Washington, DC 20549
FORM 10-KSB
|X| Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended June 30, 1997
|_| Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
Commission file number 000-22329
POWERTRADER, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 98-0163116
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
101 South Hanley, St. Louis, MO 63105
(Address of Principal Executive Offices) (Zip Code)
(604) 685-1529
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange
Title of Each Class on Which Registered
None -
Securities registered under Section 12(g) of the Act:
Common Stock $.01 par value per share
Warrants expiring in the year 2002.
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
|_| Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.
The issuer's revenues for its most recent fiscal year. $44,373
At September 26, 1997, the aggregate market value of the voting and non-voting
common equity held by non-affiliates of PowerTrader, Inc. (the "Company") was
approximately $18,196,260, based on the last issue price of the common stock
reported by the Company on July 21st, 1997.
At September 19th, 1997, the Company had outstanding 7,883,115 shares of Common
Stock.
Transitional Small Business Disclosure Format:
Yes No X
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TABLE OF CONTENTS
PART I
Page
ITEM 1. Description of Business
ITEM 2. Description of Property
ITEM 3. Legal Proceedings
ITEM 4. Submission of Matters to a Vote of Security Holders
PART II
ITEM 5. Market for Common Equity and Related Stockholder Matters
ITEM 6. Management's Discussion and Analysis
ITEM 7. Financial Statements
ITEM 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosures
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act
ITEM 10. Executive Compensation
ITEM 11. Security Ownership of Certain Beneficial Owners and Management
ITEM 12. Certain Relationships and Related Transactions
ITEM 13. Exhibits and Reports on Form 8-K
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PART I
ITEM 1. Description of Business
Overview
PowerTrader, Inc., through its wholly-owned subsidiary PowerTrader
Software Inc., designs, develops, markets and supports informational and
analytical desktop decision support and risk management systems for both
securities professionals (including securities brokerage firms, investment
advisors and trust companies) and individual investors. The Company's products
enable its clients to capture an incoming stream of market data provided by
Market Data Vendors, store such market data for future reference, display
selected data in tabular and graphic form and analyze the data to discover
trading opportunities. The Company's systems are modular, scalable and allow
clients to leverage their investments in existing systems. Individual components
of the Company's systems can function independently, giving clients the ability
to build their system over time to integrate existing software which is meeting
their current needs. The Company's systems have been licensed to more than 200
investors. Marketed directly, as well as through distribution partners, in the
United States, Canada, Europe and the Asian/Pacific region, the Company's
products are believed to offer a combination of analytical capabilities and
trading information.
Formation of the Company
The Company was incorporated under the laws of the State of Delaware on
August 22, 1996, and acquired all of the issued and outstanding shares of the
common stock of PowerTrader Software Inc. on January 2, 1997 in a series of
transactions with the holders of such shares conducted in reliance upon
Regulation S and Section 4(2) of the Securities Act of 1933, as amended.
PowerTrader Software Inc., which conducts all of the Company's operations, was
incorporated under the laws of the Canadian Province of British Columbia on
December 29, 1988, under the original corporate name "Corporate Media Solutions,
Inc."
Industry Background
The worldwide securities industry is undergoing rapid change.
Significant increases in trading volumes, driven by demand for financial
investment services from an increasing number of persons in the 40-65 year old
age group, widespread use of complex derivative and other financial instruments,
and increased use of "marked-to-market" accounting and "value at risk"
methodologies, have imposed heavy demands on the system infrastructures of many
securities firms and institutional investors. Concurrently, the growth of global
financial markets has attracted new providers of financial services, including
discount brokerages, insurance companies, banks and trust companies, and changed
the manner in which financial services are provided, such as the adoption of
on-line trading systems. To successfully compete in this evolving environment,
securities professionals are expected to increasingly rely on information
systems to lower transaction costs, manage the exponentially increasing data
flow and provide value-added analysis services.
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As demographic, instrumental and accounting changes have changed the
means by which securities professionals compete, advances in telecommunications
and information technology have fundamentally altered the way individuals
invest. The emergence of the Internet as a tool for accessing detailed, current
information has given individual investors the capability to take charge of
their investments and raised their level of sophistication. As a result, the
Company believes that individual investors will increasingly require analytical
tools to manage available data and uncover investment opportunities.
The existing information systems installed by most investors were
typically designed to function within the limits of the then available
telecommunication and information technology. Accordingly, existing systems are
limited in their ability to collect and rapidly process incoming data flow. In
addition, such systems are generally inflexible and lack the ability to display
proprietary trading indicators or other analytic methodologies. Because existing
systems lack such sophistication, they do not provide the tools which the
Company believes are required for securities professionals and individual
investors to make effective investment decisions.
The PowerTrader Solution
The Company seeks to provide solutions to the informational and
analytical challenges of both securities professionals and individual investors.
The Company's products provide an efficient application capable of supporting
rapid deployment of data and analytical functionality. The Company's products
run in a Windows environment for ease of use.
Business Strategy
The Company's objective is to capitalize on the experience of its
management in the securities industry to become a leading provider of analytical
and informational systems to both securities professionals and individual
investors. The Company's strategy for achieving this objective includes the
following elements:
Implement Dual Market Strategy. The Company intends to aggressively
pursue both the securities professional and individual investor portions of the
market for decision support and risk management systems. The Company believes
that its service to both portions of the market results in additional benefits
not generally enjoyed by competitors serving one portion of the market or the
other. Because the Company deals with more technically oriented securities
professionals, the Company's personnel are required to have a sophisticated
knowledge of analytical and risk management methodologies. The Company has found
that such knowledge enhances the Company's ability to tailor products and
services to meet the needs of individual investors. Further, the Company has
found that the more progressive marketing concepts utilized by it in the
individual investor portion of its business can be applied to enhance demand
from securities professionals for the Company's products and services.
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Expand Product Portfolio. The Company intends to expand its product
line to meet the evolving needs of its clients. The Company continually
evaluates its offerings to determine what additional products or enhancements
are required by the securities industry and the Company develops and enhances
products internally to meet clients' needs. If the Company has the opportunity
to purchase or license proven products at a reasonable cost, it will do so in
order to avoid the time and expense involved in developing new products.
Pursue Distribution Alliances. The Company has entered into two
arrangements with securities market participants to distribute the Company's
products to their respective clients under private labels. The Company intends
to focus on building similar distribution alliances that will extend the
Company's market presence.
Expanded Services. The Company intends to expand the products and
services distributed through its Financial Wire Internet web site to include
additional news, end-of-day trading data, charting applications, investment
newsletters, articles of general or educational interest, and advertising. In
addition, the Company intends to expand its consulting services to design and
configure the architecture of a clients' systems including networking, systems
integration and data conversion.
Leverage Existing Customer Base. With a licensed customer base of more
than 200 users and two distribution partners, the Company believes significant
opportunities exist to license additional products to its existing customer
base. The Company's strategic plan envisions continuing introduction of new
products that will complement the core functionality of existing systems,
thereby allowing PowerTrader to leverage its existing customer base by offering
new modules and products, platform conversions and value added consulting
services.
Products
The Company has developed a comprehensive suite of products to manage
and analyze information available to securities professionals and private
investors. A client can purchase a comprehensive system or can buy modules
separately to match its individual needs. The Company's systems facilitate
effective decision making and delivery of high quality services.
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Number of
Product Licenses Issued Product Description
- ------- --------------- -------------------
Server 135 Decodes data feeds and arranges the
resulting data into an accessible data
base.
PowerTrader
Pro-Vision 135 Displays a continually refreshed data
base created by PowerTrader in a
customizable and searchable tabular
format.
PowerTrader Analyst 225 Displays data base created by Server in
a charting package facilitating
technical securities analysis and
custom/proprietary indicators using
Microsoft Excel and Visual Basic.
Data Manager 225 A data retrieval helper application for
use with Netscape Navigator and
Microsoft Explorer to replace data which
may have been lost in the creation of
the customer's data base. Data Manager
permits the customer to retrieve data
from the Company's Internet web site.
Formula One 225 A series of dynamic data exchange links
to four custom spreadsheet templates.
In addition to the foregoing products, which have been designed
primarily for the securities professional, the Company has developed and markets
on a subscription basis its Financial Wire products and services. Through its
Financial Wire Internet web site, the Company offers the individual investor the
opportunity to use PowerTrader Analyst and Data Manager in conjunction with an
end-of-day data file retrieved through the Company's Internet server.
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Services and Support
Client service is an important component of the Company's operations.
The Company's client/service team generally provides implementation, application
and support, education and consulting services to the Company's clients.
Additional client services are provided through computer-based training or
formal instructor-led, Company sponsored educational courses and seminars.
Through its Registered Associate Members Plan ("RAMP"), the Company offers a
pre-paid maintenance program covering software upgrades and toll-free telephone
technical support service.
The Company intends to opportunistically expand the range of client
support services it provides in order to strengthen relationships with its
clients. Such services may include customized programming, private product
labeling and collaborative web site maintenance.
Product Development
The Company is dedicated to providing state-of-the-art, integrated
systems for the securities industry. The cornerstone of the Company's
development efforts is its commitment to open client/server architecture and
Internet technology.
