AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 16, 2005
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
EVOLVE ONE, INC.
(Exact name of registration as specified in its charter)
Delaware 13-3876100
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
1000 Clint Moore Road, Suite 101
Boca Raton, Florida 33487
(561) 988-0819
(Address and Telephone Number of Principal Executive Offices)
EVOLVE ONE, INC.
2005 EQUITY COMPENSATION PLAN
STOCK OPTION AGREEMENT WITH IRWIN HOROWITZ
(Full Title of the Plans)
Copies to:
Irwin Horowitz
President and CEO
Evolve One, Inc.
1000 Clint Moore Road, Suite 101
Boca Raton, Florida 33487
(561) 988-0819
CALCULATION OF REGISTRATION FEE
Proposed Proposed
maximum maximum
offering aggregate Amount of
Title of securities Amount to price per offering registration
to be registered be registered share price fee
________________________________________________________________________________
Common Stock, $.00001
par value per share (1) 105,000,000 $0.17 $17,850,000 $2,200.00
________________________________________________________________________________
(1) This calculation is made solely for the purpose of determining the
registration fee pursuant to the provisions of Rule 457(h) under the
Securities Act, and is calculated upon the average of the bid and asked
prices of the securities on the Over-the-Counter Bulletin Board on June
14, 2005.
Pursuant to Rule 416, there are also being registered such additional
number of shares of common stock as may be issuable as a result of the
anti-dilution provisions of the debentures and warrants.
ii
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
This registration statement relates to two separate prospectuses.
Items 1 and 2 of this Part I, and the documents incorporated herein by
reference pursuant to Item 3 of Part II of this Form S-8, constitute the first
prospectus relating to issuances to our employees, directors, consultants and
others of up to 100,000,000 shares of common stock pursuant to our 2005 Equity
Compensation Plan (the "Plan"). Pursuant to the requirements of Form S-8 and
Rule 428, we will deliver or cause to be delivered to Plan participants any
required information as specified by Rule 428(b)(1). We are also including a
separate plan option agreement issued to Irwin Horowitz, our current Chief
Executive Officer (the "Option"). The second prospectus, referred to as the
reoffer prospectus, relates to the reoffer or resale of any shares that are
deemed to be control securities or restricted securities under the Securities
Act of 1933, which includes the reoffer of a certain number of shares underlying
the Options.
PROSPECTUS
ITEM 1. PLAN INFORMATION
-------------------------
On May 6, 2005, our Board of Directors initially authorized and
approved the Evolve One, Inc. 2005 Equity Compensation Plan (the "Plan"). We
have reserved a total of 100,000,000 shares of our common stock for issuance
upon the exercise of options and the grant of other awards under the Plan.
Awards under the Plan must be issued only for bona fide services and may not be
issued under the Plan for services in connection with the offer and sale of
securities in a capital raising or capital promoting transaction.
Shares may be awarded under the Plan pursuant to individually
negotiated compensation contracts as determined and/or approved by the Board of
Directors or compensation committee. The eligible participants include
directors, officers, employees and non-employee consultants and advisors. There
is no limit as to the number of shares that may be awarded under the Plan to a
single participant. We anticipate that a substantial portion of the shares to be
issued under the Plan will be issued as compensation to our employees,
directors, technical consultants and advisors who provide services to us.
The Plan itself does not require restrictions on the transferability of
shares issued thereunder. However, such shares may be restricted as a condition
to their issuance where the Board of Directors deems such restrictions
appropriate. Shares issued under awards made to our officers, directors and
affiliates become control shares, the resale of which may be covered by this
prospectus. The Plan is not subject to the Employee Retirement Income Securities
Act of 1974 ("ERISA"). Restricted shares awarded under the Plan are intended to
be fully taxable to the recipient as earned income.
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ITEM 2. COMPANY INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION
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We will provide to Plan participants, without charge, upon written or
oral request, the documents incorporated by reference in Item 3 of Part II of
this Registration Statement. These documents are incorporated by reference in
the Section 10(a) prospectus. We will also provide without charge, upon written
or oral request, all other documents required to be delivered to recipients
pursuant to Rule 428(b). Any and all such requests shall be directed to the
Company at is principal office at 1000 Clint Moore Road, Suite 101, Boca Raton,
Florida 33487, attention: President.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
No person has been authorized by us to give any information or to make
any representation other than as contained in this prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized by us. Neither the delivery of this prospectus nor any distribution
of the shares of common stock issuable under the terms of the Plan shall, under
any circumstances, create any implication that there has been no change in our
affairs since the date hereof.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY
STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
The date of this Prospectus is June 16, 2005.
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REOFFER PROSPECTUS
EVOLVE ONE, INC.
105,000,000 SHARES OF COMMON STOCK
($.00001 PAR VALUE)
This prospectus forms a part of a registration statement, which
registers an aggregate of 100,000,000 shares of common stock issued or issuable
from time-to-time under the Evolve One, Inc. 2005 Equity Compensation Plan. The
Plan covers the issuance of 100,000,000 common shares. In addition to the shares
of common stock issued or issuable under the Plan, there is also covered by this
Reoffer Prospectus 5,000,000 shares of common stock underlying an option
("Option") issued to Irwin Horowitz, a present member of our management.
Evolve One, Inc. is referred to in this prospectus as "Evolve One," the
"Company," "we," "us" or "our." The 100,000,000 shares issued directly or
underlying options covered by this prospectus are referred to as the "shares."
Persons who are issued shares underlying options or directly are sometimes
referred to as the "selling security holders."
This prospectus also covers the resale of shares by persons who are our
"affiliates" within the meaning of federal securities laws. Affiliated selling
security holders may sell all or a portion of the shares from time to time in
the over-the-counter market, in negotiated transactions, directly or through
brokers or otherwise, and at market prices prevailing at the time of such sales
or at negotiated prices, but which may not exceed 1% of our outstanding common
stock in any three-month period.
We will not receive any proceeds from sales of shares by selling
security holders.
These securities have not been approved or disapproved by the
Securities and Exchange Commission nor has the Commission passed on the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
This prospectus does not constitute an offer to sell securities in any
state to any person to whom it is unlawful to make such offer in such state.
The date of this prospectus is June 16, 2005.
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AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and, in accordance therewith, we file reports,
proxy statements and other information with the Securities and Exchange
Commission. Reports, proxy statements and other information filed with the
Commission can be inspected and copied at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of this
material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a website on the Internet
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission at
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by us with the Commission are
incorporated herein by reference and made a part hereof:
- Form 10-QSB Quarterly Report filed on June 7, 2005;
- Form 8-K Current Report filed on May 2, 2005;
- Form 8-K Current Report filed on April 15, 2005;
- Form 8-K Current Report filed on April 11, 2005; and
- Annual Report on Form 10-KSB filed on March 31, 2005.
All reports and documents filed by us pursuant to Section 13, 14 or
15(d) of the Exchange Act, prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference herein and to be a part hereof from the respective
date of filing of such documents. Any statement incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this prospectus to
the extent that a statement contained herein or in any other subsequently filed
document, which also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement modified or superseded
shall not be deemed, except as so modified or superseded, to constitute part of
this prospectus.
We hereby undertake to provide without charge to each person, including
any beneficial owner, to whom a copy of the prospectus has been delivered, on
the written request of any such person, a copy of any or all of the documents
referred to above which have been or may be incorporated by reference in this
prospectus, other than exhibits to such documents. Written requests for such
copies should be directed to Corporate Secretary, Evolve One, Inc., 1000 Clint
Moore Road, Suite 101, Boca Raton, Florida 33487.
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THE COMPANY
Evolve One is a diversified holding company that develops and operates
Internet and direct retail marketing companies. The Evolve One Group includes
wholly owned subsidiaries, StogiesOnline.com, Inc. ("Stogies")
www.CigarCigar.com, Auctionstore.com Inc. ("Auctionstore") www.Auctionstore.com,
A1Discount Perfume, Inc. ("A1 Discount Perfume") www.A1DiscountPerfume.com and
International Internet Venture I, LLC ("Ventures"). Evolve One, through its
Ventures division, owns an equity interest in several companies, which are
classified as available-for-sale securities. The Company was incorporated in
Delaware on June 21, 1994.
