NZJ Holdings Inc (NZIH)

[learner1156]

No longer a shell, apparently. Here's the info:

NEVADA INTERNATIONAL STOCK EXCHANGE, INC.
INITIAL DISCLOSURE STATEMENT
September 24, 2009
We previously were a shell company, therefore the exemption offered pursuant to Rule 144 is not
available. Anyone who purchased securities directly or indirectly from us or any of our affiliates in a
transaction or chain of transactions not involving a public offering cannot sell such securities in an
open market transaction.
Part A. General Company Information
Item I. The exact name of the issuer and its predecessor (if any).
Name: Nevada International Stock Exchange, Inc. (the “Company” or the “Issuer”)
Prior Names: Nevada Stock Exchange, Inc. – 3/1/2006 to 6/23/2006
McClendon Transportation Group, Inc. – 2/1/2000 to 3/1/2006
Item II. The address of issuer’s principal executive offices.
Nevada International Stock Exchange, Inc.
c/o SearchPath International, Inc.
526 Superior East, Suite 230
Cleveland, Ohio 44114
[phone] | Toll Free: [phone]
Facsimile (216) 658‐9711
Website: http://www.searchpath.com
Item III. The jurisdiction(s) and date of issuer’s incorporation or organization.
Incorporated in Nevada on February 1, 2000.
Part B. Share Structure
Item IV. The exact title and class of securities outstanding.
The issuer has one class of securities: Common Stock
CUSIP: 641283 10 6
The trading symbol is NVDS: The Issuer currently trades on the Pink Sheets
Item V. Par or stated value and description of the security.
A. Par or Stated Value
Common Stock $0.001 par value
B. Common or Preferred Stock.
The Company has Common Stock authorized. The following summary does not purport
to be a complete description of the terms and conditions of the Company’s securities,
and is qualified entirely by reference to the Amended and Restated Articles of
Incorporation, attached hereto as Exhibit B:
1. Common Stock Dividend, Voting and Preemption Rights.
Holders of Common Stock are entitled to one vote for each share held of record on all
matters on which the holders of Common Stock are entitled to vote under the laws of
Nevada. Holders of Common Stock have no preemptive rights and they are not subject
to further calls or assessments by the Company. Holders of Common Stock are entitled
to receive dividends when, as and if declared by the Board of Directors out of funds
legally available therefore.
2. Preferred Stock Dividend, Voting and Preemption Rights.
The Company does not currently have Preferred Stock authorized.
3. Other Material Rights of Common or Preferred Stockholders.
None
4. Any Provision in the Company Articles of Incorporation or Bylaws That Would Delay, Defer
or Prevent a Change in Control of the Company.
None
Item VI. The number of shares or total amount of the securities outstanding for each class of
securities authorized.
Common Stock – Fiscal Quarter ended March 31, 2009
(i) Period end date: March 31, 2009
(ii) Number of shares authorized: 100,000,000
(iii) Number of shares outstanding: 9,049,417
(iv) Freely tradable shares (public float): 1,288,255
(v) Total number of beneficial shareholders: 108
(vi) Total number of shareholders of record: 108
Common Stock – Fiscal Year 2008
(i) Period end date: June 30, 2008
(ii) Number of shares authorized: 100,000,000
(iii) Number of shares outstanding: 9,049,417
(iv) Freely tradable shares (public float): 1,288,255
(v) Total number of beneficial shareholders: 108
(vi) Total number of shareholders of record: 108
Common Stock – Fiscal Year 2007
(i) Period end date: June 30, 2007
(ii) Number of shares authorized: 100,000,000
(iii) Number of shares outstanding: 9,049,417
(iv) Freely tradable shares (public float): 1,288,255
(v) Total number of beneficial shareholders: 108
(vi) Total number of shareholders of record: 108
PART C. Business Information
Item VII. The name and address of the transfer agent.
Island Stock Transfer
100 Second Ave South
Suite 705 S
St. Petersburg. FL 33701
PH. 727‐289‐0010
Fax: 727‐289‐0069
www.IslandStockTransfer.com
Island Stock Transfer is registered with the U.S. Securities and Exchange Commission
and authorized to conduct stock transfer transactions with the Depository Trust
Company.
Item VIII. The nature of the issuer’s business.
A. Business Development.
1. Form of organization
Nevada Corporation
2. Date Incorporated
February 1, 2000
3. Fiscal year end date
June 30
4. Any bankruptcy, receivership or any similar proceeding
None
5. Any material reclassification, merger, consolidation, or purchase or sale of a significant
amount of assets
On September 8, 2009 the Company acquired all of the outstanding stock of SearchPath
International, Inc. (“SPI”) in exchange for 370,304,000 shares of Common Stock of the
Company.
6. Any default of the terms of any note, loan, lease, or other indebtedness or financing
arrangement requiring the Company to make payments.
None
7. Any change of control
The majority interest of the stock of the Company was purchased in July 2009; however,
the transaction has yet to be completed. On September 8, 2009, the Company acquired
SPI in an acquisition whereby the shareholders of SPI became holders of the Common
Stock of the Company and SPI became a wholly owned subsidiary of the Company.
8. Any increase of 10% or more of the same class of outstanding equity securities
On September 8, 2009 the Company acquired all of the outstanding stock of SPI in
exchange for 370,304,000 shares of Common Stock of the Company.
9. Any past, pending or anticipated stock split, stock dividend, recapitalization, merger,
acquisition, spin‐off, or reorganization
None
10. Any delisting of the issuer’s securities by any securities exchange or deletion from the OTC
Bulletin Board
None
11. Any current, past, pending or threatened legal proceedings or administrative actions either
by or against the issuer that could have a material effect on the issuer’s business, financial
condition, or operations and any current, past or pending trading suspensions by a securities
regulator
None
B. Business.
1. The Company’s primary and secondary SIC codes:
7361 and 8741.
2. If the Company has never conducted operations, is in the development stage, or is currently
conducting operations:
The Company is currently conducting operations through its wholly owned subsidiary
SPI.
3. If the Company is or has at any time been a “shell company”:
Yes. The Company was a shell company until September 8, 2009 when it acquired SPI.
4. Names of any parent, subsidiary, or affiliate of the issuer, and its business purpose, its
method of operation, its ownership, and whether it is included in the financial statements
attached to this disclosure statement:
The Company has one wholly owned subsidiary, SPI, which is a franchisor of talent
acquisition services. The financial statements of SPI are included in the financial
statements attached to this disclosure.
5. The effect of existing or probable governmental regulations on the business:
The Company’s sale of franchises through its wholly owned subsidiary, SPI, is regulated
by the Federal Trade Commission and by state business opportunity and franchise laws.
SPI has filed or is in the process of filing registrations, been exempted from registration
or filed a notice in states that require pre‐sale registration or a notice filing under
franchise investment laws in order to offer the sale of franchises.
6. An estimate of the amount spent during each of the last two fiscal years on research and
development activities, and, if applicable, the extent to which the cost of such activities are
borne directly by customers:
None
7. Costs and effects of compliance with environmental laws (federal, state and local):
None
8. The number of total employees and number of full‐time employees:
The Company, through its wholly owned subsidiary, has six (6) employees, four(4) of
which are employed full‐time.
Item IX. The nature of products or services offered.
A. Principal Products or Services, and their Markets
The Company is the owner of SPI, a franchisor of talent acquisition services. As of
June 10, 2009, SPI had signed on seventy three (73) franchises. Talent acquisition
services are a relatively new concept in the human capital industry that includes any and
all services related to the identification, qualification, acquisition and retention of
human capital.
SPI has rapidly built a high quality network of franchisees, despite competition from
larger, more established firms. SPI believes that the pending retirement of hundreds of
thousands of Baby Boomers resulting in vacant positions across all industries, paired
with the rise in the number of college graduates in the U.S. seeking new positions will
open the door for high quality talent acquisition organizations to marry great talent with
open positions and that this trend will continue to grow in the coming years.
SPI has entered the marketplace as a formidable contender, tendering unique concepts
and superior service delivery. SPI has chosen franchising as a platform for growth.
SPI generates revenue from an initial franchise fee upon the sale of a franchise and an
ongoing “royalty” from the franchisee based on a percentage of franchisee gross
receipts. In addition, the company generates revenues from search fees.
The standard royalty rate for an SPI franchise is 7% of gross receipts. Gross receipts
refers to all cash received, exclusive of taxes, for services provided to clients, including
placement fees, gross margin on temporary or hourly placements, and consulting
services. There is an additional fee of .75% on gross receipts for national marketing,
advertising and public relations. SPI may reduce the royalty rate for new franchisees
with existing search experience depending upon their average annual billings prior to
signing with SPI.
B. Distribution methods of the products or services
Franchise sales leads come to SPI in a variety of ways, including referrals from existing
franchisees, interest from SPI’s website and SPI’s existing contacts. Once a sales lead has
been determined as a qualified prospect to purchase a franchise, a sales person on staff
will distribute a UFOC (Uniform Franchise Offering Circular) outlining SPI’s business and
the details of the franchise agreement. Most states require a minimum of a 15 day
waiting period from the receipt of the UFOC to the signing of a franchise agreement.
The prospect will then be scheduled to visit SPI in Cleveland for a “Discovery Day”,
where the prospects come in to meet the SPI staff and learn about SPI and its programs
in more depth. After the Discovery Day, additional exploration and references on both
sides are completed. It usually takes a minimum of two weeks and up to six months for
the prospect to become a franchisee.
C. Status of any publicly announced new products or services
None.
D. Competitive business conditions, the issuer’s competitive position in the industry, and methods
of competition
The staffing and recruitment industry is highly competitive with low barriers to entry.
Many of the companies that operate within this sector are small local or regional
operators with a few locations. Within these markets, these small local or regional firms
compete with SPI and its franchisees for the available recruiting business. The primary
competitive factors in the staffing segment include price, service and the ability to
provide the requested personnel when needed. Although the staffing services market is
highly competitive with limited barriers to entry, there are relatively few companies
providing franchise opportunities in the staffing and recruiting industry. SPI believes that
none of its competitors present the breadth of services SPI has to offer. However, the
primary competitive disadvantage is that SPI is relatively new to the franchisor business
therefore lacking financial and operational history that may influence the decision of
prospective franchisees. Competitors that provide a franchising option tend to be
involved in temporary staffing, while SPI’s focus is on permanent placement. Some of
these temporary staffing companies include True Blue, Inc. (doing business as “Labor
Ready”), Adecco, Kelly Services, Inc., Manpower, Inc., SOS Staffing Services, Inc., and
Vedior, Inc.
The industry leader by volume in the franchisor business, Management Recruiters
International (“MRI”), a division of CDI, is by far the largest franchised search firm.
