-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WvuqzV97yp6O9gvSUxv49xu8Ag5k0J4PP+agZg/uF0V/zgP9jC6xnQxXVBaDKUGZ k+NzhVTBYYEFsOmHuqLESQ== 0001269678-07-000208.txt : 20070713 0001269678-07-000208.hdr.sgml : 20070713 20070713134418 ACCESSION NUMBER: 0001269678-07-000208 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070709 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070713 DATE AS OF CHANGE: 20070713 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAXIMUM AWARDS INC CENTRAL INDEX KEY: 0001282224 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PERSONAL SERVICES [7200] IRS NUMBER: 860787790 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-50621 FILM NUMBER: 07978263 BUSINESS ADDRESS: STREET 1: LEVEL 1 164 WHARF ST STREET 2: QUEENSLAND 4000 CITY: BRISBANE STATE: C3 ZIP: 00000 BUSINESS PHONE: 61 738 312316 MAIL ADDRESS: STREET 1: LEVEL 1 164 WHARF ST STREET 2: QUEENSLAND 4000 CITY: BRISBANE STATE: C3 ZIP: 00000 8-K 1 logic8k071307.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) July 13, 2007 LOGICA HOLDINGS, Inc. (Exact name of registrant as specified in its charter) Nevada 0-50621 86-0787790 (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 82 Avenue Road, Toronto, Ontario M5R 2H2, Canada (Address of principal executive offices) Registrant's telephone number, including area code: (416) 929-5798 Maximum Awards, Inc. ------------------------------------------------------------- (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01 Entry into a Material Definitive Agreement. Item 2.01 Completion of Acquisition or Disposition of Assets. Item 3.02 Unregistered Sales of Equity Securities. SHARE EXCHANGE Effective July 9, 2007, Logica Holdings, Inc. ("Logica Holdings" or the "Company") completed the acquisition of Plays On The Net Plc, a United Kingdom company ("POTN"), Anne's World Limited ("AW"), a Canadian limited company, and Curtain Rising Inc. ("CR," and together with POTN and AW the "Acquired Companies") a Canadian Incorporated company, pursuant to a share exchange agreement (the "Exchange Agreement") by and between the Company, POTN, AW, CR and the sole shareholder of the Acquired Companies, the Winterman Group Ltd. (the "Sole Shareholder"). Under the Exchange Agreement dated July 9, 2007, the Company issued to the Sole Shareholder 12,000,000 shares of the common stock of the Company. The shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act. The Sole Shareholder is an accredited investor as defined under the Securities Act of 1933. All shares of common stock issued pursuant to the share exchange contain legends restricting transferability absent registration or applicable exemption. The issued shares constitute 84.93% of the Company's common stock outstanding immediately after the effective time of the share exchange. The description of the Exchange Agreement set forth herein is qualified in its entirety by the specific terms of the Exchange Agreement, a copy of which is attached hereto as an Exhibit. CERTAIN INFORMATION CONCERNING LOGICA HOLDINGS INC, PLAYS ON THE NET PLC, ANNE'S WORLD LIMITED AND CURTAIN RISING INC. BUSINESS DESCRIPTION - -------------------- Logica Holdings is a holding company whose primary focus is in the e-commerce and information technology sector. It has been and remains the intention of the Directors of the Company to build an organization that is able to react to the individual market places in which they operate in a timely and efficient manner by structuring each company as a small and compact unit, rather than having an interdependent behemoth as we see with a number of larger financial service organizations. Each subsidiary has a specific purpose and is managed by highly experienced, professional and motivated individuals whose performance is rewarded on the basis of the success of the subsidiary. Some of the subsidiaries are newly established, others are in development such as Anne's Diary and others have been established for many years such as Playsonthenet. As a diversified holding company, Logica Holdings focuses on the acquisition of emerging growth companies with a strategic focus on creating a host of competitive advantages while creating a leading market position and highly recognized brands. Maintaining a diverse portfolio of products and services that are offered to a broad and well-established customer base will create a stable, recurring revenue stream. The Company maintains a common branding strategy based on the belief that each brand is unique. The Logica Holdings brand is then used as an endorsement brand, supporting the individual brand with a sense of the group's global strength and resources. 1 Plays on the net Plc -------------------- Plays On The Net Plc began as an online database for unpublished playwrights. A platform for writers to share their work, to communicate with fellow dramatists and to explore new ideas, it has since grown into an extensive retail site and all-round theatre information site. In addition to the plays database, POTN now offers books, music and movies, and is as well-known for their audio book content as for their original drama. With contracts with a number of leading publishers already secured, the future for POTN will include extending across all media and dramatic arts to incorporate the worlds of theatre, literature, film and music in one easy-to-navigate online venue. POTN also offers classic works of literature and theatre in downloadable e-book format direct to your laptop, mobile phone or PDA. Choose from an extensive range of favorite novels, plays and poetry, including hard-to-find titles from classic writers. Curtain Rising Inc ------------------ Curtain Rising Inc began as an online database for theatres. Organized by city, the concept was a user-friendly search engine which would enable theatergoers to locate productions, venues and information with ease. It has since grown into an extensive worldwide directory of plays and theatres and a tight-knit community created by, and utilized by theatres, actors, producers and individuals with an interest in performing arts. Curtain Rising has now licensed the rights to its database and web site to Playsonthenet and the combination of the two companies set to become the single resource centre for theatergoers, playwrights and advertisers. An exciting addition to the original website, the Curtain Rising Magazine is a weekly online journal featuring the news and reviews from POTN along with feature articles, original plays and more. Presented in a stunning glossy magazine format, this is a fascinating and original resource for both theatergoers and theatre professionals and a significant addition to the POTN family of companies. Anne's World Ltd. ----------------- Anne's World Ltd has obtained the license for `Anne's Diary'. The world's first secure social networking site for children, Anne's Diary is an interactive virtual world for young people, secured with cutting-edge biometric technology in the form of a personal fingerprint reader. Inspired by the stories of "Anne of Green Gables", the site offers a safe, fun and educational environment where children can keep a private online diary and photo gallery and chat with their peers from around the world in a protected chatroom and forum, safe in the knowledge that they are communicating only with verified members of the same age. Thanks to the technology of our partners: Fujitsu, Novell and 123ID, Anne's Diary is setting new standards in online safety while offering children a unique and exciting world in which to express their creativity and interact with other young people. Partnerships with other high-end children's websites as well as police and education authorities will help bring this ground-breaking project to children and concerned parents around the world. DESCRIPTION OF PROPERTY - ----------------------- The Acquired Companies do not own any property. POTN has recently leased office space at 82 Avenue Road, Toronto, Ontario M5R 2H2, Canada. The office is approximately 2,000 square feet. The lease runs through June 2009 with an optional two year extension thereafter. The monthly rent is $14,100 (Canadian). POTN believes that the space is adequate for its current needs. 2 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - -------------------------------------------------------------- The following table sets forth the beneficial ownership of the Company's common stock, upon the closing of the Exchange Agreement transaction, by the Company's directors, executive officers, and each person known by the Company to own beneficially more than 5% of the Company's common stock % of Issued Shareholder # of Shares Owned and Outstanding Shares ------------ ----------------- ---------------------- Enzo Taddei - - Director and CFO Giuseppe Pino Baldassarre - - CEO and President Winterman Group Ltd. 12,273,671 84.93% DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS - ------------------------------------------------------------ The following individuals serve as the officer's and directors of the Company: Name Position ---- -------- Enzo Taddei Director and Chief Financial Officer Giuseppe Pino Baldassarre Chief Executive Officer and President Enzo Taddei. Mr. Taddei was appointed a Director and Chief Financial Officer of the Company March 21, 2007. He was previously the sole shareholder and director of a private accountancy firm, Adesso Res Asesores in Spain, which he operated for eight years between 1999 and 2006. Prior to setting up his own accountancy company, Mr. Taddei worked for a firm of chartered accountants based in Marbella, Malaga whilst completing his BBA degree. Mr. Taddei is fluent in English, Spanish and Italian. Mr. Taddei holds degrees in economics from the University of Malaga, Spain, a degree in Business Administration from the University of Wales, UK, and a Master Degree in Taxation and fiscal related subjects from the University of E.A.D.E in Malaga, Spain. Giuseppe Pino Baldassarre. Mr. Baldassarre was appointed the Chief Executive Officer and President of the Company May 15, 2007. From 2006 until April 2007, Mr. Baldassarre served as the Vice President of Business Development for 123ID, a software development company specializing in biometric solutions. From 2005 until March 2007, Mr. Baldassarre served as the Chief Executive Officer and President of BPT Technologies, where he was responsible for the establishment and implementation of the company's North American operations. From 2002 until 2005 Mr. Baldassarre served as the Managing Director of The Logica Group, a division of The MacKenzie Group, in Melbourne, Florida, where he was primarily responsible for logistics, sales and distribution. Mr. Baldassare received a B.A. degree in mathematics (with a minor in economics) from York University of Toronto, Canada in 1979, and an M.B.A. from INSEAD, Fontainebleau, France in 1981. 3 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE - ------------------------------------------------------------------------- None. The Company does not currently have any independent Directors on its Board of Directors. LEGAL PROCEEDINGS - ----------------- The Acquired Companies are not currently involved in any litigation that they believe could have a materially adverse effect on their financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending, or to the knowledge of the executive officers, threatened against or affecting the Acquired Companies, in which an adverse decision could have a material adverse effect. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS. - --------------------------------------------- None. Item 9.01 Financial Statements and Exhibits. (a) Financial Statements of Business Acquired. The financial statements required under Item 9.01(a) of Form 8-K are attached. (b) Proforma Financial Information. Proforma financial information required under Item 9.01(b) of Form 8-K is attached. (d) Exhibits. 99.1 Share Exchange Agreement dated July 9, 2007 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: July 13, 2007 LOGICA HOLDINGS, INC. BY: /s/ Giuseppe Pino Baldassarre ----------------------------- Giuseppe Pino Baldassarre Chief Executive Officer 5 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC) UNAUDITED PROFORMA CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2006 AND 2005 CONTENTS Consolidated Balance Sheets F-2 Consolidated Statements of Operations and Comprehensive Loss F-3 Consolidated Statements of Stockholders' Deficit F-4 Consolidated Statements of Cash Flows F-5 Notes to Consolidated Financial Statements F-6 - F-27 F-1
LOGICA HOLDINGS INC. AND SUBSIDIARIES. (FORMERLY KNOWN AS MAXIMUM AWARDS INC) Unaudited Proforma Consolidated Balance Sheets: December 31, 2006 and 2005 2006 2005 ---- ---- ASSETS Current Cash $ 63,271 $ 42,206 Accounts receivable (net of allowance $2,200; 2005-$nil) 69,962 43,766 Inventory 10,872 10,662 Prepaid Expense 5,472 -- ----------- ----------- Total Current Assets 149,577 96,634 Equipment, net (note 5) 447,439 21,285 Intangible Asset (note ) 140,450 -- ----------- ----------- Total Assets $ 737,466 $ 117,919 =========== =========== LIABILITIES Current Accounts payable $ 361,189 $ 156,048 Accrued charges 81,788 25,000 Liability for unredeemed points (note 4) 15,579 15,744 Due to related party (note 7) 116,000 39,000 Convertible debenture (note 8) 388,705 -- Advances from directors (note 8) -- 82,362 ----------- ----------- Total Current Liabilities 963,261 318,154 ----------- ----------- Total Liabilities 963,261 318,154 =========== =========== STOCKHOLDERS' DEFICIT Capital Stock (note 9) 213,677 33,052 Additional Paid-In Capital 2,475,558 1,106,850 Accumulated Other Comprehensive Loss (22,388) (27,030) Accumulated Deficit (2,892,642) (1,313,107) ----------- ----------- Total Stockholders' Deficit (225,795) (200,235) ----------- ----------- Total Liabilities and Stockholders' Deficit $ 737,466 $ 117,919 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. F-2 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC) Unaudited ProForma Consolidated Statements of Operations and Comprehensive Loss Years Ended December 31, 2006 and 2005 2006 2005 ---- ---- Revenue (note 10) $ 494,873 $ 329,927 Cost of Sales 239,250 114,871 ----------- ----------- Gross Profit 255,623 215,056 Expenses General and administrative 1,097,151 557,954 Legal and professional fees 60,294 91,956 Marketing Expense 221,125 -- Technology Content 259,164 -- Salary to related parties (note 7) 150,000 258,400 Amortization 10,791 5,697 ----------- ----------- 1,798,525 914,007 ----------- ----------- Loss from Operations (1,542,905) (698,951) ----------- ----------- Other Expense Interest expense (30,580) (1,485) ----------- ----------- Loss Before Income Taxes (1,573,482) (700,436) Provision for income taxes (note 11) (6,053) (3,681) ----------- ----------- Net Loss (1,579,535) (704,117) Foreign Currency Translation Adjustment 4,642 28,715 Comprehensive Loss $(1,574,893) $ (675,402) ----------- ----------- Basic and Fully Diluted Loss per Share $ (0.17) $ (0.38) ----------- ----------- Basic and Fully Diluted Weighted Average Number of Shares Outstanding During the Year Adjusted for Reverse Stock Split (note 14) and acquisition 9,457,364 1,771,585 ----------- ----------- The accompanying notes are an integral part of these consolidated financial statements. F-3
LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC) Unaudited Proforma Consolidated Statements of Stockholders' Deficit Years Ended December 31, 2006 and 2005 Preferred Shares --------------------- "Series A" Common Shares Accumulated Total --------------------- ----------------------- Additional Other Stockholders' Number Number Paid-In Comprehensive Accumulated (Deficit) of Shares Par Value of Shares Par Value Capital Loss Deficit Equity --------- --------- ----------- --------- ---------- ------------- ----------- ------------- Balance, January 1, 2005 1,000,000 $ 1,000 25,526,900 $ 25,527 $ 508,876 $ (55,745) $ (608,990) $ (129,332) Shares issued for cash -- -- 6,525,000 6,525 597,974 -- -- 604,499 Foreign exchange on translation -- -- -- -- -- 28,715 -- 28,715 Net loss -- -- -- -- -- -- (704,117) (704,117) --------- --------- ----------- --------- ---------- ------------- ----------- ------------- Balance, December 31, 2005 1,000,000 $ 1,000 32,051,900 $ 32,052 $1,106,850 $ (27,030) $(1,313,107) $ (200,235) Shares issued for cash -- -- 400,000 400 79,600 -- -- 80,000 Shares issued for services -- -- 225,000 225 22,275 -- -- 22,500 Shares issued for Acquisition -- -- 180,000,000 180,000 1,026,952 -- -- 1,206,952 Forgiveness of loan -- -- -- -- 239,881 -- -- 239,881 Foreign exchange on translation -- -- -- -- -- 4,642 -- 4,642 Net loss -- -- -- -- -- -- (1,579,535) (1,579,535) --------- --------- ----------- --------- ---------- ------------- ----------- ------------- Balance, December 31, 2006 1,000,000 $ 1,000 212,676,900 $ 212,677 $2,475,558 $ (22,388) $(2,892,642) $ (225,795)
The accompanying notes are an integral part of these consolidated financial statements. F-4
LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Unaudited Proforma Consolidated Statements of Cash Flows: Years Ended December 31, 2006 and 2005 2006 2005 ---- ---- Cash Flows from Operating Activities Net loss $(1,579,535) $ (704,117) Adjustments to reconcile net loss to net cash used in operating activities: Amortization 10,791 5,697 Accounts receivable (26,196) 53,003 Inventory (210) (5,470) Prepaid expenses (5,472) 2,542 Accounts payable 205,141 (46,109) Accrued charges 56,788 -- Liability for unredeemed points (165) 14,015 Stock issued for services 22,500 -- ----------- ----------- Net cash used in operating activities (1,316,358) (680,439) ----------- ----------- Cash Flows from Investing Activities Acquisition of Intangible Assets (140,450) -- Purchase of equipment (436,945) (16,096) ----------- ----------- Net cash used in investing activities (577,395) (16,096) ----------- ----------- Cash Flows from Financing Activities Advances from directors (82,362) 56,213 Decrease in notes payable -- (5,575) Increase in convertible debenture 388,705 -- Proceeds from issuance of capital stock for cash 80,000 604,499 Issuance of capital stock for acquisition 522,073 -- Additional Paid in Capital of Subsidiary acquired 684,879 -- Forgiveness of Directors Loans 239,881 -- Due to related party 77,000 39,000 ----------- ----------- Net cash provided by financing activities 1,910,176 694,137 ----------- ----------- Net Increase (Decrease) in Cash 16,423 (2,398) Foreign Exchange on Translation 4,642 28,715 Cash - beginning of year 42,206 15,889 ----------- ----------- Cash - end of year $ 63,271 $ 42,206 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. F-5 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 1. Operations and Business Maximum Awards, Inc., and Subsidiaries, formerly known as Rising Fortune Incorporated, (the "Company"), was incorporated in the State of Nevada on March 7, 1995. The Company was inactive between 1996 and 2000. In 2000, the Company entered into an agreement to distribute certain product. However, the agreement never materialized and the Company continued to remain inactive until November 18, 2003. On November 19, 2003, the Company amended its Articles of Incorporation to change its name to Maximum Awards, Inc. On December 9, 2003, the Company entered into a definitive Share Exchange Agreement (the "Agreement") with Maximum Awards (Pty) Ltd., ("Maximum Awards") an Australian corporation operating a consumer rewards program, whereby the Company acquired all of the issued and outstanding shares of the Maximum Awards in exchange for 1,466,667 common shares and 1,000,000 preferred shares Series "A" of the Company in a reverse merger transaction. The preferred shares Series "A" are non-participating, but each share is entitled to 50 votes in a general meeting. In addition, the Company issued 146,666 common shares as a finder's fee for assistance in the acquisition of Maximum Awards. As a result of the Agreement, the principal shareholder of Maximum Awards controlled 96% of the Company. While the Company is the legal parent, as a result of the reverse takeover, Maximum Awards became the parent company for accounting purposes. On June 1, 2004, the Company acquired 100% of the issued and outstanding share capital of both Global Business Group Australia Pty Ltd. ("Global Business") and Travel Easy Holidays Pty Ltd. ("Travel Easy") from the shareholders of the respective companies for $1.00 each. Global Business and Travel Easy are controlled by the same shareholder, who controls the Company and the Subsidiary. As such, this transfer of equity interests between common controlled entities is accounted for as a recapitalization of the Company with the net assets of the Subsidiary and the Company brought forward at their historical basis. F-6 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 1. Operations and Business (cont'd) The Company operates a consumer rewards points program known as Maximum Awards ("Maximum Awards Program"). Under this program, consumers earn points by purchasing products and services from a range offered by Global Business, Travel Easy, or program partners. Accumulated points then can be redeemed to acquire additional desired products or services from the same list of such items offered by Global Business or Travel Easy. Global Business, maintains a catalogue of available goods and services which a member can purchase, or acquire through the redemption of points. Travel Easy is a licensed travel agency which services the public and also allows members to purchase travel services or redeem points for airline tickets or travel packages. In July 2007, the Company acquired 100% of the issued and outstanding share capital of Plays On The Net Plc and its subsidiaries through the issue of 12,000,000 common shares. Plays on the Net Plc is a development stage company which establishes websites and online retail outlets for the sale of books, music, and movies for playback on personal computers and mobile devices. The acquisition has been accounted for as a business combination in these unaudited proforma financial statements. 2. Going Concern The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. F-7 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 The Company has sustained operating losses since inception, has raised minimal capital and has no long-term contracts related to its business plans. The Company's continuation as a going concern is uncertain and dependant on successfully bringing its services to market, achieving future profitable operations and obtaining additional sources of financing to sustain its operations. In the event the Company cannot obtain the necessary funds, it will be necessary to delay, curtail or cancel the further development of its products and services. Though the business plan indicates profitable operation in the coming year, these profits are contingent on completing and fulfillment of contracts with various providers of goods and services throughout the world to provide the Company with a cash flow to sustain operations. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. 3. Summary of Significant Accounting Policies a) Basis of Financial Statement Presentation These unaudited proforma consolidated financial statements have been prepared to reflect the financial position of the Company as if it had acquired Plays On The Net at the beginning of the reporting period. As Plays on The Net was incorporated in May, 2006, these financials include the results on Plays on the Net since that date. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, under the accrual method of accounting, with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. These statements are pro forma statements that include the statements of Plays On The Net Plc, a UK company which was acquired on July 9th through the issue of 180 million common shares. These pro forma statements are prepared to reflect the financial position of the Company and the results of operations as though the acquisition date for all business combinations that occurred had been as of the beginning of the annual reporting period. F-8 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 b) Basis of Consolidation The merger of the Company and Maximum Awards (Pty) Ltd. has been recorded as the recapitalization of the Company, with the net assets of the Subsidiary and the Company brought forward at their historical basis. The intention of the management of the Subsidiary was to acquire the Company as a shell company to be listed on the OTC Bulletin Board. Management has not pursued the business of the Company. As such, accounting for the merger as the recapitalization of the Company is deemed appropriate. In March 2007, the Company agreed to acquire 100% of the issued and outstanding share capital of Plays on The Net Plc and its subsidiaries through the issue of 180,000,000 common shares. The pending acquisition has been accounted in these unaudited proforma financial statements as a business combination. These consolidated financial statements include the financial position and results of operations of Global Business and Travel Easy and Plays and Plays On The Net Plc. The weighted average and total number of shares outstanding have been retroactively restated for each period to reflect the number of shares issued to shareholders of the subsidiary at acquisition as if that acquisition had occurred at the beginning of the reporting period. c) Unit of Measurement United States of America currency is being used as the unit of measurement in these financial statements. d) Use of Estimates In preparing the Company's consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. F-9 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 e) Inventory Inventory consists of goods purchased for resale. Inventory is valued at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis. The Company records their inventory reserves for estimated obsolescence or unmarketable inventory which is equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. f) Revenue Recognition Consumer Reward Points Program The Company does not charge a membership fee for joining the Maximum Awards Program. The Company recognizes commission income from a participating vendor when the participating vendor commits to purchasing points from the Company and collectibility is reasonably assured. Travel Agency The Company earns commission revenues from ticket sales and reports this revenue in accordance with Emerging Issues Task Force ("EITF") Issue No.99-19, "Reporting Revenue Gross as a Principal versus Net as an Agent". The Company is an agent and not the primary obligor, and accordingly the amounts earned are determined using a fixed percentage, a fixed-payment schedule, or a combination of the two. f) Revenue Recognition (cont'd) Online Shopping The Company recognizes revenue from product sales when the following four revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectibility is reasonably assured. Additionally, revenue arrangements with multiple deliverables are divided into separate units of accounting if the deliverables in the arrangement meets the following criteria: F-10 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 (1) The delivered item has value to the customer on a standalone basis; (2) There is objective and reliable evidence of the fair value of undelivered items; and (3) Delivery of any undelivered item is probable. Product sales, net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped and title passes to customers. Retail items sold to customers are made pursuant to a sales contract that provides for transfer of both title and risk of loss upon the Company's delivery to the carrier. The return policy allows customers to exchange product within 7 days. The Company periodically provides incentive offers to it's customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases, inducement offers, such as offers for future discounts subject to a minimum current purchase, and other similar offers. Current discount offers, when accepted by the customers, are treated as a reduction to the purchase price of the related transaction, while inducement offers, when accepted by the customers, are treated as a reduction to purchase price based on estimated future redemption rates. Redemption rates are estimated using the Company's historical experience for similar inducement offers. Current discount offers and inducement offers are presented as a net amount in revenue. Outbound shipping charges to customers are included in net sales. g) Foreign Currency Translation The Company accounts for foreign currency translation pursuant to Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation". The Company's functional currency is the Australian dollar. All assets and liabilities are translated into U.S. dollars using the current exchange rate. Revenues and expenses are translated using the average exchange rates prevailing throughout the year. Translation adjustments are included in other comprehensive income (loss) for the period. F-11 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 h) Fair Value of Financial Instruments The estimated fair value of financial instruments has been determined by the Company using available market information and valuation methodologies. Considerable judgment is required in estimating fair value. Accordingly, the estimates may not be indicative of the amounts the Company could realize in a current market exchange. At December 31, 2006 and 2005, the carrying amounts of cash, accounts receivable, accounts payable, accrued charges, notes payable and advances from directors approximate their fair values due to the short-term maturities of these instruments. i) Equipment Equipment is stated at cost. Depreciation, based on the estimated useful lives of the assets, is provided using rates that range between 20% and 30% using the declining balance method. Work in process primarily consists of expenditures for the development of a computer software project associated with the Company's website incurred subsequent to the completion of the preliminary project stage. In accordance with Statement of Position 98-1, "Accounting for Costs of Computer Software Developed or Obtained for Internal Use", the Company has capitalized external direct costs of material and services