Evolve One's original business was operated as a developmental stage
company in Mr. Cigar, Inc. ("Cigar"), in which the company previously owned a
majority interest. Cigar was in the business of licensing, selling and/or
operating cigar vending machines. The Company opened its StogiesOnline.com
Internet site in November 1998. As a result of the success of the StogiesOnline
website, the Company refocused its resources in 1999 into the Internet cigar
sales market and other specialty goods. Evolve One sold the vending equipment
and business of Cigar in December 1999. On July 22, 2004, the Company created a
new wholly owned subsidiary, Auctionstore.com, a Florida Corporation. The
Company is now focusing its resources on AuctionStore.com, which is an eBay(R)
Trading Assistant and Internet- based seller of consigned merchandise, whose
primary medium of sales is eBay(R). On December 31, 2004, the Company
discontinued operations of A1Discount Perfume Inc. and subsequently determined
to phase out the operations of Cigar.
RISK FACTORS AFFECTING OUR FUTURE RESULTS OF OPERATIONS
Our future results of operations involve a number of risks and
uncertainties. The following paragraphs discuss a number of risks that could
impact the Company's financial condition and results of operations.
WE HAVE AN ACCUMULATED DEFICIT
The consolidated financial statements have been presented on the basis
that the Company is a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
Company has incurred losses since its inception, and has an accumulated deficit
of $6,830,519 as of March 31, 2005. The Company's operations have been financed
primarily through the issuance of equity and debt. The Company may be required
to seek additional capital to continue operations. As a result, there is
substantial doubt about the Company's ability to continue as a going concern.
For the year ended December 31, 2004, the Company had a loss from continuing
operations of approximately $1,314,000 and cash used in operations of
approximately $569,000. The Company's forecast for fiscal year 2005 anticipates
a reduction in cash used for operations. The Company had an additional loss of
$298,006 for the three months ended March 31, 2005. At March 31, 2005 the
Company had approximately $76,465 of cash and cash equivalents.
The Company's ability to grow revenues, achieve cost savings or raise
sufficient additional capital will be necessary to service existing
indebtedness. The Company cannot assure that it will be able to raise additional
working capital to fund these anticipated deficits. Further, there can be no
assurance that even if such additional capital is obtained or the planned cost
reductions are implemented, that the Company will achieve profitability or
positive cash flow. The Company's continued existence is dependent upon its
ability to raise capital and to market and sell its services successfully. The
financial statements do not include any adjustments to reflect future effects on
the recoverability and classification of assets or amounts and classification of
liabilities that may result from the outcome of this uncertainty.
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WE HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU CAN EVALUATE OUR BUSINESS AND
PROSPECTS
Our Company was founded in 1997 and was incorporated in Delaware in
1994. We have only a limited operating history on which you can base an
evaluation of our past business and future prospects. As an online commerce
Company still relatively early in our development, we face substantial risks,
uncertainties, expenses and difficulties. To address these risks and
uncertainties, our Company and our subsidiaries must do the following:
o maintain and increase the number of users of our service;
o maintain and grow customer support operations at a reasonable rate;
o maintain and enhance our brands;
o develop and upgrade our technology and information processing
systems;
o enhance and expand our service to meet the changing requirements of
our users;
o provide superior customer service;
o remain attractive to potential partners; primarily eBay(R);
o respond to competitive developments; and
o attract, integrate, retain and motivate qualified personnel.
We may be unable to accomplish one or more of these goals, which could cause our
business to suffer. In addition, accomplishing one or more of these goals might
be very expensive, which could harm our financial results.
UNAUTHORIZED BREAK-INS OR OTHER ASSAULTS ON OUR SERVICE COULD HARM OUR BUSINESS
Our servers are vulnerable to computer viruses, physical or electronic
break-ins and similar disruptions, which could lead to interruptions, delays,
loss of data, public release of confidential data or the inability to complete
customer transactions. In addition, unauthorized persons may improperly access
our data. These and other types of attacks could harm us. Actions of this sort
may be very expensive to remedy and could damage our reputation and discourage
new and existing customers from using our service.
WE ARE DEPENDENT ON THE CONTINUED GROWTH OF ONLINE COMMERCE
The business of selling goods over the Internet is relatively new.
Rapid growth in the use of and interest in the Internet and online services is a
recent phenomenon. Even as the Internet is accepted, concerns about fraud,
privacy and other problems may mean that a broad base of consumers may not adopt
the Internet as a medium of commerce. If these consumers prove to be less active
and we are unable to gain efficiencies in our operating costs, including our
cost of acquiring new customers, our business could be adversely impacted.
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THE COMPANY'S REVENUES AND OPERATING RESULTS CAN BE UNPREDICTABLE.
OUR OPERATING RESULTS MAY FLUCTUATE
Our operating results have varied on our operating history. Our
operating results may fluctuate significantly as a result of a variety of
factors, many of which are outside our control.
Factors that may affect our operating results include the following:
o our ability to attract new users who will allow us to list Goods for
sale and to maintain customer satisfaction;
o our ability to keep our websites operational and to manage the
number of Goods listed by our service;
o the amount and timing of operating costs and capital expenditures
relating to the maintenance and expansion of our business,
operations and infrastructure;
o the introduction of new services and products by us or our
competitors;
o volume, size, timing and completion rate of sales on our websites;
o consumer confidence in our selling transactions and service;
o our ability to upgrade and develop our systems and infrastructure to
accommodate growth;
o technical difficulties or interruptions;
o our ability to attract new personnel in a timely and effective
manner;
o our ability to retain key employees;
o our ability to integrate and manage any acquisitions successfully;
o our ability to expand our product offerings successfully;
o the timing, cost and availability of advertising in traditional
media;
o the timing of payments to us and of marketing and other expenses
under existing and future contracts;
o consumer trends and popularity of some Goods;
o the success of our brand building and marketing campaigns;
o the level of use of the Internet and online services;
o increasing consumer acceptance of the Internet and other online
services for commerce and, in particular, the trading of products
such as those listed on our websites; and
o general economic conditions and economic conditions specific to the
Internet and e-commerce industries.
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OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT FOR US TO FORECAST THE LEVEL OR
SOURCE OF OUR REVENUES OR EARNINGS ACCURATELY.
We believe that period-to-period comparisons of our operating results
may not be meaningful, and you should not rely upon them as an indication of
future performance. Our operating results in one or more future quarters may
fall below the expectations of securities analysts and investors. In that event,
the trading price of our common stock would almost certainly decline.
COMPETITION WITHIN THE ONLINE AUCTION BUSINESS IS INTENSE.
The market for person-to-person trading over the Internet is new,
rapidly evolving and intensely competitive, and we expect competition amongst
eBay(R) sellers to intensify further in the future. Barriers to entry are
relatively low, and current and new competitors can launch at a relatively low
cost using commercially available software. We currently or potentially compete
with a number of other companies. Our direct competitors include iSold It,
QuikDrop, AuctionWagon, NuMarkets and AuctionDrop.com. Competitive pressures
created by anyone of these companies, or by them collectively, could have a
material adverse effect on our results of operations and financial condition.
Many current and potential competitors have longer operating histories, larger
customer bases, greater brand recognition and significantly greater financial,
marketing, technical and other resources than us. In addition, other online
trading services may be acquired by, receive investments from or enter into
other commercial relationships with larger, well-established and well- financed
companies as use of Internet and other online services increases. Therefore,
certain competitors may be able to devote greater resources to marketing and
promotional campaigns, adopt more aggressive pricing policies or may try to
attract traffic by offering services for free and devote substantially more
resources to Web site and systems development than Us. Increased competition may
result in reduced operating margins, loss of market share and diminished value
in our brand. There can be no assurance that we will be able to compete
successfully against current and future competitors. Further, as a strategic
response to changes in the competitive environment, we may, from time to time,
make certain pricing, service or marketing decisions or acquisitions that could
have a material adverse effect on our business, results of operations or
financial condition. New technologies and the expansion of existing technologies
may increase the competitive pressures on us by enabling our competitors to
offer a lower-cost service.
