As Filed With the Securities and Exchange Commission on ______________, 2000
Registration No. _________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Registration Statement
Under the Securities Act of 1933
MarketU Inc.
(Name of Small Business Company as Specified In Its Charter as Amended)
Nevada 6531 98-0173359
(State of Incorporation) (Primary Standard (I.R.S. Employer
Industrial Classification Identification No.)
Code Number)
Suite 101
20145 Stewart Crescent
Maple Ridge, British Columbia
Canada V2X 0T6
(604) 460-7634
-------------------------------- ---------------
(Address and telephone number of Registrant's principal
executive offices and principal place of business)
Kenneth Galpin
Suite 101
20145 Stewart Crescent
Maple Ridge, British Columbia
Canada V2X 0T6
(604) 460-7634
------------------------ ---------------
(Name, address and telephone number of agent for service)
Copies of all communications, including all communications sent
to the agent for service, should be sent to:
William T. Hart, Esq.
Hart & Trinen
1624 Washington Street
Denver, Colorado 80203
(303) 839-0061
Approximate date of proposed sale to the public:
from time to time after this registration statement becomes
effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
<PAGE>
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<S><C> <C> <C> <C> <C>
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Proposed
Title of Each Proposed Maximum
Class of Amount to be Maximum Aggregate Amount of
Securities registered Offering Price Offering Price Registration Fee
to be Offered per Share (2)
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Common Stock 12,695,014 (1) $0.19 $2,412,053 $637
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</TABLE>
(1) Shares are offered by selling shareholders.
(2) Estimated solely for the purpose of determining the registration fee.
Calculated pursuant to Rule 457(c) under the Securities Act, on the
basis of the average bid and ask price of MarketU's common stock on
December 26, 2000.
In the event of a stock split, stock dividend or similar transaction involving
common stock of MarketU, in order to prevent dilution, the number of shares
registered shall be automatically increased to cover the additional shares in
accordance with Rule 416(a) of the Securities and Exchange Commission.
MarketU hereby amends this Registration Statement on such date or dates as may
be necessary to delay its effective date until MarketU shall file a further
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
PROSPECTUS
MarketU Inc.
12,695,014 shares of Common Stock
This prospectus relates to the sale of common stock by certain persons who
either own or have the right to acquire shares of the common stock of MarketU
Inc. These persons are sometimes referred to in this prospectus as the selling
shareholders. See the section of this prospectus entitled "Principal and Selling
Shareholders" for more information concerning the selling shareholders. MarketU
will not receive any proceeds from the sale of the shares by the selling
shareholders.
MarketU's common stock is quoted on the OTC:BB under the symbol "MKTU". The
average bid and asked price of MarketU's common stock on December 26, 2000 was
$0.19.
The securities offered by this prospectus are speculative and involve a high
degree of risk. For a description of certain important factors that should be
considered by prospective investors, see "Risk Factors" beginning on page six of
this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is _____________, 2001
<PAGE>
PROSPECTUS SUMMARY
BUSINESS
MarketU provides a service which allows a homebuyer or seller wanting to
purchase or sell a property or residence in another city to locate a realtor to
assist in the real estate transaction. MarketU's services are primarily designed
for a residential customer who is relocating to another area and needs realtor
assistance with buying a residence in the new area and/or selling their current
home. In most cases, the potential customer is not familiar with realtors in the
city where the customer plans to relocate. MarketU's referral services are
available through its AMRR.COM or CMRR.COM websites, or by phoning a
1-800-414-5655 hotline.
The Offering
This prospectus relates to the sale of shares of MarketU's common stock:
o issuable upon the exercise of warrants previously issued by MarketU,
o issuable upon the conversion of MarketU's Series A Preferred stock, and
o held by certain shareholders of MarketU.
The holders of the warrants and the Series A preferred shares, to the extent
they exercise the warrants or convert the preferred shares, and the owners of
the shares of common stock described above are referred to in this prospectus as
the selling shareholders. If all warrants held by the selling shareholders are
exercised, MarketU will receive approximately $780,000, which will be used to
fund MarketU's operations. MarketU will not receive any proceeds from the
conversion of the Series A Preferred stock or from the sale of the shares by the
selling shareholders.
As of December 15, 2000, MarketU had 8,263,154 outstanding shares of common
stock. Assuming all warrants held by the selling shareholders are exercised and
all Series A Preferred shares are converted into shares of common stock, there
will be 14,697,214 shares of common stock issued and outstanding. The number of
outstanding shares before and after this offering does not give effect to shares
which may be issued upon the exercise and/or conversion of other options,
warrants or convertible securities issued by MarketU.
Risk Factors
An investment in MarketU's common stock involves risks due in part to prior
operating losses, the limited market for MarketU's common stock, and competition
in the real estate industry.
SUMMARY FINANCIAL INFORMATION
The financial data presented below should be read in conjunction with the more
detailed financial statements and related notes which are included elsewhere in
this prospectus.
<PAGE>
Balance Sheet Data
December 31, 1999 July 31, 2000 October 31, 2000
----------------- ------------- ----------------
Current Assets $51,748 $49,710 $255,154
Total Assets 155,095 182,608 411,403
Current liabilities 246,130 232,632 173,400
Total liabilities 352,730 306,907 218,671
Working Capital (Deficit) (194,382) (182,922) 81,754
Stockholders' (Deficit) (197,635) (124,299) (347,131)
Statement of Operations Data
Seven Three
Year Ended months Ended Months Ended
Dec. 31, 1999 July 31, 2000 October 31, 2000
------------- --------- -----------
Revenues $572,855 $379,344 $149,106
Cost of sales 227,846 133,733 57,307
General and administrative 320,694 305,856 177,205
------- ------- -------
expenses
Net Income (Loss) $ 24,315 $ (60,245) $(85,406)
======== ========== =========
Risk Factors
Prospective investors should be aware that ownership of MarketU's common stock
involves risks which could adversely affect the value of their shares. MarketU
does not make, nor has it authorized any other person to make, any
representations about the future market value of MarketU's common stock.
The securities offered should be purchased only by persons who can afford to
lose their entire investment. Prospective investors should read this entire
prospectus and carefully consider, among others, the following risk factors in
addition to the other information in this prospectus prior to making an
investment.
This prospectus contains forward-looking statements that involve risks and
uncertainties. These statements relate to MarketU's future plans, objectives,
expectations and intentions, and the assumptions underlying or relating to any
of these statements. These statements may be identified by the use of words such
as "expects," "anticipates," "intends," and "plans" and similar expressions.
MarketU's actual results could differ materially from those discussed in these
statements. Factors that could contribute to such differences include, but are
not limited to, those discussed below and elsewhere in this prospectus.
MarketU May Never Earn a Profit
MarketU incurred a net loss of $(85,406) for the three months ended October 31,
2000 and from the date of its formation through October 31, 2000, MarketU
incurred net losses of approximately $(347,000). MarketU expects to incur net
losses for the foreseeable future and there can be no assurance that MarketU
will be profitable.
MarketU is dependant on additional financing to expand its operations
This offering is being made on behalf of certain selling shareholders. MarketU
will not receive any proceeds from the sale of the shares offered by the selling
shareholders. MarketU needs additional
<PAGE>
capital to advance its business and marketing plans. Since the cash generated
from MarketU's operations may not be sufficient to fund these activities,
MarketU may need additional financing through private financings, debt or equity
offerings or collaborative arrangements with others. If adequate funds are not
available when required or on acceptable terms, MarketU may be required to alter
its business plans and delay or scale back its sales and marketing efforts
which, in turn, would adversely affect MarketU's operating results. Any equity
offering will result in dilution of the ownership interest of MarketU's
shareholders and may result in a decline in the price of MarketU's common stock.
MarketU's services are dependent on the use of the Internet and any
interruptions, delays or capacity problems experienced on the Internet or with
telephone connections would adversely affect MarketU's ability to operate.
MarketU may not be able to protect its intellectual property
MarketU considers the methods it uses to survey realtors for potential
membership in its program to be proprietary. Since these survey methods are not
patented, MarketU relies primarily on a combination of copyright, trademark and
trade secret laws and confidentiality procedures to protect its survey methods.
There can be no assurance that others will not independently develop superior
survey methods or obtain access to MarketU's survey methods. Monitoring and
identifying unlawful use of MarketU's technology may prove difficult, and the
cost of litigation may prevent MarketU from prosecuting any unauthorized use of
its technology.
Government regulation and legal uncertainties could impair the growth of the
Internet and decrease demand for our services or increase our cost of doing
business
Although there are currently few laws and regulations directly applicable to the
Internet, a number of laws have been proposed involving the Internet, including
laws addressing user privacy, pricing, content, copyrights, distribution,
antitrust and characteristics and quality of products and services. Further, the
growth and development of the market for online email may prompt calls for more
stringent consumer protection laws that may impose additional burdens on those
companies conducting business by means of the internet. The adoption of any
additional laws or regulations may impair the growth of the Internet or
commercial online services which could decrease the demand for MarketU's
services and increase the cost of doing business, or otherwise harm our business
and operating results. Moreover, the applicability of existing laws to the
Internet relating to property ownership, sales and other taxes, libel and
personal privacy is uncertain and may take years to resolve.
There is a Limited Public Market For MarketU's Common Stock
MarketU's common stock is quoted on the OTC Bulletin Board and there has been
only a limited public market for MarketU's common stock. There can be no
assurance that an active trading market will develop or that purchasers of the
shares offered by this prospectus will be able to resell their securities at
prices equal to or greater than the price paid for these shares. The market
price of the shares may be affected significantly by factors such as
announcements by MarketU or its competitors, variations in MarketU's results of
operations, and market conditions in the real estate and Internet industries in
general.
In addition, MarketU's common stock is subject to the low-priced security or so
called "penny stock" rules that impose additional sales practice requirements on
broker-dealers which sell such securities. The Securities Enforcement and Penny
Stock Reform Act of 1990 requires additional disclosure in connection with any
trades involving a stock defined as a penny stock (generally, any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions),
<PAGE>
including the delivery, prior to any penny stock transaction, of a disclosure
schedule explaining the penny stock market and the risks associated with this
market. The regulations governing low-priced or penny stocks sometimes limit the
ability of MarketU's shareholders to sell their securities.
Dilution Could Adversely Affect Value Of Stock And Percentage Of Stock Owned
MarketU has warrants and preferred stock outstanding, the exercise or conversion
of which could result in the issuance of 7,261,060 shares of common stock. To
the extent these shares are issued, the percentage of common stock held by
existing common stockholders will be reduced. Under certain circumstances the
exercise of any or all of the options or warrants might result in further
dilution of the net tangible book value of the existing stockholders' shares.
The holders of the options and warrants are given the opportunity to profit from
any rise in the market price of MarketU's common stock. The holders of the
options and warrants may be expected to exercise them at a time when MarketU
may, in all likelihood, be able to obtain needed capital on more favorable
terms.
Management's Discussion And Analysis Of Financial Condition And
Results Of Operations
On April 28, 2000, MarketU acquired all of the issued and outstanding shares of
Home Finders Realty Ltd. and Most Referred Real Estate Agents Inc. (collectively
referred to as "Home Finders Realty"). MarketU completed this transaction by
issuing 4,500,000 voting Series A Preferred shares, and by a wholly owned
subsidiary issuing 4,500,000 preferred shares, to the shareholders of Home
Finders Realty. One Series A Preferred share together with one preferred share
of MarketU's subsidiary may at any time be exchanged for one share of MarketU's
common stock.
Prior to the acquisition of Home Finders Realty, MarketU had conducted only
limited operations, had assets of approximately $149,000 and approximately
$66,000 in liabilities. The business of MarketU is now that which was being
conducted by Home Finders Realty. For financial reporting purposes the
acquisition of Home Finders Realty was treated as a recapitalization,
effectively as if MarketU had issued stock for consideration equal to the net
monetary assets of MarketU. See Note 2(a) to the July 31, 2000 financial
statements. As such, Home Finders Realty's historical financial statements are
now reported as MarketU's comparative financial statements. The results of
operations prior to April 28, 2000, included in the consolidated financial
statements, are limited to the operating results of Home Finders Realty. The
results of operations subsequent to April 27, 2000 are the consolidated
operating results of MarketU and Home Finders Realty.
The financial data presented below should be read in conjunction with the more
detailed financial statements and related notes which are included elsewhere in
this prospectus.
December 31, 1999 July 31, 2000 October 31, 2000
----------------- ------------- ----------------
Current Assets $51,748 $49,710 $255,154
Total Assets 155,095 182,608 411,403
Current liabilities 246,130 232,632 173,400
Total liabilities 352,730 306,907 218,671
Working Capital (Deficit) (194,382) (182,922) 81,754
Stockholders' (Deficit) (197,635) (124,299) (347,131)
<PAGE>
Seven Three
Year Ended months Ended Months Ended
Dec. 31, 1999 July 31, 2000 October 31, 2000
------------- --------- -----------
Revenues $572,855 $379,344 $149,106
Cost of sales 227,846 133,733 57,307
General and administrative 320,694 305,856 177,205
------- ------- -------
expenses
Net Income (Loss) $ 24,315 $ (60,245) $(85,406)
======== ========== =========
Three months ended October 31, 2000
First quarter results for fiscal year 2001 reflect a small reduction in revenues
from the prior year quarter due to technical problems during the summer months.
Revenues generally lag sales efforts by approximately three to fur months due to
the average time period required to close real estate transactions and earn the
referral fee.