The Company's current project development efforts use object orientated
program methodologies. This allows the Company to develop applications based on
reusable libraries of code that the Company believes results in more cost
effective and rapid product development cycles. The Company extensively employs
Microsoft tool sets and standards in its product development efforts. The
Company believes that use of these standards and tools facilitates interfacing
with other systems and products.
The Company plans to expand its product line to meet the evolving needs
of its clients. The Company currently evaluates its offerings to determine what
additional products or enhancements are required by the securities industry and
develops or enhances products internally to meet clients' needs. However, if the
Company can purchase or license proven products at reasonable costs, it will do
so in order to avoid the time and expense involved in developing products.
Currently, the Company's product development team is focused on the following
projects:
Data Mill. An open client/server architecture system which permits
securities professionals to consolidate two or more data feeds for distribution
to terminals on a local area network or the Internet.
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I-Deal. A fully-integrated cross-platform system facilitating third
party institutional customers to place brokerage orders, access their accounts
and other on-line resources through Internet technology. I-Deal will be fully
integratable with the leading "back office" brokerage operations software
support systems.
For the fiscal years ended June 30, 1996 and 1997, the Company invested
$203,933 and $265,303, respectively on research and development. The Company
expects to continue to make significant investments in research and development,
however, there can be no assurance that the Company's financial and
technological resources will permit it to develop or market new products
successfully or respond effectively to technological changes.
Sales and Marketing
The Company's existing customers include a broad range of securities
professionals and institutional investors in the United States and around the
world. The Company's products are licensed for use at more than 200 customer
terminals. The Company's installed customer base includes:
Canaccord Capital Corporation, Ltd. Yorkton Securities, Inc.
Mohawk Oil Marleau Lamier Securities
Bank of Montreal Robert Thomas Securities
Merrill-Lynch Hong Kong Bank Discount Trading Corp.
North American Quotations
Fidelity Investments, Inc.
The Company markets its products in the United States, Canada, Europe,
the United Kingdom and the Far East directly through its sales force and
indirectly through its distribution partners. The Company's current direct sales
force is located in the Company's Vancouver, British Columbia headquarters, from
which the Company's products are marketed primarily through telemarketing and
electronic means. In addition, the Company uses direct-mail, press releases,
customer referrals and trade show participation to generate sales leads. The
Company plans to expand its direct sales force by adding field sales personnel
in the future to increase market exposure and penetration.
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The Company's sales and marketing efforts are significantly augmented
by its strategic relationships with distribution partners which generally offer
related products and services. To date, the Company has entered into a joint
marketing arrangement with North American Quotations under which such MDV will
provide product information and demonstration versions of the Company's products
to their customers. In addition, the Company has entered into a distribution
alliance with Hong Kong Bank Discount Trading Corp. under which the Company's
PowerTrader Analyst product will be distributed to each of such brokerage's 2000
customers under the name PowerCharts. The Company has also entered into a
renewable, one year contractual arrangement with Yorkton Securities Inc., in the
form of a site license for the Company's Financial Wire product suite. The
Company believes that such arrangements will significantly increase the
Company's market presence and permit its distribution partners to offer a
complete data feed, information storage and analysis system.
Products are generally shipped as orders are received, and,
accordingly, the Company has historically operated with virtually no backlog.
Because of the generally short cycle between order and shipment, the Company
does not believe that its backlog as of any particular date is meaningful.
Competition
The market for informational and analytical systems applicable to the
securities industry is intensely competitive and rapidly evolving. Most of the
Company's revenues are derived from lengthy, competition procurement processes
managed by sophisticated purchasers that extensively investigate and compare the
products offered by the Company and its competitors. The Company competes
directly with other vendors of similar systems and faces further competition
from internal management information systems departments of large securities
brokerages, many of which have developed functionally competitive proprietary
systems. The Company believes that the principal competitive factors influencing
the market for its products include vendor and product reputation, product
architecture, functionality and features, ease of use, rapidity of
implementation, quality of client support, product performance and price. The
Company has formulated and intends to implement a pricing strategy which
provides potential consumers with a basic suite of products and current end-
of-day data on a monthly subscription basis. The Company believes that this
pricing structure will differentiate it from its competitors which principally
charge for the software package and supply end-of-day market data on a
transaction based fee. There can be no assurance that the Company will be able
to compete successfully with respect to any of such factors.
Many of the Company's current and potential competitors have
significantly greater financial, managerial, developmental, technical, marketing
and sales resources than the Company and may be able to devote those resources
to develop and introduce systems more rapidly than the Company, or systems with
significantly greater functionality than and superior overall performance to
those offered by the Company. These competitors may also be able to initiate and
withstand significant price decreases more effectively than the Company. In
addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase
their ability to offer products that address the needs of current and potential
customers. New competitors or new alliances among competitors may emerge and
quickly acquire market share. Competition may, therefore, result in significant
price reductions, decreased gross revenues, loss of market share and reduced
acceptance of the Company's products.
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The Company competes with a large number of system vendors, some of
which sell comprehensive systems and some of which sell products which compete
with only one or more modules of the Company's products. The Company's believes
that it is, and will be, competitive in the market place as a result of its
current and future products' functional compatibility, sophistication, open
client/server architecture and price; the ability of each of its users to
customize the systems to meet their unique needs; and the high level of service
the Company provides to all clients.
Intellectual Property
The Company's ability to compete effectively depends to a significant
extent on its ability to protect its proprietary information. The Company relies
primarily on trade secret laws, confidentiality procedures and licensing
arrangements to protect its intellectual property rights.
The Company generally enters into confidentiality agreements with its
consultants, key employees and sales representatives and generally controls
access to and distribution of its software and other proprietary information.
Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use the Company's products or technology without
authorization or to develop similar technology independently. Although the
Company intends to defend its intellectual property rights, there can be no
assurance that the steps taken by the Company to protect its proprietary
information will be adequate to prevent misappropriation of its intellectual
property or that the Company's competitors will not independently develop
software that is substantially equivalent or superior to the Company's software.
The Company is subject to the risk of alleged infringement by it of the
intellectual property rights of others. Although the Company is not currently
aware of any pending or threatened infringement claims with respect to the
Company's current or future products, there can be no assurance that third
parties will not assert such claims or that any such claims will not require the
Company to enter into licensing agreements or result in protracted and costly
litigation, regardless of the merits of such claims. No assurance can be given
that any necessary licenses will be available or that, if available, such
licenses can be obtained on commercially reasonable terms. Furthermore,
litigation may be necessary to enforce the Company's intellectual property
rights, to protect the Company's trade secrets, to determine the validity and
scope of the proprietary rights of others or to defend against claims of
infringement. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse affect on the Company's business,
financial condition and results of operations.
Employees
As of June 30, 1997, the Company employed 12 persons, all of whom serve
on a full-time basis. The Company's employees are not represented by a labor
union and the Company's management believes that its relationships with its
employees are good.
The Company believes its future success will depend in large part, upon
the continued service of its key technical and senior management personnel and
upon the Company's continued ability to attract and retain highly qualified
technical and managerial personnel. Competition for highly qualified personnel
is intense and there can be no assurance that the Company will be able to retain
its key managerial and technical employees or that it will be able to attract
and retain additional highly qualified technical and managerial personnel in the
future.
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ITEM 2. Description of Properties
The Company operates through its wholly owned subsidiary PowerTrader
Software Inc., which occupies two offices having, in the aggregate,
approximately 4000 square feet in Vancouver, British Columbia under two leases
expiring in 1998 and 1999, respectively. The Company also maintains a sales and
marketing office in Melbourne, Australia. The Company believes that its existing
facilities will be adequate to meet its current anticipated requirements and
that, if additional space is needed, such space will be available on acceptable
terms.
ITEM 3. Legal Proceedings
The Company is not presently party to any material legal proceedings.
ITEM 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of fiscal 1997 to a
vote of security holders.
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PART II
ITEM 5. Market for Common Equity and Related Stockholder Matters
As of September 19, 1997, there is no public trading market for the
Company's Common Stock and Warrants. As of such date, the number of holders of
record of each class of security is 139 and 30, respectively.
As of such date, an aggregate of 600,000 shares of Common Stock are
subject to outstanding warrants and 460,000 shares of Common Stock are subject
to outstanding options. Currently, none of the shares outstanding held by
stockholders of the Company are eligible for sale pursuant to Rule 144 under the
Securities Act.
The Company has not declared or paid any cash dividends on its Common
Stock since its inception, and the Board of Directors presently intends to
retain cash flow for the development of the Company's business for the
foreseeable future. The declaration and payment of cash dividends in the future
will be at the discretion of the Company's Board of Directors and will depend
upon a number of factors, including, among others, future earnings, operations,
capital requirements, the general financial condition of the Company and such
other factors as the Board of Directors may deem relevant.
ITEM 6. Management's Discussion and Analysis
The following should be read in conjunction with the Financial
Statements and Notes. When used in this Management's Discussion and Analysis,
the words "believes," "anticipates," "expects" and similar expressions are
intended to identify forward-looking statements. Such statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially from those projected. Readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the date hereof.
The Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Overview
PowerTrader, Inc. ("PowerTrader" or the "Company") was incorporated
under the laws of the State of Delaware on August 22, 1996 for the purpose of
acquiring the business of PowerTrader Software Inc. in a merger, exchange of
shares or other business combination. Its sole director, officer and shareholder
was Mr. Withrow. In January, 1997, PowerTrader consummated a transaction with
the shareholders of PowerTrader Software Inc. ("PSI") pursuant to which
PowerTrader became the holder of all of the issued and outstanding shares of
PSI's capital stock, issued an aggregate of 4,174,597 to the former shareholders
of PSI (including 1,467,696 shares to a corporation controlled by Mr. Withrow)
and assumed liabilities to issue an aggregate of 2,289,517 shares and options to
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purchase an additional 149,999 shares of common stock to certain creditors of
PSI. Prior to such transactions, the Company had not engaged in any business
activity, other than with respect to organizational matters, and had no
predecessors.
Through its wholly owned subsidiary, PSI, the Company designs,
develops, markets and supports informational and analytical desktop decision
support and risk management systems for both securities professionals (including
securities brokerage firms, investment advisors and trust companies) and
individual investors. Substantially all of the Company's sales have resulted
from the distribution of Beta Products and product development work continues;
accordingly, the Company remains a development stage company.
Because of the Company's limited operating history, the Company's
results of operations to date are not necessarily indicative of future operating
results. Moreover, the Company believes that its developmental operations to
date render traditional accounting presentations meaningless.
Results of Operations
Sales.
Sales decreased 12.9% during the year ended 30 June 1997 from the same
period in 1996. Sales during each of the periods compared have been
significantly impacted by the limited financial resources available to the
Company for allocation to advertising and beta product marketing. Sales in
fiscal 1997 decreased primarily due to management's decision to focus on new
market opportunities. Consequently, the marketing efforts were de-emphasized and
greater importance was placed into developing products to capitalize on these
new opportunities resulting from the new network paradigm.
Cost of Sales.
Cost of sales decreased by $12,655 (or 30.9%) from $40,910 (or 80.3% of
sales) in fiscal 1996 to $28,255 (or 63.7% of sales) in fiscal 1997. The
decrease in cost of sales from fiscal 1996 to fiscal 1997 resulted primarily
from improved economies of scale and a continued restriction on resources to
market the company's products.
Selling, General and Administrative Costs.
Selling, General and Administrative Costs ("SGA") increased by $248,713
(or 61.4%) from $405,099 (or 794.8% of sales) in the year ending 30 June 1996 to
$653,812 (or 1,473.4% of sales) in the same period ended 30 June 1997. Such
expenses were incurred to develop the necessary organizational infrastructure to
support the implementation of the Company's business plan, and as a result of
expenses incurred in relation to the Company's proposed public offering. SGA
includes salaries and benefits for corporate management, administrative and
sales personnel, as well as rent expense for PSI's offices. Because the level of
SGA which is required to maintain adequate corporate infrastructure is
relatively fixed in nature, management anticipates that such expenses as a
percentage of sales will decline as total sales levels increase.
Development Costs.
Development Costs increased by $61,370 (or 30%) from $203,933 (or 400%
of sales) in the fiscal period ending 30 June 1996 to $265,303 (or 597.9% of
sales) for the same period ended 30 June 1997. Such increases in development
expense were primarily attributable to costs incurred to support modifications
and error corrections discovered during beta product testing of the PowerTrader
suite of products and the development of a new series of Internet based
applications.
Net Loss.
As a result of the foregoing, the Company experienced a net loss of
$902,997 (or 2,035.% of sales) in fiscal 1997 compared to a net loss of $598,971
(or 1,175.1% of sales) in fiscal 1996. Such losses may be offset in part by the
use of net loss tax carry forwards in future years. Because of additional
research and development expenses and the additional personnel expenses which
the Company believes will be necessary to establish its competitive and market
position and build the organizational infrastructure required to support
implementation of the Company's growth strategy, the Company expects to incur
further losses in the future. Such losses will likely have a negative impact on
the Company's results of operation, particularly if sales of the Company's
current products fall below expectation.
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Liquidity and Capital Resources
The principal source of funds to the Company and PSI since their
respective formation has been derived from the net proceeds of certain private
offerings of securities which, together with the proceeds of sales, have been
used to fund continued research and development expenses as well as necessary
SGA costs. Although the Company believes that the proceeds of these offerings
and, to a lesser extent, cash generated from operations, will be sufficient to
fund its operations and planned capital expenditures for at least the next
twelve months, there can be no assurance that the Company will not require
additional financing during that time or thereafter. The Company has no plans to
secure any such additional financing. The inability of the Company to obtain
additional financing, if necessary, on acceptable terms, could have a material
adverse effect on the Company's business, financial condition and results of
operations. If additional funds were raised by the issuance of equity
securities, further dilution to existing stockholders could result.
The Company's limited capital resources have caused the Company's
independent accountants to issue a report which indicates that substantial doubt
exists as to the Company's ability to continue as a going concern. The Company
believes that the potential success in securing any development contracts for
work currently in progress and tenders under negotiation will significantly
improve the capital resources of the Company and thereby address certain of the
going concern reservations. Accordingly, the Company considers the conditions
which resulted in questions about the Company's ability to continue as a going
concern will be substantially alleviated through this process.
Income Taxes
The Company did not have any material current or deferred income tax
liabilities at June 30, 1997 or 1996. However, the Company did have available
tax benefits of loss carry-forwards for 1997 totaling $1,778,400 including a
total in 1996 of $1,012,000. The Company did not record these tax benefits in
the Financial Statements because the Company believes that it is more likely
than not that the tax benefits would not be realized. Accordingly, the tax
benefits have been reduced by a valuation allowance of $758,000 in 1997 and
$495,500 in 1996.
ITEM 7. Financial Statements
The Company's Balance Sheet as of June 30, 1997 and the Statements of
Operations, Stockholders' Equity and Cash Flows for the years ended June 30,
1997 and June 30, 1996 together with the notes thereto and the reports of the
Company's independent auditors, thereon, are included as a separate section of
this report which begins on page F-1.
ITEM 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
None
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PART III
ITEM 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16 (a) of the Exchange Act.
The following table sets forth certain information concerning the directors,
executive officers and other key employees of the Company:
Name Age Position
---- --- --------
Michael C. Withrow 34 Director, Chairman, President and Chief
Executive Officer
David C. Furlonger 35 Director, Chief Financial Officer and
Secretary
George E. McCord 57 Director, Chief Information Officer
The services of Messrs. Withrow and Furlonger are provided to the
Company under an agreement with corporations wholly owned by such persons. Mr.
McCord devotes up to an aggregate of 120 hours a month to the Company's
business. Set forth below are descriptions of the backgrounds of the executive
officers and directors of the Company:
Michael C. Withrow has been a director, Chairman and President of the Company
since its inception in August 1996. Also, Mr. Withrow has served as a director
of PSI, since its inception in 1988 and in August, 1994, became President. In
September 1996, he was named Chairman of the Board of PSI. From 1990 to 1992,
Mr. Withrow was engaged as an account executive with Merisel, Canada, a
multinational distributor of computer equipment, from 1992 to 1993 as a private
professional securities trader, and from 1993 to 1994 as an institutional
securities trader with Canaccord Capital Corporation, Ltd., Vancouver, British
Columbia.
David C. Furlonger has been a director, Secretary and Chief Financial Officer of
the Company since its inception in August 1996. In September 1996, Mr. Furlonger
was named a director of PSI. From April, 1995 to March, 1996, Mr. Furlonger
served as Senior Proprietary Trader for Commerzbank AG, London, United Kingdom.
For more than five years prior thereto, he was employed by Baring Brothers & Co.
serving most recently as a manager within the treasury and trading operations.
George E. McCord was elected by the Board to fill a vacancy on the Board in June
1997. For the last eight years, Mr. McCord has acted as a Principal in the
Financial Markets Consulting Group, New York, NY. Prior to this, he served for
five years as Vice President Information Systems Development at Instinet
Corporation, New York, NY.
The Board of Directors of the Company consists of three members. The
Company's Certificate and Bylaws provide that the Board of Directors will
consist of three classes serving staggered three year terms, so that
approximately one-third of the directors will be elected at each annual meeting.
The number of directors comprising the Board of Directors may be increased or
decreased by resolution adopted by the affirmative vote of a majority of the
Board of Directors.
15
<PAGE>
Compliance with Section 16 (a) of the Exchange Act
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Company during its most recent fiscal year and Form 5 and amendments
thereto, or written representations that no Form 5 is required, furnished to the
Company, the Company believes that two reporting persons (Messrs. Withrow and
Furlonger) each failed to file on a timely basis one Form 4, each of which would
have disclosed an award of employer stock options. In addition, Mr. George
McCord failed to file on a timely basis a Form 3 upon his election as a director
of the Company.
ITEM 10. Executive Compensation
Executive Compensation
The following table summarizes information concerning cash and non-cash
compensation paid to or accrued for the benefit of the chief executive officer
of the Company for all services rendered in all capacities to the Company and
its predecessors. No other officers of the Company earned compensation of more
than $100,000 during the fiscal year ended June 30, 1997.