OUR FAILURE TO MANAGE GROWTH COULD HARM US
We expect to experience a period of expansion in our headcount,
facilities and infrastructure, and we anticipate that further expansion will be
required to address potential growth in our customer base and our number of
listings as well as our expansion into new geographic areas, types of goods and
possibly alternative methods of sale. Any expansion we expect will place a
significant strain on our management, operational and financial resources. The
areas that are put under strain by our growth include the following:
o Customer Support. We will need to expand our customer support
operations to accommodate the increased number of customers and
transactions. If we are unable to provide these operations in a
cost-effective manner, customers of our service may have negative
experiences, and current and future revenues could suffer, or our
margins may decrease.
o Customer Accounts. Our revenues are dependent on prompt and accurate
billing processes. If we are unable to grow our transaction
processing abilities to accommodate the increasing number of
transactions that must be billed, our ability to collect revenue
will be harmed.
We expect to hire, train and manage new employees at a rapid rate. The
majority of our employees will have been with us less than one year and we
expect that our rate of hiring will continue at
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a very high pace. If our new hires perform poorly, or if we are unsuccessful in
hiring, training and integrating these new employees, or if we are not
successful in retaining our existing employees, our business may be harmed. To
manage the expected growth of our operations and personnel, we will need to
improve our transaction processing, operational and financial systems,
procedures and controls. This is a special challenge as we acquire new
operations with different systems. Our current and planned personnel, systems,
procedures and controls may not be adequate to support our future operations. We
may be unable to hire, train, retain and manage required personnel or to
identify and take advantage of existing and potential strategic relationships
and market opportunities.
WE HAVE LIMITED EXPERIENCE IN MANAGING AND ACCOUNTING ACCURATELY FOR LARGE
AMOUNTS OF CUSTOMER FUNDS. OUR FAILURE TO MANAGE THESE FUNDS PROPERLY WOULD HARM
OUR BUSINESS.
Our ability to manage and account accurately for customer funds
requires a high level of internal controls. We have neither an established
operating history nor proven management experience in maintaining, over a long
term, these internal controls. As our business continues to grow, we must
strengthen our internal controls accordingly. Our success requires significant
public confidence in our ability to handle large and growing transaction volumes
and amounts of customer funds. Any failure to maintain necessary controls or to
manage accurately customer funds could diminish customer use of our product
severely.
WE MAY NOT BE PROFITABLE
We believe that our profitability will depend in large part on our
ability to do the following:
o manage the costs of our business, including the costs associated
with maintaining and developing our services, customer support and
expansion;
o increase our brand name awareness; and
o provide our customers with superior selling experiences.
We are going to be investing heavily in marketing and promotion,
customer support, to further development our brand. The costs of these
investments are expected to remain significant into the future. In addition,
many of our investments in these areas may have significant ongoing contractual
commitments in some of these areas. As a result, we may be unable to adjust our
spending rapidly enough to compensate for any unexpected revenue shortfall,
which may harm our profitability. The existence of several larger and more
established companies as well as newer companies, many of whom charge lower
rates for others who are facilitating trading through other pricing formats
(e.g., fixed price, reverse auction, group buying, etc.) may limit our ability
to raise user commissions in response to declines in profitability. In addition,
we are spending in advance of anticipated growth, which may also harm our
profitability. In view of the rapidly evolving nature of our business and our
limited operating history, we believe that period-to-period comparisons of our
operating results are not necessarily meaningful.
THE COMPANY'S FUTURE STRATEGY MAY INCLUDE PURSUING ACQUISITIONS THAT MAY NOT BE
SUCCESSFUL.
The Company's future strategy may include pursuing acquisitions that
may not be successful. Acquisitions involve a number of operational risks that
the acquired business will not be successfully integrated, may distract
management attention, may involve unforeseen costs and liabilities, and possible
regulatory costs, some or all of which could have a materially adverse effect on
the Company's financial condition or results of operations. The Company may make
these additional acquisitions with cash or with stock, or a combination thereof.
If the Company does make any such acquisitions, various associated risks may be
encountered, including potential dilution to the Company's then current
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shareholders, as a result of additional shares of common stock being issued in
connection with the acquisitions.
WE CURRENTLY OWN MARKETABLE EQUITY SECURITIES HELD FOR INVESTMENT WHICH COULD
MAKE IT AN "INVESTMENT COMPANY." THE CARRYING VALUE OF THOSE SECURITIES COULD BE
SUBSTANTIALLY REDUCED OR WRITTEN OFF IN FUTURE PERIODS AS A RESULT OF A DISPUTE
REGARDING THOSE SECURITIES.
The Investment Company Act of 1940 restricts the operations of
companies that are deemed to be an "investment company." Previously, we have
made an investment in SGD Holdings, Inc. Based upon the current carrying value
of these investment securities at December 31, 2004 we could be deemed to be an
inadvertent investment company. As set forth in our annual and quarterly filings
with the SEC the number of shares of SGD Holdings, Inc. owned by us is in
dispute. It is not our intention, however, to become an investment company and
thereby be subject to the Investment Company Act of 1940. If, however, we should
inadvertently become subject to the Investment Company Act of 1940 and if we
should fail to comply with the requirements of that act, we would be prohibited
from engaging in business or selling our securities, and could be subject to
civil and criminal actions for doing so. Any failure to comply with the
Investment Company Act would therefore seriously harm our business.
OUR BUSINESS MAY BE HARMED BY THE ERRONEOUS LISTING OR SALE OF ILLEGAL GOODS
The law relating to the liability of providers of online sales services
for the activities of their customers is currently unsettled. We are aware that
certain goods, such as firearms, other weapons, adult material, tobacco
products, alcohol and other goods that may be subject to regulation by local,
state or federal authorities. In order to reduce our exposure to this liability,
we have prohibited the listing of certain Goods and designated specific
personnel to review questionable Goods. In the future, we may implement other
protective measures that could require us to spend substantial resources and/or
to reduce revenues by discontinuing certain service offerings. Any costs
incurred as a result of liability or asserted liability relating to the sale of
unlawful goods or the unlawful sale of goods, could harm our business. Any
negative publicity from erroneous listings could damage our reputation and
diminish the value of our brand name. It also could make users reluctant to
continue to use our services.
OUR BUSINESS MAY BE HARMED BY COPYRIGHT INFRINGEMENT
We anticipate we will receive in the future, communications alleging
that certain Goods listed or sold through our service infringe third-party
copyrights, trademarks and trade names or other intellectual property rights.
Although we will seek to work actively with the content community to eliminate
infringing listings, some content owners may express the view that our efforts
are insufficient. Content owners have been active in defending their rights
against online companies, including eBay(R). Allegations of infringement of
third-party intellectual property rights may in the future result in litigation
against us. Such litigation could be costly for us, could result in increased
costs of doing business through adverse judgment or settlement, could require us
to change our business practices in expensive ways, or could otherwise harm our
business. Litigation against other online companies could result in
interpretations of the law that could also require us to change our business
practices or otherwise increase our costs.
OUR BUSINESS MAY BE HARMED BY THE LISTING OR SALE OF PIRATED OR COUNTERFEIT
GOODS
We anticipate that in the future we will unknowingly receive
counterfeit or pirated merchandise, which may be offered by our listing service.
Selling counterfeit merchandise may result in costly litigation. Such litigation
could be costly for us, result in increased costs of doing business through
adverse judgment or settlement, require us to change our business practices in
expensive ways, or otherwise harm our business. Litigation against other online
companies could result in interpretations of the law that could also require us
to change our business practices or otherwise increase our costs.
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OUR BUSINESS MAY BE HARMED BY FRAUDULENT ACTIVITIES
Our future success will depend largely upon our staff to reliably
deliver and accurately represent goods and buyers paying the agreed purchase
price. We anticipate that occasionally, we will not receive the purchase price
that was to have been exchanged. In some cases individuals have been arrested
and convicted for fraudulent activities using eBay(R). While we can offer
negative feedback, we do not have the ability to require users to make payments.