developed or obtained for these projects and certain payroll and payroll related expenses for employees directly associated with these projects. Amortization for the software project begins when the computer software is ready for its intended use. j) Intangible Asset Intangible asset represents costs incurred related to the publishers' contracts. The Company determined that the asset meets the indefinite life criteria outlined in Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets", because the Company expects both the contract and the cash flows generated by the contract to continue indefinitely due to the likelihood of continued renewal at little or no cost. Accordingly, the Company does not amortize this intangible asset, but instead reviews this asset at least annually for impairment. If the carrying amount of this intangible asset exceeds the fair value, an impairment loss would be recorded in an amount equal to that excess. Additionally, each reporting period, the Company assesses whether events or circumstances have occurred which indicate that the indefinite life criteria are no longer met. If the indefinite life criteria are no longer met, the Company will amortize the intangible asset over its remaining useful life. F-12 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 j) Impairment of Long-Lived Assets In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value of asset less cost to sell. As described in Note 2, the long-lived assets have been valued on a going concern basis. However, substantial doubt exists as to the ability of the Company to continue as a going concern. If the Company ceases operations, the asset values may be materially impaired. k) Income Taxes The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes". Deferred tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period. l) Share-Based Payments In accordance with SFAS No. 123 "Share-Based Payments" ("SFAS No. 123R"), the Company enters into transactions in which goods or services are the consideration received for the issuance of equity instruments. The value of these transactions are measured and accounted for, based on the fair value of the equity instrument issued or the value of the services, whichever is more reliably measurable. The services are expensed in the periods during which the services are rendered. F-13 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 m) Earnings (Loss) per Common Share The Company calculates net earnings (loss) per share based on SFAS No. 128, "Earnings per Share". Basic earnings (loss) per share is computed by dividing the net earnings (loss) attributable to the common stockholders by the weighted average number of common shares outstanding. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. n) Comprehensive Income (Loss) The Company adopted SFAS No. 130, "Reporting Comprehensive Income." (SFAS No. 130). SFAS No. 130 establishes standards for reporting and presentation of comprehensive income and its components in a full set of financial statements. Comprehensive income (loss) is presented in the statements of stockholders' (deficit) equity, and consists of net earnings (loss) and foreign currency translation adjustments. SFAS No. 130 requires only additional disclosures in the financial statements and does not affect the Company's financial position or results of operations. o) Concentration of Credit Risk SFAS No. 105, "Disclosure of Information about Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentration of Credit Risk", requires disclosure of any significant off-balance sheet risk and credit risk concentration. The Company does not have significant off-balance sheet risk or credit concentration. The Company maintains cash with major Australian financial institutions. The Company provides credit to its clients in the normal course of its operations. It carries out, on a continuing basis, credit checks on its clients and maintains provisions for contingent credit losses which, once they materialize, are consistent with management's forecasts. F-14 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 For other debts, the Company determines, on a continuing basis, the probable losses and sets up a provision for losses based on the estimated realizable value. Concentration of credit risk arises when a group of clients having a similar characteristic such that their ability to meet their obligations is expected to be affected similarly by changes in economic conditions. The Company does not have any significant risk with respect to a single client. p) Segment Reporting SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information" establishes standards for the manner in which public enterprises report segment information about operating segments. The Company has determined that its operations primarily involve four reportable segments based on the companies being consolidated: Maximum Awards Inc. - a consumer rewards program; Travel Easy Holidays Pty Ltd. - a travel agency; and Global Business Group Pty Ltd. - an online shopping business and Plays On The Net, an online book and audible content business. The Company has two regions of operations, Australia and Canada. q) Recent Accounting Pronouncements In February 2006, the "SFAS" No. 155, "Accounting for Certain Hybrid Financial Instruments--an amendment of FASB Statements No. 133 and 140" ("SFAS No. 155"). This Statement permits fair value of remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"; establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and amended SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities", to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS F-15 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 No. 155 is effective for all financial instruments acquired, issued, or subject to a remeasurement (new basis) event occurring after the beginning of an entity's first fiscal year that begins after September 15, 2006. The Company is currently reviewing the effect, if any, SFAS No. 155 will have on its financial position. In March 2006, FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets", an amendment of FASB Statement No. 140" ("SFAS No. 156"). In a significant change to current guidance, SFAS No. 156 permits an entity to choose either of the following subsequent measurement methods for each class of separately recognized servicing assets and servicing liabilities: (1) amortization method or (2) fair value measurement method. SFAS No. 156 is effective as of the beginning of an entity's first fiscal year that begins after September 15, 2006. The Company is currently reviewing the effect, if any; SFAS No. 156 will have on its financial position. In July 2006, the Financial Accounting Standard Board (FASB) issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS No. 109, "Accounting for Income Taxes". FIN 48 prescribes a recognition threshold and measurement attributable for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company does not expect the adoption of FIN 48 to have a material effect on its financial statements. In September 2006, FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 provides enhanced guidance for using fair value to measure assets and liabilities. SFAS 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. SFAS 157 does not expand the use of fair value in any new circumstances. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. F-16 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including financial statements for an interim period within that fiscal year. The Company will adopt SFAS 157 effective for periods beginning January 1, 2008. The Company is currently evaluating the impact, if any, adoption of SFAS 157 will have on it's financial statements. In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132 (R)" ("SFAS 158") which was effective for fiscal years ending after December 31, 2006. SFAS 158 requires an employer to recognize the funded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. The funded status of a benefit plan is defined as the difference between the fair value of the plan assets and the plans benefit obligation. For a pension plan the benefit obligation is the projected benefit obligation and for any other postretirement benefit plan, such as a retiree health care plan, the benefit obligation is the accumulated postretirement benefit obligation. SFAS 158 requires an employer to recognize as a component of other comprehensive income, net of tax, the gains and losses and prior service costs or credits that arise during the period but that are not recognized as components of net periodic benefit costs pursuant to SFAS No. 87, "Employers' Accounting for Pensions". SFAS 158 also requires an employer to measure the funded status of a plan as of the date of its year-end. Additional footnote disclosure is also required about certain effects on net periodic benefit cost for the next year that arise from the delayed recognition of gains or losses, prior service costs or credits, and transition asset or obligation. The Company and its subsidiary do not anticipate that the adoption of this statement will have a material effect on their financial condition or operations. In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"), which permits entities to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. An entity would report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The objective is to improve financial reporting by providing entities with the F-17 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The decision about whether to elect the fair value option is applied instrument by instrument, with a few exceptions; the decision is irrevocable; and it is applied only to entire instruments and not to portions of instruments. SFAS 159 requires disclosures that facilitate comparisons (a) between entities that choose different measurement attributes for similar assets and liabilities and (b) between assets and liabilities in the financial statements of an entity that selects different measurement attributes for similar assets and liabilities. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year provided the entity also elects to apply the provisions of SFAS 157. Upon implementation, an entity shall report the effect of the first remeasurement to fair value as a cumulative-effect adjustment to the opening balance of retained earnings. Since the provisions of SFAS 159 are applied prospectively, any potential impact will depend on the instruments selected for fair value measurement at the time of implementation. The Company is currently evaluating the impact, if any, adoption of SFAS 159 will have on its financial statements. 4. Consumer Reward Points Program The Company operates a consumer reward program, as described in Note 1, whereby, consumers earn points by purchasing goods and services with various vendors, whom are registered with the program. When a consumer purchases a good or service, the vendor remits a cash amount for the amount of points earned by the consumer to the Company. The Company does not maintain a separate escrow account for unredeemed points. The liability for unredeemed points is determined based on management's knowledge of the industry, historical trends and other competitor's valuations in similar industries. F-18
LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 5. Equipment, net 2006 2005 Accumulated Accumulated Cost Amortization Cost Amortization ----------- ------------ ----------- ------------ Office furniture and equipment $ 63,622 $ 17,322 $ 23,147 $ 6,521 Computer software 5,560 1,274 5,177 518 Work in Progress 396,853 -- 5,177 518 ----------- ------------ ----------- ------------ $ 466,035 $ 18,596 $ 28,324 $ 7,039 ----------- ------------ ----------- ------------ Net carrying amount $ 447,439 $ 21,285 ------------ ------------
6. Intangible Asset At December 31, 2006, the Company recognized an unamortized intangible asset amounting to $140,450 related to publishers' contracts that the Company entered into in 2006. 7. Related Party Balances and Transactions Related party transactions and balances were transacted with directors of the Company and a related party. During the year, the Company paid salaries to two directors and a related party for management services incurred. Transactions were in the normal course of business and recorded at an exchange value established and agreed upon by the above mentioned parties. Included in accounts receivable is $5,567 (2005 - $nil) due to a company controlled by a director. The related party balance of $116,000 ($39,000 at December 31, 2005) is owed to a shareholder of the Company for accounting services provided. Included in General and Administrative expense is $77,000 (2005 - $39,000) related to these services. The amount is non-interest bearing, unsecured and due on demand. F-19 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 8. Convertible Debenture During the year the Company sold convertible debentures to The Winterman Group totaling $388,705. These debentures are secured by the assets of the Company as per a general security agreement, bear interest at 10% per annum and are payable on demand after January 31, 2007. The investor may convert the debenture into common stock at the lower of $0.10 per share or market price of the stock at the time of election. The Company determined that no value shall be assigned to the conversion feature of these debentures as the effective interest rate of the debenture is equal to the stated interest rate. 8. Advances from Directors 2006 2005 ---- ---- Maxwell Thomas $ - $ 42,336 Michael Sullivan - 40,026 ------------- ------------- $ - $ 82,362 ============= ============= The advances are non-interest bearing, unsecured and due demand. The Directors agreed to forgo their advances on the acquisition of Plays On The Net Plc. Amounts forgiven are reflected in Additional Paid In Capital. F-20
LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 9. Capital Stock Authorized 10,000,000 Preferred shares, Series "A", par value of $0.001 per share, non-participating, voting rights of 50 votes per share 100,000,000 Common shares, par value of $0.001 per share 2006 2005 ---- ---- Issued 1,000,000 Preferred shares, Series "A" (2005 - 1,000,000) $ 1,000 $ 1,000 212,676,900 Common shares (2005 - 2,136,793) 212,677 32,052 --------- --------- $ 213,677 $ 33,052 ========= =========