SUMMARY COMPENSATION TABLE
Annual Compensation
Name of Principal ------------------------------ Other Annual
Position Year Salary Bonus Compensation
-------- ---- ------ ----- ------------
Michael C. Withrow 1996 $62,963 - -
Chairman, President
and CEO of the Company
<TABLE>
<CAPTION>
Number of
Securities Percent of Total
Underlying Options Granted to
Options Employees in Fiscal
Name Granted Year Exercise Price Expiration Date
---- ------- ---- -------------- ---------------
<S> <C> <C> <C> <C>
Michael C. Withrow 200,000 43.5% 2.00 April 2000
</TABLE>
PSI has entered into an employment agreement with 458468 BC Ltd., a
British Columbia corporation wholly owned by Michael C. Withrow ("458468"), the
Company's Chairman and President. Pursuant to that agreement, 458468 will
provide the services of Mr. Withrow to manage PSI's operations. The agreement
with 458468 will expire in September, 1999, subject to renewal, at the option of
PSI, for an additional three year term. The agreement with 458468 contains
non-competition clauses that provide, in pertinent part, that during the term of
the agreements, as they may be extended, and for a period of one year
thereafter, 458468 will not engage in any activity competitive with the business
of PSI, will not solicit or attempt to solicit customers or employees of PSI,
and will not otherwise interfere with PSI's business relationships.
Director Compensation
Under the Company's present policy, no director of the Company is
entitled to receive compensation for services rendered to the Company as a
director. Directors are entitled to be reimbursed for expenses incurred by them
in attending meetings of the Board of Directors and its committees.
16
<PAGE>
ITEM 11. Security Ownership of Certain Beneficial Owners
The following table sets forth certain information as of September 19,
1997, concerning the beneficial ownership of the Company's Common Stock by each
person known by the Company to be the beneficial owner of more than five percent
of the outstanding Common Stock, each director, each executive officer named in
the Summary Compensation Table above, and all directors and executive officers
of the Company as a group. Each person named has sole voting and investment
power with respect to the shares indicated, except as otherwise stated in the
notes to the table:
Name and Address
of Beneficial Owner Amount Percent
- ------------------- ------ -------
Michael C. Withrow 1,667,697(1) 21.2%
12-1850 Argue Street
Port Coquitlam,
British Columbia
David C. Furlonger 450,000(2) 5.7%
11837 190th Street
Pitt Meadows,
British Columbia
George E. McCord 50,000(3) *
All directors and 2,167,697 27.5%
executive officers
as a group (2 persons)
- -------------------------------
* Less than 1%.
(1) The stated number of shares are held of record by 458468 of which Mr.
Withrow is the sole shareholder. Includes 200,000 shares subject to
acquisition by 458468 upon exercise of currently exerciseable options.
(2) The stated number of shares are held of record by Peridot International
Enterprises, Ltd. ("Peridot") of which Mr. Furlonger is the controlling
shareholder. Includes 100,000 shares subject to acquisition by Peridot
upon exercise of currently exerciseable options.
(3) The stated number of shares are comprised of shares subject to
acquisition by Mr. McCord upon exercise of currently exerciseable
options.
ITEM 12. Certain Relationships and Related Transactions
From time to time, the Company and its wholly owned subsidiary, PSI,
have engaged in various transactions with its directors, executive officers and
other affiliated parties. The following paragraphs summarize certain information
concerning such transactions and relationships which have occurred during the
past two fiscal years or which are presently proposed.
On August 1, 1995, Michael C. Withrow, a director and the Chairman,
President and Chief Executive Officer of the Company converted a debt owed to
him by PSI of approximately $58,736 incurred to fund working capital into equity
of 1,857,645 shares of PSI's common stock and transferred those shares to
458468. The debt was payable on demand and did not provide for the payment of
interest. The conversion ratio was determined by reference to the recent sale
prices of PSI's common stock to unaffiliated parties.
17
<PAGE>
On October 24, 1996, PSI entered into an agreement, effective as of
October 24, 1996, with Peridot, of which David C. Furlonger is the controlling
shareholder. Pursuant to such agreement, Peridot provides the services of Mr.
Furlonger, a director and the Chief Financial Officer and Secretary of the
Company, to act as principal accounting manager to PSI in exchange for an annual
fee of approximately $51,852, the right to receive certain options to purchase a
portion of the Company's common stock, and 350,000 restricted shares of the
Company's common stock.
On January 2, 1997, the Company acquired all of the issued and
outstanding shares of PSI, in which David C. Furlonger and Mr. Withrow are
directors and Mr. Withrow held a substantial equity interest. As a result of the
transaction, 458,468 became the beneficial owner of 1,467,696 shares of the
Company's Common Stock.
On June 12, 1997, PSI entered into a consulting agreement with George
E. McCord, a director and the Chief Information Officer of the Company. Pursuant
to such agreement, Mr. McCord provides to the Company up to 120 hours per month
of telephonic or other advice and counsel regarding the Company's business in
exchange for an annual fee of approximately $88,800, payment of 66.67% of all
travel, accomodation and incidental expenses incurred with respect to travel and
the right to receive a certain number of shares upon the first annual
anniversary of the date of the consulting agreement.
Except for the June 12, 1997 agreement with Mr. McCord, the terms and
conditions of the foregoing transactions were not negotiated on an arms-length
basis and inherently involve conflicts of interests between the Company and the
related party. All future transactions between the Company and its officers,
directors, principal stockholders and affiliates are required to be approved by
a majority of the independent and disinterested outside directors and must be on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties under similar circumstances.
ITEM 13. Exhibits and Reports on Form 8-K.
(a) Exhibits.
See Exhibit Index beginning on page E-1 of this Report.
(b) Reports on Form 8-K.
A report on Form 8-K was filed with the Commission dated May
2, 1997, disclosing the acquisition of certain intellectual
properties and, as part of the acquisition, the issuance of
125,000 shares of Common Stock in reliance on Regulation S.
A report on Form 8-K was filed with the Commission dated May
2, 1997, disclosing the issuance of 100,000 units, each
consisting of one share of Common Stock and one warrant to
purchase an additional share of Common Stock, in reliance on
Regulation S.
18
<PAGE>
Auditors' Report
To The Shareholders
PowerTrader, Inc.
We have audited the Consolidated Balance Sheets of PowerTrader, Inc. (A
Development Stage Company) as at June 30, 1997 and 1996 and the Consolidated
Statements of Loss, Cash Flow, and Changes in Shareholders' Equity (Deficit) for
each of the years in the three year period ended June 30, 1997. We have also
audited the Consolidated Statements of Loss, Cash Flow and Changes in
Shareholders' Equity (Deficit) for the period from December 29, 1988 (inception
of PowerTrader Software Inc.) to June 30, 1997 (cumulative). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PowerTrader,
Inc. as at June 30, 1997 and 1996 and the results of its operations and its cash
flows for each of the years in the three year period ended June 30, 1997 and the
period from December 29, 1988 (inception) to June 30, 1997 (cumulative) in
accordance with the generally accepted accounting principles in the United
States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 1 to the
financial statements, the Company has incurred recurring losses, has an
accumulated deficit and a working capital deficiency, which raises substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Vancouver, British Columbia
August 15, 1997 CHARTERED ACCOUNTANTS
F-1
<PAGE>
<TABLE>
PowerTrader, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
(Expressed in U.S. Dollars)
<CAPTION>
June 30 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current
Cash $ 99,986 $ 127,077
Deposits and prepaids 12,883 2,392
----------------------------------------
112,869 129,469
Fixed assets, note 3 754,741 57,249
----------------------------------------
$ 867,610 $ 186,718
- -----------------------------------------------------------------------------------------------------------------
Liabilities
Current
Accounts payable and accrued liabilities, note 3 $ 362,520 $ 168,655
Notes payable, note 4 74,248 -
Current portion of capital lease obligations, note 5 5,894 5,810
----------------------------------------
442,662 174,465
Capital lease obligations, note 5 2,555 8,166
Share subscriptions, note 6 - 408,089
----------------------------------------
445,217 590,720
----------------------------------------
Shareholders' Equity (Deficit)
Share capital, note 7
Authorization
The company is authorized to issue 23,000,000
common shares and 2,000,000 preferred shares
with a $.01 par value per share
Issued and outstanding common shares 986,030 646,331
7,633,115 Common shares (1996 - 4,174,597)
Capital surplus 1,389,693 -
Accumulated deficit during development stage (1,953,330) (1,050,333)
----------------------------------------
422,393 (404,002)
----------------------------------------
$ 867,610 $ 186,718
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-2
<PAGE>
<TABLE>
PowerTrader, Inc.