Sanford Rose International (“SRA”) has been in business for over 41 years and has less
than 60 active offices. Global Recruiting Network, (“GRN”), a relatively new (2002) startup
out of Chicago has over 150 franchises, and was founded on the same business
model as MRI. Fortune Personnel Consultants, located in New York City, only recently
began actively selling franchises after being dormant several years. In addition, there are
several large networks of independent recruiting organizations, but they offer a
substantially different operating model.
E. Sources and availability of raw materials and the names of principal suppliers
None
F. Dependence on one or a few major customers.
We depend primarily on the sale of franchises by our wholly owned subsidiary, SPI.
Such sales comprise a significant portion of our revenue.
G. Patents, trademarks, licenses, franchises, concessions, royalty agreements or labor contracts,
including their duration
SPI has registered “SearchPath” as a service mark with the U.S. Patent and Trademark
Office. This service mark will be in effect for ten years from the registration date and is
renewable for successive ten year periods. SPI licenses this service mark to its
franchisees. SPI also claims a copyright in our various franchise materials, such as the
training and operations manuals.
H. The need for any government approval of principal products or services; Discuss the status of
any requested government approvals.
The sale of franchises is regulated by the Federal Trade Commission and by state
business opportunity and franchise laws. SPI has filed or is in the process of filing
registrations, been exempted from registration, or filed a notice in states that require
pre‐sale registration or a notice filing under franchise investment laws in order to offer
the sale of franchises.
Item X. The nature and extent of the issuer’s facilities.
SPI currently leases approximately 1000 square feet of office space in an executive suite
facility with shared common space at a monthly cost of $1600. The agreement after the
initial three‐month term, which expires on October 15, 2009, is cancellable with 30 days
advance written notice. The office is located in the Leader Building at 526 Superior
Avenue East, Suite 230, Cleveland, Ohio 44114. The Leader Building would be classified
as B to B‐ office space; however the suites where SPI resides have been newly renovated
and are enhanced with up‐to‐date technology.
PART D. Management Structure and Financial Information
Item XI. The name of the chief executive officer, members of the board of directors, as well as control
persons.
A. Officers, and Directors:
1. Officers and Directors of the Issuer
Thomas K. Johnston, Chief Executive Officer, Board Member
526 Superior East, Suite 230
Cleveland, Ohio 44114
Thomas K. Johnston is the founder of SPI and has been a director, the Chief Executive
Officer and President of SPI since July 19, 2005. Mr. Johnston currently serves as the
sole Director and President of Nevada International Stock Exchange, Inc. Prior to the
founding of SPI, from 1997 through 2005, Mr. Johnston was an owner and Vice
President of Pathfinder Search Partners in Shaker Heights, Ohio. Pathfinder is an
executive recruiting firm focusing on the permanent placement of personnel services
and is currently one of the Company’s franchisees. Before that time, from 1992 to 1997,
Mr. Johnston was the Director of Interim Executive Staffing at Management Recruiters
International, in Cleveland, Ohio, where he was a member of the management team
that transitioned the company into a full‐service human resource solutions organization.
As of March 31, 2009, Mr. Johnston owned no shares of the Company. Mr. Johnston
received shares of the Company in September 2009 as part of the acquisition of SPI.
2. Control Persons, Advisors and Significant Shareholders
Thomas K. Johnston will be the beneficial owner of One Hundred Thirty‐Three Million
Four Hundred Sixteen Thousand (133,416,000) shares of Common Stock of the Company
upon the completion of the Company’s acquisition of all of the outstanding stock of SPI
and the issuance of eight (8) shares of Common Stock of the Company for each one (1)
share of SPI stock outstanding.
B. Legal/Disciplinary History.
None
C. Disclosure of Family Relationships
Amy Johnston, SPI’s Vice President and Chief Compliance Officer is the wife of the
Company’s CEO, Tom Johnston.
D. Disclosure of Related Party Transactions
None
E. Disclosure of Conflicts of Interest
None
Item XII. Financial information for the issuer’s most recent fiscal period.
Unaudited Financial Statements for SPI for the fiscal quarter ended March 31, 2009 are
attached hereto as Exhibit A, and are incorporated herein by reference. Exhibit A
includes the following unaudited financial statements for the fiscal quarter ended March
31, 2009, incorporated herein by reference, and prepared in accordance with generally
accepted accounting principles:
1. Balance Sheet
2. Statement of Income
3. Statement of Cash Flows
4. Financial Notes
Item XIII. Similar financial information for such part of the two preceding fiscal years as the issuer or
its predecessor has been in existence.
Exhibit A, attached hereto, also provides the following unaudited financial statements
for SPI for the fiscal years ended June 30, 2008 and June 30, 2007, which are
incorporated herein by reference, and have been prepared in accordance with generally
accepted accounting principles:
1. Balance Sheet
2. Statement of Income
3. Statement of Cash Flows
4. Financial Notes
Item XIV. Beneficial Owners. The following table sets forth information with respect to the beneficial
ownership of Nevada International Stock Exchange, Inc. as of March 31, 2009, by any person or group
who beneficially owns more than 5% of any class of its capital stock:
Nevada International Stock Exchange, Inc. Common Shares
Beneficially Owned (1)
Name of
Beneficial
Owner
Address
# % of Fully‐Diluted
Frances
Brownsing
3,750,000 41.44%
Debra Hines 3,750,000 41.44%
1) Based on 9,049,417 shares of Common Stock outstanding as of March 31, 2009.
There are currently no options or warrants issued or outstanding.
Item XV. The name, address, telephone number, and email address of each of the following outside
providers that advise the issuer on matters relating to the operations, business development and
disclosure:
1. Investment Banker
None
2. Promoter
None
3. Counsel
Berger Law, Inc.
30100 Chagrin Blvd., Suite 250
Cleveland, Ohio 44124
[e-mail]
4. Accountant or Auditor
Skoda Minotti & Company
6685 Beta Drive
Mayfield Village, Ohio 44143
[e-mail]
5. Public Relations Consultant(s)
None
6. Investor Relations Consultant
ZA Consulting Inc.
116 West 23rd St.
Suite 500
New York, NY 10011
david@za‐consulting.net
7. Any other advisor(s) that assisted, advised, prepared or provided information with respect
to this disclosure statement
None
Item XVI. Management’s Discussion and Analysis or Plan of Operation.
This MD&A Section contains forward‐looking statements. These statements and other
statements contained in this MD&A Section that are not purely historical fact are
forward‐looking statements, within the meaning of the Private Securities Litigation
Reform Act of 1995, and are based on management’s beliefs, certain assumptions and
current expectations. The market opportunities, future plans and performance,
objectives and expectations with respect to our future operations and development
activities and the financial projections and estimates and their underlying
assumptions, are all forward‐looking statements subject to risks and uncertainties,
including, but not limited to: the timing and success of our development efforts, and
our ability to raise capital to pursue our business strategy. Readers are cautioned not
to place any undue reliance on these forward‐looking statements. Actual results may
differ materially from those expressed in, or implied or projected by, the forwardlooking
information and statements. The forward‐looking statements contained in this
MD&A Section are made as of the date hereof, and we do not undertake any
obligation to update any forward‐looking statements to reflect events or
circumstances after the date on which any such statement is made or to reflect the
occurrence of unanticipated events.
A. Plan of Operation
The Company is currently conducting operations through its wholly owned subsidiary,
SPI. SPI will continue to operate under its existing franchise platform. It will generate
revenue from the following sources: franchise sales, royalties, and placement fees from
company owned offices. SPI will utilize its status as a subsidiary of a public company to
explore additional sources of revenue. The overall plan is to enhance each of these
sources of revenue by adding to the budget for public relations and marketing along
with other traditional and non‐traditional avenues. SPI intends to seek out and hire a
senior leadership individual to take ownership of the overall sales functions and build a
sales team to support these efforts.
SPI is currently exploring other opportunities to enhance the overall revenue base,
including, but not limited to, the introduction of a master franchise concept, a new
executive search platform and aggressive international expansion.
At this time, SPI is not in any active discussions relating to potential acquisitions or
mergers; however, the long‐term plan is to seek out complementary products or
services and work with investment opportunities to secure potential mergers and
acquisitions that will enhance the overall SPI organization and increase shareholder
value.
During the next twelve months, if the overall cash receipts continue to increase as
projected, SPI anticipates adding additional staff in the following areas: field support
coaching and training, administration and sales and marketing.
B. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The Company is currently conducting operations through its wholly owned subsidiary,
SPI. SPI was incorporated in the State of Delaware on June 30, 2005. SPI is a franchisor
of talent acquisition services. As of May 5, 2009, SPI had signed on 73 franchises;
however, SPI has recently been restricted from selling any further franchises in many
states because it has not completed its fiscal 2008 year‐end audit, due to financial
constraints. This will likely have an adverse impact on future revenue and growth until
the required audit is finished.
Talent acquisition services are a relatively new concept in the human capital industry
that include any and all services related to the identification, qualification, acquisition
and retention of human capital. SPI was created by the owner and founder of
Pathfinder Search Partners of Cleveland, Inc. (“Pathfinder”). Pathfinder, an Ohio
corporation incorporated in 1998 as Sales Consultants of Shaker Heights, Inc., is an
executive recruiting firm focusing on the permanent placement of personnel services.
Pathfinder is currently a franchisee of SPI, and does business under the name
SearchPath of Cleveland Uptown.
Upon establishing its corporate headquarters in Cleveland, Ohio in 2005, SPI began
offering and selling franchises to expand its presence in the U.S. SPI’s platform focuses
on a “client‐centric” set of service offerings that strives to be highly responsive to the
ever‐changing demands of today’s human capital market. This client focused mindset
allows SPI to tailor each and every project to the specific needs and business line of its
clients.
SPI was founded and is led by driven, focused, highly successful recruiting and
franchising professionals that bring dynamic, innovative ideas and proven track records
of success to the SPI platform. SPI’s goal is to continually introduce new concepts that
help franchisees focus on long‐term client and candidate retention, which drives
revenue and keeps it competitive with industry counterparts.
In conjunction with the evolution of the franchisor model, three primary sources of
revenues are generated by SPI. SPI recognizes revenues from the sale of franchises
upon substantial performance by SPI of all material conditions relating to the initial
fee. Royalty and advertising fees are recognized as revenue when the franchisee
receives payment for services on the placement of a candidate. Placement fees are
recognized when the placement is made by SPI.
Currently, the revenues generated from royalty and advertising fees are not sufficient to
fund the operations of SPI. Therefore, SPI is highly focused on franchise sales to
increase its franchisee base and achieve critical mass to fund the operations of SPI. In
conjunction with the franchise sales efforts, SPI corporate continues to recruit and make
placements to generate fee income to support ongoing operations.