In some cases we would expect to receive requests from customers requesting
reimbursement or threatening or commencing legal action against us if no
reimbursement is made. This sort of litigation could be costly for us, divert
management attention, result in increased costs of doing business, lead to
adverse judgments or could otherwise harm our business. In addition, affected
users will likely complain to regulatory agencies.
SYSTEM FAILURES COULD HARM OUR BUSINESS
Our servers have experienced system failures from time to time. Our
previous website has been interrupted for periods of up to 72 hours. In addition
to placing increased burdens on our outsourced engineering staff, these outages
create customer questions and complaints that need to be addressed by our
customer support personnel. Any unscheduled interruption in our service results
in an immediate loss of revenues that can be substantial and may cause some
customers to switch to competitors. If we experience frequent or persistent
system failures, our reputation and brand could be permanently harmed. We have
been taking steps to increase the reliability and redundancy of our system.
These steps are expensive, reduce our margins and may not be successful in
reducing the frequency or duration of unscheduled downtime.
SUBSTANTIALLY ALL OF OUR COMPUTER HARDWARE FOR OPERATING OUR SERVICES CURRENTLY
IS LOCATED AT OUR FACILITY IN BOCA RATON, FLORIDA.
These systems and operations are vulnerable to damage or interruption
from hurricanes, floods, fires, power loss, telecommunication failures,
terrorism and similar events. We do not maintain fully redundant systems or
alternative providers of hosting services, and we do not carry business
interruption insurance sufficient to compensate us for losses that may occur.
Despite any precautions we may take, the occurrence of a natural disaster or
other unanticipated problems could result in lengthy interruptions in our
services. Any damage to or failure of our systems could result in interruptions
in our service. Interruptions in our service will reduce our revenues and
profits, and our future revenues and profits will be harmed if our customers
believe that our system is unreliable.
WE MAY EXPERIENCE BREAKDOWNS IN OUR PAYMENT PROCESSING SYSTEM THAT COULD DAMAGE
CUSTOMER RELATIONS AND EXPOSE US TO LIABILITY, WHICH COULD AFFECT ADVERSELY OUR
ABILITY TO BECOME PROFITABLE.
A system outage or data loss could have a material adverse effect on
our business, financial condition and results of operations. To operate our
business successfully, we must protect our payment processing and other systems
from interruption by events beyond our control. Events that could cause system
interruptions include:
o fire;
o hurricane;
o terrorist attacks;
o natural disasters;
o computer viruses;
o unauthorized entry;
o telecommunications failure;
o computer denial of service attacks; and
o power surges, losses and blackouts.
11
RISKS RELATING TO POSSIBLE FLORIDA POWER SURGES
The State of Florida experiences chronic power surges. Although we have
some emergency backup power, power surges may adversely affect our business.
EBAY(R)'S BUSINESS HAS BEEN SEASONAL
EBay(R)'s results of operations historically have been somewhat
seasonal in nature because many of their users reduce their activities on their
websites during the Thanksgiving and Christmas holidays and with the onset of
good weather.
WE ARE DEPENDENT ON THE CONTINUED GROWTH OF ONLINE COMMERCE
The business of selling goods over the Internet is new and dynamic. Our
future net revenues and profits will be substantially dependent upon the
widespread acceptance of the Internet and online services as a medium for
commerce by consumers. Rapid growth in the use of and interest in the Internet
and online services is a recent phenomenon. This acceptance and use may not
continue. Even if the Internet is accepted, concerns about fraud, privacy and
other problems may mean that a sufficiently broad base of consumers will not
adopt the Internet as a medium of commerce. Market acceptance for recently
introduced services and products over the Internet is highly uncertain, and
there are few proven services and products. If these consumers prove to be less
active and we are unable to gain efficiencies in our operating costs, including
our cost of acquiring new customers, our business could be adversely impacted.
WE ARE DEPENDENT ON KEY PERSONNEL
Our future performance will be substantially dependent on the continued
services of our senior management and other key personnel. Our future
performance also will depend on our ability to retain and motivate our other key
personnel. The loss of the services of any of our executive officers or other
key employees could harm our business. We do not maintain any "key person" life
insurance policies. Our businesses are all dependent on attracting and retaining
key personnel. Our future success also will depend on our ability to attract,
train, retain and motivate highly skilled technical, managerial, marketing and
customer support personnel. We may be unable to successfully attract, integrate
or retain sufficiently qualified personnel.
OUR MARKET IS INTENSELY COMPETITIVE
Depending on the category or product, we currently or potentially
compete with a number of sellers serving particular categories of goods as well
as those serving broader ranges of goods. The Internet is a new, rapidly
evolving and intensely competitive area. We expect competition to intensify in
the future as the barriers to entry are relatively low, and current and new
competitors can launch new sites at a nominal cost using commercially available
software.
OUR BUSINESS IS DEPENDENT ON THE DEVELOPMENT AND MAINTENANCE OF THE INTERNET
INFRASTRUCTURE
The success of our service will depend largely on the development and
maintenance of the Internet infrastructure. This includes maintenance of a
reliable network backbone with the necessary speed, data capacity and security,
as well as timely development of complementary products, for providing reliable
Internet access and services. The Internet has experienced, and is likely to
continue to experience, significant growth in the numbers of users and amount of
traffic. If the Internet continues to experience increased numbers of users,
increased frequency of use or increased bandwidth requirements, the Internet
infrastructure may be unable to support the demands placed on it. In addition,
12
the performance of the Internet may be harmed by increased number of users or
bandwidth requirements or by "viruses", "worms" and similar programs. The
Internet has experienced a variety of outages and other delays as a result of
damage to portions of its infrastructure, and it could face outages and delays
in the future. These outages and delays could reduce the level of Internet usage
as well as the level of traffic and the processing transactions on our service.
ENTERING NEW BUSINESS AREAS WILL REQUIRE SIGNIFICANT EXPENSE AND COULD STRAIN
MANAGEMENT, FINANCIAL AND OPERATIONAL RESOURCES
We intend to expand our operations by promoting new or complementary
products, services or sales formats and by expanding our product or service
offerings. This will require significant additional expense and could strain our
management, financial and operational resources. We cannot expect to benefit in
these new markets from the early-to-market advantage that we experienced in the
online cigar market. Our gross margins in these new business areas may be lower
than our existing business activities. In addition, we may have limited or no
experience in these new business areas. We may not be able to expand our
operations in a cost-effective or timely manner. Any new business that our
customers do not receive favorably could damage our reputation.
WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS IF PEOPLE OR PROPERTY ARE HARMED
BY THE PRODUCTS WE SELL
As we enter new lines of business, we may increasingly sell products,
such as cigar cutters, that may increase our exposure to product liability
claims relating to personal injury, or property damage caused by such products.
We maintain insurance, but we cannot be certain that our coverage will be
adequate for liabilities actually incurred or that insurance will continue to be
available to us on economically reasonable terms, if at all. In addition, some
of our vendor agreements with our suppliers do not indemnify us from product
liability.
GOVERNMENT REGULATION OF INTERNET COMMERCE IS EVOLVING AND UNFAVORABLE CHANGES
COULD HARM OUR BUSINESS
We are subject to general business regulations and laws or regulations
regarding taxation and access to online commerce. These laws or regulations may
impede the growth of the Internet or other online services. Regulatory
authorities may adopt specific laws and regulations governing the Internet or
online commerce. These regulations may cover taxation, user privacy, pricing,
content, copyrights, distribution, electronic contracts and characteristics and
quality of products and services. Changes in consumer protection laws also may
impose additional burdens on companies conducting business online, both in the
US and internationally. It is not clear how existing laws governing issues such
as property ownership, sales and other taxes, libel and personal privacy apply
to the Internet and online commerce. Unfavorable resolution of these issues may
harm our business.