(A Development Stage Company)
Consolidated Statements of Loss
(Expressed in U.S. Dollars)
<CAPTION>
December 29, 1988
Year Ended Year Ended Year Ended (inception) to
June 30, June 30, June 30, June 30, 1997
1997 1996 1995 (cumulative)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $44,373 $50,971 $44,026 $ 139,370
Cost of Sales 28,255 40,910 17,411 86,576
16,118 10,061 26,615 52,794
---------------------------------------------------------------------------------
Selling, general and 653 812 405,099 369,910 1,428,821
Administrative costs
Development costs 265,303 203,933 108,067 577,303
---------------------------------------------------------------------------------
Net loss $ (902,997) $ (598,971) $ (451,362) $ (1,953,330)
- --------------------------------------------------------------------------------------------------------------------------
Loss per share $ (0.16) $ (0.14) $ (0.11)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-3
<PAGE>
<TABLE>
PowerTrader, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flow
(Expressed in U.S. Dollars)
<CAPTION>
December 29, 1988
Year Ended Year Ended Year Ended (inception) to
June 30, June 30, June 30, June 30, 1997
1997 1996 1995 (cumulative)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash provided (used) by:
Operating activities
Operations
Net loss $(902,997) $(598,971) $(451,362) $ (1,953,330)
Item not involving cash
Amortization 42,210 26,589 15,257 84,056
Increase (decrease) from
changes in:
Deposits and prepaids (10,491) (620) (1,772) (12,883)
Accounts payable and
Accrued liabilities 193,865 71,997 96,657 362,519
--------------------------------------------------------------------------------
(677,413) (501,005) (341,220) (1,519,638)
--------------------------------------------------------------------------------
Financing activities
Notes payable financing received 74,248 - - 74,248
Lease financing received - 11,074 7,716 18,790
Repayment of obligations (5,527) (3,732) (1,081) (10,340)
under capital leases
Shareholders' advances - 253,917 392,305 646,222
Issuance of share capital
and subscriptions 632,049 408,089 - 1,040,247
--------------------------------------------------------------------------------
700,720 669,348 398,940 1,769,167
--------------------------------------------------------------------------------
Investing activity
Net assets acquired on
Reverse Acquisition 314,254 - - 314,254
Investment in fixed assets (364,702) (43,690) (55,405) (463,797)
--------------------------------------------------------------------------------
(50,448) (43,690) (55,405) (149,543)
--------------------------------------------------------------------------------
Increase (decrease) in cash (27,091) 124,653 2,315 99,986
Cash, beginning of period 127,077 2,424 109 -
--------------------------------------------------------------------------------
Cash, end of period $99,986 $127,077 $2,424 $ 99,986
- -------------------------------------------------------------------------------------------------------------------------
Non-cash transactions
Shares issued for debt $ - 646,222 - $ 646,222
Share issued for software $375,000 - - $ 375,000
Acquisition
Shares issued on reverse
Acquisition of software $314,254 - - $ 314,254
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-4
<PAGE>
<TABLE>
PowerTrader, Inc.
(A Development Stage Company)
Consolidated Statements of Changes in Shareholders' Equity (Deficit)
(Expressed in U.S. Dollars)
<CAPTION>
Deficit
Accumulated
Class "A" Class "B" During the
Common Common Common Capital Development
Shares Amount Shares Amount Shares Amount Surplus Stage
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares issued for cash
29 December 1988 - $ - - $ - 100 $70 $ - $ -
Shares redeemed and
Cancelled
12 September 1989 - - - - (100) (70) - -
Shares issued
12 September 1989 100 72 100 73 - - -
Shares redeemed and
cancelled
12 July 1990 35 (24) 16 (12) - - - -
-----------------------------------------------------------------------------------------------------------
Balance at
1 July 1994 65 48 84 61 - - - -
Net loss - - - - - - - (451,362)
-----------------------------------------------------------------------------------------------------------
Balance at
30 July 1995 65 48 84 61 - - - (451,362)
Shares issued 4,174,448 646,222 - - -
for debt
Net loss - - - - (598,971)
-----------------------------------------------------------------------------------------------------------
Balance at
30 June 1996 4,174,513 646,270 84 51 - 646,331 - (1,050,333)
Reverse acquisition
1 January 1997 5,088,598 314,254 -
Shares issued for
Software share
subscriptions, note 6 - - - - 2,319,517 23,195 691,943
Computer software, note 3 125,000 1250 373,750
Cash - - - - 100,000 1000 324,000
Net loss - - - - - - - (902,997)
-----------------------------------------------------------------------------------------------------------
Balance at
30 June 1997 - - - - 7,633,115 $986,030 $1,389,693 $(1,953,330)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-5
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Summary of Significant Accounting Policies
June 30, 1997
Consolidation These financial statements include the
accounts of PowerTrader, Inc. and its
wholly-owned subsidiary PowerTrader Software
Inc. ("Software") (collectively, the
"Company") which was acquired in a "Reverse
Acquisition". Software (and not PowerTrader,
Inc.) is treated as the "acquiring" or
"continuing" entity for financial accounting
purposes, notwithstanding that PowerTrader,
Inc. is the continuing entity for legal
purposes. Accordingly, the consolidated
statements of loss are a continuation of
Software's financial statements, and therefore
reflect (i) the operations of Software from
inception (December 29, 1988) and (ii) the
operations of PowerTrader, Inc. after January
2, 1997, the date of acquisition.
All significant intercompany transactions and
balances are eliminated on consolidation.
Basis of Presentation The consolidated financial statements have
been prepared in accordance with generally
accepted accounting principles in the United
States.
Foreign Currency Translation Foreign monetary assets and liabilities are
translated into US dollars at the rates of
exchange in effect at the balance sheet dates.
Monetary assets are translated at historical
rates. Revenue and expense items are
translated at average exchange rates
prevailing during the period, except for
amortization which is translated at the same
rate as the assets to which it applies.
Foreign currency translation adjustments are
included in income.
Exchange ratios between the Canadian and US
dollar for periods presented in these
financial statements with bracketed figures
reflecting the average rate for the period
are:
June 30, 1997 US$1.00: $1.3805 (1.3663)
June 30, 1996 US$1.00 $1.3836 (1.3600)
June 30, 1995 US$1.00 $1.3725 (1.3793)
Fixed Assets Fixed assets are recorded at cost.
Amortization is provided at the following
annual rates:
Computer equipment 30% declining balance
Computer software 100% declining balance
Furniture and equipment 20% declining balance
F-6
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Summary of Significant Accounting Policies - Continued
June 30, 1997
Revenue Recognition The Company records revenue from the sale of
computer software upon shipment of products.
Research and Development Research and development costs are charged to
expense as incurred. Costs
Capitalized Software Costs Certain software development and productions
costs are capitalized upon a product's
reaching technological feasibility. The
capitalization of these costs will stop when a
product is ready for sale. Technological
feasibility is considered to be attained when
the company has completed all planning,
designing, coding and testing activities that
are necessary to establish that the product
can be produced to meet its design
specifications including functions, features
and technical performance requirements. The
Company has attained technological feasibility
on certain products, however, it has not
incurred any capitalizable costs with respect
to these products.
Estimates and Assumptions The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make
estimates and assumptions that affect the
reported amounts of assets and liabilities and
disclosure of contingent assets and
liabilities at the date of the financial
statements and the reported amounts of
revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Fair Value of Financial
Instruments The respective carrying value of certain on
balance sheet financial instruments
approximated their fair values. These
financial instruments include cash, accounts
receivable, accounts payable and accrued
liabilities, notes payable and capital lease
obligations. Fair values were assumed to
approximate carrying values for these
financial instruments since they are short
term in nature, their carrying amounts
approximate fair values or they are receivable
or payable on demand.
Loss Per Share Loss per share is calculated based on the
weighted average number of shares outstanding.
F-7
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Summary of Significant Accounting Policies - Continued
June 30, 1997
New Accounting
Pronouncements Statement of Financial Accounting Standards
No. 123, "Accounting for stock based
compensation" (SFAS No. 123). SFAS No. 123
encourages entities to adopt the fair value
method in place of the provisions of
Accounting Principles Board Opinion No. 25,
"Accounting for stock issued to employees"
(APB No. 25) for all arrangements under which
employees receive shares of stock or other
equity instruments of the employer or the
employer incurs liabilities to employees in
amounts based on the price of its stock. The
Company has elected to continue accounting for
stock options issued to employees in
accordance with APB No. 25 but will disclose
the effects of stock options in accordance
with SFAS No. 123. The adoption did not have a
material effect on the Company's financial
position or results of operations.
Statement of Financial Accounting Standards
No. 128, "Earnings Per Share ("SFAS No. 128")
issued by the Financial Accounting Standards
Board is effective for financial statements
with fiscal years beginning after December 15,
1997. The new standard simplifies guidelines
regarding the calculation and presentation of
earnings per share. The Company does not
expect adoption to have a material effect on
the presentation of its results of operations.
In June 1997, the Financial Accounting
Standards Board issued Statement of Financial
Accounting Standards No. 130, Reporting
Comprehensive Income ("SFAS 130"), which
establishes standards for reporting and
display of comprehensive income, its
components and accumulated balances.
Comprehensive income is defined to include all
changes in equity except those resulting from
investments by owners and distributions to
owners. Among other disclosures, SFAS 130
requires that all items that are required to
be recognized under current accounting
standards as components of comprehensive
income be reported in a financial statement
that is displayed with the same prominence as
other financial statements.
SFAS 130 is effective for financial statements
for periods beginning after December 15, 1997
and requires comparative information for
earlier years to be restated. Because of the
recent issuance of this standard, management
has been unable to fully evaluate the impact,
if any, SFAS 130 may have on future financial
statement disclosures. Results of operations
and financial position, however, will be
unaffected by implementation of this standard.