On November 19, 2003, the Company amended its authorized share capital to increase the number of its authorized common shares to 100,000,000 common shares and to create 10,000,000 preferred shares with a par value of $0.001 per share. The rights of the preferred shares are to be determined at the discretion of the directors. On December 5, 2003, the board of directors designated 1,000,000 Series "A" preferred shares. The Series "A" preferred shares are non-participating but carry 50 votes per share at a general meeting. The remaining 9,000,000 preferred shares have not as yet been designated. In 2003, the shareholder of Maximum Awards (Pty) Ltd. contributed $179,523 to fund operating expenses. The amount was recorded in equity of the legal subsidiary, Maximum Awards (Pty) Ltd., and it has been reflected as additional paid in capital upon consolidation. The following transactions occurred during 2005 and 2006: a) On June 21, 2005 the Company issued 5,000 common shares for a cash consideration of $2,500. b) On October 10, 2005 the Company issued 1,500,000 common shares for a cash consideration of $150,000. c) On November 1, 2005 the Company issued 3,500,000 common shares for a cash consideration of $300,000. F-21 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 d) On November 21, 2005 the Company issued 575,000 common shares for a cash consideration of $57,500. e) On November 30, 2005 the Company issued 345,000 common shares for a cash consideration of $34,500. f) On December 12, 2005 the Company issued 550,000 common shares for a cash consideration of $55,000. g) On December 21, 2005 the Company issued 50,000 common shares for a cash consideration of $5,000. h) On March 14, 2006 the Company issued 300,000 common shares for a cash consideration of $30,000. i) On March 14, 2006 the Company issued 100,000 common shares for a cash consideration of $50,000. j) On December 15, 2006 the Company issued 225,000 common shares for services rendered, valued at $22,500. k) In March 2007, the Company agreed to issue 180 million shares for the acquisition of Plays on The Net Plc. The transaction is valued at $522,073, or $0.0029 per share. For accounting purposes, this acquisition has been included as if the acquisition occurred as of the beginning of the reporting period. Plays On The Net was incorporated on 23 May 2006. The transaction was finalized in July, 2007 l) In March 2007, as a condition to the acquisition of Plays On The Net Plc, the directors agreed to forgive their debt in the Company. The balances outstanding at December 31, 2006 amounting to $239,881 have been transferred to additional paid-in capital to reflect this condition. F-22 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 10. Segmented Information 2006 2005 ---- ---- Revenues by Segment: Plays On The Net Plc $ -- -- Maximum Awards - consumer rewards points program 10,871 13,040 Travel Easy - travel agency 269,388 154,154 Global Business - online shopping 214,614 162,733 ----------- ----------- Consolidated Revenues $ 494,873 $ 329,927 =========== =========== Operating (Loss) Income by Segment: Plays On The Net $ (708,350) -- Maximum Awards - consumer rewards points program (890,037) (569,734) Travel Easy - travel agency 77,962 (130,902) Global Business - online shopping (22,480) 1,685 ----------- ----------- Consolidated Operating Loss $(1,542,905) $ (698,951) =========== =========== Assets by Segment: Plays On The Net $ 577,542 $ -- Maximum Awards - consumer rewards points program 18,725 27,674 Travel Easy - travel agency 107,202 44,956 Global Business - online shopping 33,997 54,798 ----------- ----------- Consolidated Gross Assets $ 737,466 $ 127,428 =========== =========== Total Liabilities by Segment: Plays On The Net $ 55,469 $ -- Maximum Awards -consumer rewards points program 650,125 251,968 Travel Easy - travel agency 284,495 41,800 Global Business - online shopping 26,828 33,895 ----------- ----------- Consolidated Total Liabilities $ 963,261 $ 327,663 =========== =========== F-23 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 Revenues by Segment: Australia 494,873 $ 329,927 Canada -- -- ----------- ----------- Consolidated Revenues $ 494,873 $ 329,927 =========== =========== Operating (Loss) Income by Geographical: Australia 834,555 (698,951) Canada (708,350) -- ----------- ----------- Consolidated Operating Loss $(1,542,905) $ (698,951) =========== =========== Assets by Geographical: Australia 159,924 44,956 Canada 577,542 -- ----------- ----------- Consolidated Gross Assets $ 737,466 $ 127,428 =========== =========== Total Liabilities by Segment: Australia 907,792 41,800 Canada 55,469 -- ----------- ----------- Consolidated Total Liabilities $ 963,261 $ 327,663 =========== =========== The Company does not earn any significant revenues from a single customer. F-24 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 11. Income Taxes The Company accounts for income taxes pursuant to, "Accounting for Income Taxes" ("SFAS 109"). This standard prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates. Under SFAS 109 income taxes are recognized for the following: a) amount of tax payable for the current year, and b) deferred tax liabilities and assets for future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. The Company's current income taxes are as follows: 2006 2005 ---- ---- Expected income tax recovery for Australia at the statutory rate of 34% $ (295,625) $ (255,148) Expected income tax recovery for Canada at the statutory rate of 36.1% $ (256,470) $ (255,148) Australian income taxes 6,053 3,681 Valuation allowance 552,095 255,148 ---------- ---------- Current income taxes $ 6,053 $ 3,681 ========== ========== The Company has deferred income tax assets as follows: 2006 2005 ---- ---- Net operating losses carry forwards $ 989,322 $ 443,000 Difference in book and tax depreciation (1,852) - Valuation allowance (987,470) (443,000) ---------- ---------- Total - - ========== ========== As of December 31, 2006, the Company had net operating loss carry forwards for income tax reporting purposes of approximately $2,897,000 (2005 - $1,302,000) that may be offset against future taxable income. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs or a change in the nature of the business. Therefore, the amount available to offset future taxable income may be limited. No tax benefit has been reported in the financial statements as the Company believes there is a 50% or greater chance the carry forwards will expire unused. Accordingly, the potential tax benefits of the loss carry forwards are offset by a valuation allowance of the same amount. The tax losses will start to expire in 2026 if not used to offset future taxable income. F-25 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 12. Commitments and Contingencies The Company entered into a consulting agreement with a consultant, who is also the spouse of a shareholder of the company holding the convertible debenture referred to in note 8, for a period of six months beginning August 1, 2006. The Company will pay a monthly fee of $15,000. The consultant may opt, in lieu of cash, to receive payment for services rendered in stock at a price of $0.10 per share or market price, which ever is lower at the time of payment. The Company has determined that the conversion feature of this contract is not material and therefore has not been valued. 13. Supplemental Disclosure of Cash Flow Information The Company had cash flows from interest paid or income taxes paid for the years ended December 31, 2006 and 2005 as follows: 2006 2005 ---- ---- Cash paid during the year for: Interest paid $ 5,310 $ 1,485 Income taxes paid $ 3,681 $ 861 14. Subsequent Events On March 12, 2007, the convertible debenture was converted to common stock by The Winterman Group and as a result the Company issued 4,101,500 shares common stock to Winterman Group Ltd. The stock was converted at a rate of $0.10 per common stock (pre-split). F-26 LOGICA HOLDINGS, INC. AND SUBSIDIARIES (FORMERLY KNOWN AS MAXIMUM AWARDS INC.) Notes to Unaudited Proforma Consolidated Financial Statements December 31, 2006 and 2005 On March 12, 2007, the Company agreed to undertake the reverse split of its authorized common stock at a ratio of fifteen to one. The issued and outstanding common stock was reduced from 36,782,970 to 2,452,198, with an amended par value of $0.015 per common stock. On May 14, 2007, the Company entered into Heads of Agreement ("HOA") with Plays On The Net Plc ("POTN") for the purchase of 100% of the common stock of POTN and its subsidiary through the issuance of 12,000,000 common shares (180,000,000 shares pre-split). These unaudited proforma consolidated financial statements include the financial accounts of Plays on the Net as a subsidiary of the company and are accounted as a business combination. 15. Comparative Information Certain prior year balances have been reclassified to conform to the current year's financial statement presentation. Plays on the Net Plc does not have comparative balances as the company was incorporated in May 2006. F-27 LOGICA HOLDINGS INC AND SUBSIDIARIES (FORMERLY: MAXIMUM AWARDS INC.) INTERIM PRO-FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 2007 AND MARCH 31, 2006 UNAUDITED CONTENTS Interim Condensed Consolidated Balance Sheets F-29 Interim Condensed Consolidated Statements of Operations and Comprehensive Loss F-30 Interim Condensed Consolidated Statements of Stockholders' Deficit F-31 Interim Condensed Consolidated Statements of Cash Flows F-32 Notes to Interim Condensed Consolidated Financial Statements F-33 - 41 F-28 LOGICA HOLDINGS INC AND SUBSIDIARIES (FORMERLY: MAXIMUM AWARDS INC.) Unaudited Pro-Forma Interim Condensed Consolidated Balance Sheets March 31, 2007 and December 31, 2006 2007 2006 (Unaudited) (unaudited) ASSETS Current Cash $ 53,221 $ 63,271 Accounts receivable 61,923 69,962 Inventory 13,320 10,872 PrePaid Expense 5,531 5,472 ----------- ----------- Total Current Assets 133,995 149,577 Equipment, net (note 4) 461,154 447,439 Intangible Asset (note 5) 141,956 140,450 ----------- ----------- Total Assets $ 737,105 $ 737,466 =========== =========== LIABILITIES Current Accounts payable $ 433,725 $ 361,189 Accrued charges 90,206 81,788 Liability for unredeemed points (note 6) 15,366 15,579 Due to related parties (note 7) 340,232 116,000 Convertible debenture (note 8) -- 388,705 ----------- ----------- Total Liabilities 879,529 963,261 ----------- ----------- STOCKHOLDERS' DEFICIT Capital Stock (note 9) 216,838 213,677 Additional Paid-In Capital 2,893,947 2,475,558 Accumulated Comprehensive Loss (37,630) (22,388) Accumulated Deficit (3,215,579) (2,892,642) ----------- ----------- Total Stockholders' Deficit (142,424) (225,795) ----------- ----------- Total Liabilities and Stockholders' Deficit $ 737,105 $ 737,466 ----------- ----------- The accompanying notes are an integral part of these interim condensed consolidated financial statements. F-29
LOGICA HOLDINGS INC AND SUBSIDIARIES (FORMERLY: MAXIMUM AWARDS INC.) Unaudited Pro-Forma Interim Condensed Consolidated Statements of Operations and Comprehensive Loss Three Months Ended March 31, 2007 and March 31, 2006 2007 2006 (Unaudited) (Unaudited) Revenues $ 77,604 $ 105,217 Cost of Sales 38,490 50,795 ------------ ------------ Gross Profit 39,114 54,422 ------------ ------------ Expenses General and administrative 168,069 260,355 Legal and professional fees 18,000 10,000 Marketing Expense 11,718 -- Technology and Content 143,580 -- Depreciation 4,580 1,319 ------------ ------------ 345,947 271,674 ------------ ------------ Loss from Operations (306,833) (217,252) ------------ ------------ Other Expense Interest Expense (16,104) (1,120) ------------ ------------ Loss Before Income Taxes (322,937) (218,372) Provision for income taxes (note 13) -- -- ------------ ------------ Net Loss (322,937) (218,372) ------------ ------------ Foreign Currency Translation Adjustment (15,242) (3,190) ------------ ------------ Comprehensive Loss $ (338,179) $ (221,562) ============ ============ Basic and Diluted Loss per Share $ (0.03) $ (0.10) ============ ============ Basic and Fully Diluted Weighted Average Number of Shares Outstanding During the Period Adjusted for the reverse stock split 14,424,583 2,155,000 ============ ============
The accompanying notes are an integral part of these interim condensed consolidated financial statements. F-30
LOGICA HOLDINGS INC AND SUBSIDIARIES (FOMERLY: MAXIMUM AWARDS INC.) Unaudited Pro-Forma Interim Condensed Consolidated Statements of Stockholders' Deficit Three Months Ended March 31, 2007 and 2006 Preferred Shares "Series A" Common Shares ------------------------ ----------------------- Additional Accumulated Total Number Number Paid-In Comprehensive Accumulated Stockholders' of Shares Par Value of Shares Par Value Capital Loss Deficit Deficit ---------- --------- ----------- --------- ---------- ------------- ----------- ------------ Balance, January 1, 2006 1,000,000 1,000 32,051,900 32,052 1,106,850 (27,030) (1,313,107) (200,235) Shares issued for cash -- -- 400,000 400 79,600 -- -- 80,000 Shares issued for services -- -- 225,000 225 22,275 -- -- 22,500 Shares issued for acquisition -- -- 180,000,000 180,000 1,026,952 -- -- 1,206,952 Forgiveness of Loan -- -- -- -- 239,881 -- -- 239,881 Foreign exchange on translation -- -- -- -- -- 4,642 -- 4,642 Net loss -- -- -- -- -- -- (1,579,535) (1,579,535) ---------- --------- ----------- --------- ---------- ------------- ----------- ------------ Balance, December 31, 2006 1,000,000 1,000 212,676,900 212,677 2,475,558 (22,388) (2,892,642) (225,795) Return of preferred shares (1,000,000) (1,000) -- -- 1,000 -- -- -- Shares issued for debentures -- -- 4,101,500 4,101 406,049 -- -- 410,150 Shares issued for services -- -- 60,000 60 11,340 -- -- 11,400 Foreign exchange on translation -- -- -- -- -- (15,242) -- (15,242) Net loss -- -- -- -- -- -- (322,937) (322,937) ---------- --------- ----------- --------- ---------- ------------- ----------- ------------ Balance, March 31, 2007 -- $ -- 216,838,400 $ 216,838 $2,893,947 $ (37,630) $(3,215,579) $ (142,424) ========== ========= =========== ========= ========== ============= =========== ============
The accompanying notes are an integral part of these interim condensed consolidated financial statements. F-31
LOGICA HOLDINGS INC AND SUBSIDIARIES (FORMERLY: MAXIMUM AWARDS INC.) Unaudited Pro-Forma Interim Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, 2007 and March 31, 2006 2007 2006 (Unaudited) (Unaudited) Cash Flows from Operating Activities Net loss $(322,937) $(218,372) Adjustment for non-cash item: Depreciation 4,580 1,319 --------- --------- (318,357) (217,053) Changes in non-cash working capital: Accounts receivable 8,038 (1,520) Inventory (2,448) 2,056 Prepaid expenses (59) (11,114) Accounts payable 72,536 773 Accrued charges 8,418 -- Liability for unredeemed points (213) 2,915 --------- --------- Net Cash Used in Operating Activities (232,085) (223,943) --------- --------- Cash Flows from Investing Activities Purchase of equipment and intangible assets (19,801) (4,525) --------- --------- Net Cash Used in Investing Activities (19,801) (4,525) --------- --------- Cash Flows from Financing Activities (Conversion of) increase in convertible debentures (388,705) 158,032 Due to from related parties 224,233 (2,016) Issuance of common stock 421,550 80,000 Advances from directors -- 1,159 --------- --------- Net Cash Provided by Financing Activities 257,078 237,175 --------- --------- Net (Decrease) Increase in Cash 5,192 8,707 Foreign Exchange on Translation (15,242) (3,190) Cash - Beginning of Period 63,271 42,206 --------- --------- Cash - End of Period $ 53,221 $ 47,723 ========= =========
