics Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). These materials can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices at Northwest Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, New York.
New York 10048. Copies of these materials can also be obtained from the
Commission at prescribed rates by writing to the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20459.
41
SIGNATURES
In accordance with the requirements of the Securities Act, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Dallas,
State of Texas, on March 23, 2001.
Repipeline.com, Inc.
By: /s/ GEORGE THOMAS BAILEY
-----------------------------------------
George Thomas Bailey
President and Chief Executive Officer
In accordance with the requirements of the Securities Act, the
following persons in the capacities and on the dates stated signed this
Registration Statement.
NAME TITLE DATE
-------------------------- ----------------------------- ------------------
/s/ JIM VAUGHAN Chairman of the Board March 21, 2001
--------------------------
Jim Vaughan
/s/ JOSEPH F. LANGSTON JR. Chief Financial Officer, March 21, 2001
-------------------------- Director
Joseph F. Langston Jr.
/s/ MICHAEL CRAVEN V.P. of Business Development, March 21, 2001
-------------------------- Director
Michael Craven
/s/ JAMES KOO Director March 21, 2001
--------------------------
James Koo
42
Dates Referenced Herein and Documents Incorporated By Reference
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