U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2/A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
URBANA.CA, INC.
(Name of Small Business Issuer in its Charter)
Nevada 454110 88-0393257
(State or jurisdiction of (Primary Standard Industrial I.R.S. Employer
incorporation or Classification Code Number) Identification No.)
organization
750 West Pender Street, Suite 804, Vancouver, British Columbia V6C 2T8
(Address and telephone number of Registrant's principal executive
offices and principal place of business)
Brian F. Faulkner, Esq., 3900 Birch Street, Suite 113, Newport Beach, Ca
(949) 975-0544
(Name, address, and telephone number of agent for service)
Approximate date of proposed sale to the public: As soon as practicable
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.
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.
CALCULATION OF REGISTRATION FEE
Title of Amount to be Proposed Proposed Amount of
Securities Registered Maximum Aggregate Registration
to be Offering Offering Fee
Registered Price Per Price
Share (1)
Common Stock 47,083,029 $0.6875 $32,369,582 $8,545.57
The company hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the
company 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.
(1) Pursuant to Rule 416, such additional amounts to prevent dilution
from stock splits or similar transactions.
(2) Calculated in accordance with Rule 457(c): The average of the
high and low prices as of August 15, 2000
PROSPECTUS
URBANA.CA, INC.
47,083,029 Shares
Common Stock
Urbana.ca, Inc., a Nevada corporation, is hereby offering shares of
common stock on a delayed basis under a shelf registration under
Rule 415 pursuant to the terms of this prospectus. A total of
47,083,029 shares of common stock are to be registered, as follows
(maximum amounts):
The company's initial public offering consists of 43,641,090 shares
of common stock, par value $0.001 (of this amount, up to
25,000,000 shares will be sold for cash). This offering is being
made on a best-efforts basis by the company, with no minimum
purchase required. The company's common stock trades on the Over
the Counter Bulletin Board under the trading symbol "URBA".
Concurrent with this initial public offering, is an offering by
certain selling shareholders of the company, in the total amount of
3,441,939 shares of common stock. These selling shareholders may
offer their stock through public or private transactions, on or off
the Over the Counter Bulletin Board, at prevailing market prices,
or at privately negotiated prices. 847,989 of these shares will be
sold upon the conversion of certain special warrants; the remainder
are currently owned by the selling shareholders.
The shares offered hereby are highly speculative and involve a high
degree of risk to public investors and should be purchased only by
persons who can afford to lose their entire investment (See "Risk
Factors" on page 5).
These securities have not been approved or disapproved by the U.S.
Securities and Exchange Commission or any state securities
commission nor has the U.S. Securities and Exchange Commission or
any state securities commission passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
Price to Public Underwriting Proceeds to
Discounts and Issuer (3)
Commissions (2)
Per Share $0.50 $0 $0.50
Total Maximum $12,500,000 $0 $12,500,000
Information contained herein is subject to completion or amendment.
The registration statement relating to the securities has been
filed with the U.S. Securities and Exchange Commission. The
securities may not be sold nor may offers to buy be accepted prior
to the time the registration statement becomes effective. This
prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of
these securities in any state in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under
the securities laws of any such state.
Subject to Completion, Dated: ______________, 2000
Table of Contents
PROSPECTUS SUMMARY 5
RISK FACTORS 7
USE OF PROCEEDS 17
DETERMINATION OF OFFERING PRICE 18
SELLING SHAREHOLDERS 18
PLAN OF DISTRIBUTION 21
LEGAL PROCEEDINGS 30
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 30
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 32
DESCRIPTION OF SECURITIES 34
INTEREST OF NAMED EXPERTS AND COUNSEL 35
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES 35
ORGANIZATION WITHIN LAST FIVE YEARS 40
DESCRIPTION OF BUSINESS 40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 54
DESCRIPTION OF PROPERTY 57
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 57
MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 58
EXECUTIVE COMPENSATION 60
FINANCIAL STATEMENTS 61
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 89
AVAILABLE INFORMATION 89
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by detailed
information appearing elsewhere in this prospectus. Each
prospective investor is urged to read this prospectus in its
entirety.
The Company.
The company is an e-commerce, transaction and content company
that intends to create Intranet and Internet-based systems in
conjunction with local area governments and high profile
corporations. The company intends to provide local communities with
community based entertainment and information services widely used
in all facets of everyday life and deliver these services through
a customized set-top-box.
The principal offices of the company's are located at 750 West
Pender Street, Suite 804, Vancouver, British Columbia V6C 2T8. The
telephone number for the company is (604) 682-8445.
The Offering.
47,083,029 shares of common stock of the company will be sold on a
delayed basis under a shelf registration under Rule 415 (shares
outstanding prior to this offering: 22,038,283) (shares to be
outstanding after this offering, assuming a full subscription:
69,121,312), as follows:
Selling shareholders: 3,441,939.
Shares to be issued upon the exercise of purchase warrants to be
issued upon the exercise of special warrants: 423,994.
Shares to be issued upon the exercise of agent's compensation
options to be issued upon the exercise of agent's special warrants:
84,798.
Shares to be issued upon the exercise of agent's purchase warrant
to be issued upon the exercise of agent's compensation options:
42,399.
Shares to be issued under units to be issued upon loan conversions:
2,059,933.
Shares to be issued upon the exercise of purchase warrants under
units to be issued upon loan conversions: 1,029,966.
Shares to be sold for cash ($0.50 per share): 25,000,000.
Shares for possible future acquisitions by the company of other
companies and/or assets: 12,000,000.
Shares to be issued for consulting services: 3,000,000.
Use of Proceeds: The amount of proceeds from this offering will
depend on the offering price per share and the number of shares
sold for cash. The initial offering price of the shares has been
set at $0.50 per share. The proceeds of the cash offering
($12,500,000), less the expenses of the offering (estimated at
$45,546), will be used to provide working capital for the company.