Expenses increased during the first quarter of fiscal year 2001 by $105,606 or
147% in comparison to the previous quarter due to the reorganization of
management and the sales and marketing departments, including hiring additional
realtors and support staff to enable MarketU to meet increased real estate
transaction demand; redesigning of the web sites to incorporate updated software
and graphical enhancements; and costs associated with public company
responsibilities. Specific changes to the first quarter of 2001 include
management fees which are up $23,638 from nil for the quarter ended October 31,
1999 reflecting the change in management. Professional fees are up from $188 in
the 2000 quarter to $36,022 in the 2001 quarter relating to accounting and legal
assistance provided to reorganize MarketU. Wages and benefits increased from
$51,100 for the quarter ended October 31, 1999 to $75,422 for the quarter ended
October 31, 2000 as a result of hiring additional realtors and support staff.
Seven Months Ending July 31, 2000
Revenues for the seven-month period ending July 31, 2000, were $379,344 which
approximates $650,000 on an annualized basis. This is an increase of
approximately 13.5% over year ended December 31, 1999, due primarily to
increased referral revenues which exceeded management expectations.
Gross margin of $245,611 (annualized - $421,000) continues to increase as costs
of providing the services are reduced. Direct operating costs are expected to be
reduced further in future years.
General and administrative expenses increased to $305,856, or $524,000 on an
annualized basis representing an increase of 63.5% over the year ended December
31, 1999. The increase in general and administrative costs result from an
increase in information technology expenditures, professional fees related to
the recapitalization and other transactions and an increase in compensation paid
to senior management and directors.
Year Ending December 31, 1999
Revenues for the year ended December 31, 1999 were $572,855, a 38.5% increase
over the year ended December 31, 1998. The increase is primarily due to a 418%
increase in referral fees from $30,785 in 1998 to $128,919 in 1999. During 1998,
MarketU focused on establishing it's initial membership base. Referrals to the
baseline membership in 1999 increased significantly resulting in the increase in
referral revenues in 1999. 1999 membership fees also increased 9% as MarketU
continued to expand its membership program.
<PAGE>
Direct costs decreased in 1999 by approximately 23% as the costs associated with
the development of the initial membership list declined and referral revenue
increased. Costs needed to generate memberships are much higher than those
associated with referral fees.
Liquidity and Sources of Capital
During the three months ended October 31, 2000 net cash used in operations was
$116,925 compared to cash provided of $27,103 in the same period in the prior
year. Net cash used in operations was largely a result of net losses and a
reduction in accounts payable and accrued liabilities. Net cash used in
investing activities was $42,149 as compared to $6,638 in the comparative
quarter. The increase was primarily the cash costs of equipment, web site
development and security deposits to meet expansion and upgrade requirements. In
October 2000, MarketU sold 3,133,787 units at a price of US$0.15 per unit. Each
unit consists of one common share and one-half non-transferable warrant. MarketU
received cash proceeds of $386,305, net of issuance costs, for 2,589,569 shares
and a promissory note in the amount of $81,633 for the remaining 544,218 shares.
The funds received from the private placement were used for working capital and
to pay liabilities.
During the seven months ended July 31, 2000 MarketU's operations provided
$78,002 in cash and MarketU spent approximately $41,829 on website development
and the purchase of property and equipment. MarketU also repaid $30,542 (net) in
obligations under promissory notes.
Notwithstanding this issuance, additional capital will be needed to expand
MarketU's operations. MarketU expects to obtain additional capital through the
private sale of MarketU's securities or from borrowings from private lenders
and/or financial institutions. There can be no assurance that MarketU will be
successful in obtaining any additional capital which may be needed.
During the twelve months ending October 31, 2001, MarketU's anticipated cash
requirements are as follows:
General and Administrative expenses $192,000
Marketing expenses 2,000,000
Software development 50,000
Debt & liability reduction 258,000
------------
$2,500,000
Market For Common STOCK
As of December 15, 2000, there were approximately 51 record owners of MarketU's
common stock. MarketU's common stock is traded on the National Association of
Securities Dealers OTC Bulletin Board under the symbol "MKTU". Set forth below
are the range of high and low bid quotations for the periods indicated as
reported by the NASD. The market quotations reflect interdealer prices, without
retail mark-up, mark-down or commissions and may not necessarily represent
actual transactions. MarketU's common stock began trading on May 5, 1998.
-----------------------------------------------------
Quarter Ending High Low
-----------------------------------------------------
July 31, 1998 $1.31 $1.06
October 31, 1998 $1.19 $0.75
-----------------------------------------------------
January 31, 1999 $0.90 $0.84
<PAGE>
April 30, 1999 $1.12 $1.12
July 31, 1999 $0.34 $0.34
October 31, 1999 $0.15 $0.15
-----------------------------------------------------
January 31, 2000 $1.25 $0.59
April 30, 2000 $1.13 $1.00
July 31, 2000 $0.38 $0.38
October 31, 2000 $0.56 $0.19
-----------------------------------------------------
Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available and, in the
event of liquidation, to share pro rata in any distribution of MarketU's assets
after payment of liabilities. The Board of Directors is not obligated to declare
a dividend. MarketU has not paid any dividends on its common stock and MarketU
does not have any current plans to pay any common stock dividends.
The provisions in MarketU's Articles of Incorporation relating to MarketU's
unissued preferred stock would allow MarketU's directors to issue preferred
stock with rights to multiple votes per share and dividends rights which would
have priority over any dividends paid with respect to MarketU's common stock.
The issuance of preferred stock with such rights may make more difficult the
removal of management even if such removal would be considered beneficial to
shareholders generally, and will have the effect of limiting shareholder
participation in certain transactions such as mergers or tender offers if such
transactions are not favored by incumbent management.
Business
The Company was incorporated in Nevada in June 1997 under the name North
American Resort & Golf, Inc. North American was formed to market golf courses
and surrounding developments. However, North American was unable to raise
capital and as a result abandoned its original business plan.
On April 28, 2000 North American acquired all of the issued and outstanding
shares of Home Finders Realty Ltd. and Most Referred Real Estate Agents, Inc.
(collectively doing business as Home Finders Realty) in exchange for (i)
4,500,000 Series A Preferred shares and (ii) 4,500,000 preferred shares in a
wholly owned subsidiary which was formed for the sole purpose of facilitating
the acquisition of Home Finders Realty.
The preferred shares may be exchanged for 4,500,000 shares of common stock at
any time at the holder's option. Each Series A Preferred share is entitled to
one vote on all matters submitted to a vote of the shareholders. The Series A
Preferred shares are not entitled to any dividends or any other distributions.
On June 27, 2000 the shareholders of North American approved a resolution to
change the name of the Company to MarketU Inc.
The business of MarketU is now that which is being conducted by Home Finders
Realty and any reference to MarketU is, unless otherwise indicated, also a
reference to Home Finders Realty.
MarketU provides a service which allows a homebuyer or seller wanting to
purchase or sell a property or residence in another city, to locate a realtor to
assist in the real estate transaction.
<PAGE>
MarketU's services are primarily designed for a residential customer who is
relocating to another area and needs realtor assistance with buying a residence
in the new area and/or selling their current home. In most cases, the potential
customer is not familiar with realtors in the city where the customer plans to
relocate. MarketU's referral services are available through MarketU's AMRR.COM
or CMRR.COM websites, or by phoning a 1-800-414-5655 hotline.
MarketU generates revenue through referral fees and from the sale of
memberships. Referral fees are earned when a customer buys or sells a house
through a member realtor. Memberships are available to licensed realtors who
have been nominated by their peers, based on a reputation in their community for
providing a high level of customer service.
MarketU has divided the United States and Canada into 2,600 service areas. Each
area normally has a population base of at least 100,000 people. MarketU's goal
is to have three members in each area with a population base exceeding 100,000.
In order to be eligible for membership, a licensed realtor must be nominated by
at least three other realtors who are active in the region.
MarketU begins its search for members in each area by telephoning realtors who
service the area and asking these realtors to nominate other realtors who have a
reputation for integrity and a high level of customer service. When contacted by
MarketU, a realtor is asked to provide the names of at least three other
realtors with such a reputation. Once a realtor has been nominated by at least
three other realtors, the particular realtor is contacted by a Company
representative concerning membership. If a realtor accepts the membership,
either full or associate, they are placed in MarketU's website directory and
given the award and designation of "Most Referred Realtor".
MarketU offers full and associate memberships. The average full membership
currently costs $349.00 per year. With a full membership the realtor's name,
company logo, picture, biographical information, and awards are displayed on
MarketU's website. A full member agrees to pay MarketU referral fees equal to
25% of any gross commissions earned by the member from the sale of a residence
by or to a person referred by MarketU. Full members agree to pay MarketU 5% of
all gross commissions earned by the member from customers which are referred by
another realtor in MarketU's program.
An associate member does not pay an annual fee but agrees to pay MarketU a
referral fee equal to 30% of any gross commission earned by the associate member
from the sale of a residence by or to a person referred by MarketU. Although the
name of an associate member is listed on MarketU's website, MarketU does not
display photographs, biographical information, or awards of associate members.
Associate members agree to pay MarketU 10% of all gross commissions earned by
the member from Customers or sellers which are referred by another realtor in
MarketU's program.
Since initiating its program in 1997, MarketU has noticed that the number of
full members has fluctuated from year to year. MarketU's ability to obtain and
increase members is dependent upon the effectiveness of its marketing programs.
To date, no single member has represented a material portion of MarketU's
revenues.
Replacement of members is accomplished through review of survey results or
re-surveying of service areas where required.
A customer wanting to use MarketU's services logs onto MarketU's website and
enters the name of the city where they expect to purchase or sell a property. If
a customer is interested in contacting a member realtor, the customer completes
an online form, which is emailed to MarketU. MarketU qualifies the customer with
respect to seriousness, timeliness, and ability. Once this process has
<PAGE>
been completed and documented in MarketU's lead management software, it contacts
the realtor member in the customer's requested area and confirms the realtor's
acceptance of the referral via facsimile contract. The member then signs a
second agreement with MarketU which provides that the realtor receiving the
referral agrees to pay the specified fee in regards to the subject customer.
After the referral, MarketU maintains contact with the realtor periodically to
determine if the customer has purchased or sold a residence. This periodic
contact is made until MarketU confirms the purchase or sale of a residence
through the member realtor or to confirm that a transaction will not take place.
In the case of a referral from a member realtor to another member realtor,
MarketU maintains contact with both realtors on a periodic basis.
Between August 1, 1999 and July 31, 2000 MarketU earned approximately $235,000
in referral fees from approximately 280 residential real estate closings.
MarketU currently markets its services exclusively on the Internet. MarketU
maintains in excess of 20,000 search engine listings which currently result in
approximately 150,000 visits per month to MarketU's website.
Competition
MarketU competes with a number of internet-based realtor locator services,
including Realtor.com(R) and Realestate.com. MarketU also competes with national
real estate brokerage networks such as Cendant, Better Homes and Gardens,
Century 21, Re/Max, and Coldwell Banker, all of which have referral capabilities
for customers wanting to purchase a residence in a different area. Although most
of MarketU's competitors have greater name recognition, financial resources, and
marketing resources than MarketU, MarketU believes that its program offers the
following advantages over other realtor locator services:
o MarketU's realtors are nominated by their peers for having professionalism and
integrity regardless of real estate company affiliation.
o MarketU services 2,600 geographical areas, with a minimum population of
100,000 across North America by maintaining real estate agent relationships
in those areas.
Government Regulation
MarketU's subsidiary, Most Referred Real Estate Agents Inc., is federally
registered in Canada and is a licensed real estate broker in British Columbia,
Canada, which legally allows Most Referred to receive real estate commissions
from anywhere in Canada. Although neither Most Referred Real Estate Agents Inc.
or MarketU is licensed in the United States, MarketU is of the opinion, based
upon its discussions with numerous realty boards in Canada and the United
States, that the payment of referral fees by U.S. real estate agents or realtors
is permitted by all applicable laws and regulations. Although in some states
MarketU is required to comply with certain regulations relating to the payment
of referral fees, MarketU does not believe that present or future compliance
with these regulations will have a material adverse impact on MarketU's
operations. However, there can be no assurance that MarketU will be able to
comply with any future regulations which may be adopted by state or provincial
authorities or that compliance with any future regulations will make it
uneconomical for MarketU to operate in a particular state or province. Any
future regulations would likely have a similar impact on MarketU's competition
and other real estate brokerage companies which may refer customers from state
to state or from the United States to Canada and vice versa.
<PAGE>
Employees
As of December 15, 2000 MarketU employed 18 people on a full-time basis. Several
of these employees are licensed realtors or have real estate experience.
Offices
MarketU's offices are located at Suite 101 , 20145 Stewart Crescent, Maple
Ridge, B.C., Canada. MarketU is leasing this 5,800 square feet of operations and
executive offices at a rate of $2,325 per month until March 30, 2003. MarketU's
telephone number is 604-460-7634.
MANAGEMENT
MarketU's officers and directors are as follows:
Name Age Position
Kenneth Galpin 41 President and a
Director
William Coughlin 47 Product Development
Officer
and a Director
Scott Munro 32 Treasurer and
Principal Financial
Officer
George Shahnazarian 43 Secretary
Glenn Davies 45 Director
Ken Landis 42 Director
David Woodcock 68 Director
Each director holds office until his successor is duly elected by the
stockholders. Executive officers serve at the pleasure of the Board of
Directors.
The following sets forth certain information concerning the past and present
principal occupations of MarketU's officers and directors.
Kenneth Galpin has been MarketU's President and a director since September 2000.
Mr. Galpin has also been the president of Beacom Online Systems Inc., a web
hosting and development company, since February 1998. Mr. Galpin was vice
president of MacDonald Capital from March 1995 to December 1996.
William Coughlin was MarketU's President between April 28, 2000 and September
2000. Mr. Coughlin has been an director of MarketU since April 28, 2000. Mr.
Coughlin has been MarketU's Product Development Officer since September 2000.
Mr. Coughlin has been the President of Home Finders Realty since October 1998.
Between 1982 and 1998 Mr. Coughlin was a realtor with Re/Max Little Oak Realty
Ltd. in Abbotsford, British Columbia.