WE ARE CONTROLLED BY CERTAIN STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS
Certain stockholders own nearly 66% of our outstanding common stock. As
a result, they have the ability to effectively control our Company and direct
our affairs and business, including the election of directors and approval of
significant corporate transactions. This concentration of ownership may have the
effect of delaying, deferring or preventing a change in control of our Company
and may make some transactions more difficult or even impossible without the
support of these stockholders. Any of these events could decrease the market
price of our common stock.
13
FUTURE SALES OF OUR COMMON STOCK MAY CAUSE OUR STOCK PRICE TO DECLINE
If our stockholders sell substantial amounts of our common stock in the
public market, the market price of our common stock could decline.
OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE EXTREMELY VOLATILE
The trading price of our common stock has been and is likely to be
extremely volatile. Our stock price could be subject to wide fluctuations in
response to a variety of factors, including the following:
o actual or anticipated variations in our quarterly operating results;
o additions or departures of key personnel;
o announcements of new services by us or our competitors;
o changes in financial estimates by securities analysts;
o conditions or trends in the Internet and online commerce;
o changes in the market valuations of other Internet companies;
o developments in Internet regulation;
o announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
o sales of our common stock or other securities in the open market;
and
o other events or factors, including these described in this "Risk
Factors" section and others that may be beyond our control.
In addition, the trading price of Internet stocks in general, and ours
in particular, have experienced extreme price and volume fluctuations in recent
periods. These fluctuations often have been unrelated or disproportionate to the
operating performance of these companies. Notwithstanding a sharp decline in the
prices of Internet stocks in general, the valuation of our stock remains
extraordinarily high based on conventional valuation standards such as
price-to-earnings and price-to-sales ratios. The trading price of our common
stock has increased and decreased enormously from the initial offering price.
This trading price and valuation may not be sustained. Negative changes in the
public's perception of the prospects of Internet or e-commerce companies have in
the past and may in future depress our stock price regardless of our results.
Other broad market and industry factors may decrease the market price of our
common stock, regardless of our operating performance. Market fluctuations, as
well as general political and economic conditions, such as recession or interest
rate or currency rate fluctuations, also may decrease the market price of our
common stock. In the past, following declines in the market price of a company's
securities, securities class-action litigation often has been instituted.
Litigation of this type, if instituted, could result in substantial costs and a
diversion of management's attention and resources.
THE COMPANY'S STOCK PRICE WILL FLUCTUATE AND COULD SUBJECT THE COMPANY TO
LITIGATION.
The market price of the Company's common stock may fluctuate
significantly in response to a number of factors, some of which are beyond its
control. These factors include:
14
o quarterly variations in operating results;
o changes in accounting treatments or principles;
o additions or departures of key personnel;
o stock market price and volume fluctuations of publicly-traded
companies in general and Internet-related companies in particular;
and
o general political, economic and market conditions.
WE DO NOT PLAN TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE.
We do not anticipate paying cash dividends to our stockholders in the
foreseeable future. Accordingly, investors must rely on sales of their common
stock after price appreciation, which may never occur, as the only way to
realize on their investment. Investors seeking cash dividends should not
purchase our common stock.
THERE IS A LIMITED PUBLIC MARKET FOR THE COMPANY'S COMMON STOCK AND THERE ARE NO
ASSURANCES OF A CONTINUED TRADING MARKET FOR THE COMPANY'S COMMON STOCK.
The Company's common stock is currently quoted on the Over the Counter
Market. The Company's common stock is thinly traded. There are no assurances the
Company will maintain its listing. If the Company's common stock should be
delisted, it is likely that the stock would then be quoted on the Pink Sheets,
which would materially and adversely affect any future liquidity in the
Company's common stock.
FOR ALL OF THE AFORESAID REASONS, AND OTHERS, INCLUDING THOSE SET FORTH HEREIN,
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. ANY PERSON CONSIDERING AN
INVESTMENT IN THE SECURITIES OFFERED HEREBY SHOULD BE AWARE OF THESE AND OTHER
FACTORS SET FORTH IN THIS PROSPECTUS. THESE SECURITIES SHOULD ONLY BE PURCHASED
BY PERSONS WHO CAN AFFORD A TOTAL LOSS OF THEIR INVESTMENT IN EVOLVE ONE AND
HAVE NO IMMEDIATE NEED FOR A RETURN ON THEIR INVESTMENT.
15
EVOLVE ONE, INC.
2005 EQUITY COMPENSATION PLAN
INTRODUCTION
------------
The following descriptions summarize certain provisions of our Evolve
One, Inc. 2005 Equity Compensation Plan. This summary is not complete and is
qualified by reference to the full text of the Plan. A copy of the Plan and the
Plan, as Amended, have been filed as exhibits to the registration statement of
which is prospectus is a part. Each person receiving a Plan option or stock
award under the Plan should read the Plan in its entirety.
On May 6, 2005, our Board of Directors authorized the Plan covering
100,000,000 shares of common stock. As of the date of this prospectus, awards
covering 26,300,000 shares have been made under the Plan.
The purpose of the Plan is to encourage stock ownership by our
officers, directors, key employees and consultants, and to give such persons a
greater personal interest in the success of our business and an added incentive
to continue to advance and contribute to us. Our Board of Directors, or a
committee of the Board, will administer the Plan including, without limitation,
the selection of the persons who will be awarded stock grants and granted
options, the type of options to be granted, the number of shares subject to each
Option and the exercise price.
Plan options may either be options qualifying as incentive stock
options under Section 422 of the Internal Revenue Code of 1986, as amended, or
non-qualified options. In addition, the Plan allows for the inclusion of a
reload option provision, which permits an eligible person to pay the exercise
price of the option with shares of common stock owned by the eligible person and
receive a new option to purchase shares of common stock equal in number to the
tendered shares. Furthermore, compensatory stock amounts may also be issued.
Additionally, deferred stock grants and stock appreciation rights may also be
granted under the Plan. Any incentive option granted under the Plan must provide
for an exercise price of not less than 60% of the fair market value of the
underlying shares on the date of grant, but the exercise price of any incentive
option granted to an eligible employee owning more than 10% of our outstanding
common stock must not be less than 110% of fair market value on the date of the
grant. The term of each Plan option and the manner in which it may be exercised
is determined by the Board of Directors or the committee, provided that no
option may be exercisable more than ten years after the date of its grant and,
in the case of an incentive option granted to an eligible employee owning more
than 10% of the common stock, no more than five years after the date of the
grant.
In the event the Plan is not approved by our shareholders prior to May
6, 2006, the Plan will not be invalidated, however, (i) in the absence of
shareholder approval, incentive stock options may not be awarded under the Plan
and (ii) any incentive stock options theretofore awarded under the Plan shall be
converted into non-qualified options upon terms and conditions determined by the
Board or committee to reflect, as nearly as is reasonably practicable in its
sole determination, the terms and conditions of the incentive stock options
being so converted.
ELIGIBILITY
-----------
Our officers, directors, key employees and consultants are eligible to
receive awards under the Plan. Only our employees are eligible to receive
incentive options.
ADMINISTRATION
--------------
The Plan will be administered by our Board of Directors or a committee
established by the Board such as a compensation committee (the "Committee"). The
Board of Directors or the Committee
16
determines from time to time those of our officers, directors, key employees and
consultants to whom stock grants or Plan options are to be granted, the terms
and provisions of the respective option agreements, the time or times at which
such options shall be granted, the type of options to be granted, the dates such
Plan options become exercisable, the number of shares subject to each option,
the purchase price of such shares and the form of payment of such purchase
price. All other questions relating to the administration of the Plan, and the
interpretation of the provisions thereof and of the related option agreements,
are resolved by the Board or Committee.
SHARES SUBJECT TO AWARDS
------------------------
We have currently reserved 100,000,000 of our authorized but unissued
shares of common stock for issuance under the Plan, and a maximum of 100,000,000
shares may be issued, unless the Plan is subsequently amended (subject to
adjustment in the event of certain changes in our capitalization), without
further action by our Board of Directors and stockholders, as required. Subject
to the limitation on the aggregate number of shares issuable under the Plan,
there is no maximum or minimum number of shares as to which a stock grant or
Plan option may be granted to any person. Shares used for stock grants and Plan
options may be authorized and unissued shares or shares reacquired by us,
including shares purchased in the open market. Shares covered by Plan options
which terminate unexercised will again become available for grant as additional
options, without decreasing the maximum number of shares issuable under the
Plan, although such shares may also be used by us for other purposes.