The accompanying notes are an integral part of these interim condensed consolidated financial statements. F-32 LOGICA HOLDINGS INC. AND SUBSIDIARIES (FORMERLY: MAXIMUM AWARDS INC) Notes to Unaudited Interim Proforma Condensed Consolidated Financial Statements March 31, 2007 Unaudited 1. Operations and Business Maximum Awards, Inc. ("Maximum"), and Subsidiaries (the "Company"), formerly known as Rising Fortune Incorporated, was incorporated in the State of Nevada on March 7, 1995. The Company was inactive between fiscal 1996 and fiscal 2003. On November 19, 2003, the Company amended its Articles of Incorporation to change its name to Maximum Awards, Inc. On December 9, 2003, Maximum entered into a definitive Share Exchange Agreement (the "Agreement") with Maximum Awards (Pty) Ltd., ("Maximum Awards") an Australian corporation operating a consumer rewards program, whereby Maximum acquired all of the issued and outstanding shares of the Maximum Awards in exchange for 22,000,000 common shares and 1,000,000 preferred shares Series "A" of Maximum in a reverse merger transaction. The preferred shares Series "A" are non-participating, but each share is entitled to 50 votes in a general meeting. In addition, Maximum issued 2,200,000 common shares as a finder's fee for assistance in the acquisition of Maximum Awards. As a result of the Agreement, the principal shareholder of Maximum Awards controls 96% of Maximum. While Maximum is the legal parent, as a result of the reverse takeover, Maximum Awards became the parent company for accounting purposes. On June 1, 2004, Maximum Awards acquired 100% of the issued and outstanding share capital of both Global Business Group Australia Pty Ltd. ("Global Business") and Travel Easy Holidays Pty Ltd. ("Travel Easy") from the shareholders of the respective companies for $1.00 each. At the time of the transaction Maximum Awards, Global Business, Travel Easy and Maximum were companies under common control. As such, this transfer of equity interests between common controlled entities is accounted for as a recapitalization of Maximum Awards with the net assets of Global Business and Travel Easy brought forward at their historical basis. The Company operates a consumer rewards points program known as Maximum Awards ("Maximum Awards Program"). Under this program, consumers earn points by purchasing products and services from a range offered by Global Business, Travel Easy, or program partners. Accumulated points then can be redeemed to acquire additional desired products or services from the same list of such items offered by Global Business or Travel Easy. Global Business, maintains a catalog of available goods and services which a member can purchase, or acquire through the redemption of points. Travel Easy is a licensed travel agency which services the public and also allows members to purchase travel services or redeem points for airline tickets or travel packages. F-33 LOGICA HOLDINGS INC. AND SUBSIDIARIES (FORMERLY: MAXIMUM AWARDS INC) Notes to Unaudited Interim Proforma Condensed Consolidated Financial Statements March 31, 2007 Unaudited In July 2007, the Company acquired 100% of the issued and outstanding share capital of Plays on The Net Plc and its subsidiaries through the issue of 12,000,000 common shares. Plays on the Net Plc is a development stage company which establishes websites and online retail outlets for the sale of books, music, and movies for playback on personal computers and mobile devices. The acquisition has been accounted for as a business combination in these unaudited proforma financial statements. 2. Going Concern The accompanying interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. The Company has sustained operating losses since inception, has raised minimal capital and has no long-term contracts related to its business plans. The Company's continuation as a going concern is uncertain and dependant on successfully bringing its services to market, achieving future profitable operations and obtaining additional sources of financing to sustain its operations. In the event the Company cannot obtain the necessary funds, it will be necessary to delay, curtail or cancel the further development of its products and services. Though the business plan indicates profitable operation in the coming year, these profits are contingent on completing and fulfillment of contracts with various providers of goods and services throughout the world to provide the Company with a cash flow to sustain operations. The interim condensed proforma consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. 3. Summary of Significant Accounting Policies The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. These financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the unaudited pro-forma consolidated financial statements and notes thereto for the year ended December 31, 2006 included in this form 8K. F-34
LOGICA HOLDINGS INC. AND SUBSIDIARIES (FORMERLY: MAXIMUM AWARDS INC) Notes to Unaudited Interim Proforma Condensed Consolidated Financial Statements March 31, 2007 Unaudited These financial statements have been prepared to show the effect of the acquisition of Plays On The Net as if the acquisition had occurred at the beginning of the period. The acquisition of Plays On The Net has been accounted for as a business combination. Recent Accounting Pronouncement In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115". This statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This statement is expected to expand the use of fair value measurement, which is consistent with the Board's long-term measurement objectives for accounting for financial instruments. This statement also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. This statement does not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value. This statement does not establish requirements for recognizing and measuring dividend income, interest income, or interest expense. This statement does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in FASB Statements No. 157, "Fair Value Measurements", and No. 107, "Disclosures about Fair Value of Financial Instruments." This statement is effective as of the beginning of the entity's first fiscal year that begins after November 15, 2007. The Company is currently reviewing the effect, if any, the proposed guidance will have on its financial statements. 4. Equipment, net March 31, December 31, 2007 2006 Accumulated Accumulated Cost Depreciation Cost Depreciation ------------ ------------ ------------ ------------ Office furniture and equipment $ 77,536 $ 21,704 $ 63,622 $ 17,322 Computer software 5,686 1,472 5,560 1,274 Work in Progress 401,108 -- 396,853 -- ------------ ------------ ------------ ------------ $ 484,330 $ 23,176 $ 466,035 $ 18,596 Net carrying amount $ 461,154 $ 447,439 ------------ ------------
F-35 LOGICA HOLDINGS INC. AND SUBSIDIARIES (FORMERLY: MAXIMUM AWARDS INC) Notes to Unaudited Interim Proforma Condensed Consolidated Financial Statements March 31, 2007 Unaudited 5. Intangible Asset The Intangible Assets amounting to $141,956 (Dec 2006 -$140,450) relates to publishers' contracts that the Company entered into in 2006. 6. Consumer Reward Points Program The Company operates a consumer reward program, as described in Note 1, whereby consumers earn points by purchasing goods and services with various vendors, whom are registered with the program. When a consumer purchases a good or service, the vendor remits a cash amount for the amount of points earned by the consumer to the Company. The Company does not maintain a separate escrow account for unredeemed points. The liability for unredeemed points is determined based on management's knowledge of the industry, historical trends and competitor's valuations in similar industries. 7. Due to Related Parties The amount due to related party is owed to shareholders of the Company for consulting services and cash investments. The amount is non-interest bearing, unsecured and due on demand. 8. Convertible Debenture During 2006, the Company sold convertible debentures to The Winterman Group totaling $388,705. These debentures were secured by the assets of the Company as per a general security agreement, bore interest at 10% per annum and were payable on demand after January 31, 2007. The debenture was converted into common stock at $0.10 per share on March 21, 2007 through the issuance of 4,101,500 common shares. 9. Advances from Directors March 31, December 31, 2007 2006 Maxwell Thomas $ -- $ 89,184 Michael Sullivan -- 150,697 ----------- ----------- $ -- $ 239,881 ----------- ----------- F-36
LOGICA HOLDINGS INC. AND SUBSIDIARIES (FORMERLY: MAXIMUM AWARDS INC) Notes to Unaudited Interim Proforma Condensed Consolidated Financial Statements March 31, 2007 Unaudited The advances are non-interest bearing, unsecured and are due on demand. The Directors agreed to forgo their advances on the acquisition of Plays On The Net Plc. Amounts forgiven are reflected in Additional Paid In Capital. 10. Capital Stock Authorized 10,000,000 Preferred shares, rights to be granted at the discretion of the Board of Directors 1,500,000,000 Common shares, par value of $0.001 per share (2006 - $0.001 per share) March 31, December 31, 2007 2006 Issued NilPreferred shares, Series "A" (December 31, 2006 - 1,000,000) $ - $ 1,000 216,838,400Common shares (December 31, 2006 - 32,676,900) 216,838 32,677 ----------- ----------- $ 216,838 $ 33,677 ----------- -----------
The following transactions occurred during 2006 and 2007: a) On January 19, 2006 the Company issued 300,000 common shares for a cash consideration of $30,000 b) On February 16, 2006 the Company issued 100,000 common shares for a cash consideration of $50,000 c) On December 15, 2006 the Company issued 225,000 common shares for a legal services valued at $22,500 d) On March 21, 2007, a director of the Company returned 1,000,000 preferred shares, Series "A" for no consideration and the Company cancelled the shares. e) On March 21, 2007 the Company issued 4,101,500 common shares for the conversion of a note held in the company. The shares were issued at $0.10 per share. f) On March 28, 2007 the Company issued 60,000 common shares (pre reverse split) for a cash consideration of $11,400 . F-37 LOGICA HOLDINGS INC. AND SUBSIDIARIES (FORMERLY: MAXIMUM AWARDS INC) Notes to Unaudited Interim Proforma Condensed Consolidated Financial Statements March 31, 2007 Unaudited g) In May 2007 the company completed a stock roll back of 15:1. The authorized share capital remained at 100 million shares after the roll back. h) In July the company completed the acquisition of Plays On The Net through the issue of 12 million common shares. 11. Related Party Transaction During the period, the Company paid salaries to a director in the amount of $ nil (2006 - $50,000). During the period, the Company also paid consulting fees to a director in the amount of $22,500 (2006 - $19,983) and consulting fees to a shareholder in the amount of $15,000 (2006 - $39,000), both of which have been included in general and administrative expenses. Included in accounts receivable is $5,567 (2006 - $5,567) due to a company controlled by a director. Included in accounts payable is $5,901 (2006 - $nil) due to a company controlled by a director. These transactions were in the normal course of business and recorded at an exchange value established and agreed upon by the related parties. 12. Segmented Information Three Months Three Months Ended Ended March 31 March 31 2007 2006 Revenues by Segment: Maximum Awards - consumer rewards points program $ -- $ 3,595 Travel Easy - travel agency 31,924 51,543 Plays On The Net -- -- Global Business - online shopping 45,680 50,079 --------- --------- Interim Consolidated Revenues $ 77,604 $ 105,217 --------- --------- Operating (Loss) Income by Segment: Maximum Awards - consumer rewards points program $ (78,576) $(169,882) Travel Easy - travel agency (60,896) (48,359) Plays On The Net (170,658) -- Global Business - online shopping 3,297 989 --------- --------- Interim Consolidated Operating Loss $(306,833) $(217,252) ========= ========= F-38 LOGICA HOLDINGS INC. AND SUBSIDIARIES (FORMERLY: MAXIMUM AWARDS INC) Notes to Unaudited Interim Proforma Condensed Consolidated Financial Statements March 31, 2007 Unaudited March 31, March 31, 2007 2006 Assets by Segment: Maximum Awards - consumer rewards points program $ 17,419 $ 18,725 Travel Easy - travel agency 82,250 107,202 Plays On The Net 606,683 577,542 Global Business - online shopping 30,753 33,997 --------- --------- Consolidated Gross Assets $ 737,105 $ 737,466 ========= ========= Liabilities by Segment: Maximum Awards - consumer rewards points program $ 249,180 $ 596,469 Travel Easy - travel agency 344,680 284,495 Plays On The Net 259,546 55,469 Global Business - online shopping 26,123 26,828 --------- --------- Consolidated Total Liabilities $ 879,529 $ 963,261 ========= ========= Geographical information is as follows: Revenues by Segment: Australia 77,604 $ 105,217 Canada -- -- --------- --------- Consolidated Revenues $ 77,604 $ 105,217 ========= ========= Operating (Loss) Income by Geographical: Australia (136,175) (217,252) Canada (170,658) -- --------- --------- Consolidated Operating Loss $(306,833) $(217,252) ========= ========= Assets by Geographical: Australia 130,422 159,924 Canada 606,683 577,542 --------- --------- Consolidated Gross Assets $ 737,105 $ 737,466 ========= ========= Total Liabilities by Segment: Australia 619,983 907,792 Canada 259,546 55,469 --------- --------- Consolidated Total Liabilities $ 879,529 $ 963,261 ========= ========= F-39
LOGICA HOLDINGS INC. AND SUBSIDIARIES (FORMERLY: MAXIMUM AWARDS INC) Notes to Unaudited Interim Proforma Condensed Consolidated Financial Statements March 31, 2007 Unaudited The Company does not earn any significant revenues from a single customer. 12. Income Taxes The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes" ("SFAS 109"). This standard prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates. Under SFAS No. 109 income taxes are recognized for the following: a) amount of tax payable for the current year, and b) deferred tax liabilities and assets for future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. The Company's current income taxes are as follows: Three Months Three Months Ended Ended March 31, March 31, 2007 2006 Expected income tax recovery at statutory tax rate of 34% $ (109,798) $ (73,368) Valuation allowance 109,798 73,368 ------------- ------------ Current income taxes $ -- $ -- ------------- ------------ The Company has deferred income tax assets as follows: March 31, December 31, 2007 2006 Deferred income tax assets $ 840,798 $ 731,000 Valuation allowance (840,798) (731,000) ---------- ---------- $ - $ - ---------- ---------- As of March 31, 2007, the Company had net operating loss carry forwards for income tax reporting purposes of approximately $2,472,000 (2006 - $2,182,000) that may be offset against future taxable income indefinitely. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs or a change in the nature of the business, therefore, the amount available to offset future taxable income may be limited. Management determined that the deferred tax assets do not satisfy the recognition criteria of SFAS No. 109 and, it is more likely than not that the losses will not be utilized, accordingly, a full valuation allowance has been recorded for this amount. F-40 LOGICA HOLDINGS INC. AND SUBSIDIARIES (FORMERLY: MAXIMUM AWARDS INC) Notes to Unaudited Interim Proforma Condensed Consolidated Financial Statements March 31, 2007 Unaudited 13. Supplemental Disclosure of Cash Flow Information: Three Months Three Months Ended Ended March 31, March 31, 2007 2006 Cash paid during the period for: Interest paid $ 2,429 - Income taxes paid - -