SPI will continue an aggressive pursuit of new franchises through its current resources.
Additionally, SPI intends to engage independent franchise brokers and employ
additional corporate staff to help facilitate rapid franchise growth. Incentive plans have
been offered to our existing franchise owners to support the franchise sales efforts. SPI
is also exploring new financing partners to provide a wide variety of financing options to
the franchisee that will increase the number of qualified franchisee candidates and
increase cash received by SPI at the time of close for franchise sales. Note, however, as
mentioned above, SPI has recently been restricted from selling any further franchises in
many states because it has not completed its fiscal 2008 year‐end audit, due to financial
constraints.
As SPI continues to move forward, its primary focus is to increase royalty and
advertising revenues from existing franchisees. As of December 2008, SPI has revamped
its training and coaching programs which commenced in January 2009 to assist in
increasing placement activities of its existing franchisees and foster organic growth
within SPI.
SPI has increased and will continue to focus on corporate revenue generating activities
through the addition of a variably‐compensated, full‐time, committed resource to focus
on corporate placement activities including talent acquisition, business development
and the creation of a national accounts program. Additionally, SPI intends to combine
current execution expertise at SPI corporate with the existing centralized research
program to create a new revenue generating unit within SPI in 2009. For a fixed or
variable‐based fee, this unit will assist all SPI franchisee offices with candidate
identification and assist in placements.
Liquidity and Capital Resources
SPI’s principal sources of liquidity consist of cash and cash equivalents, cash generated
from operations, borrowing primarily from private investors and vendor payment
deferrals. No additional net proceeds from convertible debentures were received in the
period ended March 31, 2009; however SPI is actively pursuing this avenue. At March
31, 2009, SPI’s cash totaled $10,575 and SPI had a working capital deficit of $1,400,541.
SPI's existence is dependent on management's ability to develop profitable operations
and resolve SPI's liquidity problems. In order to improve SPI's liquidity, management is
actively pursuing additional equity and debt financing through discussions with
investment bankers and private investors. There can be no assurance that SPI will be
successful in its efforts to raise additional financing. If successful in completing this
financing, it may not be able to do so on terms that are not excessively dilutive to our
existing stockholders or less costly than existing sources of financing. Failure to secure
additional financing in a timely manner and on favorable terms if and when needed in
the future will have a material adverse effect on our financial performance, balance
sheet and stock price and require us to implement cost reduction initiatives and curtail
operations.
The following table sets forth our cash flows for nine month period ending:
MARCH 31,
2009
MARCH
31, 2009
Provided by (used in)
Operating activities $ (110,060) $ (63,254)
Investing activities (55,238) (262,136)
Financing activities 162,219 328,863
$ (3,079) $ 3,473
Cash Flows from Operations
SPI’s cash flows from operations include cash received from placement fees, recurring
royalties and advertising fees, and franchise fees received. Cash used in operations
include monthly operating expenses, the largest of which is the salary expense which
exceeds over 50% of SPI’s total operating expenses. Cash used in operations increased
$46,806 to $110,060 from the prior period. This increase was primarily due to a
decrease in accounts payable and accrued expenses as SPI continued to pay off debts
and assigned certain notes receivable.
Investing Activities
Cash used in investing activities is used for operations as well as equipment costs and
software. Cash from investing activities is acquired through collections on promissory
notes for franchise fees that were financed by SPI and then offset by the issuance of
new promissory notes. Cash flows used in investing activities decreased $206,898 to
$55,238 primarily due to collections and assignment of certain notes receivable.
Financing Activities
Cash flows from financing activities include cash proceeds from stock issuance and
convertible note offerings and other cash received from related parties and used to pay
operating expenses. Cash flows from financing activities decreased $166,644 to
$162,219 from the prior period. This substantial decrease is due to $73,294 less in
convertible debt, no current‐year proceeds from long‐term debt, and repayments made
on long‐term debt.
Results of Operations
Results of operations for the nine months ended March 31, 2009 compared to nine
months ended March 31, 2008 are as follows:
(UNAUDITED)
MARCH 31, 2009 MARCH 31, 2008 Change ($) Change (%)
Revenues
Franchise fee income $ 244,725 $ 440,312 $ (195,587) (44)%
Royalties & advertising fees 197,748 187,731 10,017 5%
Other 101,941 366,932 (264,991) (72)%
Total revenues 544,414 994,975 (450,561) (45)%
Cost of revenues 112,361 293,407 (181,046) (62)%
Gross profit 432,053 701,568 (269,515) (38)%
Margin% 79% 71%
Operating expenses:
Compensation expense 459,277 570,322 (111,045) (19)%
Other general and
administrative
100,121 80,797 19,324 24%
Professional fees 139,573 80,144 59,429 74%
Facilities 90,251 75,098 15,153 20%
Reimbursable expenses 46,719 58,300 (11,581) (20)%
Bad Debt 33,768 30,900 2,868 9%
Marketing & conferences 12,858 14,647 (1,789) (12) %
Total operating expenses 882,567 910,208 (27,641) (3)%
Operating loss (450,514) (208,640) (241,874) 116%
Interest expense (68,566) (51,274) (17,292) 34%
Interest income 2,776 25,774 (22,998) (89)%
Net loss $ (516,304) $ (234,140) $ (282,164) 121%
Income
In 2009, franchise fee revenues decreased by $195,587 to $244,725, a 44% reduction
compared to the comparable period in 2008. The change is attributable to the decrease
in sales by eight franchises. Fifteen franchises were sold in 2008 compared to only
seven being sold during the period in 2009. However the average franchise fee in 2009
increased from $27,881 in 2008 to $34,961.
Royalties and advertising fee income increased $10,017 despite a slower economy. We
believe this to be attributed to SPI franchisees becoming more proficient in their
recruiting skills and several of the newer franchisees joining SPI are assisting in the
increase of royalties. Note that there was an increase despite the loss of one franchisee
who had contributed substantially to royalties during the 2008 period.
Other income decreased by $264,991 to $101,941. Other income consists primarily of
fee income from recruiting placements made by the CEO of SPI. The decrease year over
year in Other Income is due to reduced placements, as the CEO redirected his focus on
franchise support.
Cost of Revenues
Cost of revenues decreased by $181,046 to $112,361. This decrease is relatively
proportional to the decrease in placement fees due to SPI’s CEO focusing on franchise
development. Further, a portion of the decrease is due to less external franchise sale
referrals and fewer commissions being paid because of fewer placements made.
Operating Expenses
Compensation expense has decreased approximately 19% to $459,277. One employee
was terminated in November and an additional two employees were terminated in
December, thus decreasing the overall compensation expense.
Other general and administrative expenses increased $19,324 to $100,121, representing
a 24% increase. The largest increase in expenses related to the costs associated with
taking the company public.
Professional fees increased $59,429 to $139,573 due to the expenses incurred with a
public offering.
Facilities expense increasedonly20% increase to $90,251, primarily due to a small
increase in office rental fees, the cost of which is based on a sliding scale.
Reimbursable expenses decreased $11,581, a 20% decrease due to controlling travel
costs and a reduction in staff.
Bad debt expenses increased $2,868 to $33,768, representing a 9% increase. Marketing
and conferences expenses decreased $1,789 to $12,858, representing a 12% decrease.
Interest Expense
Interest expense increased $17,292 to $68,566, representing a 34% increase primarily
due to the issuance of additional notes during this time period, and additional interest
on promissory notes.
Interest Income
Total interest income earned on Notes Receivable from outstanding franchise fees
decreased 89% from $25,774 to $2,776. Interest income in 2008 reflected a one time
accounting adjustment of $24,084. Before the adjustment, interest income in 2008 was
$1,690 compared to $2,776 in 2009. Interest income is expected to increase as SPI
begins charging monthly interest on unpaid principal balances for all franchises financed
through SPI effective July, 2007.
Revenue Recognition
Franchise agreements have terms ranging from five to ten years. These
agreements also include extension terms of five years, depending on contract
terms and if certain conditions are met. SPI provides the use of the SearchPath
trademarks, training, pre‐opening assistance and operational assistance in
exchange for franchise fees, royalty fees ranging from 3% to 7% of placement
revenue, and advertising fees of .75% of placement revenue.
SPI recognizes revenues from the sale of franchises upon substantial performance
by SPI of all material conditions relating to the initial fee. Royalty and advertising
fees are recognized as revenue when the franchisee recognizes the placement.
Placement fees are recognized when the placement is made by SPI.
Accounts Receivable
Accounts receivable are generally due within 30 days and are stated as amounts
due from customers, net of an allowance for doubtful accounts. Accounts
outstanding longer than the contractual payment terms are considered past due.
SPI determines its allowance by considering a number of factors, including the
length of time trade accounts are past due, SPI’s previous loss history, the
customer’s current ability to pay its obligations to SPI, and the condition of the
general economy and industry as a whole. SPI writes off accounts receivable when
they become uncollectible.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of deferred taxes. Deferred income taxes reflect
the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes.
Notes Receivable
Notes receivable are stated at fair value, net of an allowance for uncollectible
accounts. The fair value of the notes receivable is estimated by discounting future
cash flows using the mid‐term applicable federal rate at the date of the financials. SPI
determines its allowance based on payment history, length of time outstanding and
previous history with the franchisee. SPI writes off notes when they become
uncollectible.
C. Off‐Balance Sheet Arrangement.
SPI does not have any off‐balance sheet arrangements that have or are reasonably likely
to have a current or future effect on SPI’s financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to investors. SPI has no interests in or relationships
with any special purpose entities or variable interest entities.
PART E. Issuance History
Item XVII. List of securities offerings and shares issued for services in the past two years
None
PART F Exhibits
Item XVIII. Material Contracts
The Company, or its subsidiary, has the following material contracts with the following material
terms.
None
Item XIX. Articles of Incorporation and Bylaws.
The Company’s Articles of Incorporation, as amended, and Bylaws, as amended, are included as
part of this filing, and attached hereto as Exhibit B and Exhibit C, respectively
Item XX. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
None
Item XXI. Issuer’s Certification
I, Thomas K. Johnston, certify that:
1. I have reviewed this initial disclosure statement of Nevada International Stock Exchange,
Inc.;
2. Based on my knowledge, this disclosure statement does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this disclosure statement; and
3. Based on my knowledge, the financial statements, and other financial information included
or incorporated by reference in this disclosure statement, fairly present in all material
respects the financial condition, results of operations and cash flows of the issuer as of, and
for, the periods presented in this disclosure statement.
Date: September __, 2009
____________________
Thomas K. Johnston
CEO
EXHIBIT A
Financial Statements
SearchPath International, Inc.