The Plan provides that, if our outstanding shares are increased,
decreased, exchanged or otherwise adjusted due to a share dividend, forward or
reverse share split, recapitalization, reorganization, merger, consolidation,
combination or exchange of shares, an appropriate and proportionate adjustment
shall be made in the number or kind of shares subject to the Plan or subject to
unexercised options and in the purchase price per share under such options. Any
adjustment, however, does not change the total purchase price payable for the
shares subject to outstanding options. In the event of our proposed dissolution
or liquidation, a proposed sale of all or substantially all of our assets, a
merger or tender offer for our shares of common stock, the Board of Directors
may declare that each option granted under the Plan shall terminate as of a date
to be fixed by the Board of Directors; provided that not less than 30 days
written notice of the date so fixed shall be given to each participant holding
an option, and each such participant shall have the right, during the period of
30 days preceding such termination, to exercise the participant's option, in
whole or in part, including as to options not otherwise exercisable.
TERMS OF EXERCISE
-----------------
The Plan provides that the options granted thereunder shall be
exercisable from time to time in whole or in part, unless otherwise specified by
the Committee or by the Board of Directors.
The Plan provides that, with respect to incentive stock options, the
aggregate fair market value (determined as of the time the option is granted) of
the shares of common stock, with respect to which incentive stock options are
first exercisable by any option holder during any calendar year shall not exceed
$100,000.
EXERCISE PRICE
--------------
The purchase price for shares subject to incentive stock options must
be at least 100% of the fair market value of our common stock on the date the
option is granted, except that the purchase price must be at least 110% of the
fair market value in the case of an incentive option granted to a person who is
a "10% stockholder." A "10% stockholder" is a person who owns (within the
meaning of Section 422(b)(6) of the Internal Revenue Code of 1986) at the time
the incentive option is granted, shares possessing more than 10% of the total
combined voting power of all classes of our outstanding shares. The Plan
provides that fair market value shall be determined by the Board or the
Committee in accordance with procedures
17
which it may from time to time establish. If the purchase price is paid with
consideration other than cash, the Board or the Committee shall determine the
fair value of such consideration to us in monetary terms.
The exercise price of non-qualified options shall be determined by the
Board of Directors or the Committee, but shall not be less than the par value of
our common stock on the date the option is granted.
The per share purchase price of shares issuable upon exercise of a Plan
option may be adjusted in the event of certain changes in our capitalization,
but no such adjustment shall change the total purchase price payable upon the
exercise in full of options granted under the Plan.
MANNER OF EXERCISE
------------------
Plan options are exercisable by delivery of written notice to us
stating the number of shares with respect to which the option is being
exercised, together with full payment of the purchase price therefor. Payment
shall be in cash, checks, certified or bank cashier's checks, promissory notes
secured by the shares issued through exercise of the related options, shares of
common stock or in such other form or combination of forms which shall be
acceptable to the Board of Directors or the Committee, provided that any loan or
guarantee by us of the purchase price may only be made upon resolution of the
Board or Committee that such loan or guarantee is reasonably expected to benefit
us, and further provided that any such loan or guarantee is permitted under
applicable law.
OPTION PERIOD
-------------
All incentive stock options shall expire on or before the tenth
anniversary of the date the option is granted except as limited above. However,
in the case of incentive stock options granted to an eligible employee owning
more than 10% of the common stock, these options will expire no later than five
years after the date of the grant. Non-qualified options shall expire ten years
and one day from the date of grant unless otherwise provided under the terms of
the option grant.
TERMINATION
-----------
All Plan options which are Incentive Stock Options are nonassignable
and nontransferable, except by will or by the laws of descent and distribution,
and during the lifetime of the optionee, may be exercised only by such optionee,
except as provided by the board of the Committee. If an optionee shall die (a)
while our employee or (b) within three months after termination of employment by
us because of disability, or retirement or otherwise, such options may be
exercised, to the extent that the optionee shall have been entitled to do so on
the date of death or termination of employment, by the person or persons to whom
the optionee's right under the option pass by will or applicable law, or if no
such person has such right, by his executors or administrators. Options are also
subject to termination by the Committee or the Board under certain conditions.
In the event of termination of employment because of death while an
employee, or because of disability, the optionee's options may be exercised not
later than the expiration date specified in the option or one year after the
optionee's death, whichever date is earlier, or in the event of termination of
employment because of retirement or otherwise, not later than the expiration
date specified in the option or one year after the optionee's death, whichever
date is earlier.
If an optionee's employment by us terminates because of disability and
such optionee has not died within the following three months, the options may be
exercised, to the extent that the optionee shall have been entitled to do so at
the date of the termination of employment, at any time, or from time to time,
but not later than the expiration date specified in the option or one year after
termination of employment, whichever date is earlier.
18
If an optionee's employment shall terminate for any reason other than
death or disability, optionee may exercise the options to the same extent that
the options were exercisable on the date of termination, for up to three months
following such termination, or on or before the expiration date of the options,
whichever occurs first. In the event that the optionee was not entitled to
exercise the options at the date of termination or if the optionee does not
exercise such options (which were then exercisable) within the time specified
herein, the options shall terminate.
If an optionee's employment shall terminate for any reason other than
death, disability or retirement, all right to exercise the option shall
terminate not later than 90 days following the date of such termination of
employment, except as otherwise provided under the Plan.
Non-qualified options are not subject to the foregoing restrictions
unless specified by the Board of Directors or Committee.
MODIFICATION AND TERMINATION OF PLANS
-------------------------------------
The Board of Directors or Committee may amend, suspend or terminate the
Plan at any time. However, no such action may prejudice the rights of any holder
of a stock grant or optionee who has prior thereto been granted options under
the Plan. Any such termination of the Plan shall not affect the validity of any
stock grants or options previously granted thereunder. Unless the Plan shall
theretofore have been suspended or terminated by the Board of Directors, the
Plan shall terminate on May 6, 2015.
FEDERAL INCOME TAX EFFECTS
--------------------------
The following discussion applies to the Plan and is based on federal
income tax laws and regulations in effect on December 31, 2004. It does not
purport to be a complete description of the federal income tax consequences of
the Plan, nor does it describe the consequences of state, local or foreign tax
laws which may be applicable. Accordingly, any person receiving a grant under
the Plan should consult with his own tax adviser.
The Plan is not subject to the provisions of the Employee Retirement
Income Security Act of 1974 and is not qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
An employee granted an incentive stock option does not recognize
taxable income either at the date of grant or at the date of its timely
exercise. However, the excess of the fair market value of common stock received
upon exercise of the incentive stock option over the exercise price is an item
of tax preference under Section 57(a)(3) of the Code and may be subject to the
alternative minimum tax imposed by Section 55 of the Code. Upon disposition of
stock acquired on exercise of an incentive stock option, long-term capital gain
or loss is recognized in an amount equal to the difference between the sales
price and the incentive option exercise price, provided that the option holder
has not disposed of the stock within two years from the date of grant and within
one year from the date of exercise. If the incentive option holder disposes of
the acquired stock (including the transfer of acquired stock in payment of the
exercise price of an incentive stock option) without complying with both of
these holding period requirements ("Disqualifying Disposition"), the option
holder will recognize ordinary income at the time of such Disqualifying
Disposition to the extent of the difference between the exercise price and the
lesser of the fair market value of the stock on the date the incentive option is
exercised (the value six months after the date of exercise may govern in the
case of an employee whose sale of stock at a profit could subject him to suit
under Section 16(b) of the Securities Exchange Act of 1934) or the amount
realized on such Disqualifying Disposition. Any remaining gain or loss is
treated as a short-term or long-term capital gain or loss, depending on how long
the shares are held. In the event of a Disqualifying Disposition, the incentive
stock option tax preference described above may not apply (although, where the
19
Disqualifying Disposition occurs subsequent to the year the incentive stock
option is exercised, it may be necessary for the employee to amend his return to
eliminate the tax preference item previously reported). We are not entitled to a
tax deduction upon either exercise of an incentive option or disposition of
stock acquired pursuant to such an exercise, except to the extent that the
option holder recognized ordinary income in a Disqualifying Disposition.