14. Subsequent Events On April 23, 2007, the Company agreed to undertake the reverse split of its authorized common stock at a ratio of fifteen to one. The issued and outstanding common stock was reduced from 36,782,970 to 2,452,198, with an amended par value of $0.015 per common stock. On July 9th, 2007, the Company finalized an agreement for the acquisition of Plays On The Net Plc ("POTN") for the purchase of 100% of the common stock of POTN and its subsidiary through the issuance of 12,000,000 common shares (post reverse split). The acquisition has been included in these unaudited pro-forma financial statements. F-41 EX-99.1 2 logic8k071307ex991.txt SHARES EXCHANGE AGREEMENT Exhibit 99.1 SHARE EXCHANGE AGREEMENT THIS SHARE EXCHANGE AGREEMENT ("Agreement") is dated as of July 9th, 2007, by and among MAXIMUM AWARDS, INC., a Nevada corporation (the "Company"), and the Shareholders of PLAYS ON THE NET PLC, a United Kingdom corporation ("Acquisition"), ANNE'S WOLRD Ltd. a Canadian Limited company and CURTAIN RISING Inc. a Canadian incorporated company. W I T N E S S E T H: WHEREAS, the Shareholders own 100% of the issued and outstanding capital stock of Acquisition (the "Equity Interests"); WHEREAS, Acquisition operates 3 websites (i) has developed an online store and theatre information site, with more than 500,000 books for sale and audio book titles available for download from BBC Audio, Time Warner, Harper Collins and Random House, Naxos and Little Brown, and (ii) provides information, tickets, productions search, reviews and news relating to theatre in an online magazine format; (iii) is licensed to operate a secure online diary, social networking environment and chat room for young people, with a focus on education and creative writing; WHEREAS, the Company desires to acquire from the Shareholders, and the Shareholders desires to sell to the Company, all of the Equity Interests in exchange (the "Exchange") for the issuance by the Company of 12,000,000 shares (the "Company Shares") of the Company's restricted common stock, par value $0.001 per share (the "Company Common Stock") making Acquisition a wholly-owned subsidiary of the Company, on the terms and conditions set forth below; NOW, THEREFORE, in consideration of the promises and of the mutual representations, warranties and agreements set forth herein, the parties hereto agree as follows: ARTICLE I EXCHANGE 1.1 Exchange. Subject to the terms and conditions of this Agreement on the Closing Date (as hereinafter defined): (a) The Company shall issue and deliver the Company Shares to the Shareholders allocated in the amounts designated on Schedule 1.1. (b) The Shareholders shall transfer to the Company the Equity Interests in Acquisition. 1.2 Time and Place of Closing. The closing of the transactions contemplated hereby (the "Closing") shall take place at the offices of Arnstein & Lehr LLP, 200 East Las Olas Boulevard, Suite 1700, Fort Lauderdale, Florida 33301 on such date as the parties shall mutually agree (the "Closing Date") or at such other place as the parties agree. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Acquisition and the Shareholders that as of the Closing of this Agreement: 2.1 Due Organization and Qualification; Due Authorization (a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada, with full corporate power and authority to own, lease and operate its respective business and properties and to carry on its respective business in the places and in the manner as presently conducted or proposed to be conducted. The Company is in good standing as a foreign corporation in each jurisdiction in which the properties owned, leased or operated, or the business conducted, by it requires such qualification except for any such failure, which when taken together with all other failures, is not likely to have a material adverse effect on the business of the Company taken as a whole. (b) The Company has all requisite corporate power and authority to execute and deliver this Agreement, and to consummate the transactions contemplated hereby and thereby. The Company has taken all corporate action necessary for the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, and this Agreement constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms, except as may be affected by bankruptcy, insolvency, moratoria or other similar laws affecting the enforcement of creditors' rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought. 2.2 Capitalization. The authorized equity capitalization of the Company consists of 100,000,000 shares of the Company Common Stock and 100,000,000 shares of Preferred Stock. As of the date hereof, 2,452,198 shares of the Company Common Stock are issued and outstanding, all of which shares are validly issued, fully paid and non-assessable. Except as disclosed in Schedule 2.2, there are no options, warrants, conversion privileges or other rights, agreements, arrangements or commitments obligating the Company to issue or sell any shares of capital stock of the Company or securities or obligations of any kind convertible into or exchangeable for any shares of capital stock of the Company or of any other corporation, nor are there any stock appreciation, phantom stock or similar rights outstanding based upon the book value or any other attribute of the Company. No holders of outstanding shares of the Company Common Stock are entitled to any preemptive or other similar rights. 2.3 No Conflicts or Defaults. The execution and delivery of this Agreement by the Company and the consummation of the transactions contemplated hereby do not and shall not (a) contravene the Articles of Incorporation or Bylaws of the Company or (b) with or without the giving of notice or the passage of time (i) violate, conflict with, or result in a breach of, or a default or loss of rights under, any material covenant, agreement, mortgage, indenture, lease, instrument, permit or license to which the Company is a party or by which the Company is bound, or any judgment, order or decree, or any law, rule or regulation to which the Company is subject, (ii) result in the creation of, or give any party the right to create, any lien, charge, encumbrance or any other right or adverse interest ("Liens") upon any of the assets of the Company, (iii) terminate or give any party the right to terminate, amend, abandon or refuse to perform, any material agreement, arrangement or commitment to which the Company is a party or by which the Company's assets are bound, or (iv) accelerate or modify, or give any party the right to accelerate or modify, the time within which, or the terms under which, the Company is to perform any duties or 2 obligations or receive any rights or benefits under any material agreement, arrangement or commitment to which it is a party. 2.4 SEC Reports and Financial Statements. The Company has filed all required forms, reports and documents with the Securities and Exchange commission ("SEC") from December 31, 2005 through the period ended March 31, 2007, each of which has compiled in all material respects with applicable requirements of the Securities Act of 1933, as amended (the "Securities Act"), and Securities Exchange Act of 1933 (as amended) (the "Exchange Act"), each as in effect on the date such forms, reports and documents were filed (the "Company SEC Reports"). None of such Company SEC Reports, including, without limitation, any financial statements or schedules incorporated by reference therein, contain, when filed, any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein are necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited financial statements of the Company included in the Company SEC Reports fairly present, in conformity with generally accepted accounting principals applied on a consistent basis (except as may be indicated in the notes thereto), the financial position of the company as of the dates thereof and its results of operations and changes in financial position for the periods then ended. 2.5 Employees and Independent Contractors. (a) Schedule 2.5(a) contains a complete list of the name, title, base salary and bonuses paid for each current employee or independent contractor. (b) There exists no pending or to the knowledge of the Company, threatened lawsuit, administrative proceeding or investigation between the Company and any current or former employee or independent contractor of the Company, including any claim for wrongful termination, breach of express or implied contract of employment or for violation of equal employment opportunity laws. There exist no allegations of hostile work environment, sexual discrimination or racial discrimination. 2.6 Litigation. (i) The Company has not received notice of any pending or, to the Company's knowledge, threatened action and, there is no action pending, or to the Company's knowledge, threatened, in each case, by or against the Company before any governmental authority, and (ii) there is no order outstanding against the Company. 2.7 Consents, Notices and Approvals. (a) No consent, approval, waiver, authorization of or notice or filing with, any governmental authority is required to be made or obtained by the Company in connection with the execution, delivery and performance by the Company of this Agreement and the other agreements and instruments to be executed and delivered by the Company hereunder or in connection herewith. (b) Except as set forth on Schedule 2.7(b), neither the execution and delivery of this Agreement will (i) require the consent of or notice to, any party to any material contract of the Company, or (ii) violate, or conflict with, or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or give rise to a right of termination, cancellation, modification or acceleration of the performance required by or a loss of a benefit under, any material contract of the Company. 3 2.8 Absence of Undisclosed Liabilities. Except as set fort on Schedule 2.8, the Company has not incurred any contractual liability or incurred any other liability, whether accrued, contingent, absolute, determined, indeterminable or otherwise, which was not (i) reflected or reserved against in the Company Financial Statements or (ii) incurred in the ordinary course of business consistent with past practice since December 31, 2006, in each case, in an amount less than $10,000. 2.9 Compliance with Laws; Permits. (a) The Company has not violated in any respect any order, writ, injunction or decree of any governmental authority and the Company has complied and is presently in compliance in all material respects with all applicable laws that are material to the conduct of the Company's business or ownership of its properties or assets. (b) The Company and its employees have all licenses, franchises, permits and authorizations of any governmental authority for the lawful conduct of the business of the Company as presently conducted, except for such permits or authorizations, the failure to possess would result in a material adverse effect on the Company, and such permits are in full force and effect. Schedule 2.9(b) sets forth a true, complete and accurate list of all of the material permits. Neither the Company nor any of its employees has received any notice of revocation of or default under, any permits. 2.10 Tax Matters. The Company has (x) timely filed (or there has been filed on its behalf) all tax returns required to be filed by it (taking into account valid extensions) and all tax returns are true and correct, (y) paid (or there has been paid on its behalf) in full all taxes required to be paid by it, and (z) established (or there has been established on its behalf) in the Company Financial Statements reserves that are adequate for the payment of any taxes not yet due and payable. 2.11 No Material Adverse Change. (a) Except as set forth on Schedule 2.11(a), since the date of the Company Financial Statements, the business of the Company has been conducted in the ordinary course of business. (b) Except as set forth on Schedule 2.11(b), since the date of the Company Financial Statements, there has not occurred any event, change or development that has had or could reasonably be expected to have, individually or in the aggregate, a material adverse effect. 2.12 Brokers and Finders. There are no broker, finder or investment broker fees or commissions owed or to be owed by the Company in connection with the transactions contemplated by this Agreement. 2.13 No Violation. The execution and delivery by the Company of this Agreement and the other agreements and instruments to be executed by the Company hereunder and the consummation of this Agreement do not and will not (i) conflict with or result in any breach of any provision of the respective articles of incorporation or by-laws of the Company; (ii) violate, or conflict with, or result in a breach of any provisions of or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or give rise to a right of termination, cancellation, modification or acceleration of the performance required by, any material note, bond, mortgage, indenture, deed of trust, lease, license, permit, franchise, agreement, commitment, contract or other instrument or obligation by which the Company is bound; (iii) constitute a material violation of any law, order, judgment or 4 decree to which the Company is bound; or (iv) result in the creation of any material Lien, other than the case of clauses (ii), (iii), (iv) and (v) any such violations, defaults, rights, losses or Liens that, individually, or in the aggregate, could not be reasonably expected to have a Material Adverse Effect on the Company. 