Scott Munro has been an officer of MarketU since April 28, 2000. Prior to
joining MarketU Mr. Munro was controller for Home Finders Realty Ltd. Mr. Munro
was general manager of a coating company from January of 1998 to January 1999.
He also managed a fitness chain from October 1995 to March 1997. Prior to this
Mr. Munro was controller for a national helicopter company from April 1992 to
September 1995.
<PAGE>
George Shahnazarian has been MarketU's Secretary since September 2000. Mr.
Shahnazarian has also been the Chief Financial Officer and part owner of M.G.A.
Connectors in Maple Ridge, B.C. since 1985.
Glenn Davies has been a director of MarketU since December 2000. For the past
five years Mr. Davies has been the owner of Beacom Online Systems Inc.
Ken Landis has been a director of MarketU since December 2000. For the past five
years Mr. Landis has been the owner of Landmark Structural Lumber and Truss.
David Woodcock has been a director of MarketU since December 2000. Mr. Woodcock
has been the Managing Director of Harrell, Woodcock and Linkletter since 1990.
Changes in Management and Share Ownership
Christine Cerisse was appointed as the President and a director of MarketU in
December 1999.
On April 28, 2000, and following the acquisition of Home Finders Realty:
o Ms. Cerisse resigned as MarketU's president but remained a director of
MarketU.
o William Coughlin was appointed MarketU's President and as a Director.
o Scott Munro was appointed MarketU's Principal Financial Officer.
o Robert Dent and James Sanford were appointed Directors of MarketU.
In September 2000:
o William Coughlin resigned as President and was appointed MarketU's Product
Development Officer.
o Kenneth Galpin was appointed MarketU's President and as a director.
o George Shahnazarian was appointed the Secretary of MarketU.
o Christine Cerisse, Robert Dent and James Sanford resigned as directors of
MarketU.
Executive Compensation
The following table sets forth in summary form the compensation received by (i)
the Chief Executive Officer of MarketU and (ii) by each other executive officer
of MarketU who received in excess of $100,000 during the fiscal years ending
July 31, 1999 and July 31, 2000. Amounts in the table include compensation
received from Home Finders Realty, which was acquired by MarketU in April 2000.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------
Name and Fiscal Other Annual Restricted Options
Principal Year Salary (1) Bonus Compensation Stock Awards Granted
Position (2) (3) (4) (5)
-------------------------------------------------------------------
William Coughlin 2000 $36,700 $0 $0 0 0
Chief Executive 1999 $28,700 $0 $13,300 0 0
Officer prior to
Sep. 21, 2000
</TABLE>
(1) The dollar value of base salary (cash and non-cash) received.
(2) The dollar value of bonus (cash and non-cash) received.
<PAGE>
(3) Any other annual compensation not properly categorized as salary or bonus,
including perquisites and other personal benefits, securities or property.
Amounts in the table represent dividends paid by Home Finders Realty to Mr.
Coughlin.
(4) During the year ending July 31, 2000, the value of the shares of MarketU's
common stock issued as compensation for services.
(5) The shares of common stock to be received upon the exercise of all stock
options granted during the fiscal years shown in the table.
The following shows the amounts which MarketU expects to pay its officers during
the year ending July 31, 2001 and the time which MarketU's executive officers
plan to devote to MarketU's business. MarketU has an employment agreement with
Scott Munro which is up for renewal on June 1, 2001, and an employment agreement
with William Coughlin which is up for renewal on September 17, 2001. MarketU
does not have employment agreements with any other of its officers. MarketU's
officer Ken Galpin is compensated through management fees paid to 612559 B.C.
Ltd. MarketU does not compensate directors for their services in their capacity
as directors, except for the granting of stock options.
-------------------------------------------------------------------------
Time to be Devoted to
Name Proposed Compensation Company's Business
-------------------------------------------------------------------------
Kenneth Galpin $4,000 per month 100%
-------------------------------------------------------------------------
William Coughlin $6,667 per month 100%
-------------------------------------------------------------------------
Scott Munro $2,667 per month 100%
-------------------------------------------------------------------------
George Shahnazarian $0 25%
-------------------------------------------------------------------------
Options Granted During Fiscal Year Ending July 31, 2000
The following tables set forth information concerning the options granted,
during the twelve months ended July 31, 2000, to MarketU's officers and
directors, and the value of all unexercised options (regardless of when granted)
held by these persons as of July 31, 2000, exclusive of options cancelled
subsequent to July 31, 2000. James Sanford and Christine Cerisse are former
officers and/or directors of MarketU. See "Changes in Management" above for
information concerning the changes in MarketU's management.
<TABLE>
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------
% of Total
Options Options Granted Exercise Expiration
Name Date of Granted (#) to Employees Price Per Date
Grant Officers & Share
Directors
-------------------------------------------------------------------------------------
Scott Munro 6/02/00 50,000 $0.43 8/01/03
-------------------------------------------------------------------------------------
James Sanford 6/02/00 10,000 (2) $0.43 8/01/03
-------------------------------------------------------------------------------------
Christine 3/01/00 100,000 $1.00 3/01/01
Cerisse
-------------------------------------------------------------------------------------
</TABLE>
Option Exercises and Option Values
<TABLE>
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------
Number of Value of
Securities Unexercised
Shares Underlying In-the-Money
Acquired Value Unexercised Options at July
Name on Realized Options at July 31, 2000
Exercise (2) 31, 2000 Exercisable/
(1) Exercisable/ Unexercisable (4)
Unexercisable (3)
-------------------------------------------------------------------------------------
Scott Munro -- -- 50,000/-- --
-------------------------------------------------------------------------------------
<PAGE>
James Sanford -- -- 10,000/-- --
-------------------------------------------------------------------------------------
Christine Cerisse -- -- 100,000/-- --
-------------------------------------------------------------------------------------
</TABLE>
(1) The number of shares received upon exercise of any options.
(2) With respect to options exercised the dollar value of the difference
between the option exercise price and the market value of the option
shares purchased on the date of the exercise of the options.
(3) The total number of unexercised options held as of July 31, 2000,
separated between those options that were exercisable and those options
that were not exercisable.
(4) For all unexercised options held as of July 31, 2000, the difference
between $0.37, which was the market value of MarketU's common stock on
that date and the exercise price of the option
Long Term Incentive Plans - Awards in Last Fiscal Year
None.
Employee Pension, Profit Sharing or Other Retirement Plans
MarketU does not have an active defined benefit, pension plan, profit sharing or
other retirement plan, although MarketU may adopt one or more of such plans in
the future.
Compensation of Directors
Standard Arrangements. At present MarketU does not pay its directors for
attending meetings of the Board of Directors, although MarketU expects to adopt
a director compensation policy in the future. MarketU has no standard
arrangement pursuant to which directors of MarketU are compensated for any
services provided as a director or for committee participation or special
assignments.
Other Arrangements. Except as disclosed elsewhere in this prospectus, no
director of MarketU received any form of compensation from MarketU during the
year ended July 31, 2000.
Stock Option and Bonus Plans
MarketU's Incentive Stock Option Plan, Non-Qualified Stock Option Plan and Stock
Bonus Plan are collectively referred to in this prospectus as the "Plans".
Incentive Stock Option Plan.
---------------------------
The Incentive Stock Option Plan authorizes the issuance of options to purchase
shares of MarketU 's common stock. Only officers, directors and employees of
MarketU may be granted options pursuant to the Incentive Stock Option Plan.
In order to qualify for incentive stock option treatment under the Internal
Revenue Code, the following requirements must be complied with:
1. Options granted pursuant to the Plan must be exercised no later than:
<PAGE>
(a) The expiration of thirty (30) days after the date on which an option
holder's employment by MarketU is terminated.
(b) The expiration of one year after the date on which an option
holder's employment by MarketU is terminated, if such termination is
due to the Employee's disability or death.
2. In the event of an option holder's death while in the employ of MarketU,
his legatees or distributees may exercise (prior to the option's
expiration) the option as to any of the shares not previously exercised.
3. The total fair market value of the shares of common stock (determined at
the time of the grant of the option) for which any employee may be granted
options which are first exercisable in any calendar year may not exceed
$100,000.
4. Options may not be exercised until one year following the date of grant.
Options granted to an employee then owning more than 10% of the common
stock of MarketU may not be exercisable after five years from the date of
grant.
5. The purchase price per share of common stock purchasable under an option
is determined by MarketU's Board of Directors but cannot be less than the
fair market value of the Common Stock on the date of the grant of the
option (or 110% of the fair market value in the case of a person owning
MarketU's stock which represents more than 10% of the total combined
voting power of all classes of stock).
Non-Qualified Stock Option Plan.
-------------------------------
The Non-Qualified Stock Option Plan authorizes the issuance of options to
purchase shares of MarketU's common stock to MarketU's employees, directors,
officers, consultants and advisors, provided however that bona fide services
must be rendered by consultants or advisors and such services must not be in
connection with the offer or sale of securities in a capital-raising
transaction. The option exercise price and expiration date are determined by
MarketU's Board of Directors.
Stock Bonus Plan.
----------------
MarketU's Stock Bonus Plan authorizes the issuance of shares of common stock to
MarketU's employees, directors, officers, consultants and advisors provided,
however, that bona fide services must be rendered by consultants or advisors and
such services must not be in connection with the offer or sale of securities in
a capital-raising transaction.
Other Information Regarding the Plans.
-------------------------------------
The Plans are administered by MarketU's Board of Directors. The Board of
Directors has the authority to interpret the provisions of the Plans and
supervise the administration of the Plans. In addition, the Board of Directors
is empowered to select those persons to whom shares or options are to be
granted, to determine the number of shares subject to each grant of a stock
bonus or an option and to determine when, and upon what conditions, shares or
options granted under the Plans will vest or otherwise be subject to forfeiture
and cancellation.
In the discretion of the Board of Directors, any option granted pursuant to the
Plans may include installment exercise terms such that the option becomes fully
exercisable in a series of cumulating portions. The Board of Directors may also
accelerate the date upon which any option (or any part of any options) is first
exercisable. Any shares issued pursuant to the Stock Bonus Plan and any
<PAGE>
options granted pursuant to the Incentive Stock Option Plan or the Non-Qualified
Stock Option Plan will be forfeited if the "vesting" schedule established by the
Board of Directors at the time of the grant is not met. For this purpose,
vesting means the period during which the employee must remain an employee of
MarketU or the period of time a non-employee must provide services to MarketU.
At the time an employee ceases working for MarketU (or at the time a
non-employee ceases to perform services for MarketU), any shares or options not
fully vested will be forfeited and cancelled. In the discretion of the Board of
Directors payment for the shares of common stock underlying options may be paid
through the delivery of shares of MarketU's common stock having an aggregate
fair market value equal to the option price, provided such shares have been
owned by the option holder for at least one year prior to such exercise. A
combination of cash and shares of common stock may also be permitted at the
discretion of the Board of Directors.
Options are generally non-transferable except upon the death of the option
holder. Shares issued pursuant to the Stock Bonus Plan will generally not be
transferable until the person receiving the shares satisfies the vesting
requirements imposed by the Board of Directors when the shares were issued.
The Board of Directors of MarketU may at any time, and from time to time, amend,
terminate, or suspend one or more of the Plans in any manner it deems
appropriate, provided that such amendment, termination or suspension cannot
adversely affect rights or obligations with respect to shares or options
previously granted.
The Plans are not qualified under Section 401(a) of the Internal Revenue Code,
nor are they subject to any provisions of the Employee Retirement Income
Security Act of 1974.
Summary. The following sets forth certain information as of December 15, 2000
concerning the stock options and stock bonuses granted by MarketU pursuant to
the Plans, and options granted outside of the Plans. Each option represents the
right to purchase one share of MarketU's common stock.
<TABLE>
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------
Total Shares Shares Remaining
Reserved Reserved for Shares Options/Shares
Type of Option Under Plans Outstanding Issued Under Plans
Options As Stock
Bonus
-------------------------------------------------------------------------------------
Incentive Stock Option Plan 500,000 50,000 N/A 450,000
-------------------------------------------------------------------------------------
Non-Qualified Stock Option 1,500,000 347,000 N/A 763,000
Plan
-------------------------------------------------------------------------------------
Stock Bonus Plan 500,000 N/A 75,000 429,000
-------------------------------------------------------------------------------------
Options outside of plans N/A 230,000 N/A N/A
-------------------------------------------------------------------------------------
</TABLE>
In August 2000, Scott Munro and James Sanford were issued 15,000 and 56,000
shares, respectively, of common stock from MarketU's Stock Bonus Plan for
services rendered. In November 2000, Rupinder Nanuwa was issued 4,000 shares of
common stock from MarketU's Stock Bonus Plan for services rendered.
The following table lists all options and warrants granted by MarketU as of
December 15, 2000, including those that were not granted pursuant to MarketU's
Incentive or Non-Qualified Stock Option Plans.
<PAGE>
--------------------------------------------------------------------------------
Shares Issuable Option Exercise Expiration Date
Name Upon Price of Option
Exercise of Options
--------------------------------------------------------------------------------
Scott Munro 50,000 $0.43 08/01/03
--------------------------------------------------------------------------------
Christine Cerisse * 100,000 $1.00 03/01/01
--------------------------------------------------------------------------------
James Sanford * 10,000 $0.43 08/01/03
--------------------------------------------------------------------------------
Company employees, 337,000 $0.43 08/01/03
former employees and
consultants
--------------------------------------------------------------------------------
Other option holders 130,000 $0.43 08/01/03
--------------------------------------------------------------------------------
Total 627,000
--------------------------------------------------------------------------------
o Former officer and/or director. See "Changes in Management" above for
information concerning changes in MarketU's management.