Balance Sheets
ASSETS
March 31, 2009 June 30, 2008
CURRENT ASSETS
Cash $ 10,575 $ 13,654
Accounts receivable 84,788 47,500
Other receivables 615 11,401
Notes receivable 242,900 446,244
Prepaid expenses 22,931 34,956
361,809 553,755
PROPERTY AND EQUIPMENT - AT COST
Furniture and equipment 17,887 17,887
Less: Accumulated depreciation (11,103) (8,122)
6,784 9,765
OTHER ASSETS
Intangibles - net 1,628 6,135
Notes receivable – net 319,761 188,786
Deferred tax benefit 94,300 94,300
415,689 289,221
$ 784,282 $ 852,741
LIABILITIES
March 31, 2009 June 30, 2008
CURRENT LIABILITIES
Current portion of long-term debt $ 34,077 $ 82,384
Accounts payable 210,817 141,426
Accrued expenses 714,012 497,777
Convertible debt 621,744 591,744
Due to related parties 164,736 29,210
1,745,386 1,342,541
LONG-TERM DEBT 63,584 63,584
1,808,970 1,406,125
SHAREHOLDERS' DEFICIT
COMMON STOCK
$0.01 par value
Authorized 100,000,000 shares
Issued and outstanding 22,988,000 shares 240,480 195,480
ACCUMULATED DEFICIT (1,265,168) (748,864)
(1,024,688) (553,384)
$ 784,282 $ 852,741
The accompanying notes are an integral part of these financial statements.
SearchPath International, Inc.
Statements of Operations and Accumulated Deficit
Three months ended March 31, 2009 and March 31, 2008
2009 2008
PERCENTAGE OF PERCENTAGE OF
NET REVENUES NET REVENUES
REVENUES - NET
Franchise fees $ 76,725 44.2 % $ 198,044 69.0 %
Other 96,707 55.8 88,982 31.0
173,432 100.0 287,026 100.0
COST OF SALES 16,547 9.5 38,647 13.5
GROSS PROFIT 156,885 90.5 248,379 86.5
OPERATING EXPENSES 279,341 161.1 249,187 86.8
LOSS FROM OPERATIONS (122,456) (70.6) (808) (0.3)
OTHER INCOME (EXPENSE)
Interest expense (14,112) (8.1) (7.2)
Interest income 256 0.1 25,774 9.0
(13,856) (8.0) 5,079 1.8
NET INCOME (LOSS) BEFORE
PROVISION FOR INCOME
TAXES (136,312) (78.6) 4,271 1.5
PROVISION FOR INCOME
TAXES - -
NET INCOME (LOSS) (136,312) (78.6) % 4,271 1.5 %
ACCUMULATED DEFICIT -
BEGINNING OF
PERIOD (1,128,856) (536,440)
ACCUMULATED DEFICIT -
END OF PERIOD $ (1,265,168) $ (532,169)
NET LOSS PER COMMON (0.0063) (0.0002)
WEIGHTED AVERAGE 21,336,315 18,964,667
The accompanying notes are an integral part of these financial statements.
SearchPath International, Inc.
Statements of Operations and Accumulated Deficit
Nine months ended March 31, 2009 and March 31, 2008
2009 2008
PERCENTAGE OF PERCENTAGE OF
NET REVENUES NET REVENUES
REVENUES - NET
Franchise fees $ 244,725 45.0 % $ 440,312 44.3 %
Other 299,689 55.0 554,663 55.7
544,414 100.0 994,975 100.0
COST OF SALES 112,361 20.6 293,407 29.5
GROSS PROFIT 432,053 79.4 701,568 70.5
OPERATING EXPENSES 882,567 162.1 910,208 91.5
LOSS FROM OPERATIONS (450,514) (82.7) (208,640) (21.0)
OTHER INCOME (EXPENSE)
Interest expense (68,566) (12.6) (51,274) (5.1)
Interest income 2,776 0.5 25,774 2.6
(65,790) (12.1) (25,500) (2.5)
NET LOSS BEFORE
PROVISION FOR INCOME
TAXES (516,304) (94.8) (234,140) (23.5)
PROVISION FOR INCOME
TAXES - - - -
NET LOSS (516,304) (94.8) % (234,140) (23.5) %
ACCUMULATED DEFICIT -
BEGINNING OF
PERIOD (748,864) (298,029)
ACCUMULATED DEFICIT -
END OF PERIOD $ (1,265,168) $ (532,169)
NET LOSS PER COMMON (0.026) (0.012)
WEIGHTED AVERAGE 21,336,315 18,964,667
The accompanying notes are an integral part of these financial statements.
SearchPath International, Inc.
Statements of Cash Flows
Nine months ended March 31, 2009 and March 31, 2008
2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (516,304) $ (234,140)
Adjustments to reconcile net loss to net cash
used in operating activities:
Add back items not affecting cash:
Depreciation and amortization 7,488 6,806
Bad debts 33,768 30,900
Cash provided by (used in) changes in the following items:
(Increase) decrease in accounts receivable (37,288) 11,813
Decrease in other receivables 10,786 3,743
(Increase) decrease in prepaid expenses 12,025 (30,899)
Increase (decrease) in accounts payable 163,230 (36,923)
Increase in accrued expenses 216,235 185,446
Net cash used in operating activities (110,060) (63,254)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment - (3,290)
Acquisition of intangibles - (1,735)
Issuance of notes receivable (130,975) (257,111)
Collection of notes receivable 75,737 -
Net cash used in investing activities (55,238) (262,136)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in due to related parties 135,526 101,499
Proceeds from convertible debt 75,000 148,294
Proceeds from long-term debt - 79,070
Repayments of long-term debt (48,307) -
Net cash provided by financing activities 162,219 328,863
NET INCREASE (DECREASE) IN CASH (3,079) 3,473
CASH - BEGINNING OF PERIOD 13,654 8,007
CASH - END OF PERIOD $ 10,575 $ 11,480
The accompanying notes are an integral part of these financial statements.
SearchPath International, Inc.
Notes to Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
SearchPath International, Inc. (SPI) is a franchisor of search and recruitment franchises. The franchisor and franchises’
primary focus is full time permanent placement of managerial, sales, professional and executive level positions in all
industries and locations. SPI sold seven franchises and sixteen franchises during the nine months ended March 31, 2009
and March 31, 2008, respectively.
Basis of Presentation
We have prepared the accompanying unaudited financial statements of SPI on the same basis as our annual financial statements.
Interim Financial Statements
The interim financial statements are unaudited. In the opinion of management, these financial statements reflect all adjustments,
which are of a normal recurring nature, necessary for presentation of financial statements for the interim periods in accordance with
GAAP and with the instructions to Form 10-Q in Article 10 of Regulation S-X.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those
estimates.
Concentration of Credit Risk
Financial instruments that potentially subject SPI to concentration of credit risk consist principally of cash and cash equivalents and
trade accounts receivable. SPI invests its cash balances through high-credit quality financial institutions. From time to time, SPI
maintains bank account levels in excess of FDIC insurance limits. If the financial institutions in which SPI has its accounts have
financial difficulties, SPI’s cash balances could be at risk.
Revenue Recognition
Franchise agreements have terms ranging from five to ten years. These agreements also include extension terms of five
years, depending on contract terms and if certain conditions are met. SPI provides the use of the SearchPath trademarks,
training and education, pre-opening assistance and operational assistance in exchange for franchise fees, royalty fees
ranging from 3% to 7% of placement revenue and advertising fees of .75% of placement revenue.
SPI recognizes revenues from the sale of franchises upon substantial performance by SPI of all material conditions relating
to the initial fee. Royalty and advertising fees are recognized as revenue when the franchisee recognizes the placement.
Placement fees are recognized when the placement is made by SPI.
Net Loss per Share
Basic loss per share is calculated by dividing net loss by SPI’s weighted average common shares outstanding during the period.
Diluted net loss per share reflects the potential dilution to basic earnings per share that could occur upon conversion or exercise of
securities, options or other such items to common shares using the treasury stock method, based upon SPI’s weighted average fair
value of the common shares during the period. For each period presented, basic and diluted loss per share amounts are identical as
the effect of potential common shares is antidilutive.
Cash and Cash Equivalents
SPI considers all highly liquid investments with insignificant interest rate risk and original maturities of three months or less from the
date of purchase to be cash equivalents. The carrying amounts of cash and cash equivalents approximate their fair values. SPI
maintains cash and cash equivalents balances at certain financial institutions in excess of amounts insured by federal agencies.
Management does not believe that as a result of this concentration, it is subject to any unusual financial risk beyond the normal risk
associated with commercial banking relationships. At March 31, 2009, SPI did not have any investments that would be considered
cash equivalents.
Accounts Receivable
Accounts receivable are generally due within 30 days and are stated at amounts due from customers, net of an allowance for
doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. SPI
determines its allowance by considering a number of factors, including the length of time trade accounts are past due, SPI’s
previous loss history, the customer’s current ability to pay its obligations to SPI, and the condition of the general economy
and industry as a whole. SPI writes off accounts receivable when they become uncollectible.
Notes Receivable
Notes receivable are stated at fair value, net of an allowance for uncollectible accounts. The fair value of the notes receivable is
estimated by discounting future cash flows using the mid-term applicable federal rate at March 31, 2009 and June 30, 2008,
respectively, unless the note includes a reasonably stated rate in the terms. SPI determines its allowance based on payment
history, length of time outstanding and previous history with the franchisee. SPI writes off notes when they become uncollectible. At
March 31, 2009 and June 30, 2008, the allowance for uncollectible notes receivable totaled $171,000 and $180,200, respectively.
Property and Equipment
Depreciation of property and equipment is provided by use of the straight-line method over the following estimated useful lives of the
assets:
Furniture and equipment 5 - 10 years
Advertising
Advertising and promotional costs are expensed as incurred. No advertising and promotional expenses were incurred during
the three months ended March 31, 2009 and 2008, and $0 and $500 were incurred for the nine months ended March 31,
2009 and 2008, respectively.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of deferred taxes.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Recent Accounting Pronouncements
In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB
Statement No. 109” (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial
statements in accordance with SFAS No. 109, “Accounting for Income Taxes”. FIN 48 describes a recognition threshold and
measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in a tax return and also
provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
FIN 48 is effective for fiscal years beginning after December 15, 2006. Therefore, FIN 48 was effective for SPI beginning October 1,
2007. The cumulative effect of adopting FIN 48 had no effect on SPI’s financial position or results of operations.
In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements”
which provides a definition of fair value, establishes a framework for measuring fair value and requires expanded disclosures about
fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15,
2007, and interim periods within those years. The provisions of SFAS No. 157 are applied prospectively and had no effect on SPI’s
financial position or results of operations.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS
No. 159 permits entities to choose to measure certain financial instruments and other items at fair value. Under SFAS No. 159, the
decision to measure items at fair value is made at specified election dates on an irrevocable instrument-by-instrument basis. This
statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. This standard had no effect
on SPI’s financial position or results of operations.