RISK FACTORS
The securities offered hereby are highly speculative in nature and
involve a high degree of risk. They should be purchased only by
persons who can afford to lose their entire investment. Therefore,
each prospective investor should, prior to purchase, consider very
carefully the following risk factors among other things, as well as
all other information set forth in this prospectus.
The Company is in a New Business and Has Not Completed Development
of its Products.
The company is at an early stage of development. The company has
not completed the development of any commercial products, and,
accordingly, has no profitable operating history upon which
investors may rely. The company has received limited revenues from
operations and expects that most of its revenues in the foreseeable
future will result from further corporate collaborations, if any.
The company's product candidates will require significant
additional investment in research and development will require
substantial resources. There can be no assurance that any of the
Issuer's products will meet applicable regulatory standards, obtain
required regulatory approvals, or be capable of being produced in
commercial quantities at reasonable costs. Products that may
result from the company's research and development programs are not
expected to be commercially available for a number of years, if at
all, and it will be a number of years, if ever, before the company
will receive any significant revenues from commercial sales of such
products. There is no assurance that the company will be able to
enter into any corporate collaborations or that the company will
ever achieve profitability.
The Company has had No Revenues and Anticipates Losses for the
Foreseeable Future.
The company has had no sales revenue to date. Although the company
has been involved with e-commerce since 1999, it has been engaged
only in research and development. The company has incurred
significant operating losses, including a net loss of $568,750 in
fiscal 1999. At June 30, 2000, the company had an accumulated
deficit of $2,985,599. Notwithstanding the company's objective to
accelerate the period in which a return on investment would
typically be recognized with traditional technology companies, for
some projects it may be a number of years, if ever, before the
company will receive any significant revenues from commercial sales
of products. The future growth and profitability of the company
will be principally dependent upon its ability to successfully
complete development of, obtain regulatory approvals for, and
market or license its proposed products. Accordingly, the
company's prospects must be considered in light of the risks,
expenses and difficulties frequently encountered in connection with
the establishment of a new business in a highly competitive
industry, characterized by new product introductions. The company
anticipates that it will incur substantial operating expenses in
connection with the research, development, testing and approval of
its proposed products and expects these expenses to result in
continuing and significant losses until such time as the company is
able to achieve adequate revenue levels. There can be no assurance
that the company will be able to significantly increase revenues or
achieve profitable operations. Failure to obtain additional
capital, if needed, would have a material adverse effect on the
company's operations.
The Company Will Need Additional Financing to Implement its
Business Plan and Such Financing May Be Unavailable or Too Costly.
The company has sufficient funds to undertake its currently planned
research and development activities through fiscal 2000. However,
the company will require substantial funds in order to conduct its
future activities. The company intends to seek these funds through
equity financing, collaborative arrangements with corporate
sponsors, or from other sources. The company may also require
additional funds in order to acquire technology or products that
complement the company's efforts. Financing may not be available
or on terms acceptable to the company. Additional equity
financings could result in significant dilution to existing
shareholders. If sufficient capital is not available, or available
at prohibitive cost, the company may be required to delay, reduce
the scope of, eliminate or divest one or more of its discovery,
research or development programs, any of which could have a
material adverse effect on the company's business, financial
condition and results of operations.
On June 15, 2000, the company entered into an agreement with
Ladenburg Thalmann & Co., Inc. for the purpose of this firm to act
as the company's exclusive placement agent (later revised to non-
exclusive) and financial advisor in connection with a best efforts
raising of up to $3,500,000. Under the terms of this agreement,
the company agrees to pay Ladenburg a cash fee of 6% of the funds
raised and to issued to this firm a warrant to purchase common
stock equal to 6% of the funds so raised. To date no funds have
been secured for the company under this agreement. There is no
guarantee that funds will be available under this agreement in the
future for use by the company.
USE OF PROCEEDS
The amount of proceeds from this offering will depend on the
offering price per share and the number of shares sold for cash.
The initial offering price of the shares has been set at $0.50 per
share. The proceeds of the cash offering ($12,500,000), less the
expenses of the offering, will be used to provide working capital
for the company.
The following table sets forth the use of proceeds from this
offering (with three scenarios assuming 25%, 50%, and 100%
subscriptions of the shares for cash):
Use of Proceeds Subscriptions Subscriptions Subscriptions
(1) of 25% of of 50% of of 100% of
Total Total Total
Transfer Agent
Fee of $1,000 0.03% 0.015% 0.0075%
Printing Costs of
$1,000 0.03% 0.015% 0.0075%
Legal Fees
of $25,000 0.80% 0.40% 0.20%
Accounting fees of
$5,000 0.05% 0.025% 0.0125%
Filing Fees
of $13,546 0.43% 0.22% 0.11%
Working Capital 98.66% 99.655% 99.6625%
($3,082,954) ($6,207,954) ($12,457,954)
Total $3,125,000 $6,250,000 $12,500,000
(1) These are estimates, and the actual number could be higher or
lower that these numbers.
Management anticipates expending these funds for the purposes
indicated above. To the extent that expenditures are less than
projected, the resulting balances will be retained and used for
general working capital purposes or allocated according to the
discretion of the board of directors. Conversely, to the extent
that such expenditures require the utilization of funds in excess
of the amounts anticipated, supplemental amounts may be drawn from
other sources, including, but not limited to, general working
capital and/or external financing. The net proceeds of this
offering that are not expended immediately may be deposited in
interest or non-interest bearing accounts, or invested in
government obligations, certificates of deposit, commercial paper,
money market mutual funds, or similar investments.
SELLING SHAREHOLDERS
Selling shareholders will be offering a total of 3,441,939
shares of common stock of the company, as follows (in the
chronological order of their original issuance as restricted
shares) (currently, the only affiliate of the company among the
selling shareholders is Da-Jung Resources Corp, by virtue of the
size of its holdings of company common stock; there is no
affiliation between any of the selling shareholders, and the
company and its officers and directors):
Da-Jung Resources Corp.