See "Principal and Selling Shareholders" for information concerning outstanding
warrants which collectively allow for the purchase of 2,134,060 shares of
MarketU's common stock.
Transactions with Related Parties and Recent Sales of Unregistered Securities
On April 28, 2000 MarketU acquired all of the issued and outstanding shares of
Home Finders Realty Ltd. and Most Referred Real Estate Agents, Inc.
(collectively doing business as Home Finders Realty) in exchange for (i)
4,500,000 shares of MarketU's Series A Preferred stock and (ii) 4,500,000
preferred shares in a wholly owned subsidiary of MarketU which was formed for
the sole purpose of facilitating the acquisition of Home Finders Realty. William
and Carole Coughlin owned all of the issued and outstanding shares of Home
Finders Realty at the time of the acquisition.
The preferred shares of MarketU and MarketU's subsidiary may be exchanged for
4,500,000 shares of MarketU's common stock, at the holder's option. Each share
of MarketU's Series A Preferred stock is entitled to one vote on all matters
submitted to a vote of MarketU's shareholders. The Series A Preferred shares are
not entitled to any dividends or any distributions upon the liquidation of
MarketU.
The following table shows the shares of MarketU's common stock which Mr.
Coughlin and Ms. Coughlin are entitled to receive upon the conversion of the
preferred shares.
--------------------------------------------------------------------------------
Shares of Company's
Series A Preferred Shares common stock
Preferred Shares of Subsidiary issuable upon
exchange
--------------------------------------------------------------------------------
William Coughlin 2,250,000 2,250,000 2,250,000
--------------------------------------------------------------------------------
Carole Coughlin 2,250,000 2,250,000 2,250,000
--------------------------------------------------------------------------------
On September 21, 2000, Khachik Toomian acquired 2,000,000 shares of MarketU's
common stock from Christine Cerisse, a former officer and director of MarketU,
for $153,000 in cash.
On September 21, 2000, 612559 B.C. Ltd. acquired 250,000 shares of MarketU's
common stock from Christine Cerisse for $50,000. 612559 B.C. Ltd. agreed to
purchase 500,000 additional shares of MarketU's common stock owned by Ms.
Cerisse for $150,000 on or before April 21, 2001. As part of its agreement with
Ms. Cerisse, 612559 B.C. Ltd. has the right to vote these 500,000 shares.
<PAGE>
Also on September 21, 2000, 612559 B.C. Ltd. acquired the voting rights to
3,500,000 shares of MarketU's Series A Preferred stock owned by William and
Carole Coughlin. 612559 B.C. Ltd. also acquired from Mr. and Mrs. Coughlin an
option to acquire the 3,500,000 Series A Preferred shares (as well as 3,500,000
preferred shares of a wholly owned subsidiary of MarketU) at a price that ranges
from $0.65 to $0.85 per share. The option expires on April 30, 2002. Kenneth
Galpin, George Shahnazarian and Ken Landis are the sole directors and officers
of 612559 B.C. Ltd.
On October 19, 2000, Mr. Toomian and 612559 B.C. Ltd. acquired 2,000,000 and
1,133,787 units respectively of MarketU for $0.15 per unit. Each unit consists
of one share of MarketU's common stock and one-half warrant. Every two-1/2
warrants will entitle the holder to purchase one additional share of MarketU's
common stock at a price of $0.25 per unit if exercised during the first twelve
months following the sale of the units and $0.30 per unit during the succeeding
twelve months.
Ken Galpin and George Shahnazarian are both directors and officers of 612559
B.C. Ltd. Mr. Galpin and Mr. Shahnazarian are also a director and officers of
MarketU, and Mr. Toomian is a business associate of Mr. Shahnazarian. Mr.
Toomian, together with Mr. Shahnazarian and Mr. Galpin, on behalf of 612559 have
an understanding (but not a written agreement) that they will vote, at
shareholders meetings, for the same directors of MarketU and any matters
proposed at the shareholders meetings, to accomplish the same business ends.
Principal and Selling Shareholders
The following table sets forth information as of December 15, 2000 with respect
to the beneficial ownership of MarketU's common stock both before and
immediately following this offering. The table includes the shares owned by the
the selling shareholders, those shareholders who beneficially own more than 5%
of MarketU's common stock and preferred stock, each of MarketU's directors and
executive officers, and all directors and officers as a group.
The percentages in these calculations are based upon 15,524,214 outstanding
shares of common stock, which assumes that all outstanding options and warrants
are exercised and all outstanding Series A Preferred shares are converted into
shares of common stock.
The number of shares being offered by the selling shareholders include shares of
common stock currently held by the selling shareholders, shares of common stock
issuable to the selling shareholders upon exercise of warrants and options and
upon the conversion of the Series A Preferred stock.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
Shares of Common Shares of Common
Stock Beneficially Shares of Stock
Owned Prior to Common Stock Beneficially
Relationship this Offering (1) Being Owned After this
Name and Address of with the Offered Offering (3)
Beneficial Owner Company Pursuant to
this
Prospectus
Number Percent Number
----------------------------------------------------------------------------------------
Kenneth Galpin Director & (2)
12385-221 Street, President
Maple Ridge, B.C.
Canada V2X 0T6
----------------------------------------------------------------------------------------
William Coughlin Director & 500,000 (2) 3.2% 500,000 0
11202 Stave Lake Product
Road, Mission, B.C. Development
Canada V2V 4J1 Officer
----------------------------------------------------------------------------------------
Carole Coughlin (2) 500,000 (2) 3.2% 500,000 0
11202 Stave Lake
Road, Mission, B.C.
Canada V2V 4J1
----------------------------------------------------------------------------------------
George Shahnazarian Secretary (2)
11476 Kingston
Street Maple Ridge,
B.C. Canada V2X 0Y5
----------------------------------------------------------------------------------------
Scott Munro Treasurer 65,000 0.4% 15,000 50,000
10933 Sylvester Road and
RR3, Mission, B.C. Principal
Canada V2V 4J1 Financial
Officer
----------------------------------------------------------------------------------------
Glenn Davies Director (2)
9263-209B Place,
Langley, B.C.,
Canada, V1M 1T1
----------------------------------------------------------------------------------------
Ken Landis Director (2)
31470 Southern Drive
Abbotsford, B.C.
Canada, V2T 5N9
----------------------------------------------------------------------------------------
David Woodcock Director (2)
4353 Huntington
Forest Drive,
Jacksonville, FL
32257
----------------------------------------------------------------------------------------
Rupinder Nanuwa 4,000 0.0% 4,000
32125 Rodgers Ave.
Mission, B.C.
Canada, V2Y 5B7
----------------------------------------------------------------------------------------
James Sanford former 66,000 0.4% 56,000 10,000
Unit 106, 32119 Old Director
Yale Road,
Abbotsford, British
Columbia, Canada V3G
1H2
<PAGE>
----------------------------------------------------------------------------------------
Khachik Toomian 5,000,000 32.2% 5,000,000 0
902 S. Glendale (2)
Avenue, Glendale,
California CA91205
----------------------------------------------------------------------------------------
612559 B.C. Ltd. 5,950,680 38.3% 5,950,680 0
11476 Kingston (2)
Street, Maple Ridge,
British Columbia,
Canada V2X 0Y5
----------------------------------------------------------------------------------------
Pegasus Investments 100,000 0.6% 100,000 0
Limited
76 Dean St.
Belize City, Belize
----------------------------------------------------------------------------------------
Shamrock Asset 241,000 1.6% 241,000 0
Management Corp.
60 Market Square,
P.O. Box 364
Belize City, Belize
----------------------------------------------------------------------------------------
Popcorn Holdings, 133,334 0.9% 133,334 0
Inc.
60 Market Square,
P.O. Box 364
Belize City, Belize
----------------------------------------------------------------------------------------
Cascade Pacific 195,000 1.3% 195,000 0
Investments S.A.
76 Dean St.
Belize City, Belize
----------------------------------------------------------------------------------------
All Executive 7,015,680 45.2% 6,965,680 50,000
Officers & Directors
as a Group (7
persons)
----------------------------------------------------------------------------------------
Total 12,695,014 60,000
----------------------------------------------------------------------------------------
</TABLE>
(1) Includes shares issuable to the following persons upon the exercise of
options or warrants or upon the exchange of MarketU's Series A Preferred
stock:
Expiration Shares Issuable
Shares Issuable Date of Upon Exchange
Upon Exercise of Exercise Option or of Series A
NameOptions or Warrants Price Warrant Preferred Stock
William Coughlin -- -- -- 500,000
Carole Coughlin -- -- -- 500,000
Scott Munro 50,000 $0.43 8/01/03 --
James Sanford 10,000 $0.43 8/01/03 --
<PAGE>
Khachik Toomian 1,000,000 $0.25 * 10/18/02 --
612559 B.C. Ltd. 566,893 $0.25 * 10/18/02 3,500,000
Pegasus Investments
Limited 50,000 $0.75 2/10/01 --
Shamrock Asset
Management Corp. 61,500 $0.75 3/10/01 --
Shamrock Asset
Management Corp. 59,000 $1.00 3/17/01 --
Popcorn Holdings, Inc. 66,667 $1.00 3/17/01 --
Cascade Pacific
Investments S.A. 65,000 $1.25 5/01/01 --
Cascade Pacific
Investments S.A. 65,000 $1.50 5/01/01 --
* Exercise price increases to $0.30 after 10/18/01.
(2) On September 21, 2000, 612559 B.C. Ltd. acquired 250,000 shares of
MarketU's common stock from Christine Cerisse for $50,000. 612559 B.C. Ltd.
agreed to purchase 500,000 additional shares of MarketU's common stock
owned by Ms. Cerisse for $150,000 on or before April 21, 2001. As part of
its agreement with Ms. Cerisse, 612559 B.C. Ltd. has the right to vote
these 500,000 shares.
Also on September 21, 2000, 612559 B.C. Ltd. acquired the voting
rights to 3,500,000 shares of MarketU's Series A Preferred stock which are
owned by William and Carole Coughlin. Each Series A Preferred share is
entitled to one vote. 612559 B.C. Ltd. also acquired from Mr. and Mrs.
Coughlin an option to acquire the 3,500,000 Series A Preferred shares
(as well as 3,500,000 preferred shares of a wholly owned subsidiary of
MarketU) at a price that ranges from $0.65 to $0.85 per share. The option
expires on April 30, 2002. Kenneth Galpin, George Shahnazarian and Ken
Landis are the sole directors, officers and controlling persons of 612559
B.C. Ltd. Glenn Davies and David Woodcock are also shareholders of 612559
B.C. Ltd.
The share ownership in the table for 612559 B.C. Ltd. assumes the
3,500,000 preferred shares of MarketU and MarketU's subsidiary which may
be acquired from William and Carole Coughlin are exchanged for 3,500,000
shares of MarketU's common stock, and includes 566,893 shares of
MarketU's common stock issuable upon exercise of outstanding warrants.
William Coughlin is the husband of Carole Coughlin.
(3) Assumes all shares being offered pursuant to this prospectus are sold,
in which case none of the selling shareholders will own more than 1% of
MarketU's common stock following this offering.
Plan Of Distribution
The shares of common stock owned, or which may be acquired, by the selling
shareholders may be offered and sold by means of this prospectus from time to
time as market conditions permit in the over-the-counter market, or otherwise,
at prices and terms then prevailing or at prices related to the then-current
market price, or in negotiated transactions. These shares may be sold by one or
more of the following methods, without limitation: (a) by a broker or dealer as
agent for a selling shareholder; (b) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
prospectus; (c) ordinary brokerage transactions and transactions in
<PAGE>
which the broker solicits purchasers; and (d) face-to-face transactions between
sellers and purchasers without a broker/dealer. In effecting sales, brokers or
dealers engaged by the selling shareholders may arrange for other brokers or
dealers to participate. Such brokers or dealers may receive commissions or
discounts from selling shareholders in amounts to be negotiated.
A Selling Shareholder may enter into hedging transactions with broker-dealers
and the broker-dealers may engage in short sales of MarketU's common stock in
the course of hedging the positions they assume with such Selling Shareholder,
including, without limitation, in connection with the distribution of MarketU's
common stock by such broker-dealers. A Selling Shareholder may also enter into
option or other transactions with broker-dealers that involve the delivery of
the common stock to the broker-dealers, who may then resell or otherwise
transfer such common stock. A Selling Shareholder may also loan or pledge the
common stock to a broker-dealer and the broker-dealer may sell the common stock
so loaned or upon default may sell or otherwise transfer the pledged common
stock.
Broker-dealers, underwriters or agents participating in the distribution of
MarketU's common stock as agents may receive compensation in the form of
commissions, discounts or concessions from the Selling Shareholders and/or
purchasers of the common stock for whom such broker-dealers may act as agent, or
to whom they may sell as principal, or both (which compensation as to a
particular broker-dealer may be less than or in excess of customary
commissions). Selling Shareholders and any broker-dealers who act in connection
with the sale of common stock hereunder may be deemed to be "Underwriters"
within the meaning of the Securities Act, and any commissions they receive may
be deemed to be underwriting discounts and commissions under the Securities Act.
Neither MarketU nor any Selling Shareholder can presently estimate the amount of
such compensation. MarketU knows of no existing arrangements between any selling
shareholder, any other stockholder, broker, dealer, underwriter or agent
relating to the sale or distribution of MarketU's common stock.