F-8
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Summary of Significant Accounting Policies - Continued
June 30, 1997
New Accounting
Pronouncements
continued In June 1997, the Financial Accounting
Standards Board issued SFAS No. 131,
Disclosures and Segments of an Enterprise and
Related Information ("SFAS 131") which
supersedes SFAS No. 14, Financial Reporting
for Segments of a Business Enterprise. SFAS
131 establishes standards for the way that
public companies report information about
operating segments in annual financial
statements and requires reporting of selected
information about operating segments in
interim financial statements issued to the
public. It also establishes standards for
disclosures regarding products and services,
geographic areas and major customers. SFAS 131
defines operating segments as components of
company about which separate financial
information is available that is regularly by
the chief operating decision maker in deciding
how to allocate resources and in assessing
performance.
SFAS 131 is effective for financial statements
for periods beginning after December 15, 1997
and requires comparative information for
earlier years to be restated. Because of the
recent issuance of SFAS 131, management has
been unable to fully evaluate the impact, if
any, it may have on future financial statement
disclosures. Results of operations and
financial position, however, will be
unaffected by implementation of this standard.
F-9
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
June 30, 1997
1. Nature of Business and Continued Operations
PowerTrader, Inc. and Software (the "Company") design, develop, market
and support informational and analytical desktop decision support and
risk management systems. Software was originally incorporated on
December 29, 1988 under the name Corporate Media Solutions, Inc. On
November 6, 1989, it changed its name to Precision Investment Services
and on April 16, 1996, changed its name from Precision Investment
Services, Inc. to PowerTrader Software Inc. The Company was inactive
until July 1994 when it commenced development of its current suite of
software products. On January 2, 1997, The Company was acquired in a
Reverse Acquisition by PowerTrader Software, Inc. (Note 2).
To date, since the Company has only sold Beta product and support
services, major product development work continues and the Company has
not yet recorded significant sales, accordingly, the Company is still a
development stage company with its principal business and assets in
Canada and its revenue earned in Canada.
These financial statements are stated in U.S. dollars and have been
prepared in accordance with United States generally accepted accounting
principles, on a going concern basis. As reflected in these financial
statements, the Company has at June 30, 1997 an accumulated deficit of
$1,953,330 and a working capital deficiency of $329,793. In addition,
the Company has incurred operating losses in each of the last three
years. These factors among others, raise substantial doubt about the
Company's ability to be able to continue as a going concern. The
ability of the Company to continue as a going concern is dependent on
the Company obtaining additional financing through private or public
share offerings or debt. The financial statements do not include any
adjustments related to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities
that may be necessary should the Company be unable to continue as a
going concern. However, it is reasonably possible, based on existing
knowledge, that changes in future conditions in the near term could
require a material change in the recognized amounts for the assets and
liabilities.
Management's plans in this regard are to obtain financing from private
or public share offerings or debt until such time that sufficient
revenue can be generated to sustain continuing operations.
2. Acquisition
On January 2, 1997, PowerTrader, Inc. entered into an agreement with
the shareholders of Software whereby it acquired all of the outstanding
shares of Software in exchange for 4,174,597 common shares. The
transaction was accounted for as a Reverse Acquisition, utilizing
historical costs. Software is in the same business as PowerTrader, Inc.
The financial position of PowerTrader, Inc. as of January 2, 1997 is
summarized as follows:
Tangible assets $ 314,468
Liabilities (214)
---------
Shareholders' equity $ 314,254
=========
F-10
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
June 30, 1997
The following is a summary of pro-forma sales, pro-forma net loss and
pro-forma loss per share for the Company under the assumption that the
Reverse Acquisition was completed on July 1, 1996.
1997 1996
(Unaudited) (Unaudited)
----------- -----------
Pro-forma sales $ 44,373 $ 50,971
Pro-forma net loss $ 1,164,029 $598,971
Pro-forma loss per share $ (0.20) $(0.14)
3. Fixed Assets
Accumulated
Cost Amortization 1997 Net 1996 Net
---- ------------ -------- --------
Computer equipment $186,666 $52,443 $139,224 $54,606
Computer software 626,211 29,635 596,576 2,643
Furniture and equipment 25,921 1,979 23,942 -
---------------------------------------------------
$838,798 $84,057 $754,741 $57,249
===================================================
Source code related to the acquisition of $592,312 in software during
1997 is being held in escrow pending the Company's payment of $170,228
which is presently included in accounts payable, representing the
balance of the software purchase price owing.
The estimated useful life of the fixed assets varies between 1 and 5
years.
4. Notes Payable
The notes payable bear interest at 10% per annum and are due on the
earlier of the date the Company is registered with the Securities and
Exchange Commission under the Securities Act of 1933 or on May 5, 1997.
Subsequent to year-end, $36,219 in notes payable were repaid.
5. Capital Lease Obligations
The company has two capital leases for computer equipment. Future
minimum lease payments are as follows:
1998 $ 5,894
1999 3,447
-------
9,341
Interest Component (892)
$ 8,449
F-11
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
June 30, 1997
6. Share Subscriptions
As at June 30, 1996, Software had received a total of $408,089 with
respect to subscriptions for 1,599,880 Class "A" common shares and
received a further $307,049 with respect to subscriptions for 689,637
Class "A" common shares during 1997. Software shares were never issued
for these share subscriptions, accordingly the amounts were recorded as
a liability at June 30, 1996. On the date of the Reverse Acquisition,
and shortly thereafter, these liabilities were settled through the
issuance of 2,319,517 PowerTrader, Inc. shares.
7. Share Capital
Restricted Shares
All of the outstanding common shares are restricted shares and may not
be sold in the absence of registration under the Securities Act of 1933
(United States).
Prospectus
The Company is registered under the Security Acts of 1933 and 1934
(United States) and has filed a prospectus with the Securities and
Exchange Commission for the issuance of a minimum of 1,000,000 Units
and a maximum of 1,700,000 Units, with each Unit consisting of one
share of the Company's Common Stock, $0.01 par value per share, and one
Warrant to purchase one additional share of common stock at an exercise
price of $3.50 per share for a five year period. The Warrants are
subject to redemption by the Company, at a redemption price of $0.01
per Warrant on 30 days prior written notice to the registered holder
thereof if the average closing bid price of the Common Stock as
reported by the principal market on which the Common Stock is traded
equals or exceeds $4.50 per share for any 20 trading days within a
period of 30 consecutive trading days ending on the fifth trading day
prior to the notice of redemption.
Warrants
100,000 warrants are outstanding at June 30, 1997.
Shares Issued to Director
350,000 shares issued to Director are subject to an agreement, which
contains certain restrictions on transfer over a three year period and
provisions for forfeiture upon the occurrence of certain events.
Vesting of these shares occurs as follows:
Number of Shares Date
100,000 24 October 1997
150,000 24 October 1998
100,000 24 October 1999
-------
350,000
F-12
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
June 30, 1997
8. Stock Options and Stock Compensation Plans
At June 30, 1997, all of the Company's common stock options were
exercisable. The following options, which are not part of the Company's
1996 Stock Option Plan, were outstanding at the date of the Reverse
Acquisition and June 30, 1997.
Number Exercise Price Expiry Date
------ -------------- -----------
149,999 $ 0.37 Dec 1998
100,000 1.00 Feb 1999
100,000 3.00 Feb 1999
-------
349,999
Stock Option Plan
Pursuant to the Company's 1996 Stock Option Plan ("the Plan"),
officers, key employees, advisers and consultants, of the Company may
receive stock options to purchase up to an aggregate of 750,000 shares
of the Company's Common Stock. Under the Plan, stock options awarded
under the Plan may not have a term of more than 10 years or provide for
an exercise price of less than the fair market value of the Common
Stock on the date of grant. During 1997, the Company granted under the
Plan 300,000 options, exercisable at $2.00 per share and expiring April
16, 2000.
1996 Share for Debt Agreements
The number of shares issued in connection with the 1996 Share for Debt
Agreements was determined based on management's estimate of value of
the Company at the date the agreements were entered into.
Stock Based Compensation
The Company has elected to provide pro-forma information regarding net
income and earnings per share as if compensation cost for the Company's
stock options granted had been determined in accordance with the fair
value based method prescribed in FASB Statement 123. The Company
estimates the fair value of each stock option at the grant date by
using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1997: dividend yield of
Nil-1996; expected volatility of Nil-1996; risk-free interest rates of
6.25% (1996-5.02% to 5.70%) based on US Treasury Bills yields and the
expected life of two years (1996-two years).
Under the accounting provisions of FASB Statement 123, the Company's
net loss and loss per share would have been reduced to the pro-forma
amounts indicated below:
F-13
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
June 30, 1997
1997 1996
---- ----
Net loss
As reported $ (902,997) $ (598,971)
Pro-forma $ (956,792) $ (598,971)
Loss per share
As reported $ ( 0.16) $ (0.14)
Pro-forma $ (0.16) $ (0.14)
The weighted average fair value of options granted during 1997 was
$0.24 per share and to the date of the Reverse Acquisition was $0.65
per share.
9. Related Party Transactions
During 1997, the Company paid consulting and leasing fees totaling
approximately $171,600 (1996 - $11,800 and 1995 - nil) to directors,
shareholders and a company controlled by a director of the Company.