On October 7, 1997, the company entered into an agreement with Da-
Jung Resource Corp. to acquire 100% of this firm's interest in an
agreement on establishment of a Sino foreign equity joint venture
with the China-Canada Liumao Graphite Products Co., Ltd..
Consideration for this acquisition was 6,000,000 restricted shares
of the company's common stock, plus $200,000 of which $70,000 has
been paid and $130,000 was settled by the issuance of 325,000
restricted shares of common stock (in 1999).
Da-Jung Resource Corp. currently owns a total of 4,842,900
shares of common stock of the company, obtained as set forth above.
This firm is hereby offering a total of 1,000,000 shares of its
stock under this prospectus (the sale of all these shares would
leave this firm owning a total of 3,842,900 shares of common stock
of the company; a percentage ownership of 17.44% of the issued and
outstanding common stock of the company of 22,238,283 as of October
30, 2000).
Settlement Conversions.
During the fiscal year ended December 31, 1999, the company settled
debts of $86,268 to Hound Pound Equities by the issuance of
215,665 restricted shares at $0.40 per share. The company also
settled its agreement payable of $130,000 to Da-Jung Resources
Corp., a major shareholder in the company (Da-Jung, prior to the
debt settlement, sold the debt to Clyde Resources Ltd.), and
various of its trade payables of $204,122, by the issuance of
325,000 and 510,303, respectively, restricted shares at $0.40 per
share. Subsequent to December 31, 1999, the company settled $9,190
of accounts payable by the issuance of 22,975 restricted shares of
common stock at a price of $0.40 per share.
An aggregate of 1,073,950 shares of common stock converted
from these settlements are being offered under this prospectus for
the account of the following selling shareholders:
Name of Amount Amount Offered Amount Percentage
Selling Beneficially for Selling Beneficially Ownership
Shareholders Owned Prior Shareholder's Owned After After
to Offering Account Offering(1) Offering(1)
Douglas Symes & 17,630 17,630 0 0.00%
Brissenden
Rescan
Engineering Ltd. 169,000 169,000 0 0.00%
Shawn F. Hackman,
Esq. (former counsel)75,444 75,444 0 0.00%
Nottinghill
Resources 125,000 125,000 0 0.00%
Hound Pound
Equities Ltd. 215,665 215,665 0 0.00%
F.R. Ventures
Corp. 12,660 12,660 0 0.00%
Yi-Hong Zhan 12,452 12,452 0 0.00%
Robert Hoegler
(former director) 20,000 8,137 11,863 0.05%
Nu-Media Systems
International 35,667 35,667 0 0.00%
Lakefield
Research Ltd. 51,795 51,795 0 0.00%
The Letter Shop
(1990) Ltd. 2,518 2,518 0 0.00%
Clyde Resources
Ltd. 325,000 325,000 0 0.00%
Ed Dorffi 6,927 6,927 0 0.00%
The LOM Group 16,050 16,050 0 0.00%
Total 1,085,808 1,073,943 11,863 0.05%
(1) Based on the issued and outstanding shares of common stock of
22,038,283 as of October 30, 2000.
Questech Corporation.
Questech Corporation currently owns a total of 520,000 shares
of common stock of the company. These shares were acquired from
Da-Jung Resources Corp. in a private transaction in January 2000.
This firm is hereby offering all 520,000 shares of its stock under
this prospectus (the sale of all these shares would leave this firm
owning a no shares of common stock of the company; a percentage
ownership of 0.00% of the issued and outstanding common stock of
the company of 22,238,283 as of October 30, 2000).
Units Offering.
On May 11, 2000, the company completed a private placement of
847,989 special warrants to ten investors for total consideration
of $1,059,986. Each special warrant is convertible for no
additional consideration at any time after closing of the
transactions on April 27, 2000 into one common share and one-half
share purchase warrant, exercisable at a price of $5.00 per whole
share purchase warrant. An aggregate of 847,989 shares of common
stock to be converted from these special warrants are being offered
under this prospectus for the account of the following selling
shareholders:
Name of Amount Amount Offered Amount Percentage
Selling Beneficially for Selling Beneficially Ownership
Shareholders Owned Prior Shareholder's Owned After After
to Offering Account Offering Offering(1)
National Bank
Financial ITF
Austin Consultancy
Services Ltd. 174,000 116,000 58,000 0.26%
National Bank
Financial ITF
Benevest S.A. 37,500 25,000 12,500 0.06%
National Bank
Financial ITF
Wajde Darwish 124,500 83,000 41,500 0.19%
Gordon G. Hoover 81,000 54,000 27,000 0.12%
National Bank
Financial ITF
Joryjil Industries
Ltd. 121,980 81,320 40,660 0.18%
BMO Nesbitt Burns
Inc. ITF Trevor
Leslie 216,825 144,550 72,275 0.33%
Prudential
Securities Inc.
ITF Societe
Financiere Mirelis
S.A. 119,998 79,999 39,999 0.18%
HSBC Securities
(Canada) Inc. ITF
T.R.L. Investments
Limited 124,200 82,800 41,400 0.19%
National Bank
Financial ITF
Toyotatown
Limited 150,000 100,000 50,000 0.23%
John Ryan 121,980 81,320 40,660 0.18%
Total 1,271,983 (2) 847,989 423,994 1.92%
(1) Based on the issued and outstanding share of common stock of
22,038,283 as of October 30, 2000.
(2) Included within this total is 423,994 shares underlying
purchase warrants which are presently exercisable until 4:30 p.m.
(Toronto time) on the date which is the earlier of:
the fifth business day following the date on which the last of the
final receipts of the filing of the prospectuses in Canada is
issued and this Form SB-2 registration statement is declared
effective by the Securities and Exchange Commission.
April 26, 2002.
The Plan of Distribution section of this prospectus contains a
detailed discussion of this special warrants offering.
PLAN OF DISTRIBUTION
The company does not presently intend to use any underwriters,
dealers, or finders in connection with the sales of shares under
this offering.
Units Offering.