MarketU has advised the selling shareholders that they and any securities
broker/dealers or others who may be deemed to be statutory underwriters will be
subject to the Prospectus delivery requirements under the Securities Act of
1933. MarketU has also advised the Selling Shareholders that in the event of a
"distribution" of the shares owned by the Selling Shareholder, such Selling
Shareholders, any "affiliated purchasers", and any broker/dealer or other person
who participates in such distribution may be subject to Rule 102 under the
Securities Exchange Act of 1934 ("1934 Act") until their participation in that
distribution is completed. A "distribution" is defined in Rule 102 as an
offering of securities "that is distinguished from ordinary trading transactions
by the magnitude of the offering and the presence of special selling efforts and
selling methods". MarketU has also advised the Selling Shareholders that Rule
102 under the 1934 Act prohibits any "stabilizing bid" or "stabilizing purchase"
for the purpose of pegging, fixing or stabilizing the price of the common stock
in connection with this offering. Rule 101 makes it unlawful for any person who
is participating in a distribution to bid for or purchase stock of the same
class as is the subject of the distribution.
MarketU has agreed to pay the expenses associated with registering the shares to
be sold by the selling shareholders.
Description Of Securities
Common Stock
MarketU is authorized to issue 50,000,000 shares of common stock. As of December
15, 2000 MarketU had 8,263,154 outstanding shares of common stock. Holders of
common stock are each entitled to cast one vote for each share held of record on
all matters presented to shareholders. Cumulative voting is not allowed; hence,
the holders of a majority of the outstanding common and preferred stock can
elect all directors.
<PAGE>
Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor and,
in the event of liquidation, to share pro rata in any distribution of MarketU's
assets after payment of liabilities. The Board of Directors is not obligated to
declare a dividend and it is not anticipated that dividends will be paid until
MarketU is in profit.
Holders of common stock do not have preemptive rights to subscribe to additional
shares if issued by MarketU. There are no conversion, redemption, sinking fund
or similar provisions regarding the common stock. All of the outstanding shares
of common stock are fully paid and non-assessable and all of the shares of
Common stock offered hereby will be, upon issuance, fully paid and
non-assessable.
Preferred Stock
MarketU is authorized to issue up to 10,000,000 shares of preferred stock.
MarketU's Articles of Incorporation provide that the Board of Directors has the
authority to divide the unissued preferred stock into series and, within the
limitations provided by the Nevada law, to fix by resolution the voting power,
including rights to multiple votes per share, dividends rights. which would have
priority over any dividends paid with respect to MarketU's common stock,
designations, preferences, and relative participation, special rights, and the
qualifications, limitations, or restrictions of the shares of any series so
established. The issuance of preferred stock with such rights may make more
difficult the removal of management even if such removal would be considered
beneficial to shareholders generally, and will have the effect of limiting
shareholder participation in certain transactions such as mergers or tender
offers if such transactions are not favored by incumbent management. As the
Board of Directors has authority to establish the terms of, and to issue, the
preferred stock without shareholder approval, the preferred stock could be
issued to defend against any attempted take-over of MarketU.
Series A Preferred Stock
On April 20, 2000, the Board of Directors created a class of preferred stock,
designated as the Series A Preferred stock and authorized the issuance of
4,500,000 Series A Preferred shares in connection with the acquisition of Home
Finders Realty. As of December 15, 2000, MarketU had 4,500,000 shares of Series
A Preferred stock issued and outstanding. Holders of the Series A Preferred
stock are each entitled to one vote on all matters submitted to a vote of
MarketU's shareholders. Cumulative voting is not allowed; hence, the holders of
a majority of the outstanding common and Series A Preferred stock can elect all
directors. One Series A Preferred share together with one preferred share of
MarketU's subsidiary may at any time be exchanged for one share of MarketU's
common stock.
Transfer Agent
The transfer agent for MarketU's common stock is Corporate Stock Transfer,
having an office at 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado
80209.
Legal Proceedings
MarketU is not engaged in any litigation, and the officers and directors
presently know of no threatened litigation involving MarketU.
<PAGE>
Experts
The financial statements of MarketU as of July 31, 2000 and December 31, 1999
and for the seven months ended July 31, 2000 and the years ended December 1999
and 1998, included as part of this prospectus have been audited by KPMG LLP,
independent auditors, as stated in their report dated November 14, 2000, and
have been included in this prospectus in reliance upon the report of KPMG LLP,
appearing elsewhere herein, and upon authority of said firm as experts in
accounting and auditing.
Effective October 19, 2000 MarketU retained KPMG to act as its auditors. In this
regard KPMG replaced Morgan & Company which audited MarketU's financial
statements for the fiscal years ended July 31, 1999 and 1998. The reports of
Morgan & Company for these fiscal years did not contain an adverse opinion, or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. During MarketU's two most recent fiscal
years and subsequent interim periods, there were no disagreements with Morgan &
Company on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedures, which disagreements, if not resolved
to the satisfaction of Morgan & Company would have caused Morgan & Company to
make reference to such disagreements in its reports.
MarketU has authorized Morgan & Company to discuss any matter relating to
MarketU's operations with KPMG.
The change in auditors was recommended and approved by MarketU's board of
directors. MarketU does not have an audit committee.
During the two most recent fiscal years and subsequent interim period ending
July 31, 2000 MarketU did not consult with KPMG regarding the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on MarketU's financial
statements, or any matter that was the subject of a disagreement or what is
defined as a reportable event by the Securities and Exchange Commission.
Indemnification
MarketU's Bylaws authorize indemnification of a director, officer, employee or
agent of MarketU against expenses incurred by him in connection with any action,
suit, or proceeding to which he is named a party by reason of his having acted
or served in such capacity, except for liabilities arising from his own
misconduct or negligence in performance of his duty. In addition, even a
director, officer, employee, or agent of MarketU who was found liable for
misconduct or negligence in the performance of his duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, or persons
controlling MarketU pursuant to the foregoing provisions, MarketU has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
ADDITIONAL INFORMATION
MarketU is subject to the requirements of the Securities Exchange Act of 1934
and is required to file reports, proxy statements and other information with the
Securities and Exchange Commission. Copies of any such reports, proxy statements
and other information filed by MarketU can be read and copied at the
Commission's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.,
20549. The public may obtain information on the operation of the Public
Reference Room by
<PAGE>
calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet
site that contains reports, proxy and information statements, and other
information regarding MarketU. The address of that site is http://www.sec.gov.
MarketU has filed with Securities and Exchange Commission a Registration
Statement under the Securities Act of 1933, as amended, with respect to the
securities offered by this prospectus. This prospectus does not contain all of
the information set forth in the Registration Statement. For further information
with respect to MarketU and such securities, reference is made to the
Registration Statement and to the exhibits filed with the Registration
Statement. Statements contained in this prospectus as to the contents of any
contract or other documents are summaries which are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. The Registration Statement
and related exhibits may also be examined at the Commission's internet site.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
MarketU Inc.
We have audited the consolidated balance sheets of MarketU Inc. (formerly North
American Resort and Golf, Inc.) as of July 31, 2000 and December 31, 1999, and
the related consolidated statements of operations, stockholders' deficiency and
comprehensive income (loss) and cash flows for the seven months ended July 31,
2000, and the years ended December 31, 1999 and 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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 present fairly, in all
material respects, the financial position of MarketU Inc. as at July 31, 2000
and December 31, 1999 and the results of its operations and its cash flows for
the seven months ended July 31, 2000, and the years ended December 31, 1999 and
1998 in conformity with accounting principles generally accepted in the United
States of America.
Chartered Accountants
Abbotsford, Canada
November 14, 2000
<PAGE>
MarketU Inc.
(Formerly North American Resort and Golf, Inc.)
Consolidated Balance Sheets
(Expressed in U.S. Dollars)
July 31, 2000 and December 31, 1999
July 31, December 31,
2000 1999
-------- -----------
Assets
Current assets:
Cash $ 3,034 $ 9,631
Accounts receivable 6,821 1,846
Prepaid expenses 29,045 36,600
Security deposit 10,810 3,671
------ --------
49,710 51,748
Due from shareholder (Note 3) 69,241 --
Deferred recapitalization costs
(Note 4) -- 55,429
Fixed assets (Note 5) 30,094 34,698
Web site development (Note 6) 33,563 13,220
----------- -------------
$ 182,608 $ 155,095
========== ============
Liabilities and Stockholders' Deficiency
Current liabilities:
Accounts payable and accrued
liabilities $ 95,143 $ 61,734
Unearned revenue 137,489 176,000
Due to shareholder -- 8,396
------------- ---------
232,632 246,130
Promissory notes payable (Note 7) 24,887 55,429
Payable to related party (Note 8) 49,388 51,171
Stockholders' deficiency (Note 11):
Common stock 404 339
Additional paid in capital 48,685 -
Series A preferred stock 83,468 -
Deficit (261,725) (201,480)
Accumulative other comprehensive
income:
Cumulative exchange adjustment 4,869 3,506
---------- ----------
(124,299) (197,635)
Subsequent events (Note 13)
$ 182,608 $ 155,095
See accompanying notes to consolidated financial statements.
<PAGE>
MarketU Inc.
(Formerly North American Resort and Golf, Inc.)
Consolidated Statements of Operations
(Expressed in U.S. Dollars)
-----------------------------------------------------------------------------
Seven months Year Year
ended ended ended
July 31 December 31 December 31
2000 1999 1998
-----------------------------------------------------------------------------
Revenue:
Referral fees and membership dues $375,320 $ 572,654 $413,647
Miscellaneous revenue 4,024 201 -
--------------------------------------------------------------------------
379,344 572,855 413,647
Direct costs:
Commission 49,833 93,768 62,796
Courier 1,293 3,355 5,912
Credit card 5,597 8,499 8,213
Office and miscellaneous - 151 7,693
Telephone 19,563 37,763 73,987
Wages and benefits 28,905 52,561 128,354
Web site maintenance and
development 28,542 31,749 8,780
-----------------------------------------------------------------------------
133,733 227,846 295,735
-----------------------------------------------------------------------------
Gross margin 245,611 345,009 117,912
General and administrative expenses:
Advertising and promotion 8,354 12,842 19,580
Amortization 5,784 20,880 2,434
Automobile 2,061 3,089 1,419
Bank charges and interest 3,817 4,725 2,799
Computer services 12,152 9,142 5,984
Insurance and licensing 1,649 2,730 706
Investor relations and
marketing 21,723 28,943 -
Membership and dues 139 4,738 2,157
Office rent 13,515 16,499 4,873
Office supplies 5,171 12,027 16,712
Professional fees 38,073 17,835 1,005
Maintenance and utilities 3,054 7,985 5,897
Management fees 38,863 - 31,773
Stock transfer and filings 615 - -
Telephone 1,730 4,156 1,192
Travel 2,972 8,174 5,337
Wages and benefits 146,184 166,929 116,834
-----------------------------------------------------------------------------
305,856 320,694 218,702
-----------------------------------------------------------------------------
Net income (loss) for the period $ (60,245) $ 24,315 $ (100,790)
-----------------------------------------------------------------------------
Net income (loss) per common share:
- basic $ (0.01) $ 0.01 $ (0.04)
- diluted $ (0.01) $ 0.01 $ (0.04)
Weighted average common shares
outstanding, basic and diluted
(Note 2(g)) 4,856,062 2,714,795 2,695,068
-----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
MarketU Inc.
(Formerly North American Resort and Golf, Inc.)
Consolidated Statements of Stockholders' Deficiency and Comprehensive Income
(Loss)
(Expressed in U.S. Dollars)
Seven months ended July 31, 2000 and years ended December 31, 1999 and December
31, 1998
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Accumulated
Additional Series A other compre-
Common Stock paid-in Preferred Stock hensive Accumulated
Shares Amount capital Shares Amount income (loss) deficit Total
-----------------------------------------------------------------------------------------------------------
Balance, December 31, 100 $70 $ - - $ - $1,926 $(111,148) $(109,152)
1997
Issuance of common
stock for cash 200 133 - - - - - 133
Comprehensive loss:
Translation adjustment - - - - - (57) - (57)
Loss for the period - - - - - - (100,790) (100,790)
------------------------------------------------------------------------------------------------------------
(100,847)
------------------------------------------------------------------------------------------------------------
Balance, December 31, 300 203 - - - 1,869 (211,938) (209,866)
1998
Issuance of common
stock for cash 200 136 - - - - - 136
Dividends paid by
Home Finders Realty
prior to
recapitalization - - - - - - (13,857) (13,857)
Comprehensive income:
Translation adjustment - - - - - 1,637 - 1,637
Income for the period - - - - - - 24,315 24,315
-------------------------------------------------------------------------------------------------------
25,952
-----------------------------------------------------------------------------------------------------------
Balance, December 31, 500 339 - - - 3,506 (201,480) (197,635)
1999
Shares deemed to be
issued on
recapitalization
transaction (Note
2(a)) 4,988,867 - - 4,500,000 83,468 - - 83,468
Common stock issued
for cash, May 5, 2000
at $0.75 per share,
net of issuance costs
of $ nil 65,000 65 48,685 - - - - 48,750
Comprehensive loss:
Translation - - - - - 1,363 - 1,363
adjustment
Loss for the - - - - - - (60,245) (60,245)
period
-------------------------------------------------------------------------------------------------------
- - - - - 1,363 (60,245) (58,882)
-------------------------------------------------------------------------------------------------------
Balance, July 31,
2000 5,054,367 $ 404 $48,685 4,500,000 $83,468 $ 4,869 $(261,725) $(124,299)
-----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MarketU Inc.
(Formerly North American Resort and Golf, Inc.)
Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
------------------------------------------------------------------------------
Seven Year Year
months ended ended
ended December 31 December 31
July 31 1999 1998
2000
------------------------------------------------------------------------------
Cash flows from operating activities:
Income (loss) for the period $(60,245) $24,315 $(100,790)
Items not involving cash:
Amortization 5,784 20,880 2,434
Deferred recapitalization costs 36,987 - -
Amortization of web site
development costs 19,264 15,502 2,283
Changes in operating asset
and liabilities:
Accounts receivable 36,795 (1,846) -
Prepaid expenses 7,555 10,288 (20,200)
Accounts payable and 70,761 23,830 10,451
accrued liabilities
Unearned revenue (38,899) (51,525) 103,061
-----------------------------------------------------------------------------
Net cash provided by (used
by) operating activities 78,002 41,444 (2,761)
Cash flows from investing activities:
Deferred recapitalization costs - (55,429) -
Purchase of fixed assets (1,180) (26,817) (9,547)
Web site development (39,607) (26,440) (4,565)
Cash acquired on
recapitalization 6,097 - -
Security deposits (7,139) (3,671) -
-------------------------------------------------------------------------------
Net cash used in investing activities (41,829) (112,357) (14,112)
Cash flows from financing activities:
Net proceeds from issuances
of and subscriptions for common stock 48,750 136 133
Advances from related party - 51,171 -
Repayment of advances to related party (1,783) - -
Advances from shareholder - - 27,367
Advances to shareholder (59,195) (38,856) -
Repayment of promissory notes (46,346) - -
Proceeds from promissory notes 15,804 55,249 -
----------------------------------------------------------------------------
Net cash provided by (used
in) financing activities (42,770) 67,700 27,500
-------------------------------------------------------------------------------
Increase (decrease) in cash (6,597) (3,213) 10,627
Cash, beginning of period 9,631 12,844 2,217
-------------------------------------------------------------------------------
Cash, end of period $ 3,034 $ 9,631 $ 12,844
-------------------------------------------------------------------------------
Supplementary disclosure:
Non-cash transactions:
Stock issued on
recapitalization, net of
cash acquired (Note 2(a)) $77,371 $ - $ -
Dividends credited to
shareholder loan by
subsidiary prior to the
reverse take over $ - $ 13,857 $ -
Interest paid $ 2,425 $ - $ -
Taxes paid $ - $ - $ -
-------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
MarketU Inc.
(Formerly North American Resort and Golf, Inc.)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Seven months ended July 31, 2000 and year ended December 31, 1999
--------------------------------------------------------------------------------
1. General operations:
North American Resorts & Golf, Inc. ( "NARG") was incorporated under the laws
of the State of Nevada on June 4, 1997. On April 28, 2000, NARG acquired two
Canadian subsidiaries in a series of transactions that have been accounted
for as a recapitalization of the Canadian subsidiaries (Note 2(a)). For
purposes of these consolidated financial statements the reporting entity is
defined as the Company. On June 27, 2000 the Company changed its name to
MarketU Inc. Prior to the recapitalization, NARG was a development stage
company as it was devoting substantially all efforts to the identification
and development of new business opportunities.
Since the transactions on April 28, 2000, the Company's primary business
activity is to provide a service which allows real estate professionals and
the general public to find customer service oriented realtors in North
American cities through the Company's web sites AMRR.com and CMRR.com.
2. Significant accounting policies:
(a) Basis of presentation:
On April 28, 2000, NARG acquired all of the issued and outstanding shares
of Home Finders Realty Inc. and Most Referred Real Estate Agents Inc.
(collectively referred to as "Home Finders Realty"). Home Finders Realty
was incorporated in British Columbia, Canada on April 1, 1981. Most
Referred Real Estate Agents Inc. was incorporated under the Canada
Business Corporations Act on August 5, 1997. This transaction was
completed by issuing 4,500,000 voting Series A Preferred shares to the
shareholders of Home Finders Realty. Upon completion of this transaction
the former shareholders of Home Finders Realty held approximately 47.4% of
the voting shares of the Company. The Home Finders Realty shareholders
also had options to acquire from existing Company shareholders
approximately 11% of the existing common shares. Collectively the former
shareholders of Home Finders Realty directly and indirectly controlled
approximately 58.4% of the voting shares of the Company.
The steps utilized to complete this transaction were as follows:
(i) NARG incorporated 604587 British Columbia Ltd. ("604587"), as a
wholly-owned subsidiary, to facilitate the transaction. 604587's sole
purpose was to facilitate the transaction and has no operations.
(ii) 604587 issued 4,500,000 non-voting preferred shares and NARG issued
4,500,000 voting Series A preferred shares, to the former shareholders of
Home Finders Realty in exchange for all of the issued and outstanding
common shares of Home Finders Realty.
<PAGE>
2. Significant accounting policies (continued):
(a) Basis of presentation (continued):
The preferred shareholders of 604587 and the Company can cause, at
their option, the Company to convert one preferred share in 604587 and
one Series A preferred share of the Company into one common share of
the Company. This is summarized as follows:
Shares of
the
Company's
Series A Preferred shares common stock
preferred shares of 604587 issuable
upon exchange
4,500,000 4,500,000 4,500,000
========= ========= =========
This business combination has been accounted for as a recapitalization of
NARG by Home Finders Realty.
Application of recapitalization accounting results in the following:
(i)The consolidated financial statements are issued under the name of the
Company, but are considered a continuation of the combined financial
statements of Home Finders Realty. Accordingly, the comparative
financial information is based on Home Finders Realty's fiscal years
ended December 31, 1999 and 1998.
(ii) The stockholder's deficit is presented as a continuation of Home Finders
Realty.
(iii) The acquisition was accounted for as a recapitalization of Home
Finders Realty, effectively representing an issue of shares by Home
Finders Realty for the net monetary assets of NARG.
The net monetary assets acquired are as follows:
----------------------------------------------------------
Cash $ 6,097
Other working capital, net 77,371
----------------------------------------------------------
Value assigned to Series A preferred shares
issued $83,468
----------------------------------------------------------
Acquisition related costs of $36,987 were incurred on this
recapitalization and have been recorded in professional fees and other
expenses.
The historical financial statements reflect the financial position of
Home Finders Realty from the date of its incorporation, consolidated
with those of NARG from April 28, 2000. The assets and liabilities of
Home Finders Realty are recorded at their historical costs without
adjustment for the recapitalization transaction.
<PAGE>
2. Significant accounting policies (continued):
(a) Basis of presentation (continued):
The following is a continuity of the legal share capital of NARG up to
the date of recapitalization:
----------------------------------------------------------
Number of
shares
----------------------------------------------------------
Balance, December 31, 1997 4,523,200
Issued for cash on April 3, 1998 20,200
Issued for cash on exercise of options on 8,800
April 3, 1998
----------------------------------------------------------
Balance, December 31, 1998 4,552,200
Issued for cash on December 15, 1999 200,000
----------------------------------------------------------
Balance, December 31, 1999 4,752,200
Issued for cash on March 17, 2000 237,167
----------------------------------------------------------
Balance at April 28, 2000 4,989,367
Less: Home Finders Realty shares (500)
outstanding at April 28, 2000
----------------------------------------------------------
Shares deemed to be issued on 4,988,867
recapitalization
----------------------------------------------------------
(b) Consolidation:
The consolidated financial statements include the accounts of the Company
and all of its directly and indirectly owned subsidiaries as follows:
Most Referred Real Estate Agents Inc.
Home Finders Realty Ltd.
604587 British Columbia Ltd.
All significant intercompany balances and transactions have been
eliminated in the consolidated financial statements.
(c) Use of estimates:
The preparation of consolidated financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the recorded amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
dates of the consolidated financial statements and reported revenues and
expenses for the reporting period. Actual results may significantly differ
from those estimates.
<PAGE>
2. Significant accounting policies (continued):
(d) Foreign currency translation:
The Company's reporting and functional currency is the U.S. dollar. The
operations of the Company's subsidiaries are located in Mission, Canada
and their functional currency is the Canadian dollar. The operations have
been translated into U.S. dollars using the current rate method whereby
the assets and liabilities are translated at the rates of exchange in
effect at the balance sheet date and revenue and expenses are translated
at the average rates of exchange during the year.
Adjustments from the translation of the subsidiaries financial information
are included in comprehensive income (loss) and as a separate component of
stockholders' deficiency.
(e) Fixed assets:
Fixed assets are recorded at cost. Amortization has been provided on the
declining balance basis using the following rates:
Office equipment 20%
Automotive equipment 30%
Computer hardware 30%
Computer software 100%
(f) Income taxes:
The Company follows the asset and liability method of accounting for
income taxes. Under this method, current taxes are recognized for the
estimated income taxes payable for the current period.
Deferred income taxes are provided based on the estimated future tax
effects of timing differences between financial statement carrying amounts
of assets and liabilities and their respective tax basis as well as the
benefit of losses available to be carried forward to future years for tax
purposes.
(f) Income taxes (continued):
Deferred tax assets and liabilities are measured using enacted tax rates
that are expected to apply to taxable income in the years in which those
timing differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized
in operations in the period that includes the substantive enactment date.
A valuation allowance is recorded for deferred tax assets when it is more
likely than not that such future tax assets will not be realized.
(g) Net loss per share:
Basic net loss per share is computed using the weighted average number of
common shares outstanding during the period. Diluted loss per share is
computed using the weighted average number of common and potentially
dilutive common stock outstanding during the period. As the Company has a
net loss in the seven month period ending July 31 and the year ended
December 31, 1998, basic and diluted net loss per share are the same. Net
loss per share for December 1999 and 1998 are calculated on the basis of
Home Finders Realty's effective weighted average number of diluted shares
of the Company calculated on an assumed post conversion basis.
<PAGE>
2. Significant accounting policies (continued):
(h) Web site development:
Web site development, including customizing database software, development
of HTML web page templates and installation of servers as well as
significant upgrades and enhancements, are capitalized. Amortization of
these costs is provided for over two years on a straight-line basis and is
recorded as part of web site maintenance and development.
(i) Stock-based compensation:
The Company accounts for its employee stock-based compensation arrangement
in accordance with provisions of Accounting Principles Board ("APB")
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense under fixed plans is
recorded on the date of grant only if the market value of the underlying
stock at the date of grant exceeds the exercise price. The Company
recognizes compensation expense for stock options, common stock and other
equity instruments issued to non-employees for services received based
upon the fair value of the equity instruments issued.
SFAS No. 123, Accounting for Stock Based Compensation, requires entities
that continue to apply the provisions of APB Opinion No. 25 for
transactions with employees to provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants as if the
fair-value-based method defined in SFAS No. 123 had been applied to these
transactions.
(i) Stock-based compensation (continued):
Pro forma loss and pro forma loss per share are disclosed in Note 11(b).
(j) Revenue recognition:
The Company earns revenues from the sale of annual non-refundable realtor
memberships and through referral fees resulting when a person buys or
sells a house through a member realtor referred by the Company. Membership
fees are recognized over the membership period from the commencement of
the membership term. Referral fees are recorded when earned and received
from the members.
3. Due from shareholder:
The amount due from shareholder is without interest, has no specified terms
of repayment and is unsecured. The shareholder is also a director of the
Company.
4. Deferred recapitalization costs:
During the year ended December 31, 1999, Home Finders Realty incurred $55,429
in costs related to the proposed transaction with NARG. On April 28, 2000,
the Company completed this transaction at which time $36,987 in costs were
expensed with the balance of $18,442 charged back to the former shareholders
of Home Finders Realty for their portion of the costs.
<PAGE>
5. Fixed assets:
Fixed assets consist of the following:
----------------------------------------------------------------
July 31 December 31
2000 1999
----------------------------------------------------------------
Cost:
Automotive $ 7,172 $7,172
Computer equipment 16,278 15,979
Computer software 25,813 24,912
Office equipment 10,787 9,863
------------------------------------------------------------
60,050 57,926
------------------------------------------------------------
Accumulated amortization:
Automotive 3,341 2,388
Computer equipment 5,064 3,229
Computer software 11,246 7,748
Office equipment 10,305 9,863
------------------------------------------------------------
29,956 23,228
------------------------------------------------------------
Net book value $30,094 $34,698
----------------------------------------------------------------
6. Web site development:
----------------------------------------------------------------
July 31 December 31
2000 1999
----------------------------------------------------------------
Cost $70,612 $31,005
Less accumulated amortization 37,049 17,785
----------------------------------------------------------------
Net book value $33,563 $13,220
----------------------------------------------------------------
7. Promissory notes payable:
----------------------------------------------------------------
July 31 December 31
2000 1999
----------------------------------------------------------------
Note payable, with interest at 10%
(reduced to 8.5% if fully repaid by
December 2, 2000), no fixed terms of $9,083 $55,429
repayment; secured - see below
Note payable, with interest at 10% per
annum (reduced to 8.5% if fully repaid
by December 2, 2000), no fixed terms of 15,804 -
repayment; secured - see below
----------------------------------------------------------------
$24,887 $55,429
----------------------------------------------------------------
The above promissory notes are secured by a general security agreement over
all of the assets of the Company's subsidiary, Home Finders Realty Ltd.
<PAGE>
8. Payable to related party:
----------------------------------------------------------------
July 31 December 31
2000 1999
----------------------------------------------------------------
Due to AMRR.com Inc. ("AMRR"), without
interest or specified terms of repayment $49,388 $51,171
----------------------------------------------------------------
A director of the Company is the sole director of AMRR.
The Company leases computer and office equipment with a cost of approximately
$31,000 from AMRR for $1 per year.
9. Income taxes:
The Company has income tax loss carryforwards of approximately $154,000 which
are available to reduce future taxable income. The benefits of the losses has
not been recognized in the financial statements. The losses will expire as
follows:
Canada U.S. Total
2005 $26,000 $ - $26,000
2006 $24,000 $ - $24,000
2007 $44,000 $ - $44,000
2010 $ - $60,000 $60,000
Significant components of the Company's deferred tax assets and liabilities
are shown below. A valuation allowance has been recognized to fully offset
the net future tax assets as realization of such net assets is uncertain.