In December 2007, the FASB issued SFAS No. 141R (revised 2007), “Business Combinations,” replacing SFAS No. 141. SFAS
No. 141R changes or clarifies the acquisition method of accounting for acquired contingencies, transaction costs, step acquisitions,
restructuring costs and other major areas affecting how the acquirer recognizes and measures the assets acquired, the liabilities
assumed and any noncontrolling interest in the acquiree. In addition, this pronouncement amends previous interpretations of
intangible asset accounting by requiring the capitalization of in-process research and development and proscribing impacts to
current income tax expense (rather than a reduction to goodwill) for changes in deferred tax benefits related to a business
combination. Statement No. 141R is effective for fiscal years beginning after December 15, 2008. Generally, the effect of Statement
No. 141R on SPI’s financial position or results of operations will depend on future acquisitions.
In December 2007, the FASB issued FASB Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an
amendment of ARB 51.” Statement No. 160 requires the recognition of a noncontrolling interest as equity in the consolidated
financial statements and separate from the parent’s equity. The amount of net income attributable to the noncontrolling interest will
be included in consolidated net income on the face of the income statement. Statement No. 160 is effective for fiscal years
beginning after December 15, 2008. SPI has not yet determined the effect on SPI’s financial position or results of operations of
complying with the provisions of Statement No. 160.
In March 2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities.”
Statement No. 161 establishes guidelines to report how derivative and hedging activities affect an entity’s financial position, financial
performance and cash flows. Statement No. 161 is effective for fiscal years beginning after November 15, 2008. SPI has not yet
determined the effect, if any, that Statement No. 161 will have on SPI’s disclosures regarding derivatives and hedging activities.
2. NOTES RECEIVABLE
Notes receivable consist of the following: March 31, June 30,
2009 2008
Notes due from franchisees, bearing interest with rates
ranging between 10.00% - 19.75%, with maturity dates
through February 28, 2012, secured by all business
assets of the franchisees $ 324,396 $ 303,905
Various notes due from franchisees, with imputed interest at
2.97% at March 31, 2009, and various maturity dates
through June 30, 2017, secured by all business assets of
the franchisees 409,265 511,325
733,661 815,230
Less: Allowance for potentially uncollectible principal (171,000) (180,200)
Less: Current portion (242,900) (446,244)
$ 319,761 $ 188,786
Future principal payments on the notes receivable are as follows:
YEAR ENDING
MARCH 31,
2009 $ 133,041
2010 108,942
2011 21,857
2012 17,466
Thereafter 38,455
$ 319,761
3. INTANGIBLE ASSETS
Intangible assets, consisting of software, at March 31, 2009 and June 30, 2008 totaled:
Accumulated Net Book
Cost Amortization Value
March 31, 2009 $ 18,028 $ 16,400 $ 1,628
June 30, 2008 $ 18,028 $ 11,893 $ 6,135
Amortization of software is provided by use of the straight-line method over 3 years. Amortization expense totaled $1,502 and
$1,508 for the three months ended March 31, 2009 and 2008, respectively, and $4,507 and $4,507 for the nine months ended
March 31, 2009 and March 31, 2008, respectively.
Future amortization expense is as follows:
YEAR ENDING
MARCH 31,
2009 $ 1,339
2010 289
$ 1,628
4. RELATED PARTY TRANSACTIONS
At March 31, 2009 and June 30, 2008, due to related party represents amounts payable to a related party for various shared
expenses, including rent, utilities, payroll and insurance. Shared expenses totaled $0 and $1,116 for the three months ended March
31, 2009 and 2008, respectively, and $882 and $2,733 for the nine months ended March 31, 2009 and March 31, 2008,
respectively. In addition, the related party paid royalties and advertising fees to SPI in the amount of $0 and $1,744 for the three
months ended March 31, 2009 and 2008, respectively, and $0 and $3,975 for the nine months ended March 31, 2009 and March
31, 2008, respectively. The amounts above totaling $0 for both shared expenses and royalty payments is attributed to the related
party having no employees during this time period.
5. CONVERTIBLE DEBT
During the fiscal year ended June 30, 2006, SPI issued $273,450 of convertible debt. SPI repaid $5,000 of the convertible debt
during fiscal year ended June 30, 2007. During fiscal year ended June 30, 2008, SPI raised $323,294 of additional convertible debt
for a total balance of $591,744 at June 30, 2008. During the fiscal quarter ended September 30, 2008, SPI raised $75,000 of
additional convertible debt for a total balance of $666,744 at September 30, 2008. No additional capital was raised through
convertible debt as of March 31, 2009; however, a note holder converted $45,000 of debt into three million shares of equity during
the quarter ended March 31, 2009.
The debt can be converted into 3,563,090 shares of common stock on the earliest of the 30th day of the onset of public trading or the
initial maturity date of the note, which was October 30, 2006 for the first note issued. In the event SPI does not redeem the notes in
their entirety as of 540 days subsequent to the date of the note, April 30, 2007 for the first note issued, and SPI has not achieved
public trading status, the holders shall have put rights to SPI for the unredeemed portion of the outstanding note, plus any accrued
and unpaid interest. As of the date of the financial statements, one holder has exercised his put right on the notes. The holder has
not been paid, and as a result he could file a judgment against SPI. The debt accrues interest at an annual rate of 10%, which
increased for a portion of the notes to 18% in March 2007. At December 31, 2008 and June 30, 2008, accrued interest on the
convertible debt totaled $168,544 and $114,716, respectively. The accrued interest is recorded as an accrued expense on the
accompanying balance sheets.
6. LONG-TERM DEBT
Long-term debt consisted of the following:
March 31, 2009 June 30, 2008
Note payable in monthly installments of $2,000 through
November 2008, and $7,120 in December 2008, including
interest at 7.5% $ - $ 16,674
Note payable in monthly installments of $500 through November
2008, and $1,000 through June 2012, including interest at
7.5% 37,791 39,822
Note payable in monthly installments of $2,200 in July 2008,
$3,000 through November 2008, and $5,537 in December
2008, including interest at 9.25%. $5,495 plus interest still
due
5,495 19,153
Note payable in monthly installments of $2,000 through June
2009, including interest at 6.99% 15,956 23,475
Non-interest bearing loan payable to franchisee, 5.75% of
royalty and advertising fees SPI earns will offset the principle
balance owed to the franchisee 38,419 46,844
97,661 145,968
Less: Current portion (34,077) (82,384)
$ 63,584 $ 63,584
7. COMMITMENTS
Leases
SPI leases equipment under operating lease agreements. Total lease expense amounted to $3,963 and $3,154 for the three
months ended March 31, 2009 and 2008, respectively, and $9,509 and $10,643 for the nine months ended March 31, 2009
and 2008, respectively.
Future annual minimum payments under the agreements having remaining terms in excess of one year are as follows:
YEAR ENDING
MARCH 31,
2009 $ 9,648
2010 11,769
2011 7,070
$ 28,487
SPI leases its office under an operating lease which expires in July 2011. Rent expense amounted to $22,529 and $15,362
for the three months ended March 31, 2008 and 2009, respectively, and $62,918 and $52,969 for the nine months ended
March 31, 2009 and 2008, respectively. Minimum annual rentals under the remaining lease term are as follows:
YEAR ENDING
MARCH 31,
2009 $ 67,600
2010 91,200
2011 91,200
$ 250,000
The current lease expires July 30, 2011, and it is the intention of SPI to remain in this space.
8. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
NON-CASH FINANCING ACTIVITIES:
SPI assigned $127,608 of notes receivable to a professional services firm in exchange for payment of $93,839 of outstanding
invoices. The remaining $33,768 was charged to bad debt expense.
SPI converted debt notes of $45,000 into three million shares of common stock.
SEARCHPATH INTERNATIONAL, INC.
BALANCE SHEETS
JUNE 30, 2008, 2007, AND 2006
ASSETS
2008 2007 2006
CURRENT ASSETS
Cash $ 13,654 $ 8,007 $ -
Accounts receivable 47,500 30,813 90,850
Other receivables 11,401 3,743 2,200
Notes receivable - net 446,244 197,132 20,785
Prepaid expenses 29,725 7,220 -
Deferred income taxes - - 13,800
548,524 246,915 127,635
PROPERTY AND EQUIPMENT - AT COST
Furniture and equipment 17,887 14,597 14,597
Less: Accumulated depreciation (8,122) (4,709) (1,413)
9,765 9,888 13,184
OTHER ASSETS
Intangibles - net 6,135 10,409 15,840
Notes receivable - net 117,286 176,751 153,295
Deferred income taxes - - 60,400
Deposits 5,231 - -
128,652 187,160 229,535
$ 686,941 $ 443,963 $ 370,354
LIABILITIES
2008 2007 2006
CURRENT LIABILITIES
Current portion of long-term debt $ 82,384 $ 24,188 $ -
Accounts payable 141,427 140,084 112,852
Accrued expenses 497,775 193,627 49,877
Deferred revenue - - 40,000
Convertible debt 591,744 268,450 273,450
Due to shareholder - 18,500 -
Due to related party 29,210 35,543 3,890
1,342,540 680,392 480,069
LONG-TERM LIABILITIES
Deferred income taxes 1,300 1,400 -
Long-term debt 63,584 104,973 -
1,407,424 786,765 480,069
SHAREHOLDERS' DEFICIT
COMMON STOCK
$0.01 par value
Authorized - 100,000,000, 3,000, and 3,000
Issued and outstanding - 19,548,000, 1,000, and 1,000 195,480 10 10
ADDITIONAL PAID-IN-CAPITAL - 49,990 49,990
ACCUMULATED DEFICIT (915,963) (392,802) (159,715)
(720,483) (342,802) (109,715)
$ 686,941 $ 443,963 $ 370,354
The accompanying notes are an integral part of these financial statements.
SEARCHPATH INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
YEARS ENDED JUNE 30, 2008, 2007, AND 2006
2008 2007 2006
GROSS PROFIT 993,857 876,994 366,780
OPERATING EXPENSES 1,372,950 998,243 587,552
LOSS FROM OPERATIONS (379,093) (121,249) (220,772)
OTHER INCOME (EXPENSE)
Interest expense (81,192) (43,380) (13,143)
Interest income 34,764 7,142 -
(46,428) (36,238) (13,143)
NET LOSS BEFORE INCOME TAXES (425,521) (157,487) (233,915)
BENEFIT FROM (PROVISION FOR) DEFERRED
INCOME TAXES 100 (75,600) 74,200
NET LOSS (425,421) (233,087) (159,715)
ACCUMULATED DEFICIT - BEGINNING OF YEAR (392,802) (159,715) -
EFFECT OF STOCK SPLIT (97,740) - -
ACCUMULATED DEFICIT - END OF YEAR $ (915,963) $ (392,802) $ (159,715)
The accompanying notes are an integral part of these financial statements.