The company entered into an agency agreement effective April
10, 2000 with Groome Capital.com Inc. whereby the company and
Groome engaged in a best efforts offering of up to 20,000,000
special warrants at a price of $1.25 per special warrant. The
price of the special warrants was negotiated between the company
and Groome Capital with reference to the market price of the common
shares of the company, dilution, and the capital needs of the
company. Each special warrant is convertible for no additional
consideration into one common share and one-half share purchase
warrant, exercisable at a price of $5.00 per whole share purchase
warrant.
On May 11, 2000, the company completed a private placement of
847,989 special warrants pursuant to exemptions from prospectus
requirements of applicable securities laws in Canada, resulting in
gross proceeds to the company of $1,059,986 from a total of ten
investors, none of which is affiliated with the company (a similar
offering was undertaken in the United States, but no sales resulted
from this offering), as follows:
Name of Special Warrant Holder No. of Warrants
Special Warrants
Purchased
National Bank Financial ITF
Austin Consultancy Services Ltd. 116,000
National Bank Financial ITF
Benevest S.A. 25,000
National Bank Financial ITF
Wajde Darwish 83,000
Gordon G. Hoover 54,000
National Bank Financial ITF
Joryjil Industries Ltd. 81,320
BMO Nesbitt Burns Inc. ITF
Trevor Leslie 144,550
Prudential Securities Inc. ITF
Societe Financiere Mirelis S.A. 79,999
HSBC Securities (Canada) Inc.
ITF T.R.L. Investments Limited 82,800
National Bank Financial ITF
Toyotatown Limited 100,000
John Ryan 81,320
Total 847,989
Groome received an agent's fee equal to 8% of the total amount
raised (reduced to 4% for investors on a president's list),
resulting in total fees paid of $84,798.88. In addition, Groome
has been granted non-assignable agent's special warrants equaling
10% of the number of special warrants sold, resulting in the
issuance of 84,798 non-transferable agent's special warrants to
Groome Capital. These warrants entitle the holder to acquire,
without additional consideration, one non-transferable agent's
compensation option. Each agent's compensation option will entitle
Groome Capital to purchase, at a price of U.S. $1.25, one unit
consisting of one agent's option share and one-half of one agent's
purchase warrant. Each agent's purchase warrant will entitle
Groome Capital to purchase one agent's warrant share at a price of
U.S. $5.00 each.
The warrants are exercisable at any time after closing until 4:30
p.m. (Toronto time) on the date which is the earlier of:
the fifth business day following the date on which the last of the
final receipts of the filing of the prospectuses in Canada is
issued and this Form SB-2 registration statement is declared
effective by the Securities and Exchange Commission.
April 26, 2002.
Any special warrants, agent's special warrants, agent's
compensation options, or agent's purchase warrants not previously
exercised will be automatically deemed to have been exercised by
the holder at this time without any further action on the part of
the holder.
If, for any reason, a Form SB-2 to register the shares underlying
the warrants and options is not declared effective by September 25,
2000, the holders of the special warrants and agent's warrants will
be entitled to receive, for no additional consideration, a unit
consisting of 1.1 common shares (rather than one common share) and
0.55 purchase warrants (rather than 0.50 purchase warrants) upon
exercise of each special warrant held. This Form SB-2 has not yet
been declared effective, so this penalty provision will apply.
(a) Special Warrants
All of the special warrants are identical in all respects. The
special warrants were issued under and are subject to the terms of
a special warrant agreement, dated April 27, 2000, between the
company and Pacific Corporate Trust Company, and include the
following terms and conditions:
no fractional common shares will be issued; holders of special
warrants may be entitled to cash payment in respect of fractional
entitlements
the special warrants, including the number of common shares
issuable upon exercise or deemed exercise thereof, may be subject
to adjustment upon the occurrence of certain stated events,
including the subdivision or consolidation of common shares,
certain distributions of common shares, or securities convertible
into or exchangeable for common shares, or of other securities or
assets of the company, certain offerings of rights, warrants or
options and certain capital reorganizations
the holding of special warrants will not give the holder rights as
a shareholder of the company
special warrants may be exercised by the holder at any time to and
until the Expiry Time, and special warrants not exercised by the
Expiry Time shall, immediately prior to the Expiry Time, be deemed
to have been exercised without any further action on the part of
the holder
(b) Purchase Warrants
All of the purchase warrants are identical in all respects. The
purchase warrants were issued under and are subject to the terms of
a purchase warrant agreement, dated April 27, 2000, between the
company and Pacific Corporate Trust Company, and include:
the purchase warrant agreement provides for the adjustment to
exercise price of the Purchase warrants in certain circumstances,
such as a common share reorganization including where the company
subdivides its outstanding common shares into a greater number or
common shares or where the company conducts a rights offering, and
further provides for an adjustment in the number of common shares
which the holder is entitled to receive upon the exercise of
purchase warrants in certain circumstances, such as where there is
an amalgamation of the company with or into any other corporation
no fractional shares will be issued upon the exercise of the
purchase warrants.
(c) Agent's Warrants and Agent's Special Warrants.
The agent's special warrants, agent's compensation options, and
agent's purchase warrants contain provisions that, in the event of:
the subdivision or consolidation of common shares
any issue or distribution by the company of any securities to its
shareholders, including rights, options, or warrants or securities
convertible or exchangeable into common shares of the company or
property or assets, or
any reclassification or capital reorganization (other than as a
result of a subdivision or consolidation) or any consolidation or
merger of the company, or any sale or conveyance to another
corporation of the property and assets of the company as an
entirety or substantially as an entirety
the number of common shares issuable upon exercise of the warrants
or options will be adjusted, if necessary, so that the holders will
be in the same position, to the extent reasonably possible, as they
would have been in had the warrants or options been exercised prior
to the occurrence of each such event.
To the extent that the holder of a warrant or option would
otherwise be entitled to purchase a fraction of a common share,
such right may be exercised only in combination with other rights
which in the aggregate entitle the holder to purchase a whole
number of common shares; holders of such warrants or options will
be entitled to cash payment in respect of fractional entitlements
no adjustments as to dividends will be made upon any exercise of
the warrants or options.
holders of the warrants or options do not have any voting or pre-
emptive rights or any other rights as shareholders of the company.