During 1997, the Company also acquired from a director, office
equipment for $ 7100. As of 30 June 1997, there was nil owing (1996 -
$3,491) to directors.
10. Income Taxes
The Company has income tax loss carry-forwards of approximately
$1,778,400 available to reduce future taxable income, the tax effect of
which has not been recorded in these financial statements. These losses
will expire between 2002 and 2004.
Deferred tax liabilities at June 30, 1997 and 1996 were not material.
A summary of deferred tax assets and liabilities at June 30, 1997 and
1996 is as follows:
<TABLE>
<CAPTION>
Deferred
Tax Valuation Tax
Rate Amount Allowance Asset
---- ------ --------- -----
<S> <C> <C> <C> <C> <C>
1997
Tax benefit of loss
carry forward $1,778,400 .45 $899,300 $(899,300) $ -
1996
Tax benefit of loss
carry forward $1,012,000 .45 $455,403 $(455,400) $ -
</TABLE>
Since in management's opinion, it is more likely than not that the tax
benefits would not be realized, they have been reduced by a valuation
allowance of $899,300 (1996 - $ 455,400).
F-14
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in U.S. Dollars)
June 30, 1997
11. Commitments
The Company has entered compensation contracts requiring minimum
payments as follows:
1998 $ 117,391
1999 55,554
2000 19,323
----------
$ 192,268
The Company has entered into a Lease Agreement for its premises
requiring total minimum lease payments of $71,245, with required lease
payments as follows:
1998 $ 38,861
1999 32,384
----------
$ 71,245
During 1997, 1996 and 1995, the Company had rent expenses for its
premises of $27,536, $23,795 and $8,770, respectively.
12. Subsequent Events.
Subsequent to year-end the Company paid $ 50,000 to enter a one-year
license agreement to publish Financial World Magazine electronically.
Subsequent to year-end the Company issued 250,000 units for total cash
consideration of $812,500. Each unit consisted of one share and two
warrants, each warrant entitles the holder to purchase one additional
share of common stock at an exercise price of $3.50 per share for a
five year period. These shares and warrants restricted for 40 days from
the July 21, 1997 date of issue.
Subsequent to the year-end 100,000 shares and warrants became
unrestricted after a 40 day restricted day period from the May 21, 1997
date of issue.
F-15
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
POWERTRADER, INC.
By: /s/ Michael C. Withrow
Michael C. Withrow
Chairman and President
Date: September 29, 1997
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Michael C. Withrow Director, Chairman September 29, 1997
Michael C. Withrow and President
(principal executive
officer)
/s/ David C. Furlonger Director, Secretary September 29, 1997
David C. Furlonger and Vice-President
(principal financial
and accounting officer)
/s/ George E. McCord Director,
George E. McCord Chief Information Officer September 29, 1997
<PAGE>
EXHIBIT INDEX
Exhibit Number Description Page
- -------------- ----------- ----
2.1(1) Stock Acquisition Agreement...................................
3.1(1) Restated Certificate of Incorporation
of the Registrant.............................................
3.2(1) Bylaws of the Registrant......................................
4.3(1) Warrant Agreement with American Stock Transfer
and Trust Company.............................................
10.1(1) Consultant Agreement with 458468 B.C. Ltd.....................
10.2(1) Consultant Agreement with Peridot International
Enterprises, Ltd..............................................
10.3(1) Restricted Stock Agreement with Peridot International
Enterprises, Ltd..............................................
10.5(1) License Agreement with North American Quotations, Inc.........
10.6(1) License Agreement with Hong Kong Bank Discount Trading Corp...
10.7(1) PowerTrader, Inc. 1996 Stock Option Plan......................
10.8(2) Asset Purchase Agreement dated as of May 2, 1997, between
West Coast Title Search Ltd. and PowerTrader, Inc.............
10.9(3) Consulting Agreement with George E. McCord....................
11.1(3) Statement Regarding Computation of Per Share Earnings.........
21.1(1) Subsidiaries of the Registrant................................
27.1(3) Financial Data Schedule.......................................
(1) Incorporated by reference to Form SB-2 Registration Statement (File No.
333-20121) declared effective April 4, 1997.
(2) Incorporated by reference to Form 8-K dated May 2, 1997.
(3) Filed herewith.
E-1
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is made and entered into as of the 12th day
of June, 1997 by and between PowerTrader Software, Inc., a British Columbia
corporation (the "Company"), and George E. McCord ("Consultant").
W I T N E S S E T H:
WHEREAS, Consultant possesscertain specialized skills and expertise in
the fields of Finance and Information Technology.
WHEREAS, the Company desires to engage Consultant to perform certain
consulting services, and Consultant desires to be engaged by the Company to
perform such services, all upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements herein contained and for other good and valuable consideration
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
mutually agree as follows:
1. Recitals. The above recitals are, and shall be construed to be,
incorporated into and made an integral part of this Agreement.
2. Engagement. The Company hereby engages Consultant as consultant to
provide advice and counsel and Consultant hereby accept such engagement, upon
the terms and conditions provided for in this Agreement.
3. Basic Services. During each calendar year of Consultant's Period of
Engagement (as hereinafter defined) pursuant to the terms of this Agreement,
Consultant shall make available the services of George E. McCord to provide the
Company with an aggregate of up to one hundred twenty (120) hours per month of
telephonic or other advice and counsel regarding the Company's business. Such
advice and counsel shall be rendered only during normal business hours upon
reasonable notice and request of the Company. In providing such advice and
counsel, Consultant shall exercise such degree of care and diligence as is
consistent with the professional standards prevailing in Canada and all of such
advice and counsel shall be provided as expeditiously as is consistent with said
standards.
4. Compensation for Services. As compensation for the advice and
counsel to be provided by Consultant under this Agreement during the Period of
Engagement (as hereinafter defined), the Company agrees to pay to Consultant,
and Consultant agrees to accept, the aggregate sum of One Hundred Twenty
Thousand Canadian Dollars (CDN $120,000) per year (the "Consulting Fee").
Commencing on July 1st, 1997, the Consulting Fee shall accrue semi-monthly at a
rate of Two Thousand Five Hundred Canadian Dollars (CDN $2,500), and shall be
payable on the 15th and last day (each of which is hereinafter referred to as a
"Payment Date") of each calendar month thereafter during the Period of
Engagement.
In addition, on the first annual anniversary of the date of this
Agreement and on each such anniversary thereof during the Period of Engagement,
<PAGE>
the Company shall cause to be issued to Consultant a number of shares of the
common stock of Power Trader, Inc., a Delaware corporation having an aggregate
market value (as determined by the Board of Directors of PowerTrader, Inc.) of
Sixty Thousand Canadian Dollars (CDN $60,000).
5. Period of Engagement. The initial Period of Engagement under this
Agreement shall commence on the date hereof and expire on July 1st, 1998. The
Period of Engagement shall be extended automatically from year to year
thereafter (each an "Extended Period of Engagement"), provided however that
either party may terminate the Period of Engagement under this Agreement at the
end of the initial Period of Engagement or any Extended Period of Engagement by
providing the other party with written notice of termination not less than
thirty nor more than sixty days prior to the expiration of the then current
Period of Engagement. Notwithstanding anything to the contrary contained in this
Agreement, the applicable provisions of this Agreement, including, without
limitation, the provisions of Sections 8, (a) and (b), shall survive the
expiration of the Period of Engagement under this Agreement.
6. Legal Status of Consultant. The Company and Consultant acknowledge
and agree that it is the intention of each of them that the relationship herein
created is that of independent contractors. Nothing contained in this Agreement
shall be construed to constitute Consultant as a partner or joint venturer of
the Company, it being intended that Consultant shall remain an independent
contractor and shall be responsible for its actions and those of any of its
agents, employees and servants. The Company shall have the right to control and
direct the results to be accomplished pursuant to this Agreement, but shall have
no right to control and direct the means or methods by which such results are to
be accomplished. The Company shall have no right to control or direct the place
or time at which the performance of Consultant's obligations under this
Agreement are to be fulfilled.
7. Taxes. Consultant hereby agrees and acknowledges that, as an
independent contractor, it is responsible for payment of any and all taxes
imposed upon it by any governmental entity or agency thereof, including, without
limitation, income and self- employment taxes. Consultant hereby agrees to
indemnify and hold the Company harmless from and against any claim, loss,
damage, liability, cost or expense including, without limitation, reasonable
attorneys' fees, incurred by the Company by reason of Consultant's willful
failure to comply with this section.
8. Competition; Confidentiality; Solicitation of Employees.
(a) Competition. Consultant acknowledges and agrees that the
market in which the Company operates includes the entire North American
continent (the "Territory") and that the Company has given valuable
consideration, the adequacy of which is hereby acknowledged, to conduct its
business free of competition from Consultant. Accordingly, Consultant agrees
that it shall not and none of its agents (including George McCord) shall, during
the Period of Engagement hereunder, engage directly of indirectly, either
personally or as an employee, partner, associate partner, officer, manager,
agent, advisor, consultant, or otherwise, or by means of any corporate or other
entity or device, in any business which is competitive with the business of the
Company.