SEARCHPATH INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 2008, 2007, AND 2006
2008 2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (425,421) $ (233,087) $ (159,715)
Adjustments to reconcile net loss to net cash
used in operating activities:
Add back (deduct): Items not affecting cash
Depreciation and amortization 9,422 8,727 1,866
Bad debts 150,600 167,107 22,000
Deferred revenue - (40,000) 40,000
Deferred income taxes (100) 75,600 (74,200)
Common stock issued in lieu of cash
compensation 47,740 - -
Issuance of notes receivable (436,204) (404,806) (207,965)
Cash provided by (used in) changes in the
following items:
(Increase) decrease in accounts receivable 21,813 60,037 (90,850)
Increase in other receivables (7,658) (1,543) (2,200)
Increase in prepaid expenses (22,505) (7,220) -
Increase in deposits (5,231) - -
Increase in accounts payable 1,343 95,806 112,852
Increase in accrued expenses 304,148 143,750 49,877
Net cash used in operating activities (362,053) (135,629) (308,335)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,290) - (14,597)
Acquisition of intangibles (1,735) - (16,293)
Collection of notes receivable 57,457 37,896 11,885
Net cash provided by (used in) investing activities 52,432 37,896 (19,005)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on (repayment of) convertible debt 323,294 (5,000) 273,450
Increase (decrease) in due to shareholder (18,500) 18,500 -
Increase (decrease) in due to related party (6,333) 31,653 3,890
Borrowings on long-term debt principal 16,807 60,587 -
Net cash provided by financing activities 315,268 105,740 277,340
NET INCREASE (DECREASE) IN CASH 5,647 8,007 (50,000)
CASH - BEGINNING OF YEAR 8,007 - 50,000
CASH - END OF YEAR $ 13,654 $ 8,007 $ -
2008 2007 2006
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR:
INTEREST $18,798 $ - $ 733
NON-CASH FINANCING ACTIVITIES:
During 2008, SPI set up payment plans with two vendors for balances owed. The balance of the liabilities that were
reclassified to notes payable was $57,458.
During 2008, SPI issued $47,740 of common stock in exchange for salary and consulting services.
During 2007, SPI set up payment plans with two vendors for balances owed. The balance for these notes payable at
June 30, 2007 was $68,574.
SEARCHPATH INTERNATIONAL, INC.
SCHEDULES OF OPERATING EXPENSES
YEARS ENDED JUNE 30, 2008, 2007, AND 2006
2008 2007 2006
Advertising $ 3,360 $ 2,611 $ 10,838
Amortization 6,009 5,431 453
Automobiles 10,326 9,071 8,975
Bad debts 150,600 167,107 22,000
Consulting 90,848 85,080 14,610
Contributions 510 1,000 1,045
Depreciation 3,413 3,296 1,413
Dues and subscriptions 9,780 5,908 5,965
Employee benefits 35,373 31,067 10,898
Equipment rentals 4,611 10,243 6,260
Insurance 6,025 3,621 -
Legal and professional 102,756 86,193 118,157
Legal settlement (35,532) 2,591 -
Meals and entertainment 32,607 19,207 32,161
Meetings 19,206 17,810 3,753
Office and miscellaneous 32,900 10,958 17,238
Parking 13,441 12,318 8,878
Payroll services 1,856 1,182 663
Payroll taxes 21,200 19,503 21,455
Postage 5,678 5,182 2,838
Printing 1,412 4,998 3,305
Rent 70,198 115,978 50,935
Salaries 727,790 312,503 207,736
Taxes - other 1,658 1,755 1,651
Telephone 16,500 16,777 23,777
Travel 16,653 8,439 9,387
Utilities 23,772 38,414 3,161
$ 1,372,950 $ 998,243 $ 587,552
SEARCHPATH INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
SPI is a franchisor of search and recruitment franchises. The franchisor and franchises’ primary focus is full time
permanent placement of managerial, sales, professional and executive level positions in all industries and
locations. During the years ended June 30, 2008, 2007, and 2006, SPI sold 23, 25, and 18 franchises,
respectively.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
Franchise agreements have terms ranging from five to ten years. These agreements also include extension
terms of five years, depending on contract terms and if certain conditions are met. SPI provides the use of the
SearchPath trademarks, training and education, pre-opening assistance and operational assistance in exchange
for franchise fees, royalty fees ranging from 3% to 7% of placement sales, and advertising fees of .75% of
placement revenues.
SPI recognizes revenues from the sale of franchises upon substantial performance by SPI of all material
conditions relating to the initial fee. Royalty and advertising fees are recognized as revenue when the franchisee
recognizes the placement. Placement fees are recognized when the placement is made by SPI.
Accounts Receivable
Accounts receivable are generally due within 30 days and are stated at amounts due from customers, net of an
allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are
considered past due. SPI determines its allowance by considering a number of factors, including the length of
time trade accounts are past due, SPI’s previous loss history, the customer’s current ability to pay its obligations
to SPI, and the condition of the general economy and industry as a whole. SPI writes off accounts receivable
when they become uncollectible. At June 30, 2008, 2007, and 2006, all accounts receivable were considered
collectible and no allowance was necessary.
Notes Receivable
Notes receivable are stated at fair value, net of an allowance for uncollectible accounts. The fair value of the notes
receivable is estimated by discounting future cash flows using the mid-term applicable federal rate at June 30, 2008,
2007, and 2006, respectively. SPI determines its allowance based on payment history, length of time outstanding and
previous history with the franchisee. SPI writes off notes when they become uncollectible. At June 30, 2008, 2007,
and 2006, the allowance for uncollectible notes receivable totaled $251,700, $132,020, and $22,000, respectively.
Property and Equipment
Depreciation of property and equipment is provided by use of the straight-line method over the following estimated
useful lives of the assets:
Furniture and equipment 3 – 5 years
During the years ended June 30, 2008, 2007, and 2006, depreciation expense totaled $3,413, $3,296, and
$1,413, respectively.
SEARCHPATH INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Advertising
Advertising and promotional costs are expensed as incurred. During the years ended June 30, 2008, 2007, and
2006, advertising expense totaled $3,360, $2,611, and $10,838, respectively.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of deferred
taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Reclassifications
Certain reclassifications have been made to the 2007 and 2006 financial statements to conform with the 2008 financial
statement presentation. Such reclassifications had no effect on net income as previously reported.
2. NOTES RECEIVABLE
Notes receivable consist of the following at June 30:
2008 2007 2006
Notes due from franchisees, including interest between
10.00% and 19.75% with various maturity dates
through November 30, 2013; secured by all
business assets of the franchisees $ 392,738 $ 67,502 $ 27,548
Various notes due from franchisees, with imputed
interest at 2.97%, 4.64%, and 4.95% at June 30,
2008, 2007, and 2006, respectively and various
maturity dates through June 30, 2017; secured by
all business assets of the franchisees 422,492 438,401 168,532
Less: Allowance for potentially uncollectible principal
and interest (251,700) (132,020) (22,000)
Less: Current portion (446,244) (197,132) (20,785)
$ 117,286 $ 176,751 $ 153,295
Future principal collections of the notes receivable are as follows:
YEAR ENDING
JUNE 30,
2009 $ 446,244
2010 172,220
2011 104,403
2012 23,103
2013 23,112
Thereafter 46,148
$ 815,230
SEARCHPATH INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
3. INTANGIBLE ASSETS
Intangible assets consisted of the following at June 30, 2008, 2007, and 2006, respectively:
Accumulated Net Book
Cost Amortization Value
June 30, 2008:
Software $ 18,028 $ 11,893 $ 6,135
June 30, 2007:
Software $ 16,293 $ 5,884 $ 10,409
June 30, 2006:
Software $ 16,293 $ 453 $ 15,840
Amortization of software is provided by use of the straight-line method over 3 years. Amortization expense totaled
$6,009, $5,431, and $453 for the years ended June 30, 2008, 2007, and 2006, respectively.
Future amortization expense is as follows:
YEAR ENDING
JUNE 30, 2009 $ 5,557
JUNE 30, 2010 578
$ 6,135
4. RELATED PARTY TRANSACTIONS
At June 30, 2008, 2007, and 2006, due to related party represents amounts payable to a related party for various
shared expenses, including rent, utilities, payroll and insurance. Shared expenses totaled $107,012, $193,486, and
$219,817 for the years ended June 30, 2008, 2007, and 2006, respectively. In addition, the related party paid royalties
and advertising fees to SPI in the amount of $4,800, $0, and $0 for the years ended June 30, 2008, 2007, and 2006,
respectively.
During 2008, a lawsuit filed against a related party with which SPI shares office space was settled resulting in a
reduction of the amount owed to that related party of $35,532.
5. CONVERTIBLE DEBT
During the year ended June 30, 2006, SPI issued $273,450 of convertible debt. The debt can be converted into
1,233,800 shares of common stock on the earliest of the 30th day of the onset of public trading or the initial maturity
date of the note, which was October 30, 2006. In the event SPI does not redeem the note in its entirety as of 540 days
subsequent to the date of the note (April 30, 2007) and SPI has not achieved public trading status, the holders shall
have put rights to SPI for the unredeemed portion of the outstanding notes, plus any accrued and unpaid interest.
During the year ended June 30, 2008, SPI issued an additional $323,294 of convertible debt. The debt can be
converted into 720,486 shares of common stock. As of August 2009, the holders have not exercised their put rights on
the notes. The debt accrues interest at annual rates ranging from 10% to 18%. At June 30, 2008, 2007, and 2006,
accrued interest on the convertible debt totaled $114,716, $46,787, and $12,410, respectively. The accrued interest is
recorded as an accrued expense in the accompanying balance sheets. During the years ended June 30, 2008, 2007,
and 2006 SPI repaid $0, $5,000, and $0, respectively, of the convertible debt.