(d) Escrowed Proceeds
Pursuant to an agreement dated April 27, 2000, 15% of the gross
proceeds of the private placement ($158,997.90) were placed into
escrow pursuant to an escrow agreement between the company, the
Agent and Pacific Corporate Trust Company (as escrow agent) on the
closing of the private placement. The proceeds will be released to
the company on the earlier of the Expiry Time.
Loan Conversions.
During fiscal year ended December 31, 1999, the company
received loans totaling $60,000. For the quarter ended March 31,
2000, the company received additional loans of $1,224,161.86, for
total loans of $1,284,161.86. These loans bear interest at an
annual rate of 8% and were due and payable on March 15, 2000. The
company did not repay these loans and as a result has offered the
lenders the right to convert the principal into units of the
company at a price of $0.57 per unit. Each unit is comprised of
one restricted common share of the company and one-half share
purchase warrant. Each whole share purchase warrant entitles the
holder to purchase an additional share at a price of $5.00 per
share for a period of two years. A total of $110,000 of the loans,
plus accrued interest, has been repaid.
An aggregate of 2,059,933 shares of common stock underlies the
units and an aggregate of 1,029,966 shares of common stock
underlies the purchase warrants, as follows:
Loan Holders Principal Number of Number of Number of
Amount of Units Upon Shares Shares
Loan Conversion Underlying Underlying
Of Units Purchase
Principal Warrants
J.M. Collingshaw $ 26,000 45,614 45,614 22,807
T.R.L. Investments
Limited $ 50,000 87,719 87,719 43,859
Gordon McLean $ 20,000 35,088 35,088 17,544
Theresa Patterson $ 10,000 17,544 17,544 8,772
Marilyn Scott $ 10,000 17,544 17,544 8,772
Questech
Corporation $ 63,000 110,526 110,526 55,263
The Loyalist
Insurance Group Ltd. $ 10,000 17,544 17,544 8,772
Leanne Arnold $ 10,000 17,544 17,544 8,772
John Barthel $ 5,000 8,772 8,772 4,386
Aaron Fleischer $ 11,500 20,175 20,175 10,087
Laura Harding $ 1,368.80 2,401 2,401 1,200
John Wright $ 3,410.40 5,983 5,983 2,991
Ray Orser $ 3,410.40 5,983 5,983 2,991
James Pollard $ 10,000 17,544 17,544 8,772
Lillian Rottar $ 5,000 8,772 8,772 4,386
James Topliss $ 10,000 17,544 17,544 8,772
Peter Travis $ 5,000 8,772 8,772 4,386
Peter Wong & Karen
Chiang $ 5,000 8,772 8,772 4,386
Kenneth Wright $ 3,410.40 5,983 5,983 2,991
Phantom Management $ 25,000 43,860 43,860 21,930
Brad Baker $ 10,000 17,544 17,544 8,772
Barbara Dunnington $ 10,000 17,544 17,544 8,772
Matthew Johnstone $ 12,457.39 21,855 21,855 10,927
Ron Pearson $ 31,000 54,386 54,386 27,193
Gary Shuchat $ 5,104.47 8,955 8,955 4,477
Steve Copp $ 10,000 17,544 17,544 8,772
Mark Donahue $ 10,000 17,544 17,544 8,772
Allan Drewlo $ 10,000 17,544 17,544 8,772
Murray Harvey $ 10,000 17,544 17,544 8,772
Doug Lamon $ 62,000 108,772 108,772 54,386
Roy Mayers $ 25,000 43,860 43,860 21,930
Michael Mollison $ 13,500 23,684 23,684 11,842
Steve Rice $ 25,000 43,860 43,860 21,930
W. Bryan Tamblyn $ 10,000 17,544 17,544 8,772
Trent Abraham $ 10,000 17,544 17,544 8,772
Linda Breese $ 17,000 29,825 29,825 14,912
John Crockett $ 20,000 35,088 35,088 17,544
Rosalie Harris $ 10,000 17,544 17,544 8,772
Kahntact
Incorporated $ 40,000 70,175 70,175 35,087
Ladan Javid $ 10,000 17,544 17,544 8,772
Patrick Logue $ 10,000 17,544 17,544 8,772
Amax Holdings Ltd. $ 10,000 17,544 17,544 8,772
Martha Sharp $ 10,000 17,544 17,544 8,772
Scott Washington $ 1,500 2,632 2,632 1,316
Marilyn Williams $ 31,000 54,386 54,386 27,193
Gino Di Leonardo $ 10,000 17,544 17,544 8,772
Dr. Paul Kordish $ 100,000 175,439 175,439 87,719
Norma MacLean $ 5,000 8,772 8,772 4,386
Sharon L. Younger
Living Trust $ 10,000 17,544 17,544 8,772
Ernest Raymond $ 75,000 131,579 131,579 65,789
Robert Kerr $ 10,000 17,544 17,544 8,772
Nicole Methe $ 2,500 4,386 4,386 2,193
Judy Rottar $ 26,000 45,614 45,614 22,807
Kensington
International
Enterprises Inc. $ 150,000 263,158 263,158 131,579
David Phillips $ 5,000 8,772 8,772 4,386
Ivan Vinnick $ 5,000 8,772 8,772 4,386
Dino Constabile $ 10,000 17,544 17,544 8,772
Ralph MacColl $ 10,000 17,544 17,544 8,772
Gordon Rottar $ 50,000 87,719 87,719 43,859
John Barthel $ 5,000 8,772 8,772 4,386
Totals $1,174,161.86 2,059,933 2,059,933 1,029,966
Registration under this Offering.
47,083,029 shares of common stock of the company will be sold on a
delayed basis under a shelf registration under Rule 415 (shares
outstanding prior to this offering: 22,038,283) (shares to be
outstanding after this offering, assuming a full subscription:
69,121,312), as follows:
Selling shareholders: 3,441,939.