If the holder of an incentive stock option pays the exercise price, in
full or in part, with shares of previously acquired common stock, the exchange
should not affect the incentive stock option tax treatment of the exercise. No
gain or loss should be recognized on the exchange, and the shares received by
the employee, equal in number to the previously acquired shares exchanged
therefor, will have the same basis and holding period for long-term capital gain
purposes as the previously acquired shares. The employee will not, however, be
able to utilize the old holding period for the purpose of satisfying the
incentive stock option statutory holding period requirements. Shares received in
excess of the number of previously acquired shares will have a basis of zero and
a holding period which commences as of the date the common stock is issued to
the employee upon exercise of the incentive option. If an exercise is effected
using shares previously acquired through the exercise of an incentive stock
option, the exchange of the previously acquired shares will be considered a
disposition of such shares for the purpose of determining whether a
Disqualifying Disposition has occurred.
In respect to the holder of non-qualified options, the option holder
does not recognize taxable income on the date of the grant of the non-qualified
option, but recognizes ordinary income generally at the date of exercise in the
amount of the difference between the option exercise price and the fair market
value of the common stock on the date of exercise. However, if the holder of
non-qualified options is subject to the restrictions on resale of common stock
under Section 16 of the Securities Exchange Act of 1944, such person generally
recognizes ordinary income at the end of the six-month period following the date
of exercise in the amount of the difference between the option exercise price
and the fair market value of the common stock at the end of the six-month
period. Nevertheless, such holder may elect within 30 days after the date of
exercise to recognize ordinary income as of the date of exercise. The amount of
ordinary income recognized by the option holder is deductible by us in the year
that income is recognized.
In connection with the issuance of stock grants as compensation, the
recipient must include in gross income the excess of the fair market value of
the property received over the amount, if any, paid for the property in the
first taxable year in which beneficial interest in the property either is
"transferable" or is not subject to a "substantial risk of forfeiture." A
substantial risk of forfeiture exists where rights and property that have been
transferred are conditioned, directly or indirectly, upon the future performance
(or refraining from performance) of substantial services by any person, or the
occurrence of a condition related to the purpose of the transfer, and the
possibility of forfeiture is substantial if such condition is not satisfied.
Stock grants received by a person who is subject to the short swing profit
recovery rule of Section 16(b) of the Securities Exchange Act of 1934 is
considered subject to a substantial risk of forfeiture so long as the sale of
such property at a profit could subject the stockholder to suit under that
section. The rights of the recipient are treated as transferable if and when the
recipient can sell, assign, pledge or otherwise transfer any interest in the
stock grant to any person. Inasmuch as the recipient would not be subject to the
short swing profit recovery rule of Section 16(b) of the Securities Exchange Act
of 1934 and the stock grant, upon receipt following satisfaction of condition
prerequisites to receipt, will be presently transferable and not subject to a
substantial risk of forfeiture, the recipient would be obligated to include in
gross income the fair market value of the stock grant received once the
conditions to receipt of the stock grant are satisfied.
RESTRICTIONS UNDER SECURITIES LAWS
----------------------------------
The sale of all shares issued under the Plan must be made in compliance
with federal and state securities laws. Our officers, directors and 10% or
greater stockholders, as well as certain other persons
20
or parties who may be deemed to be "affiliates" of ours under federal securities
laws, should be aware that resales by affiliates can only be made pursuant to an
effective registration statement, Rule 144 or other applicable exemption. Our
officers, directors and 10% and greater stockholders may also become subject to
the "short swing" profit rule of Section 16(b) of the Securities Exchange Act of
1934.
SELLING SECURITY HOLDERS
The following selling security holders are affiliates of the Company:
Number of
Name Options/Shares
---- --------------
Irwin Horowitz 5,000,000
Gary Schultheis 2,000,000
Herbert Tabin 2,000,000
Robert Sands 100,000
Lonnie Sciambi 200,000
In addition, other options or stock grants may be made to affiliates
which we are not able to identify at this time. Before any of our affiliates
sell any of his or her shares received under the Plan, we will supplement this
prospectus with the required information regarding the names of the persons
selling, the total number of shares owned by these persons and the number of
shares proposed to be sold under this prospectus.
On January 26, 2005, the Company entered into an Executive Employment
agreement with Irwin Horowitz, who became our chief executive officer. Pursuant
to this agreement, the Company issued an Option to purchase an aggregate of
50,000,000 shares of common stock of the Company at an exercise price of $0.30
per share, exercisable over an option term of eight years from the date of
grant. We are registering at this time that portion of the Option to purchase an
aggregate of 5,000,000 shares of the total options granted to Mr. Horowitz. Mr.
Horowitz's Option is not included under the Plan.
In addition, pursuant to Separation and Severance Agreements entered
into on January 26, 2005 with Mr. Schultheis and Mr. Tabin, both of whom were
former members of management of the Company, options were issued to each of them
to purchase up to 10,000,000 shares of common stock of the Company, with such
options being granted effective with the adoption of the Plan. The options
granted to Messrs. Schultheis and Tabin are included under the Plan. The options
are exercisable at a price of $0.30 per share and terminate on January 26, 2013.
During such time as Messrs. Horowitz, Tabin and Schultheis are deemed
affiliates of the Company, as well as any other persons who receive options or
stock grants under the Plan and are deemed affiliates, such persons may effect
sales of shares of common stock covered hereby not in excess of 1% of our
outstanding common stock of the Company in any three-month period.
PLAN OF DISTRIBUTION
The information under this heading includes resales of shares covered
by this prospectus by persons who are our "affiliates" as that term in defined
under federal securities laws.
The shares covered by this prospectus may be resold and distributed
from time to time by the selling security holders in one or more transactions,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of these shares as
principals, at market prices existing at the time of sale, at prices related to
existing market prices, through
21
Rule 144 transactions or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the selling
security holders in connection with sales of securities.
The selling security holders may sell shares in one or more of the
following methods, which may include crosses or block transactions:
- through the "pink sheets", on the over-the-counter Bulletin Board,
or on such exchanges or over-the-counter markets on which our shares
may be listed from time-to-time, in transactions which may include
special offerings, exchange distributions and/or secondary
distributions, pursuant to and in accordance with the rules of such
exchanges;
- in transactions other than on such exchanges or in the
over-the-counter market, or a combination of such transactions,
including sales through brokers, acting as principal or agent, sales
in privately negotiated transactions, or dispositions for value,
subject to rules relating to sales by affiliates; or
- through the writing of options on our shares, whether or not such
options are listed on an exchange, or other transactions requiring
delivery of our shares, or the delivery of our shares to close out a
short position.
Any such transactions may be effected at market prices prevailing at
the time of sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices.
In making sales, brokers or dealers used by the selling security
holders may arrange for other brokers or dealers to participate. The selling
security holders who are affiliates of Evolve One and others through whom such
securities are sold may be "underwriters" within the meaning of the Securities
Act for the securities offered, and any profits realized or commission received
may be considered underwriting compensation. Information as to whether an
underwriter(s) who may be selected by the selling security holders, or any other
broker-dealer, is acting as principal or agent for the selling security holders,
the compensation to be received by underwriters who may be selected by the
selling security holders, or any broker-dealer, acting as principal or agent for
the selling security holders and the compensation to be received by other
broker-dealers, in the event the compensation of other broker-dealers is in
excess of usual and customary commissions, will, to the extent required, be set
forth in a supplement to this prospectus. Any dealer or broker participating in
any distribution of the shares may be required to deliver a copy of this
prospectus, including the supplement, if any, to any person who purchases any of
the shares from or through a dealer or broker.
We have advised the selling security holders who are affiliates that,
at the time a resale of the shares is made by or on behalf of a selling security
holder, a copy of this prospectus should be delivered. In addition, selling
security holders who are affiliates may not dispose of that number of shares
that exceed 1% of our outstanding common stock in any consecutive three-month
period.