SEARCHPATH INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
6. LONG-TERM DEBT
Long-term debt consisted of the following at June 30, 2008 2007
Unsecured note payable in monthly installments of
$500 through March 2008 and then $2,000 through
November 2008, including interest at 7.5% $ 16,674 $ 26,091
Unsecured note payable in various monthly installments
through November 2008, including interest at 9.3% 19,153 -
Unsecured note payable in monthly installments of
$2,000 through June 2009, including interest at 7.0% 23,475 -
Unsecured note payable in monthly installments of
$500 through November 2008 and then $1,000 through
June 2012, including interest at 7.5% 39,822 42,483
Non-interest bearing unsecured loan payable to
franchisee, 5.75% of royalty and advertising fees the
Company earns will offset the principal balance owed
to the franchisee 46,844 60,587
145,968 129,161
Less: Current portion (82,384) (24,188)
Future maturities of long-term debt are as follows:
YEAR ENDING JUNE 30,
2009 $ 82,384
2010 21,849
2011 22,613
2012 17,885
2013 1,237
$ 145,968
7. COMMITMENTS
Leases
SPI leases equipment and an automobile under operating lease agreements. Future annual minimum payments
under the agreements having remaining terms in excess of one year are as follows:
YEAR ENDING JUNE 30,
2009 $12,165
2010 3,657
$15,822
Total equipment lease expense for the years ended June 30, 2008, 2007, and 2006 amounted to $12,165,
$12,165, and $3,657, respectively.
During 2008, SPI began leasing its office facility under an operating lease which expires in July 2010. Rent
expense for the year ended June 30, 2008 amounted to $70,198. Minimum annual rentals under the remaining
lease term are as follows:
YEAR ENDING JUNE 30,
2009 $74,996
2010 87,196
2011 7,349
$169,541
SEARCHPATH INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
8. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets
for financial reporting purposes and the amounts used for income tax purposes.
Significant components of SPI's deferred tax liabilities are as follows at June 30,
2008 2007 2006
Current deferred tax asset
Accruals and reserves $ 49,200 $ 30,200 $13,800
Valuation allowance (49,200) (30,200) 13,800
Long-term deferred tax asset (liability)
Net operating losses 264,700 125,900 61,400
Property and equipment basis difference (1,300) (1,400) (1,000)
Valuation allowance (264,700) (125,900) -
(1,300) (1,400) 60,400
Net long-term deferred tax asset (liability) $ (1,300) $ (1,400) $ 74,200
A valuation allowance of $313,900, $156,100, and $0 at June 30, 2008, 2007, and 2006, respectively, has been
recognized to offset the net deferred tax assets due to the uncertainty of realizing the benefits of these assets in the
future. The difference between the expected tax and the benefit from deferred income tax is due to the increase in the
valuation allowance during the year ended June 30, 2008.
The components of the benefit from (provision for) income taxes are as follows at June 30,
2008 2007 2006
Deferred:
Federal income taxes $ 85 $ (64,260) $63,070
State and local income taxes 15 (11,340) 11,130
Total benefit (provision) $ 100 $ (75,600) $ 74,200
At June 30, 2008, 2007, and 2006, SPI had available for tax purposes net operating loss carryovers of $800,000,
$330,000, and $234,000, respectively, which begin to expire in 2025.
9. COMMON STOCK
Effective May 2008, the Board of Directors approved a 10,000 for one stock split. The par value of the shares was not
changed, resulting in the elimination of $49,990 of previously recorded additional paid-in-capital and a $97,740 charge
to accumulated deficit.
EXHIBIT B
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
NEVADA INTERNATIONAL STOCK EXCHANGE, INC.
FIRST: The name of the corporation is Nevada International Stock Exchange, Inc.
SECOND: The address of the resident agent of this corporation in this state is Corporation
Service Company, 502 E. John St., Carson City, Nevada 89706.
THIRD: The purpose of the corporation is to engage in any lawful act or activity for which
corporations may be organized under the corporation laws of the State of Nevada.
FOURTH: The corporation shall be authorized to issue the following shares:
Class Number of Shares Par Value
Common 600,000,000 $0.001
FIFTH: The Board of Directors shall consist of one or more directors.
SIXTH: The period of duration of the corporation shall be perpetual.
SEVENTH: The corporation may, to the fullest extent permitted by Section 78.751 of the Nevada
General Corporation Law, indemnify any and all directors and officers whom it shall have the
power to indemnify under said section from and against any and all of the expenses, liabilities,
or other matters referred to in or covered by such section, and the indemnification provided for
herein shall not be deemed exclusive of any other rights to which the persons so indemnified
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 by
holding office, and shall continue as to a person who has ceased to be a director or officer and
shall inure to the benefits of the heirs, executors and administrators of such persons.
EXHIBIT C
AMENDED AND RESTATED
BYLAWS
OF
Nevada International Stock Exchange, Inc.
A Nevada Corporation
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL EXECUTIVE OFFICE. The principal office of the Corporation is hereby fixed at such
location within or without the State of Nevada as may be determined from time to time by the Board of
Directors of the Corporation (the “Board”).
SECTION 2. OTHER OFFICES. Branch or subordinate offices may be established by the Board at such
other places as may be desirable.
ARTICLE II
STOCKHOLDERS
SECTION 1. PLACE OF MEETING. Meetings of stockholders shall be held at such location within or
without the State of Nevada which may be determined by the Board of the Corporation.
SECTION 2. ANNUAL MEETINGS. The annual meeting of stockholders shall be held on such day and at
such time as may be fixed by the Board. At such meetings, directors shall be elected by plurality vote
and any other proper business may be transacted.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders may be called for any purpose or
purposes permitted under Chapter 78 of Nevada Revised Statutes at any time by the Board, the
Chairman of the Board, the President, or by the stockholders entitled to cast not less than twenty‐five
percent (25%) of the votes at such meeting. Upon request in writing to the Chairman of the Board, the
President, any Vice‐President or the Secretary, by any person or persons entitled to call a special
meeting of stockholders, the Secretary shall cause notice to be given to the stockholders entitled to
vote, that a special meeting will be held not less than thirty (30) nor more than sixty (60) days after the
date of the notice.
SECTION 4. NOTICE OF ANNUAL OR SPECIAL MEETING. Written notice of each annual meeting of
stockholders shall be given not less than ten (10) or more than sixty (60) days before the date of the
meeting to each shareholder entitled to vote thereat. Such notice shall state the place, date and hour of
the meeting and (i) in the case of a special meeting the general nature of the business to be transacted,
or (ii) in the case of the annual meeting, those matters which the Board, at the time of the mailing of the
notice, intends to present for action by the stockholders, but, any proper matter may be presented at
the meeting for such action. The notice of any meeting at which directors are to be elected shall include
the names of the nominees intended, at the time of the notice, to be presented by management for
election. Notice of a stockholders' meeting shall be given either personally or by mail or, addressed to
the shareholder at the address of such shareholder appearing on the books of the Corporation or if no
such address appears or is given, by publication at least once in a newspaper of general circulation in
Clark County, Nevada. An affidavit of mailing of any notice, executed by the Secretary, shall be prima
facie evidence of the giving of the notice. Any shareholder may waive notice of any meeting by a writing
signed by him, or his duly authorized attorney, either before or after the meeting; and if notice of any
kind is required to be given under the provisions of Nevada Law, a waiver thereof in writing and duly
signed whether before or after the time stated therein, shall be deemed equivalent thereto.
SECTION 5. QUORUM. A majority of the shares entitled to vote, represented in person or by proxy, shall
constitute a quorum at any meeting of stockholders. If a quorum is present, the affirmative vote of the
majority of stockholders represented and voting at the meeting on any matter, shall be the act of the
stockholders unless specifically required otherwise in Articles of Incorporation or these Bylaws. The
stockholders present at a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding withdrawal of enough stockholders to leave less than a
quorum, if any action taken (other than adjournment) is approved by at least a majority of the number
of shares required as noted above to constitute a quorum. Notwithstanding the foregoing, (1) the sale,
transfer and other disposition of substantially all of the Corporation's properties and (2) a merger or
consolidation of the Corporation shall require the approval by an affirmative vote of not less than twothirds
(2/3) of the Corporation's issued and outstanding shares.
SECTION 6. ADJOURNED MEETING AND NOTICE THEREOF. Any stockholders meeting, whether or not a
quorum is present, may be adjourned from time to time. In the absence of a quorum (except as
provided in Section 5 of this Article), no other business may be transacted at such meeting.
SECTION 7. VOTING. The stockholders entitled to notice of any meeting or to vote at such meeting shall
be only persons in whose name shares stand on the stock records of the Corporation on the record date
determined in accordance with Section 8 of this Article.
SECTION 8. RECORD DATE. The Board may fix in advance, a record date for the determination of the
stockholders entitled to notice of a meeting or to vote or entitled to receive payment of any dividend or
other distribution, or any allotment of rights, or to exercise rights in respect to any other lawful action.
The record date so fixed shall be not more than sixty (60) nor less than ten (10) days prior to the date of
the meeting nor more than sixty (60) days prior to any other action. When a record date is so fixed, only
stockholders of record on that date are entitled to notice of and to vote at the meeting or to receive the
dividend, distribution, or allotment of rights, or to exercise of the rights, as the case may be,
notwithstanding any transfer of shares on the books of the Corporation after the record date. A
determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders
shall apply to any adjournment of the meeting unless the Board fixes a new record date for the meeting.
The Board shall fix a new record date if the meeting is adjourned for more than forty‐five (45) days. If no
record date is fixed by the Board, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be the close of business on the business day next preceding
the day on which notice is given or, if notice is waived, at the close of business on the business day next
preceding the day on which notice is given. The record date for determining stockholders for any
purpose other than as set in this Section 8 or Section 10 of this Article shall be at the close of the day on
which the Board adopts the resolution relating thereto, or the sixtieth day prior to the date of such
other action, whichever is later.
SECTION 9. CONSENT OF ABSENTEES. The transactions of any meeting of stockholders, however called
and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and
notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting,
each of the persons entitled to vote not present in person or by proxy, signs a written waiver of notice,
or a consent to the holding of the meeting or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records or made a part of the minutes of the
meeting.
SECTION 10. ACTION WITHOUT MEETING. Any action which, under any provision of law, may be taken
at any annual or special meeting of stockholders, may be taken without a meeting and without prior
notice if a consent in writing, setting forth the actions to be taken, shall be signed by the holders of
outstanding shares having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote thereon were present and
voted. Unless a record date for voting purposes be fixed as provided in Section 8 of this Article, the
record date for determining stockholders entitled to give consent pursuant to this Section 10, when no
prior action by the Board has been taken, shall be the day on which the first written‐consent is given.
SECTION 11. PROXIES. Every person entitled to vote shares has the right to do so either in person or by
one or more persons authorized by a written proxy executed by such shareholder and filed with the
Secretary not less than five (5) days prior to the meeting.