Shares to be issued upon the exercise of purchase warrants to be
issued upon the exercise of special warrants: 423,994.
Shares to be issued upon the exercise of agent's compensation
options to be issued upon the exercise of agent's special warrants:
84,798.
Shares to be issued upon the exercise of agent's purchase warrant
to be issued upon the exercise of agent's compensation options:
42,399.
Shares to be issued under units to be issued upon loan conversions:
2,059,933.
Shares to be issued upon the exercise of purchase warrants under
units to be issued upon loan conversions: 1,029,966.
Shares to be sold for cash ($0.50 per share): 25,000,000.
Shares for possible future acquisitions by the company of other
companies and/or assets: 12,000,000.
Shares to be issued for consulting services: 3,000,000.
There can be no assurance that all of these shares will be issued
or that any of them will be sold for cash. The gross proceeds to
the company will depend on the amount actually sold for cash and
the sales price per share. No commissions or other fees will be
paid, directly or indirectly, by the company, or any of its
principals, to any person or firm in connection with solicitation
of sales of the shares. These securities are offered by the
company subject to prior issue and to approval of certain legal
matters by counsel.
Selling Shareholders.
(a) Manner of Sales; Broker-Dealer Compensation.
The selling shareholders, or any successors in interest to the
selling shareholders, may sell their shares of common stock in one
or more of the following methods:
ordinary brokers' transactions;
transactions involving cross or block trades or otherwise on the
Bulletin Board;
purchases by brokers, dealers or underwriters as principal and
resale by these purchasers for their own accounts pursuant to this
prospectus;
"at the market" to or through market makers or into an existing
market for the company's common stock;
in other ways not involving market makers or established trading
markets, including direct sales to purchases or sales effected
through agents;
through transactions in options, swaps or other derivatives
(whether exchange-listed or otherwise);
in privately negotiated transactions;
to cover short sales; or
any combination of the foregoing.
The selling shareholders also may sell their shares in reliance
upon Rule 144 under the Securities Act at such times as they are
eligible to do so. The company has been advised by the selling
shareholders that they have not made any arrangements for the
distribution of the shares of common stock. Brokers, dealers or
underwriters who effect sales for the selling shareholders may
arrange for other brokers, dealers or underwriters to participate.
Brokers, dealers or underwriters engaged by the selling
shareholders will receive commissions or discounts from them in
amounts to be negotiated prior to the sale. These brokers,
dealers or underwriters may act as agent or as principals.
From time to time, one or more of the selling shareholders may
pledge, hypothecate or grant a security interest in some or all of
the shares of common stock being offered for sale, and the
pledgees, secured parties or persons to whom these securities have
been pledged shall, upon foreclosure in the event of default, be
considered a selling shareholder hereunder. In addition, a selling
shareholders may, from time to time, sell short their common stock.
In these instances, this prospectus may be delivered in connection
with these short sales and the shares of the common stock may be
used to cover these short sales.
From time to time one or more of the selling shareholders may
transfer, pledge, donate or assign shares of their common stock to
lenders or others and each of these persons will be considered a
selling shareholder for purposes of this prospectus. The number of
shares of the company's common stock beneficially owned by those
selling shareholders who so transfer, pledge, donate or assign
shares of their common stock will decrease as and when they take
these actions. The plan of distribution for the company's common
stock by the selling shareholders set forth herein will otherwise
remain unchanged, except that the transferees, pledgees, donees or
other successors will be considered selling shareholders hereunder.
Subject to the limitations discussed above, a selling shareholder
may enter into hedging transactions with broker-dealers and the
broker-dealers may engage in short sales of the company's common
stock in the course of hedging the positions they assume with this
selling shareholders, including in connection with distributions of
the common stock by these broker-dealers. A selling shareholder
may also enter into option or other transactions with broker-
dealers that involve the delivery of the company's common stock to
the broker-dealers, who may then resell or otherwise transfer
these shares. A selling shareholder also may loan or pledge the
company's common stock to a broker-dealer and the broker-dealer
may sell the common stock so loaned or upon a default may sell or
otherwise transfer the pledged common stock.
(b) Filing of a Post-Effective Amendment In Certain Instances.
If any selling shareholders notifies the company that he, she, or
it has entered into a material arrangement (other than a customary
brokerage account agreement) with a broker or dealer for the sale
of shares of common stock under this prospectus through a block
trade, purchase by a broker or dealer or similar transaction, the
company will file a post- effective amendment to the registration
statement for this offering. The post-effective amendment will
disclose:
The name of each broker-dealer involved in the transaction.
The number of shares of common stock involved.
The price at which those shares of common stock were sold.
The commissions paid or discounts or concessions allowed to the
broker-dealer(s).
If applicable, that these broker-dealer(s) did not conduct any
investigation to verify the information contained or incorporated
by reference in this prospectus, as supplemented.
Any other facts material to the transaction.
(c) Certain Persons May Be Deemed to Be Underwriters.
The selling shareholders and any broker-dealers who execute sales
for them may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933 because of the number of shares of
common stock to be sold or resold by these persons or entities or
the manner of sale of these shares, or both. If a selling
shareholder or any broker-dealer or other holders were determined
to be underwriters, any discounts, concessions or commissions
received by them or by brokers or dealers acting on their behalf
and any profits received by them on the resale of their shares of
common stock might be deemed to be underwriting discounts and
commissions under the Securities Act.
(d) Regulation M.
The company has informed the selling shareholders that Regulation
M promulgated under the Securities Exchange Act of 1934 may be
applicable to them with respect to any purchase or sale the
company's common stock. In general, Rule 102 under Regulation M
prohibits any person connected with a distribution of the company's
common stock from directly or indirectly bidding for, or purchasing
for any account in which it has a beneficial interest, any of the
common stock or any right to purchase this stock, for a period of
one business day before and after completion of its participation
in the distribution.