----------------------------------------------------------------
July 31 December 31
2000 1999
----------------------------------------------------------------
Deferred tax assets:
Operating loss carryforwards $67,000 $22,000
Unearned revenues 59,000 77,000
------------------------------------------------------------
126,000 99,000
Valuation allowance for deferred tax (109,000) (79,000)
assets
----------------------------------------------------------------
Net deferred tax assets 17,000 20,000
Deferred tax liabilities:
Capital assets and web site development (5,000) (4,000)
Prepaid expenses (12,000) (16,000)
------------------------------------------------------------
(17,000) (20,000)
---------------------------------------------------------------
$ - $ -
----------------------------------------------------------------
<PAGE>
10. Financial instruments:
The Company's financial instruments consist of cash, accounts receivable,
security deposit, amount due to (from) shareholder, accounts payable and
accrued liabilities, promissory notes payable and payable to related party.
It is the opinion of management that the maximum credit risk equals their
carrying values.
Fair value:
The carrying values of cash, accounts receivable, security deposit, amount
due from shareholders, accounts payable and accrued liabilities, promissory
notes payable and payable to related party approximate fair value due to the
short-term maturities of these instruments.
It is not practicable to determine the fair value of the amounts due from
shareholders nor amounts due to related parties due to their related party
nature and the absence of a secondary market for such instruments.
Foreign Exchange Risk:
The Company's Canadian subsidiaries, Home Finders Realty Inc. and Most Referred
Real Estate Agents Inc., operate in Canadian dollars. As a result, the amounts
included in the consolidated financial statements relating to these two
subsidiaries will fluctuate with the Canadian foreign exchange rate.
11. Share capital:
(a) Authorized:
50,000,000 Common shares, par value of $0.001 per share
10,000,000 Preferred shares, par value $0.001 per share, designated as
follows:
4,500,000 Series A preferred shares (1999 - nil)
5,500,000 Unissued and undesignated (1999 - 10,000,000)
During the period, the Company created the Series A preferred shares and
allocated 4,500,000 of the Preferred shares to Series A.
Each share of the Company's Series A preferred stock is entitled to one
vote on all matters submitted to a vote of the Company's stockholders. The
Series A preferred shares are not entitled to any dividends or any
distributions upon the liquidation of the Company.
One Series A preferred share of the Company together with one preferred
share of 604587 British Columbia Ltd. may be exchanged for one share of
the Company's common stock. Otherwise, the rights and preferences of the
unissued and undesignated Preferred shares have not been determined.
<PAGE>
11. Share capital (continued):
(b) Options:
The following table sets forth information concerning the options granted
to the Company's officers, directors, employees and others and the
exercise price as of July 31, 2000:
-------------------------------------------------------------
Number
of
Expiry date options Exercise
granted price
-------------------------------------------------------------
Options issued before December 6,
recapitalization 2001 400,000 1 $0.25
transaction:
March 1, 2001 300,000 2 $1.00
-------------------------------------------------------------
Options deemed issued
at April 28, 2000 700,000
Options issued since August 1, 2003 567,000 4 $0.43
April 28, 2000 3
-------------------------------------------------------------
1,267,000
-------------------------------------------------------------
1 All of these options were cancelled subsequent to July 31, 2000.
2 Subsequent to July 31, 2000, 200,000 of these options were cancelled.
3 These options were not exercisable before August 1, 2000.
4 Subsequent to July 31, 2000, 40,000 of these options were cancelled.
At the time of grant the market value of all options did not exceed the
exercise price. No options were exercised during the seven months ending
July 31, 2000.
During the seven months ending July 31, 2000, the following options,
included in the total above, have been issued and remain unexercised as of
July 31, 2000 under the "Incentive Stock Option Plan":
-------------------------------------------------------------
Number
of
Date of grant Expiry date options Exercise
granted price
-------------------------------------------------------------
Incentive Stock Option
Plan:
May 20, 2000 3 August 1, 2003 50,000 $0.43
-------------------------------------------------------------
The fair value of options granted in fiscal was $0.29 per share.
Pro forma income (loss) and income (loss) per share after consideration of
fair market value of share options granted is as follows:
<PAGE>
11. Share capital (continued):
(b) Options (continued):
-------------------------------------------------------------------
Seven months Year ended Year ended
ended July 31, December December
2000 31, 1999 31, 1998
-------------------------------------------------------------------
Net income (loss) as $(60,245) $24,315 $(100,790)
reported
Pro forma compensation (125,310) - -
for stock options
-------------------------------------------------------------------
Pro forma income (loss) $(185,555) $24,315 $(100,790)
-------------------------------------------------------------------
Pro forma net income
(loss) per share, basic $ (0.04) $0.01 $(0.04)
-------------------------------------------------------------------
(c) Warrants:
The following table sets forth information concerning warrants granted:
-------------------------------------------------------------------
Number
of Exercise price
Expiry date options
granted
-------------------------------------------------------------------
Warrants issued before
recapitalization
transaction: December 22, 2001 200,000 $0.51 per share
to December 22,
2000 $0.75 per
share after
December 22,
2000
February 10, 2001 50,000 $0.75 per share
March 10, 2001 61,500 $0.75 per share
March 17, 2001 59,000 $1.00 per share
March 17, 2001 66,667 $1.00 per share
--------------------------------------------------------------------------
Warrants deemed
issued at April 28, 2000 437,167
Warrants issued since
April 28, 2000: May 1, 2001 65,000 $1.25 per share
May 1, 2001 65,000 $1.50 per share
--------------------------------------------------------------------------
567,167
--------------------------------------------------------------------------
12. Stock compensation plans:
(a) Incentive Stock Option Plan:
The incentive stock option plan authorizes the issuance of options to
purchase shares of the Company's common stock. Only officers, directors,
and employees of the Company may be granted options pursuant to the
Incentive Stock Option Plan.
<PAGE>
12. Stock compensation plans (continued):
(a) Incentive Stock Option Plan (continued):
The total fair market value of the shares of common stock (determined at
the time of the grant of the option) for which any employee may be granted
options which are first exercisable in any calendar year may not exceed
$100,000.
Options may not be exercised until one year following the date of grant.
Options granted to an employee then owning more than 10% of the common
stock of the Company may not be exercisable after five years from the date
of grant.
The purchase price per share of common stock, purchasable under an option,
is determined by the Company's Board of Directors but cannot be less than
the fair market value of the common stock on the date of the grant of the
option.
(b) Non-Qualified Stock Option Plan:
The non-qualified stock option plan authorizes the issuance of options to
purchase shares of the Company's common stock to the Company's employees,
directors, officers, consultants or advisors and such services. The option
exercise price and expiration date are determined by the Company's Board
of Directors.
(c) Stock Bonus Plan:
The Company's stock bonus plan authorizes the issuance of shares of common
stock to the Company's employees, directors, officers, consultants and
advisors provided however, that bona fide services must be rendered by
consultants or advisors and such services must not be in connection with
the offer or sale of securities in a capital-raising transaction.
All options outstanding and issued during the period are listed in Note
11(b).
13. Subsequent events:
On October 19, 2000, the Company issued 3,133,787 common shares of the
Company for $0.15 each through a private placement. The money raised by this
issuance of shares was approximately $470,000. In conjunction with this
transaction the Company issued warrants to the purchasers that, upon
exercise, allow them to acquire an additional 1,566,893 shares as follows:
Up to October 18, 2001 $0.25 per share
From October 19, 2001 to October 18,
2002 $0.30 per share
These warrants expire October 18, 2002.
On October 19, 2000, the Company conditionally allotted 1,566,893 common
shares from treasury for these warrants.
14. Segmented information:
Management has determined that the Company operates in one operating segment
which involves the generation of real estate referrals. Substantially all of
the Company's operations, assets and employees are located in Canada;
however, substantially all of the Company's revenues are from customers
located in the United States.
<PAGE>
MARKETU INC.
(Formerly North American Resort & Golf, Inc.)
October 31, 2000
(Unaudited)
(Stated in U.S. Dollars)
<PAGE>
MARKETU INC.
INTERIM CONSOLIDATED BALANCE SHEET
(Stated in U.S. Dollars)
October 31, 2000 July 31
(Unaudited) 2000
---------------- -------
ASSETS
Current
Cash $197,820 $3,034
Accounts receivable 10,077 6,821
Security deposit 18,236 10,810
Prepaid expenses 29,021 29,045
--------- ------
255,154 49,710
Due from shareholder (note 4) 74,813 69,241
Fixed assets 42,081 30,094
Website development 39,355 33,563
---------- ----------
$411,403 $182,608
========== ==========
LIABILITIES
Current
Accounts payable and accrued liabilities $55,528 $95,143
Unearned revenue 117,872 137,489
------- -------
173,400 232,632
Promissory notes payable -- 24,887
Due to related party (note 5) 45,271 49,388
STOCKHOLDERS' EQUITY
Capital Stock (note 3)
Authorized:
50,000,000 common shares, par value
$0.001 per share 10,000,000 preferred
shares, par value $0.001 per share
designated as follows:
(a) 4,500,000 Series A preferred shares
with no par value
(b) 5,500,000 unissued and undesignated.
The rights and preferences of these
unissued preferred shares have not
been determined.
Issued and Outstanding:
8,259,154 common shares at October 31, 2000
and 5,054,367 at July 31, 2000 3,065 404
Additional paid in capital 450,079 48,685
4,500,000 Series A preferred shares 83,468 83,468
-------- --------
536,612 132,557
Accumulative other comprehensive income
Cumulative Translation Adjustment 3,251 4,869
Deficit (347,131) (261,725)
--------- ---------
192,732 (124,299)
$411,403 $182,608
========= =========
See accompanying notes to interim consolidated financial statements
<PAGE>
MARKETU INC.
INTERIM CONSOLIDATED STATEMENT OF LOSS AND DEFICIT
(Unaudited)
(Stated in U.S. Dollars)
THREE MONTHS ENDED
OCTOBER 31
2000 1999
----------------------
Revenue
Referral fees and membership dues $ 148,599 $160,366
Other 507 --
--------- ------------
149,106 160,366
Direct Costs
Commissions 23,035 24,598
Courier 409 800
Credit card 1,982 2,109
Office and miscellaneous -- --
Telephone 6,841 6,413
Wages and benefits 4,853 10,721
Website maintenance and development 20,187 9,618
------ -----
57,307 54,259
------ ------
91,799 106,107
Expenses
Advertising and promotion 232 977
Amortization 2,207 3,058
Automobile 866 823
Bank charges and interest 2,047 999
Computer services 1,730 1,120
Insurance and licensing 1,322 1,918
Investor relations and marketing 2,208 --
Management fees 23,638 --
Membership and dues -- 366
Office rent 4,185 4,543
Office supplies 1,011 1,774
Professional fees 36,022 188
Maintenance and utilities 988 2,031
Stock based compensation 17,750 --
Telephone 728 659
Travel 6,849 2,043
Wages and benefits 75,422 51,100
-------- ------
177,205 71,599
Income (Loss) For The Period (85,406) 34,508
Deficit, Beginning Of Period (261,725) (81,734)
--------- --------
Deficit, End Of Period $(347,131) $(47,226)
========== =========
Net Income (Loss) Per Common Share, basic and diluted
Basic $ (0.02) $ 0.01
Diluted $ (0.02) $ 0.01
============ ===========
Weighted Average Number Of Shares Outstanding,
Basic 5,051,593 2,700,000
diluted 5,051,593 3,300,000
========= =========
See accompanying notes to interim consolidated financial statements
<PAGE>
MARKETU INC.
IINTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Stated in U.S. Dollars)
-------------------------------------------------------------------------------
THREE MONTHS ENDED
OCTOBER 31, 2000
2000 1999
-------------------------------------------------------------------------------
Cash Flows From Operating Activities
Net income (loss) for the period $(85,406) $ 34,508
Add: Non-cash items:
Amortization 2,207 3,058
Amortization of website costs 12,970 3,336
Stock based compensation 17,750 -
Change in non-cash working capital balances related
to operations
Accounts receivable (3,256) (155)
Prepaid expenses 24 (2,309)
Accounts payable and accrued liabilities (39,467) (2,787)
Unearned revenue (19,617) (8,548)
-----------------------
(114,795) 27,103
-----------------------
Cash Flows From Investing Activities
Acquisition of fixed assets (14,637) -
Website development (20,086) (6,638)
Security deposits (7,426) -
-----------------------
(42,149) (6,638)
-----------------------
Cash Flows From Financing Activities
Common stock issued 386,305 -
Advances to related party (4,117) (337)
Advances to shareholder (5,572) (22,020)
Repayment of promissory notes (24,886) -
-----------------------
351,730 (22,357)
-----------------------
Increase (Decrease) In Cash During The Period 194,786 (1,892)
Cash, Beginning Of Period 3,034 4,926
-----------------------
Cash, End Of Period $197,820 $ 3,034
===============================================================================
See accompanying notes to interim consolidated financial statements
<PAGE>
MARKETU INC.
IINTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND
COMPREHENSIVE INCOME (LOSS)
OCTOBER 31, 2000
(Unaudited)
(Stated in U.S. Dollars)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ADDITIONAL SERIES A PREFERRED Accumulated
COMMON STOCK PAID IN STOCK Other
CAPITAL Comprehen-sive
income Accumulated
(loss) Deficit Total
Number Number
Of Of
Shares Amount Amount Shares Amount
---------------------------------------------------------------------------------------
Balance, July 31, 1999 500 $ 339 $ -- - $ $ 3,506 $(81,734) $(77,889)
--
Comprehensive income
Translation adjustment - - - - - - (2,234)
(2,234)
Income for the period - - - - - - 34,508 34,508
----------------------------------------------------------------------------------------
32,274
----------------------------------------------------------------------------------------
Balance, October 31, 1999 500 $ 339 $ -- - $ $ 1,272 $(47,226) $(45,615)
--
========================================================================================
Balance, July 31, 2000 5,054,367 404 $48,685 4,500,000 $83,468 $4,869 $(261,725) $(124,299)
Common stock issued for 71,000 71 17,679 - - - - 17,750
compensation
on August 8, 2000 for deemed
issuance price of $0.25 per
share
Common stock issued for cash on 2,589,569 2,590 383,715 - - - - 386,305
October 19, 2000 at $0.15 per
share,
net of issuance costs of
$2,130
Issuance of common stock under 544,218 544 81,089 - - - - 81,633
subscription on October 19,
2000
at $0.15 per share
Less: note receivable for - (544) (81,089) - - - - (81,633)
subscription
Comprehensive loss
Translation adjustment - - - - - (1,618) - (1,618)
Loss for the period - - - - - - (85,406) (85,406)
----------------------------------------------------------------------------------------
(87,024)
----------------------------------------------------------------------------------------
Balance, October 31, 2000 8,259,154 $ 3,065 $ 450,079 4,500,000 $ 83,468 $ 3,251 $ (347,131) $192,732
========================================================================================
</TABLE>
See accompanying notes to interim consolidated financial statements
<PAGE>
MARKETU INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
(Unaudited)
(Stated in U.S. Dollars)
1. GENERAL OPERATIONS:
MarketU, Inc. (the "Company") was incorporated under the laws of Nevada on
June 4, 1997. On April 28, 2000, the Company acquired two Canadian
corporations in a transaction that was accounted for as a recapitalization of
the Canadian corporations. For purposes of these consolidated financial
statements the historical financial statements of these two Canadian
corporations are the historical financial statements of the Company. Prior to
the recapitalization, the Company was in the development stage company as it
was devoting substantially all of its efforts to the identification and
development of new business opportunities.
Following the acquisition described above, the Company's primary business
activity is providing a service which allows real estate professionals and
the general public to find customer service oriented realtors in North
American cities through the Company's web sites AMRR.com and CMRR.com.
2. SIGNIFICANT ACCOUNTING POLICIES
The interim consolidated financial statements of the Company have been
prepared in accordance with generally accepted accounting principles in the
United States
a) Consolidation:
The interim consolidated financial statements include the accounts of the
Company and its subsidiaries: Most Referred Real Estate Agents Inc., Home
Finders Realty Ltd. (collectively "Home Finders Realty"), and 604587 British
Columbia Ltd. All significant intercompany balances and transactions have been
eliminated in the interim consolidated financial statements.
b) Use of Estimates:
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
for the reporting period. Actual results could differ from these
estimates.
c) The accompanying unaudited financial statements have been prepared in
accordance with Item 310 (b) of Regulation S-B, and, therefore, do not
include all information and footnotes necessary for a complete presentation
of financial position, results of operations, cash flows, and stockholders'
<PAGE>
MARKETU INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
(Unaudited)
(Stated in U.S. Dollars)
equity in conformity with generally accepted accounting principles. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the results of operations and financial position have been
included and all such adjustments are of a normal recurring nature. Readers of
these financial statements should read the audited financial statements of the
Company for the year ended July 31, 2000 which are included elsewhere in this
prospectus. Operating results for the three months ended October 31, 2000 are
not necessarily indicative of the results that can be expected for the year
ending July 31, 2001.
3. CAPITAL STOCK
a) As of October 31, 2000, the Company has outstanding stock options for the
purchase of common shares as follows:
100,000 shares at $1.00 per share to March 1, 2001 527,000 shares at
$0.43 per share to August 1, 2003.
b) As of October 31, 2000 the Company had outstanding warrants for the
purchase of common shares as follows:
Number Exercise Price Expiration Date
Of Shares Year 1 Year 2 Year 1 Year 2
-------------------------------------------------------------------------
200,000 $ 0.50 $ 0.75 December 22, 2000 December 22,2001
50,000 $ 0.75 February 10, 2001
61,500 $ 0.75 March 10, 2001
125,667 $ 1.00 March 17, 2001
65,000 $ 1.25 May 1, 2001
65,000 $ 1.50 May 1, 2001
1,566,893 $ 0.25 $ 0.30 October 18, 2001 October 18, 2002
During the three month period ended October 31, 2000 the following share
transactions occurred:
a) On August 8, 2000 the Company issued 15,000 common shares to an
employee and 56,000 common shares to a former director for
services rendered.
b) On October 19, 2000, the Company sold 3,133,787 units at a price
of US$0.15 per unit to two persons. Each unit consists of one
common share and a one-half non-transferable share purchase
warrant. Each whole warrant entitles the holder to purchase one
additional share at a price of US$0.25 if
<PAGE>
MARKETU INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
(Unaudited)
(Stated in U.S. Dollars)
exercised prior to October 19, 2001 and at a price of US$0.30 per
share if exercised prior to October 19, 2002. The warrants will
expire on October 18, 2002. The Company received cash proceeds of
$386,305, net of issuance costs, for 2,589,569 shares and a
promissory note in the amount of $81,633 for the remaining 544,218
shares.
4. DUE FROM SHAREHOLDER
The amount due from shareholder is without interest, has no specified terms
of repayment and is unsecured. The shareholder is also a director of the
Company.
5. DUE TO RELATED PARTY
October 31, 2000 July 31, 2000
(Unaudited)
---------------- -------------
Due to AMRR.com, Inc. ("AMRR"), without
interest or specified terms of repayment $ 45,271 $49,388
========= ========
A director of the Company is the sole director of AMRR.
The Company leases computer and office equipment with a cost of approximately
$31,000 from AMRR for $1 per year.
6. SUBSEQUENT EVENT
On December 12, 2000, the Company delivered a Share Purchase Agreement,
scheduled to close on January 25, 2001, to the shareholders of a related
company, AMRR.com, Inc. ("AMRR"), to acquire all of the issued and outstanding
shares of AMRR. The Purchase Agreement offers two (2) common shares in MarketU,
Inc. for each issued and outstanding common share of AMRR. If all shareholders
of AMRR accept the Company's offer the Company will issue 513,912 shares of its
common stock to the shareholders of AMRR. As of December 15, 2000 AMRR had
assets of approximately $80,000 and was not conducting any business.
<PAGE>
No dealer salesman or other person has been authorized to give any information
or to make any representations, other than those contained in this prospectus.
Any information or representation not contained in this prospectus must no be
relied upon as having been authorized by MarketU. This prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the
securities offered by this prospectus in any state or other jurisdiction to any
person to whom it is unlawful to make any offer or solicitation.
TABLE OF CONTENTS
Prospectus Summary.........................................................
Risk Factors...............................................................
Management's Discussion And Analysis Of Financial
Condition And Results Of Operations.......................................
Market For Common Stock....................................................
Business...................................................................
Management.................................................................
Principal and Selling Shareholders.........................................
Plan Of Distribution.......................................................
Description Of Securities..................................................
Legal Proceedings..........................................................
Experts....................................................................
Indemnification............................................................
--------------------------
Common Stock
MARKETU INC.
--------------------------
PROSPECTUS
--------------------------
<PAGE>
PART II
ITEM 24. Indemnification Of Directors And Officers
Pursuant to the Nevada Revised Statutes a Nevada corporation has the power to
indemnify its directors, officers, employees and agents. Pursuant to Article 7
of the Company's Articles of Incorporation, the personal liability of the
Company's directors and officers is limited to the fullest extent permitted by
Nevada law.
ITEM 25. Other Expenses Of Issuance And Distribution
The following sets forth the estimated expenses in connection with this offering
as described in this Registration Statement:
SEC Registration Fee $637
Printing Fees 100
Legal Fees and Expenses 15,000
Accounting Fees and Expenses 5,000
Blue Sky Fees 2,000
Miscellaneous 263
--------
Total $20,000
=======
All of the above expenses will be paid by the Company.
ITEM 26. Recent Sales Of Unregistered Securities
The Company has sold the following securities which were not registered under
the Securities Act of 1933.
--------------------------------------------------------------------------------
Number of
Date Name Securities Consideration Note Reference
--------------------------------------------------------------------------------
June 1997 One person 2,500,000 Services A
rendered
--------------------------------------------------------------------------------
Year ended 64 persons 2,052,200 cash, services B
Jul. 31, shares of rendered and
1998 common stock other
property,
totalling
$86,680
--------------------------------------------------------------------------------
Dec. 1999 Sierra Group, Inc. 200,000 shares $50,000 in cash A
of common stock
warrants to
acquire 200,000
shares of
common stock
--------------------------------------------------------------------------------
Feb. 2000 Pegasus Investments 50,000 shares $25,000 in cash A
Limited of common stock
warrants to
acquire 50,000
shares of
common stock
--------------------------------------------------------------------------------
<PAGE>
Mar. 2000 Shamrock Asset 120,500 shares $75,000 in cash A
Management Corp. of common stock
warrants to
acquire 120,500
shares of
common stock
--------------------------------------------------------------------------------
Mar. 2000 Popcorn Holdings, 66,667 shares $50,000 in cash A
Inc. of common stock
warrants to
acquire 66,667
shares of
common stock
--------------------------------------------------------------------------------
Apr. 2000 William Coughlin & 4,500,000 outstanding A
Carole Coughlin shares of shares of two
Series A subsidiary
Preferred stock companies
--------------------------------------------------------------------------------
May 2000 Cascade Pacific 65,000 shares $48,750 in cash A
Investments S.A. of common stock
warrants to
acquire 130,000
shares of
common stock
--------------------------------------------------------------------------------
Aug. 2000 Scott Munro & James 71,000 shares Services A
Sanford of common stock rendered
--------------------------------------------------------------------------------
Oct. 2000 612559 B.C. Ltd. 1,133,787 $170,068 C
shares of
common stock
warrants to
acquire 566,893
shares of
common stock
--------------------------------------------------------------------------------
Oct. 2000 Khachik Toomian 2,000,000 $300,000 C
shares of
common stock
warrants to
acquire
1,000,000
shares of
common stock
--------------------------------------------------------------------------------
Nov. 2000 Rupinder Nanuwa 4,000 shares of Services A
common stock rendered
--------------------------------------------------------------------------------
A. The sale of these shares was an exempt transaction under Section 4(2) of
the Securities Act of 1933 as a transaction by an issuer not involving a
public offering. The securities sold were acquired for investment purposes
only and without a view to distribution. At the time the shares were
purchased, the purchasers were fully informed and advised about matters
concerning the Company, including its business, financial affairs and other
matters. The purchasers acquired the securities for their own account. The
certificates evidencing the shares cannot be offered, sold or transferred
other than pursuant to an effective registration statement under the
Securities Act of 1933, or pursuant to an applicable exemption from
registration. The shares sold are "restricted" shares as defined in Rule
144 of the Rules and Regulations of the Securities and Exchange Commission.
No underwriters were involved
<PAGE>
with the sale of these shares and no commissions or other forms of
remuneration were paid to any person in connection with such sale.
B. The sales of these shares were exempt from registration pursuant to Rule
504 of the Securities and Exchange Commission. At the time of these sales
the Company was not subject to the reporting requirements of the
Securities Exchange Act of 1934 and the total amount received by the
Company from the sale of these shares was less than $1,000,000. No
underwriters were involved with the sale of these securities and no
commissions or other forms of remuneration were paid to any person in
connection with these sales.
C. The sale of these shares was an exempt pursuant to Rule 506 of the
Securities and Exchange Commission. The shares sold were acquired for
investment purposes only and without a view to distribution. At the time
the shares were purchased, the purchasers were fully informed and advised
about matters concerning the Company, including its business, financial
affairs and other matters. The purchasers acquired the securities for their
own account. The certificates evidencing the shares cannot be offered, sold
or transferred other than pursuant to an effective registration statement
under the Securities Act of 1933, or pursuant to an applicable exemption
from registration. The shares sold are "restricted" shares as defined in
Rule 144 of the Rules and Regulations of the Securities and Exchange
Commission. No underwriters were involved with the sale of these shares and
no commissions or other forms of remuneration were paid to any person in
connection with such sale.
ITEM 27. Exhibits
Index to Exhibits
--------------------------------------------------------------------------------
Exhibit No. Description of Exhibit Page No.
--------------------------------------------------------------------------------
2 Share Exchange Agreement between Company and (1)
shareholders of
Homefinders Realty
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3.1 Articles of Incorporation and By-Laws (2)
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3.2 Amendment to Articles of Incorporation (2)
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4 Certificate of Designation setting forth rights and (1)
preferences of Series A
Preferred Stock
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5 Opinion of counsel
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21 Subsidiaries
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23.1 Consent of Attorneys
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23.2 Consent of Accountants
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24 Power of Attorney Included as
part of the
signature page
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27 Financial Data Schedule
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<PAGE>
(1) Incorporated by reference to same exhibit filed with the Company's 8-K
Report dated April 28, 2000
(2) Incorporated by reference to same exhibit filed with Company's registration
statement on Form 10-SB
ITEM 28. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to:
(i) include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933 (the "Securities Act");
(ii) reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement; and
(iii) include any additional or changed material information on the plan
of distribution.
(2) That, for determining liability under the Securities Act, each such
post-effective amendment shall be treated as a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To file a post-effective amendment to remove from registration any of the
securities being registered that remain unsold at the termination of the
offering.
In so far as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedence, submitted to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the persons whose signatures appear
below constitute and appoint Kenneth Galpin, their true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Vancouver, British Columbia, Canada on December 28, 2000.
MARKETU INC.
By: /s/ Kenneth Galpin
--------------------------------
Kenneth Galpin, President
By: Scott Munro
--------------------------------
Scott Munro, Treasurer and
Principal Financial Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated
By: /s/ Kenneth Galpin December 28, 2000
------------------------------
Kenneth Galpin, Director
By: /s/ William Coughlin December 28, 2000
------------------------------
William Coughlin, Director
By: /s/ Glenn Davies December 28, 2000
------------------------------
Glenn Davies, Director
By: /s/ Ken Landis December 28, 2000
------------------------------
Ken Landis, Director
By:
------------------------------
David Woodcock, Director