We have also advised the selling security holders that during the time
as they may be engaged in a distribution of the shares included herein they are
required to comply with Regulation M of the Exchange Act. With certain
exceptions, Regulation M precludes any selling security holders, any affiliated
purchasers and any broker-dealer or other person who participates in the
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase any security which is the subject of the distribution
until the entire distribution is complete. Regulation M also prohibits any bids
or purchase made in order to stabilize the price of a security in connection
with the distribution of that security.
22
Sales of securities by us and the selling security holders or even the
potential of these sales may have an adverse effect on the market price for
shares of our common stock.
DESCRIPTION OF SECURITIES
GENERAL
-------
The following description of our capital stock and provisions of our
Certificate of Incorporation is a summary thereof and is qualified by reference
to our Certificate of Incorporation, copies of which may be obtained upon
request. Our authorized capital consists of 1,000,000,000 shares of common
stock, par value $.00001 per share, of which 29,182,432 shares were issued and
outstanding as of May 31, 2005. We are authorized to issue 10,000,000 shares of
preferred stock, of which no shares are issued or outstanding.
COMMON STOCK
------------
Holders of shares of common stock are entitled to share, on a ratable
basis, such dividends as may be declared by the board of directors out of funds,
legally available therefor. Upon our liquidation, dissolution or winding up,
after payment to creditors, our assets will be divided pro rata on a per share
basis among the holders of our common stock.
Each share of common stock entitles the holders thereof to one vote.
Holders of common stock do not have cumulative voting rights which means that
the holders of more than 50% of the shares voting for the election of directors
can elect all of the directors if they choose to do so, and, in such event, the
holders of the remaining shares will not be able to elect any directors. Our
By-Laws require that only a majority of our issued and outstanding shares need
be represented to constitute a quorum and to transact business at a
stockholders' meeting. Our common stock has no preemptive, subscription or
conversion rights and is not redeemable by us.
PREFERRED STOCK
---------------
Our articles of incorporation authorizes our board of directors to
create and issue series of preferred stock from time to time, with such
designations, preferences, conversion rights, cumulative, relative,
participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof as permitted under Delaware
law.
TRANSFER AGENT AND REGISTRAR
----------------------------
The transfer agent and registrar for our common stock is Olde Monmouth
Stock Transfer Co., Inc., 200 Memorial Parkway, Atlantic Highlands, New Jersey
07716; telephone (732) 872-2727.
LEGAL MATTERS
The validity of the securities offered under the options described in
this registration statement will be passed upon for us by Schneider Weinberger &
Beilly LLP, 2200 N.W. Corporate Boulevard, Suite 210, Boca Raton, Florida
33431-7307. The firm owns 5,000 shares of common stock of the Company.
EXPERTS
The consolidated financial statements of Evolve One, Inc. as of
December 31, 2004, and for the years ended December 31, 2004 and 2003 appearing
in our Annual Report on Form 10-KSB for the year ended December 31, 2004, have
been audited by Goldstein Lewin & Co., Certified Public Accountants, as
23
set forth in their report thereon and are incorporated by reference in reliance
upon the authority of such firm as experts in auditing and accounting.
INDEMNIFICATION
Section 145 of the General Corporation Law of Delaware, under which we
are incorporated, empowers a corporation to indemnify any person who was, or is,
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or enterprise. A corporation may indemnify against expenses
(including attorneys' fees) and, other than in respect of an action by or in the
right of the corporation, against judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding if the person indemnified acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or in the right of the corporation, no indemnification of expenses may
be made in respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action was brought shall
determine that, despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Section 145 of the General Corporation Law of Delaware further provides
that to the extent a director, officer, employee or agent of the corporation has
been successful in the defense of any action, suit or proceeding referred to
above or in the defense of any claim, issue or matter therein, eh or she shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
Our certificate of incorporation require us to indemnify our directors
and officers to the fullest extent permitted by the General Corporation Law of
the State of Delaware.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
24
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
------------------------------------------------
The documents listed below are incorporated by reference in the
Registration Statement. All documents subsequently filed by the Registrant
pursuant to Section 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), prior to the filing of a post-effective
amendment which indicates that all securities offered have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference in the Registration Statement and to be part thereof
from the date of filing of such documents.
- Form 10-QSB Quarterly Report filed on June 7, 2005;
- Form 8-K Current Report filed on May 2, 2005;
- Form 8-K Current Report filed on April 15, 2005;
- Form 8-K Current Report filed on April 11, 2005; and
- Annual Report on Form 10-KSB filed on March 31, 2005.
All reports and documents filed by us pursuant to Section 13, 14 or
15(d) of the Exchange Act, prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference herein and to be a part hereof from the respective
date of filing of such documents. Any statement incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this prospectus to
the extent that a statement contained herein or in any other subsequently filed
document, which also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement modified or superseded
shall not be deemed, except as so modified or superseded, to constitute part of
this prospectus.
We hereby undertake to provide without charge to each person, including
any beneficial owner, to whom a copy of the prospectus has been delivered, on
the written request of any such person, a copy of any or all of the documents
referred to above which have been or may be incorporated by reference in this
prospectus, other than exhibits to such documents. Written requests for such
copies should be directed to Corporate Secretary, Evolve One, Inc., 1000 Clint
Moore Road, Suite 101, Boca Raton, Florida 33487.
ITEM 4. DESCRIPTION OF SECURITIES
----------------------------------
A description of the Registrant's securities is set forth in the
Prospectus incorporated as a part of this Registration Statement.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
-----------------------------------------------
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
--------------------------------------------------
Section 145 of the General Corporation Law of Delaware, under which we
are incorporated, empowers a corporation to indemnify any person who was, or is,
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or enterprise. A corporation may indemnify against expenses
(including attorneys' fees) and, other than in respect of an action by or in the
right of the corporation, against judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection
II-1
with such action, suit or proceeding if the person indemnified acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. In the case of an action by or in the right of the corporation, no
indemnification of expenses may be made in respect to any claim, issue or matter
as to which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action was brought shall determine that, despite the adjudication of
liability, such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper. Section 145 of the General
Corporation Law of Delaware further provides that to the extent a director,
officer, employee or agent of the corporation has been successful in the defense
of any action, suit or proceeding referred to above or in the defense of any
claim, issue or matter therein, eh or she shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith.
Our certificate of incorporation require us to indemnify our directors
and officers to the fullest extent permitted by the General Corporation Law of
the State of Delaware.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
--------------------------------------------
Persons eligible to receive grants under the Plan will have an existing
relationship with us and will have access to comprehensive information about us
to enable them to make an informed investment decision. The recipient must
express an investment intent and, in the absence of registration under the Act,
consent to the imprinting of a legend on the securities restricting their
transferability except in compliance with applicable securities laws.
ITEM 8. EXHIBITS
-----------------
5.1 Opinion of Schneider Weinberger & Beilly LLP*
23.1 Consent of Registered Independent Public Accounting Firm*
23.2 Consent of Schneider Weinberger & Beilly LLP (included in
Exhibit 5.1)*
99.1 Evolve One, Inc. 2005 Equity Compensation Plan*
99.2 Option issued to Irwin J. Horowitz*
_________________
* Filed herewith.
ITEM 9. UNDERTAKINGS
---------------------
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
II-2
(a) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(b) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement;
(c) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 against such liabilities (other than the payment by the
registrant in the successful defense of an action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel, the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boca Raton, State of Florida on June 16, 2005.
EVOLVE ONE, INC.
By: /s/ Irwin Horowitz
------------------
Irwin Horowitz, Chief Executive Officer,
President and Principal Executive,
Financial and Accounting Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Irwin Horowitz Chief Executive Officer and President June 16, 2005
------------------ (Principal Executive, Financial and
Irwin Horowitz Accounting Officer)
/s/ Robert Sands Director June 16, 2005
------------------
Robert Sands
/s/ Lonnie Sciambi Director June 16, 2005
------------------
Lonnie Sciambi