During any distribution period, Regulation M prohibits the selling
shareholders and any other persons engaged in the distribution
from engaging in any stabilizing bid or purchasing the company's
common stock except for the purpose of preventing or retarding a
decline in the open market price of the common stock. None of
these persons may effect any stabilizing transaction to facilitate
any offering at the market. As the selling shareholders will be
reoffering and reselling the company's common stock at the market,
Regulation M will prohibit them from effecting any stabilizing
transaction in contravention of Regulation M with respect to this
stock.
Opportunity to Make Inquiries.
The company will make available to each offeree, prior to any sale
of the shares, the opportunity to ask questions and receive answers
from the company concerning any aspect of the investment and to
obtain any additional information contained in this prospectus, to
the extent that the company possesses such information or can
acquire it without unreasonable effort or expense.
Execution of Documents.
Each person desiring to be issued shares, either as a conversion of
a debenture, or an exercise of a warrant, must complete, execute,
acknowledge, and deliver to the company certain documents. By
executing these documents, the subscriber is agreeing that such
subscriber will be, a shareholder in the company and will be
otherwise bound by the articles of incorporation and the bylaws of
the company in the form attached to this prospectus.
LEGAL PROCEEDINGS
The company is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by or
against the company has been threatened.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS,AND CONTROL PERSONS
The names, ages, and respective positions of the directors and
executive officers of the company are set forth below; there are no
other promoters or control persons of the company. The Directors
named below will serve until the next annual meeting of the
company's stockholders or until their successors are duly elected
and have qualified. Directors are elected for a one-year term at
the annual stockholders' meeting. Officers will hold their
positions at the will of the board of directors, absent any
employment agreement. There are no arrangements, agreements or
understandings between non-management shareholders and management
under which non-management shareholders may directly or indirectly
participate in or influence the management of the company's
affairs. The directors and executive officers of the company are
not a party to any material pending legal proceedings and, to the
best of their knowledge, no such action by or against them has been
threatened.
Officer and Directors.
(a) David M. Groves, President/Chief Executive Officer/Director.
Mr. Groves, age 50, brings over 20 years of senior management
experience (CEO & COO positions) with particular expertise in
emerging technologies and markets including e-commerce, internet
marketing, wireless communications, electronic billing systems and
a variety of internet business models. He was the President and CEO
of Image Data International Corporation from 1991-1997 and went on
to serve as Senior Vice President at Omega Digital Data Inc. until
June 1998 and started E-Bill Direct, Inc. shortly thereafter. Along
with his strong technical and administrative background, Mr. Groves
brings considerable experience in the financial areas of
acquisitions, divestitures, public offerings and private placements
and he will be counted on to contribute in a leadership capacity in
all these areas. He currently serves as CEO of Urbana Enterprises
Corp.
(b) Robert S. Tyson, Vice President/Secretary/Director.
Mr. Tyson, age 40, is an experienced administrator of 12 years
specializing in the development of emerging public companies having
held senior management positions or management consulting positions
with emerging companies in the manufacturing and high-tech sectors.
From 1991 to 1996 Mr. Tyson was president of Watson Bell
Communications, Inc. and its predecessor company, Silent
Communications Inc. Watson Bell was a public company trading on the
Vancouver Stock Exchange that developed a hand-held
telecommunications device. Mr. Tyson has spent the past 4 years as
a consultant with MCA Equities Ltd., a Vancouver based business
consulting firm and has served as an officer and director of the
issuer since 1997. Mr. Tyson is responsible for the corporate
affairs of the company, including all issues to do with corporate
governance and assisting with finance, administrative, contract
and corporate communications issues.
(c) Greg Alexanian, Vice President/Chief Operating Officer/Director.
Mr. Alexanian, age 34, has developed a strong operations
background from his 15 years experience performing a similar role
as a major shareholder in a chain of 16 home carpet and accessories
retailers, Alexanian Carpet. As COO of Urbana Enterprises Corp., he
will be responsible for vendor and distributor relations and ensure
that the company delivers product to its customers in a reliable
and timely manner.
(d) Rick Whittaker, Vice President, Business Development/Director.
Mr. Whittaker, age 41, has extensive experience in the area of
wireless monitoring and collection of public utility consumption
data for billing purposes. From 1992-1998, he was the Vice
President of Sales and a co-founder of Nexsys Commtech
International Inc. where he was the project manager responsible for
the successful development of a $3 million wireless meter reading
project and its pilot testing with 3 Canadian and 1 American
utility. He was also the president and co-founder of Enersphere in
1998. Mr. Whittaker is directly responsible for the development and
expansion of the company's LocalNet project.
Key Employees.
(a) Henry Tyler, Vice President, Electronic Bill Presentment.
Mr. Tyler, age 54, has more than 20 years experience with
leading Canadian companies having mastered skills in analysis,
design, development, tactical & strategic planning, project
management, administration and sales. Mr. Tyler sold and managed
the development and delivery of multi-million dollar E-commerce
business solutions to companies such as American Express, IBM and
four of Canada's five chartered banks. From 1996-1998, he was Vice
President, Sales for Omega Digital Data, Inc. where he was
responsible for the sale and delivery of the first hand-held
wireless LAN terminal solutions to the Bank of Nova Scotia. He
became a partner and Vice President of E-Bill Direct, Inc. in 1999.
Mr. Tyler will be responsible to oversee and review all technical
and product development issues as well as sales of the company's
Electronic Bill Presentment products and solutions.
(b) John Cullen, Chief Technology Officer.
Mr. Cullen, age 39, has been developing and managing R&D and
technical sales programs for the past 11 years. These projects
include developing communications and information technology
solutions for the utilities markets. Mr. Cullen has held executive
management positions with various successful start-ups including
Telular Canada Inc. and Control Advancements Inc. from 1989 to
1998. He then became a partner in Enersphere in 1998. Mr. Cullen is
responsible for the research, product design and quality control of
new product offerings as well as providing technical sales support.