2.14 Information None of the information supplied or to be supplied by the Company for inclusion or incorporation by reference in connection with this Agreement will at the date filed with the SEC contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND Shareholders Acquisition and Shareholders represent and warrant to the Company that as of the Closing of this Agreement: 3.1 Corporate Organization; Authority. (a) Acquisition is a corporation, duly organized or created, validly existing and in good standing under the laws of the United Kingdom and has all requisite corporate power and authority to (i) own, lease, operate or otherwise hold its properties and assets and to carry on its business as now being conducted and (ii) execute, deliver and perform its obligations under this Agreement and the other agreements and instruments to be executed and delivered by it hereunder or in connection herewith and to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and the other agreements and instruments to be executed and delivered by Acquisition and/or Shareholders hereunder or in connection herewith, have been duly authorized by all necessary corporate and other actions of Acquisition and Shareholders pursuant to and in accordance with the laws governing Acquisition and Shareholders. (b) Acquisition is duly qualified or licensed and in good standing as a foreign corporation, authorized to do business under the laws of each jurisdiction where the character of the properties owned, leased or used by it or the nature of its activities makes such qualification or licensing necessary, except where the failure to be so qualified or licensed, would not have a material adverse effect on Acquisition. (c) True, correct and complete copies of the Articles of Incorporation of Acquisition (the "Acquisition Charter") and bylaws of Acquisition (the "Acquisition Bylaws"), each as currently in effect, have been delivered to Buyer. Acquisition is not in violation of any term of the Acquisition Charter or the Acquisition Bylaws. (d) This Agreement and the other agreements and instruments to be executed and delivered by Acquisition and/or Shareholders hereunder or in connection herewith have been or will be duly executed and delivered by Acquisition and/or Shareholders, and constitute valid and binding obligations of Acquisition and/or Shareholders, enforceable against them in accordance with their respective terms, except as enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or other similar Laws now or hereafter in effect relating to creditors' rights 5 generally or by general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). 3.2 Capitalization. (a) The Acquisition has a total authorized capitalization consisting of 5,000,000 shares of Plays On The Net Plc, 100 shares of Anne's World Ltd. And 100 shares of Curtain Rising Inc. of which all issued and outstanding shares are held by the Shareholders. All of the Acquisition's issued and outstanding shares have been duly authorized and validly issued, and are fully paid and nonassessable and were not issued in violation of any preemptive or subscription rights, and are not subject to any preemptive or subscription rights. All of the shares have been issued in compliance with all applicable federal and state securities laws or pursuant to valid exemptions therefrom. Acquisition has no subsidiaries and owns no capital stock or other equity or beneficial interests in any entity. There are no options, warrants or other rights, arrangements, agreements, or other commitments of any kind whatsoever obligating Acquisition to grant, issue or sell any shares of capital stock or equity or beneficial interest of Acquisition. There is no obligation, contingent or otherwise, of Acquisition to provide funds to, or make any investment in (in the form of a loan, capital contribution or otherwise), or provide any guarantee with respect to the obligations of Acquisition or any other Person. 3.3 Financial Statements. The acquisition has delivered to the Company the audited balance sheet of the Company as of December 31, 2006 and the related statements of income, shareholders equity and cash flows of the Acquisition from inception through year ended December 31, 2006, and the independent auditors report thereon (the "Acquisition Audit"). In addition, the Acquisition has delivered to the Company the reviewed Balance Sheet of the Company as of March 31, 2007, and the related statements of income, shareholders equity and cash flows of the Acquisition for the three months ended March 31, 2007 (the "Interim Balance Sheet"). The Acquisition Audit and the Interim Balance Sheet are collectively referred to herein as the "Acquisition Financial Statements". The Acquisition represents that the Interim Balance Sheet has been reviewed by the Acquisition's independent certified public accountants. The Acquisition financial statements have been and will be prepared in accordance with applicable GAAP throughout the periods involved, subject, in the case of Interim Balance Sheet, to normal reoccurring year end adjustments (the effect of which will not, individually or in the aggregate, be materially adverse) and the absence of notes (that if presented, would not differ materially from those included in the Interim Balance Sheet), applied on a consistent basis, and fairly reflect and will reflect in all material respects the financial condition of the Acquisition as at the dates thereof and the results of operations of the Acquisition for the periods then ended, are true and complete and consistent with the books and records of Acquisition. Acquisition has no debt, liability or obligation of any kind, whether accrued, absolute, contingent or otherwise, except: (a) those reflected on the balance sheet contained in the Acquisition Audit or Interim Balance Sheet, including the notes thereto, and (b) liabilities incurred in the ordinary course of business since March 31, 2007, none of which will have had a material adverse effect on the financial condition of Acquisition. 6 3.4 Employees and Independent Contractors. (a) Schedule 3.4(a) contains a complete list of the name, title, base salary and bonuses paid for each current employee or independent contractor. (b) There exists no pending or to the knowledge of Acquisition or Shareholders, threatened lawsuit, administrative proceeding or investigation between Acquisition and any current or former employee or independent contractor of Acquisition, including any claim for wrongful termination, breach of express or implied contract of employment or for violation of equal employment opportunity laws. There exist no allegations of hostile work environment, sexual discrimination or racial discrimination. 3.5 Assets. Schedule 3.5 sets forth a true, correct and complete list of all tangible assets, properties and rights owned, leased or licensed by Acquisition having an individual current fair market value in excess of $25,000. All of the improvements, machinery and equipment currently used in connection with the business of Acquisition are in good and working condition and sufficient repair to permit the continual operation and conduct of the business of Acquisition as presently conducted, ordinary wear and tear excepted. Except as set forth on Schedule 3.5 Acquisition has good and valid title to all assets, properties and rights owned by Acquisition, free and clear of all liens. 3.6 Litigation. (i) Acquisition has not received notice of any pending or, to Acquisition's or Shareholder's knowledge, threatened action and, there is no action pending, or to Acquisition's or Shareholders knowledge, threatened, in each case, by or against Acquisition before any governmental authority, and (ii) there is no order outstanding against Acquisition. 3.7 Consents, Notices and Approvals. (a) No consent, approval, Permit, waiver, authorization of or notice or filing with, any governmental authority is required to be made or obtained by Acquisition in connection with the execution, delivery and performance by Acquisition of this Agreement and the other agreements and instruments to be executed and delivered by Acquisition hereunder or in connection herewith. (b) Except as set forth on Schedule 3.7(b), neither the execution and delivery of this Agreement nor the consummation of the contemplated transactions herewith will (i) require the consent of or notice to, any party to any Material Contract (as defined below), or (ii) violate, or conflict with, or result in a breach of any provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or give rise to a right of termination, cancellation, modification or acceleration of the performance required by or a loss of a benefit under, any Material Contract. 3.8 Contracts. Set forth on Schedule 3.8 is a true, correct and complete list of the Contracts, to which Acquisition is a party or by which it or its properties are bound, or pursuant to which it obtains benefits or incurs obligations in the conduct of its businesses (the "Material Contracts"). 3.9 Absence of Undisclosed Liabilities. Except as set fort on Schedule 3.9, Acquisition has not incurred any contractual liability or incurred any other liability, whether accrued, contingent, absolute, determined, indeterminable or otherwise, which was not (i) reflected or reserved against in the Acquisition Financial Statements or (ii) incurred in the ordinary course of business consistent with past practice since December 31, 2005, in each case, in an amount less than $10,000. 7 3.10 Compliance with Laws; Permits. (a) Acquisition has not violated in any respect any order, writ, injunction or decree of any governmental authority and Acquisition has complied and is presently in compliance in all material respects with all applicable laws that are material to the conduct of Acquisition's business or ownership of its properties or assets. (b) Acquisition and its employees have all licenses, franchises, permits and authorizations of any governmental authority for the lawful conduct of the business of Acquisition as presently conducted, except for such permits or authorizations, the failure to possess would result in a material adverse effect on Acquisition, and such permits are in full force and effect. Schedule 3.10(b) sets forth a true, complete and accurate list of all of the material permits. Neither Acquisition nor any of its employees has received any notice of revocation of or default under any permits. 3.11 Tax Matters. Acquisition has (x) timely filed (or there has been filed on its behalf) all tax returns required to be filed by it (taking into account valid extensions) and all tax returns are true and correct, (y) paid (or there has been paid on its behalf) in full all taxes required to be paid by it, and (z) established (or there has been established on its behalf) in the Acquisition Financial Statements reserves that are adequate for the payment of any taxes not yet due and payable. 3.12 No Material Adverse Change. (a) Except as set forth on Schedule 3.13(a), since the date of the Acquisition Financial Statements, the business of Acquisition has been conducted in the ordinary course of business. (b) Except as set forth on Schedule 3.13(b), since the date of the Acquisition Financial Statements, there has not occurred any event, change or development that has had or could reasonably be expected to have, individually or in the aggregate, a material adverse effect. 3.13 Brokers and Finders. There are no broker, finder or investment banker fees or commissions owed or to be owed by or on behalf of Acquisition in connection with the transactions contemplated by this Agreement. 3.14 Books and Records. The books of account, stock record books, minute books and other records of Acquisition, all of which have been made available to Buyer, are complete and correct in all material respects. 3.15 Shareholders Approval. The Shareholders has approved this Agreement and the related transactions and no other corporate or Shareholders consent or action is required. 3.16 No Violation. The execution and delivery by Acquisition and Shareholders of this Agreement and the other agreements and instruments to be executed by Acquisition and/or Shareholders hereunder, do not and will not (i) conflict with or result in a breach of any provision of the Acquisition Charter or the Acquisition Bylaws; (ii) violate, or conflict with, or result in a breach of any provisions of or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or give rise to a right of termination, cancellation, modification or acceleration of the 8 performance required by or a loss of a benefit under, any note, bond, mortgage, indenture, deed of trust, lease, license, permit, franchise, agreement, commitment, contract or other instrument or obligation to which Acquisition or Shareholders is a party or by which their properties are bound or affected; (iii) violate in any material respect any laws or material order applicable to Acquisition or Shareholders, or by which any of their properties are bound or affected; (iv) constitute a violation of any law, order, judgment or decree to which Acquisition or Shareholders is bound or (v) result in the creation of any lien on any Assets, other than the case of clauses (ii), (iii), (iv) and (v) any such violations, defaults, rights, losses or liens that, individually, or in the aggregate, could not be reasonable expected to have a material adverse effect on Acquisition. 3.17 Environmental. Acquisition is, and at all times has been, in full compliance with, and has not been and is not in violation of or liable under, any environmental law. Acquisition has no basis to expect, nor has Acquisition or any other person for whose conduct Acquisition is or may be held to be responsible received, any actual or threatened order, notice or other communication from governmental body or private person or entity. 3.18 Company Shares. (a) The Shareholders acknowledges that they can bear the economic risk of its investment, and has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks in the acquisition of the Company Shares. (b) The Shares are being acquired solely for the account of the Shareholders and not with a view to, or for resale in connection with, any distribution in any jurisdiction where such sale or distribution would be precluded. (c) Acquisition and the Shareholders understand that the Company Shares are not registered under the Securities Act on the ground that the sale and the issuance of securities hereunder is exempt from registration under the Securities Act pursuant to Section 4(2) thereof, and that the Company's reliance on such exemption is predicated on Acquisition's and the Shareholder's representations set forth herein. The Shareholders is deemed to be an "accredited investor" as that term is defined in Rule 501(a) of Regulation D under the Securities Act. 3.19 Intellectual Property. Acquisition, owns, or possesses adequate licenses or other valid rights to use, all existing patents, trademarks, trade names, service marks, copyrights, trade secrets and applications therefor that are material to its business as currently conducted. 3.20 Information. None of the information supplies or to be supplied by Acquisition for inclusion to the Company's Form 8-K Current Report or other SEC report will, at the time such report is filed with the SEC and at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. ARTICLE IV INDEMNIFICATION 4.1 Indemnity of Acquisition and the Shareholders The Company agrees to jointly and severally defend, indemnify and hold harmless Acquisition and the Shareholders from and against, and to reimburse Acquisition and the Shareholders with respect to, all liabilities, losses, costs and expenses, including, without limitation, reasonable attorneys' fees and disbursements, asserted against or 9 incurred by Acquisition by reason of, arising out of, or in connection with any material breach of any representation or warranty contained in this Agreement made by the Company or in any document or certificate delivered by the Company pursuant to the provisions of this Agreement or in connection with the transactions contemplated thereby. 