-2-
<PAGE>
(b) Confidentiality. Consultant acknowledges and agrees that as
a result of its engagement under this Agreement, it will obtain, be entrusted
with, have access to and develop for and on behalf of the Company, certain
Confidential Information (as defined below). Consultant further acknowledges and
agrees that the Company made and will make a substantial investment of labor and
capital in the development and use of such Confidential Information which has
enabled and will enable it to acquire a competitive advantage in the highly
competitive industry in which it operates and establish and maintain valuable
business relationships. Accordingly, Consultant shall not, unless the
Confidential Information becomes publicly known through legitimate means not
involving an act or omission by Consultant or except in connection with any
litigation between the Company and Consultant, directly or indirectly disclose
or use such Confidential Information for its own benefit or for the benefit of
any other person or entity other than the Company. Upon termination of the
Period of Engagement, Consultant shall immediately return to the Company all
documentary or tangible Confidential Information in its possession, custody or
control and shall not remove from Company premises or make or keep any copies,
notes, abstracts, summaries, tapes, or other record of any type of any of the
Confidential Information.
As used in this Agreement, the term "Confidential Information"
shall mean and include information which the Company has taken reasonable
efforts to keep confidential and which has not become publicly available by
legitimate means concerning (1) the Company's financial condition, including,
without limitation, its actual and forecasted statements of results of
operations, balance sheets, funds flow statements, gross sales, profit margins,
and other financial matters, (2) competitive conditions and strategic plans, (3)
marketing methods and plans, (4) the needs, wishes, requirements, and other
characteristics of customers and suppliers of the Company, (5) new or proposed
products, (6) computer software or data bases, (7) the technical specifications
of machinery, equipment and raw materials needed in the manufacture of the
Company's products, (8) the sources for the purchase of such machinery,
equipment, raw materials and components thereof, (9) the proper storage of such
raw materials and installation, operation, maintenance and repair of such
machinery and equipment, (10) descriptions of each stage in the quality control
of the Company's products, (11) trade secrets of the Company, (12) information
concerning the Company and its consideration and evaluation of and plans for
possible acquisitions including, without limitation, any and all information
which the Company is required to keep confidential in accordance with the
provisions of confidentiality agreements with third parties, (13)
investigations, (14) any and all communications between the Company (including,
without limitation, any employee, officer, director or shareholder of the
Company), on the one hand, and any attorney retained by the Company for any
purpose, or any person employed by or retained by such attorney for the purpose
of assisting such attorney, on the other hand, in connection with an attorney's
performance of services for the Company, and (15) all other matters and
materials belonging to or relating to the internal affairs, operation, or
business of the Company, including, without limitation, information recorded on
any medium which gives the Company an opportunity to obtain an advantage over
its competitors who do not know or use the same.
(b) Solicitation of Employees. Consultant shall not during the Period
of Engagement hereunder, directly or indirectly, solicit for employment, employ,
or advise or recommend to any other person or entity, that such person or entity
-3-
<PAGE>
employ or solicit for employment, any person employed by the Company or any of
its parent, subsidiary, affiliated or related companies.
(c) Remedies. Consultant expressly acknowledges and agrees that
the business of the Company is highly competitive and that a violation of any of
the provisions of this Section would cause immediate and irreparable harm, loss,
and damage to the Company not adequately compensable by a monetary award.
Without limiting any of the other remedies available to the Company at law or in
equity, Consultant agrees that any actual or threatened violation of any of the
provisions of this Section may be immediately restrained or enjoined by any
court of competent jurisdiction, and that any temporary restraining order or
emergency, preliminary, or final injunctions may be issued in any court of
competent jurisdiction. In the event any proceedings are initiated by the
Company as a result of any actual or threatened violation of any of the
provisions of this Section 8, the non-prevailing party shall be liable to the
other party for, and shall pay to such other party, all costs and expenses,
including, without limitation, reasonable attorneys' fees, incurred by such
other party in connection with such proceedings.
9. Miscellaneous.
(a) Further Assurances. Each party agrees to cooperate with the
other, and to execute and deliver, or cause to be executed and delivered, all
such other documents and instruments, and to take all such other actions as it
may be reasonably requested to take, from time to time, in order to effectuate
the provisions and purposes of this Agreement.
(b) Binding Effect and Benefit. This Agreement shall be for the
sole and exclusive benefit of the Company and Consultant. This Agreement may not
be assigned by either party, whether by operation of law or otherwise, without
the prior written consent of the other party. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
(c) Entire Agreement. All discussions, understandings, and
agreements heretofore made between the parties concerning the subject matter
contained in this Agreement are merged into and superseded by this Agreement,
which contains the entire agreement between the parties concerning the subject
matter contained in this Agreement. Any modification hereof may be made only by
an instrument in writing signed by or on behalf of the party to be charged.
(d) Notices. All notices required or permitted hereunder shall
be in writing, signed by the party giving notice or an officer thereof and shall
be deemed to have been given when delivered by personal delivery, by facsimile,
telegraph or telex, or Federal Express or similar courier service or by deposit
in the mail, registered or certified, with postage prepaid, return receipt
requested, addressed as follows:
-4-
<PAGE>
If the Company, at:
Suite 591, 885 Dunsmuir Street
Vancouver
British Columbia
V6C 1N5
Fax: (604) 685-1513
with a copy to:
David Furlonger
If to Consultant, at:
13 Lyons Plain Road
Weston
Connecticut
06883
Fax: (203) 222-8273
with a copy to:
George E. McCord
or to such other address as any party may designate for itself by notice given
to the other party from time to time in accordance with the provisions hereof.
(e) Headings. The headings of sections and subsections herein
are merely for convenience of reference and shall not affect the interpretations
of any of the provisions of this Agreement. Whenever the context so requires,
the plural shall include singular and vice versa, the masculine shall include
the feminine and the neuter, the feminine shall include the masculine and neuter
and the neuter shall include the masculine and the feminine.
(f) Governing Law. This Agreement is being executed and
delivered in the Province of British Columbia and the validity, construction and
enforceability of this Agreement shall be governed in all respects by the
Province of British Columbia.
(g) Severability. Whenever possible, each provision of this
Agreement shall be construed as to be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
-5-
<PAGE>
or the application thereof to any party or circumstance shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition without invalidating the remainder of such provision
or any other provision of this Agreement or the application of such provision to
other parties or circumstances.
(h) Waivers. No delay on the part of any party in the exercise
of any right or remedy shall operate as a waiver thereof, and no single or
partial exercise by any party of any remedy shall preclude other or further
exercise thereof, or the exercise of any other right or remedy. Neither the acts
or omissions of any of the parties hereto or their agents or beneficiaries nor
any knowledge obtained by or on behalf of any of them as a result of any
activities, tests, or investigations undertaken pursuant to or contemplated by
the terms of this Agreement or otherwise shall constitute a waiver of or
estoppel or other barrier to enforcement by any party hereto of any
representation or warranty or other provision contained in this Agreement.
(i) Counterparts. This Agreement may be executed in any one or
more counterparts, each of which shall constitute an original, no other
counterpart needing to be produced, and all of which, when taken together, shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed, or have caused to be
executed by their duly authorized officers or agents, this Agreement on the date
and year first above written.
POWERTRADER SOFTWARE, INC.,
a British Columbia corporation
By: /s/ David C. Furlonger
David C. Furlonger, President
George E. McCord,
a Consultant
By: /s/ George E. McCord
George E. McCord
-6-
PowerTrader, Inc.
Computation of Per Share Earnings
Year Ended Year Ended Year Ended
June 30, June 30, June 30,
1997 1996 1995
-------- -------- --------
Weighted Average of:
Common Stock Outstanding 5,813,876 4,174,597 4,174,597
Common Stock Equivalents - - -
Shares Outstanding 5,813,876 4,174,597 4,174,597
Net Loss (902,997) (598,971) (451,362)
Weighted Average Shares
Outstanding 5,813,876 4,174,597 4,174,597
Net Loss Per Share (0.16) (0.14) (0.11)
BDO Dunwoody
Chartered Accountants
One Bentall Centre
300-505 Burrard Street
Vancouver, BC, Canada V7X1T1
Consent of Independent Accountants
PowerTrader, Inc.
Vancouver, British Columbia
We hereby consent to the incorporation by reference of our report dated August
15, 1997, relating to the consolidated financial statements of the Company
appearing in the Company's Annual Report on Form 10-KSB as of and for the year
ended June 30, 1997.
Vancouver, British Columbia
September 26, 1997 /s/ BDO Dunwoody Chartered Accountants
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-1-1996
<PERIOD-END> JUN-30-1997
<CASH> 99,986
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 112,869
<PP&E> 838,798
<DEPRECIATION> 84,057
<TOTAL-ASSETS> 867,610
<CURRENT-LIABILITIES> 442,662
<BONDS> 0
0
0
<COMMON> 2,375,723
<OTHER-SE> 1,953,330
<TOTAL-LIABILITY-AND-EQUITY> 867,610
<SALES> 44,373
<TOTAL-REVENUES> 44,373
<CGS> 28,255
<TOTAL-COSTS> 653,812
<OTHER-EXPENSES> 265,303
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (902,997)
<INCOME-TAX> 0
<INCOME-CONTINUING> (902,997)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (902,997)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