SECTION 12. CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by one of the
following officers in the order of seniority and if present and acting ‐ the Chairman of the Board, if any,
the Vice‐Chairman of the Board, if any, the President, a Vice‐President, or, if none of the foregoing is in
office and present and acting, by a chairman to be chosen by the stockholders. The Secretary of the
corporation, or in his absence, an Assistant Secretary, shall act as secretary of every meeting, but if
neither the Secretary nor an Assistant Secretary is present the Chairman of the meeting shall appoint a
secretary of the meeting. The Chairman shall conduct each such meeting in a businesslike and fair
manner, but shall not be obligated to follow any technical, formal or parliamentary rules or principles of
procedure. The Chairman's ruling on procedural matters shall be conclusive and binding on all
stockholders, unless at the time of ruling a request for a vote is made by the stockholders entitled to
vote and represented in person or by proxy at the meeting, in which case the decision of a majority of
such shares shall be conclusive and binding on all stockholders without limiting the generality of the
foregoing, the Chairman SHALL have all the powers usually vested in the chairman of a meeting of
stockholders.
ARTICLE III
DIRECTORS
SECTION 1. POWERS. Subject to limitation of the Articles of Incorporation, of these bylaws, and of
actions required to be approved by the stockholders, the business and affairs of the Corporation shall be
managed and all corporate powers shall be exercised by or under the direction of the Board. The Board
may, as permitted by law, delegate the management of the day‐to‐day operation of the business of the
Corporation to a management company or other persons or officers of the Corporation provided that
the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised
under the ultimate direction of the Board. Without prejudice to such general powers, it is hereby
expressly declared that the Board shall have the following powers:
(a) To select and remove all of the officers, agents and employees of the Corporation, prescribe
the powers and duties for them as may not be inconsistent with law, or with the Articles of
Incorporation or by these bylaws, fix their compensation, and require from them, if necessary,
security for faithful service.
(b) To conduct, manage, and control the affairs and business of the Corporation and to make
such rules and regulations therefore not inconsistent with law, with the Articles of Incorporation
or these bylaws, as they may deem best.
(c) To prescribe the forms of certificates of stock and to alter the form of such certificates from
time to time in their judgment they deem best.
(d) To authorize the issuance of shares of stock of the Corporation from time to time, upon such
terms and for such consideration as may be lawful.
(e) To borrow money and incur indebtedness for the purposes of the Corporation, and to cause
to be executed and delivered therefor, in the corporate name, promissory notes, bonds,
debentures, deeds of trust, mortgages, pledges, hypothecation or other evidence of debt and
securities therefor.
SECTION 2. NUMBER AND QUALIFICATION OF DIRECTORS. Each director must be at least 18 years of
age. A director need not be a stockholder or a resident of the State of Nevada. The initial Board of
Directors shall consist of three (3) persons. Thereafter the number of directors constituting the whole
board shall be at least one. Subject to the foregoing limitation and except for the first Board of
Directors, such number may be fixed from time to time by action of the stockholders or of the directors,
or, if the number is not fixed, the number shall be five (5). The number of directors may be increased or
decreased by action of the stockholders or of the directors.
SECTION 3. ELECTION AND TERM OF OFFICE. The directors shall be elected at each annual meeting of
stockholders but if any such annual meeting is not held or the directors are not elected the stockholders
may elect a director or directors at any time to fill any vacancy or vacancies. Any such election by
written consent requires the consent of a majority of the outstanding shares entitled to vote. If the
Board accepts the resignation of a director tendered to take effect at a future time, the remaining
directors shall have power to elect a successor to take office when the resignation is to become
effective. No reduction of the authorized number of directors shall have the effect of removing any
director prior to the expiration of the director's term of office.
SECTION 4. MEETINGS. Any meeting of the Board shall be held at any place within or without the State
of Nevada which has been designated from time to time by the Board. Meetings shall be held at such
time as the Board shall fix, except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble. No call shall be required for regular
meetings for which the time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice‐Chairman of the Board, if any, of the President,
or of a majority of the directors in office.
SECTION 6. QUORUM. A majority of the number of directors then serving constitutes a quorum of the
Board for the transaction of business, except to adjourn as hereinafter provided. Every act or decision
done or made by a majority of the directors present at a meeting duly held at which a quorum is present
shall be regarded as the act of the Board, unless a greater number be required by law or by the Articles
of Incorporation or these bylaws. A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least
a majority of the number of directors required as noted above to constitute a quorum for such meeting.
SECTION 7. PARTICIPATION IN MEETINGS. Members of the Board may participate in a meeting through
use of conference telephone or similar communications equipment, so long as all members participating
in such meeting can hear one another.
SECTION 8. WAIVER OF NOTICE. The transactions of any meeting of the Board, however called and
noticed or wherever held, are as valid as though had at a meeting duly held after regular call and notice
if a quorum be present and if, either before or after the meeting, each of the directors not present signs
a written waiver of notice, a consent to holding such meeting or an approval of the minutes thereof. All
such waivers, consents or approvals shall be filed with the corporate records or made part of the
minutes of the meeting.
SECTION 9. ADJOURNMENT. A majority of the directors present, whether or not a quorum is present,
may adjourn any directors' meeting to another time and place. Notice of the time and place of holding
an adjourned meeting need not be given to absent directors if the time and place be fixed at the
meeting being adjourned. If the meeting is adjourned for more than forty‐eight (48) hours, notice of any
adjournment to another time or place shall be given prior to the time of the adjourned meeting to the
directors who were not present at the time of adjournment.
SECTION 10. FEES AND COMPENSATION. Directors and members of committees may receive such
compensation, if any, for their services, and such reimbursement for expenses, as may be fixed or
determined by the Board.
SECTION 11. ACTION WITHOUT A MEETING. Any action required or permitted to be taken by the Board
may be taken without a meeting if all members of the Board shall individually or collectively consent in
writing to such action. Such consent or consents shall have the same effect as a unanimous vote of the
Board and shall be filed with the minutes of the proceedings of the Board.
SECTION 12. COMMITTEES. Whenever its number consists of two or more, the Board may designate one
or more committees which have such powers and duties as the Board shall determine. Any such
committee, to the extent provided in the resolution or resolutions of the Board, shall have and may
exercise the powers and authority of the Board in the management of the business and affairs of the
corporation. Each committee must include at least one director. The Board may appoint natural persons
who are not directors to serve on committees.
ARTICLE IV
OFFICERS
Section 1. OFFICERS. The Corporation must have a President, a Secretary, and a Treasurer, and, if
deemed necessary, expedient, or desirable by the Board, a Chairman of the Board, one or more other
Vice‐Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers and agents with such titles as the resolution choosing them shall designate. Each of any such
officers must be natural persons and must be chosen by the Board or chosen in the manner determined
by the Board.
Section 2. QUALIFICATIONS. Except as may otherwise be provided in the resolution choosing him, no
officer other than the Chairman of the Board, if any, need be a director. Any person may hold two or
more offices, as the directors may determine.
Section 3. TERM OF OFFICE. Unless otherwise provided in the resolution choosing him, each officer shall
be chosen for a term which shall continue until the meeting of the Board following the next annual
meeting of stockholders and until his successor shall have been chosen or until his resignation or
removal before the expiration of his term.
Section 4. REMOVAL AND REPLACEMENT. Any officer may be removed, with or without cause, by the
Board or in the manner determined by the Board. Any vacancy in any office may be filled by the Board
or in the manner determined by the Board.
Section 5. DUTIES AND AUTHORITY. All officers of the Corporation shall have such authority and
perform such duties in the management and operation of the corporation as shall be prescribed in the
resolution designating and choosing such officers and prescribing their authority and duties, and shall
have such additional authority and duties as are incident to their office except to the extent that such
resolutions or instruments may be inconsistent therewith.
ARTICLE V
OTHER PROVISIONS
SECTION 1. DIVIDENDS. The Board may from time to time declare, and the Corporation may pay,
dividends on its outstanding shares in the manner and on the terms and conditions provided by law,
subject to any contractual restrictions on which the Corporation is then subject.
SECTION 2. INSPECTION OF BYLAWS. The Corporation shall keep in its principal executive office the
original or a copy of these bylaws as amended to date which shall be open to inspection to stockholders
at all reasonable times during office hours. If the principal executive office of the Corporation is outside
the State of Nevada and the Corporation has no principal business office in such State, it shall upon the
written notice of any shareholder furnish to such shareholder a copy of these bylaws as amended to
date.
SECTION 3. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The CEO or any other officer or
officers authorized by the Board or the CEO are each authorized to vote, represent, and exercise on
behalf of the Corporation all rights incident to any and all shares of any other corporation or
corporations standing in the name of the Corporation. The authority herein granted may be exercised
either by any such officer in person or by any other person authorized to do so by proxy or power of
attorney duly executed by said officer.
ARTICLE VI
INDEMNIFICATION
SECTION 1. INDEMNIFICATION IN ACTIONS BY THIRD PARTIES. Subject to the limitations of law, if any,
the Corporation shall have the power to indemnify any director, officer, employee and agent of the
Corporation who was or is a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of to procure a judgment in its favor) against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in connection with such proceeding,
provided that the Board shall find that the director, officer, employee or agent acted in good faith and in
a manner which such person reasonably believed in the best interests of the Corporation and, in the
case of criminal proceedings, had no reasonable cause to believe the conduct was unlawful. The
termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere shall not, of itself create a presumption that such person did not act in good faith and in a
manner which the person reasonably believed to be in the best interests of the Corporation or that such
person had reasonable cause to believe such person's conduct was unlawful.
SECTION 2. INDEMNIFICATION IN ACTIONS BY OR ON BEHALF OF THE CORPORATION. Subject to the
limitations of law, if any, the Corporation shall have the power to indemnify any director, officer,
employee and agent of the Corporation who was or is threatened to be made a party to any threatened,
pending or completed legal action by or in the right of the Corporation to procure a judgment in its
favor, against expenses actually and reasonable incurred by such person in connection with the defense
or settlement, if the Board determine that such person acted in good faith, in a manner such person
believed to be in the best interests of the Corporation and with such care, including reasonable inquiry,
as an ordinarily, prudent person would use under similar circumstances.
SECTION 3. ADVANCE OF EXPENSES. Expenses incurred in defending any proceeding may be advanced
by the Corporation prior to the final disposition of such proceeding upon receipt of an undertaking by or
on behalf of the officer, director, employee or agent to repay such amount unless it shall be determined
ultimately that the officer or director is entitled to be indemnified as authorized by this Article.
SECTION 4. INSURANCE. The Corporation shall have power to purchase and maintain insurance on
behalf of any officer, director, employee or agent of the Corporation against any liability asserted
against or incurred by the officer, director, employee or agent in such capacity or arising out of such
person's status as such whether or not the Corporation would have the power to indemnify the officer,
or director, employee or agent against such liability under the provisions of this Article.
ARTICLE VII
AMENDMENTS
These bylaws may be altered, amended or repealed by a majority vote of the Board.