4.2 Indemnity of the Company. Acquisition and Shareholders jointly and severally agree to defend, indemnify and hold harmless the Company from and against, and to reimburse the Company with respect to, all liabilities, losses, costs and expenses, including, without limitation, reasonable attorneys' fees and disbursements, asserted against or incurred by the Company by reason of, arising out of, or in connection with any material breach of any representation or warranty contained in this Agreement and made by Acquisition or Shareholders or in any document or certificate delivered by Acquisition or Shareholders pursuant to the provisions of this Agreement or in connection with the transactions contemplated thereby. 4.3 Indemnification Procedure. A party (an "Indemnified Party") seeking indemnification shall give prompt notice to the other party (the "Indemnifying Party") of any claim for indemnification arising under this Article 4. The Indemnifying Party shall have the right to assume and to control the defense of any such claim with counsel reasonably acceptable to such Indemnified Party, at the Indemnifying Party's own cost and expense, including the cost and expense of reasonable attorneys' fees and disbursements in connection with such defense, in which event the Indemnifying Party shall not be obligated to pay the fees and disbursements of separate counsel for such in such action. In the event, however, that such Indemnified Party's legal counsel shall determine that defenses may be available to such Indemnified Party that are different from or in addition to those available to the Indemnifying Party, in that there could reasonably be expected to be a conflict of interest if such Indemnifying Party and the Indemnified Party have common counsel in any such proceeding, or if the Indemnified Party has not assumed the defense of the action or proceedings, then such Indemnifying Party may employ separate counsel to represent or defend such Indemnified Party, and the Indemnifying Party shall pay the reasonable fees and disbursements of counsel for such Indemnified Party. No settlement of any such claim or payment in connection with any such settlement shall be made without the prior consent of the Indemnifying Party which consent shall not be unreasonably withheld. ARTICLE V DELIVERIES 5.1 Items to be delivered to Acquisition and the Shareholders prior to or at Closing by the Company. (a) certificates representing Company Shares issued in the denominations as set forth opposite the name of the Shareholders as set forth on Schedule 1.1 on or before the Closing, duly authorized, validly issued, fully paid for and non-assessable; (b) all applicable schedules hereto; (c) copies of board resolutions approving this transaction, authorizing the issuance of the Company Shares and appointing Shareholders to serve as the Company's President effective upon the Closing; 10 (d) all financial statements and tax returns in possession of the Company; (e) certificate of good standing of the Company; and (f) any other document reasonably requested by Acquisition that it deems necessary for the consummation of this Agreement. 5.2 Items to be delivered to the Company prior to or at Closing by Acquisition. (a) Acquisition Charter and Acquisition Bylaws; (b) all applicable schedules hereto; (c) all minutes and resolutions of board of directors and shareholders meetings of Acquisition; (d) original certificates representing the Equity Interests; (e) all financial statements and tax returns in possession of Acquisition; (f) copies of Acquisition's board of directors and shareholders resolutions approving this Agreement and the Exchange; (g) certificate of good standing of Acquisition; and (h) any other document reasonably requested by the Company that it deems necessary for the consummation of this transaction. ARTICLE VI CONDITIONS PRECEDENT The obligations of the parties under this Agreement shall be and are subject to fulfillment, prior to or at the Closing, of each of the following conditions any of which may be waived by the parties: (a) That each of the representations and warranties of the parties contained herein shall be true and correct at the time of the Closing Date as if such representations and warranties were made at such time. (b) That the parties shall have performed or complied with all agreements, terms and conditions required by this Agreement to be performed or complied with by them prior to or at the time of the Closing. (c) No material adverse change shall have occurred in the financial, business or trading conditions of the Company or Acquisition from the date hereof up to and including the Closing Date. ARTICLE VII COVENANTS 7.1 General Upon the terms and subject to the conditions hereof, each of the parties hereto shall (i) use all commercially reasonable efforts to take, or cause to be taken, all appropriate action and do, or cause to be done, all things necessary, proper or advisable under applicable law or otherwise to 11 consummate and make effective the Exchange and this Agreement, (ii) use all reasonable efforts to obtain from third parties any consents, licenses, permits, waivers, approvals, authorizations or orders required to be obtained or made by Acquisition or the Company or any Acquisition subsidiary, in connection with the authorization, execution and delivery of this Agreement and the consummation of the Exchange and the other transactions contemplated by this Agreement and (iii) make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement and the other transactions contemplated by this Agreement that are required under any applicable law. 7.2 Form 8-K. The Company and Acquisition shall prepare and file with the SEC a Form 8-K Current Report setting forth the terms of this Agreement and information relating to Acquisition as required by SEC regulations. ARTICLE VIII CONFIDENTIAL INFORMATION In connection with the negotiation of this Agreement and the consummation of the transactions contemplated hereby, each party hereto will have access to data and confidential information relating to the other party. Each party hereto shall treat such data and information as confidential, preserve the confidentiality thereof and not duplicate or use such data or information, except in connection with the transactions contemplated hereby, and in the event of the termination of this Agreement for any reason whatsoever, each party hereto shall return to the other all documents, work papers and other material (including all copies thereof) obtained in connection with the transactions contemplated hereby and will use reasonable efforts, including instructing its employees who have had access to such information, to keep confidential and not to use any such data or information; provided, however, that such obligations shall not apply to any data and information (i) which at the time of disclosure, is available publicly, (ii) which, after disclosure, becomes available publicly through no fault of the receiving party, (iii) which the receiving party knew or to which the receiving party had access prior to disclosure by the disclosing party, (iv) which is required by law, regulation or exchange rule, or in connection with legal process, to be disclosed, (v) which is disclosed by a receiving party to its attorneys or accountants, who shall respect the above restrictions, or (vi) which is obtained in connection with any tax matters and is disclosed in connection with the filing of tax returns or claims for refund or in conducting an audit or other proceeding. ARTICLE IX TERMINATION 9.1 Termination. This Agreement may be terminated at any time before or, at Closing, by: (a) The mutual agreement of the constituent parties; (b) Any party if: (i) Any provision of this Agreement applicable to a party shall be materially untrue or fail to be accomplished; (ii) Any legal proceeding shall have been instituted or shall be imminently threatening to delay, restrain or prevent the consummation of this Agreement; or 12 9.2 Effect of Termination. In the event of termination of this Agreement pursuant to Section 9.1, this Agreement shall become void, there shall be no liability under this Agreement on the part of the Company or Acquisition or any of their respective officers or directors, and all rights and obligations of each party hereto shall cease, except as otherwise provided in this Agreement. ARTICLE X MISCELLANEOUS 10.1 Survival of Representations, Warranties and Agreements. All representations and warranties and statements made by a party to in this Agreement or in any document or certificate delivered pursuant hereto shall survive the Closing Date for so long as the applicable statute of limitations shall remain open. Each of the parties hereto is executing and carrying out the provisions of this agreement in reliance upon the representations, warranties and covenants and agreements contained in this agreement or at the closing of the transactions herein provided for and not upon any investigation which it might have made or any representations, warranty, agreement, promise or information, written or oral, made by the other party or any other person other than as specifically set forth herein. 10.2 Access to Books and Records. During the course of this transaction through Closing, each party agrees to make available for inspection all corporate books, records and assets, and otherwise afford to each other and their respective representatives, reasonable access to all documentation and other information concerning the business, financial and legal conditions of each other for the purpose of conducting a due diligence investigation thereof. Such due diligence investigation shall be for the purpose of satisfying each party as to the business, financial and legal condition of each other for the purpose of determining the desirability of consummating the proposed transaction. The Parties further agree to keep confidential and not use for their own benefit, except in accordance with this Agreement any information or documentation obtained in connection with any such investigation. 10.3 Further Assurances. If, at any time after the Closing, the parties shall consider or be advised that any further deeds, assignments or assurances in law or that any other things are necessary, desirable or proper to complete the merger in accordance with the terms of this agreement or to vest, perfect or confirm, of record or otherwise, the title to any property or rights of the parties hereto, the Parties agree that their proper officers and directors shall execute and deliver all such proper deeds, assignments and assurances in law and do all things necessary, desirable or proper to vest, perfect or confirm title to such property or rights and otherwise to carry out the purpose of this Agreement, and that the proper officers and directors the parties are fully authorized to take any and all such action. 10.4 Notice. All communications, notices, requests, consents or demands given or required under this Agreement shall be in writing and shall be deemed to have been duly given when delivered to, or received by prepaid registered or certified mail or recognized overnight courier addressed to, or upon receipt of a facsimile sent to, the party for whom intended, as follows, or to such other address or facsimile number as may be furnished by such party by notice in the manner provided herein: If to the Company: MAXIMUM AWARDS, INC. 82 Avenue Road, Toronto, Ontario, M5R 2H2 Canada. Tel: 416-929-5798 Fax: 416-929-4093 13 If to Acquisition: PLAYS ON THE NET PLC 27 Old Gloucester Street LONDON WC1N 3XX Tel: + 44 20 7096 8943 ANNE'S WORLD LTD. & CURTAIN RISING INC Tel: 416-929-5798 Or such other as Acquisition may notify to the other parties to the Agreement by not less than five (5) Business Day's notice. 10.5 Entire Agreement. This Agreement, the Schedules and any instruments and agreements to be executed pursuant to this Agreement, sets forth the entire understanding of the parties hereto with respect to its subject matter, merges and supersedes all prior and contemporaneous understandings with respect to its subject matter and may not be waived or modified, in whole or in part, except by a writing signed by each of the parties hereto. No waiver of any provision of this Agreement in any instance shall be deemed to be a waiver of the same or any other provision in any other instance. Failure of any party to enforce any provision of this Agreement shall not be construed as a waiver of its rights under such provision. 10.6 Successors and Assigns. This Agreement shall be binding upon, enforceable against and inure to the benefit of, the parties hereto and their respective heirs, administrators, executors, personal representatives, successors and assigns, and nothing herein is intended to confer any right, remedy or benefit upon any other person. This Agreement may not be assigned by any party hereto except with the prior written consent of the other parties, which consent shall not be unreasonably withheld. 10.7 Governing Law. This Agreement shall in all respects be governed by and construed in accordance with the laws of the State of Nevada applicable to agreements made and fully to be performed in such state, without giving effect to conflicts of law principles and jurisdiction shall be in Nevada. 10.8 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.9 Construction. Headings contained in this Agreement are for convenience only and shall not be used in the interpretation of this Agreement. References herein to Articles, Sections and Exhibits are to the articles, sections and exhibits, respectively, of this Agreement. 14 The Disclosure Schedules are hereby incorporated herein by reference and made a part of this Agreement. As used herein, the singular includes the plural, and the masculine, feminine and neuter gender each includes the others where the context so indicates. 10.10 Severability. If any provision of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, this Agreement shall be interpreted and enforceable as if such provision were severed or limited, but only to the extent necessary to render such provision and this Agreement enforceable. 10.11 Costs and Expenses. Shareholders and Acquisition shall be responsible for all of their expenses incurred in connection with this Agreement and the transactions in connection herewith. The Company shall be responsible for all of its expenses incurred in connection with this Agreement and the transactions in connection herewith. IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the date first set forth above. Maximum Awards Inc. By /s/ Giuseppe Pino Baldassarre ----------------------------- Name: Giuseppe Pino Baldassarre Title: CEO Winterman Group Limited By /s/ Malcolm H. Stockdale ----------------------------- Name: Malcolm H. Stockdale 15 DISCLOSURE SCHEDULES Schedule 3.4(a) - --------------- Miss Emily K. Want - Communications Director - 120,000 CAD per year. Mr. Nicholas W. Murray - Chief Technical Officer - 80,000 CAD per year. Mr. Jorge Sariego Sanchez - Senior Software Programmer - 80,000 CAD per year. Mr. Samuel J. Bramley - Research Analyst - 34,980 CAD per year. Mr. Sean Tarry - Editor - 42,000 CAD per year. Mr. Julie Roza - Editor - 42,000 CAD per year. Mr. Karen Jackson - Editor - 42,000 CAD per year. Mr. Negar Motamed-Khorasani - Graphic Designer - 42,000 CAD per year. Mrs. Khadijah Mabayeke - Receptionist - 35,000 CAD per year. 16 -----END PRIVACY-ENHANCED MESSAGE-----