The company does not have standing audit, nominating or
compensation committees of the board of directors, or
committees performing similar functions. During the last fiscal
year, the board of directors met on two occasions.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of shares of the company's common stock as of September
30, 2000 (22,038,283 issued and outstanding) by (i) all
stockholders known to the company to be beneficial owners of more
than 5% of the outstanding common stock; and (ii) all directors and
executive officers of the company, and as a group (each person has
sole voting power and sole dispositive power as to all of the
shares shown as beneficially owned by them):
Title of Name and Address of Amount of Percent
Class Beneficial Owner Beneficial of
Ownership(1) class
Common Da-Jung Resources Corp. 4,842,900 21.97%
Stock P.O. Box 71
Road Town,
British Virgin Islands
Common David Groves 1,817,500 (2) 8.25%
Stock 22 Haddington Street
Cambridge, Ontario, N1R 1B9
Common Richard Whittaker 1,575,000 (2) 7.15%
Stock 22 Haddington Street
Cambridge, Ontario, N1R 1B9
Common John Cullen 1,125,000 (2) 5.10%
Stock 98 Willow Street
Waterloo, Ontario N2J 1W2
Common Doris Cullen 1,125,000(2) (3) 5.10%
Stock 98 Willow Street
Waterloo, Ontario N2J 1W2
Common Jason Cassis 1,102,500 (2) 5.00%
Stock 253 King Street North
Waterloo, Ontario N2L 2Y8
Common Greg Alexanian 1,102,500 (2) 5.00%
Stock 22 Haddington Street
Cambridge, Ontario, N1R 1B9
Common Henry Tyler 725,000 (2) 3.29%
Stock 22 Haddington Street
Cambridge, Ontario, N1R 1B9
Common Robert S. Tyson 0 0.00%
Stock 750 West Pender Street
Suite 804
Vancouver, British Columbia
V6C 2T8
Common Shares of all directors and 7,470,000 (2) 38.90%
Stock executive officers as a
group (6 persons)
(1) Other than as set forth in footnote (2), none of these
security holders has the right to acquire any amount of the shares
within sixty days from options, warrants, rights, conversion
privilege, or similar obligations.
(2) These share holding consist solely of shares of the one wholly
owned subsidiary of the company, U.R.B.A. Holdings Inc., a private
British Columbia corporation, which are exchangeable into shares of
the company. U.R.B.A. Holdings Inc. in turn owns all of the issued
and outstanding shares of Urbana Enterprises Corp., a private
Ontario corporation. Urbana Enterprises Corp. resulted from the
merger of three subsidiaries of U.R.B.A. Holdings Inc., Urbana.ca
Enterprises Corp. (a British Columbia private corporation),
Enersphere.com Inc. (an Ontario private corporation) and E-Bill
Direct, Inc. (an Ontario private corporation) on March 10, 2000.
Urbana Enterprises Corp. is the operating subsidiary of the
company.
(3) Doris Cullen is the wife of John Cullen.
DESCRIPTION OF SECURITIES
Securities.
(a) Common Stock.
The securities being offered are shares of common stock. The
authorized capital of the company consists of 80,000,000 shares of
common stock, $0.001 par value per share. The holders of common
stock shall:
have equal ratable rights to dividends from funds legally available
therefore, when, as, and if declared by the board of directors of
the company
are entitled to share ratably in all of the assets of the company
available for distribution upon winding up of the affairs of the
company
are entitled to one non-cumulative vote per share on all matters on
which shareholders may vote at all meetings of shareholders.
The shares of common stock do not have any of the following
rights:
special voting rights
preference as to dividends or interest
preemptive rights to purchase in new issues of Shares
preference upon liquidation, or
any other special rights or preferences.
In addition, the Shares are not convertible into any other
security. There are no restrictions on dividends under any loan
other financing arrangements or otherwise. As of September 30,
2000, the company had 22,038,283 shares of common stock issued and
outstanding.
(b) Preferred Stock.
The authorized capital stock of the company also consists of
10,000,000 preferred shares, $0.001 par value per share.
Currently, There are no preferred shares issued and outstanding.
(c) Loan Conversions.
At September 30, 2000 loans of $1,174,162 plus accrued
interest of $51,213 were outstanding. These loans bear interest at
an annual rate of 8% and were due and payable on March 15, 2000.
Subsequent to March 15, 2000 $110,000 of principal has been
repaid. The company has provided an option to the lenders for the
remainder of the unpaid loans to convert the principal amount of
the loans into units of the company at a price of $0.57 per unit.
Each unit is comprised of one common share of the company and one-
half share purchase warrant. Each whole share purchase warrant
entitles the holder to purchase an additional common share of the
company at a price of $5.00 per share. This offer is to be made by
way of a prospectus which has been filed with the applicable
Canadian and United States regulatory authorities.
(d) Units Offering.
The company entered into an agency agreement effective April
10, 2000 with Groome Capital.com Inc. whereby the company and
Groome engaged in a best efforts offering of up to 20,000,000
special warrants at a price of $1.25 per special warrant. Each
special warrant is convertible into one common share and one-half
share purchase warrant exercisable for a period of two years at a
price of $5.00 per whole share purchase warrant. Groome received an
Agent's Fee equal to 8% of the total amount raised (reduced to 4%
for investors on a president's list). In addition, Groome has been
granted non-assignable warrants to acquire, without payment of
additional consideration, 1 year Compensation Options providing the
right to purchase, at $1.25 per unit, a number of units equal to
10% of the number of Special Warrants sold under this offering.
This offering, which has been closed as of May 11, 2000, resulted
in total subscriptions for 847,989 units with total proceeds of
$1,059,986 from a total of nine investors in Canada. A similar
offering was undertaken in the United States, but no sales resulted
from this offering.
(e) Exchangeable Shares.
(1) Urbana.ca Enterprises Corp.
By agreement dated January 4, 2000, the company's wholly-owned
subsidiary U.R.B.A. Holdings Inc. acquired 100% of the outstanding
shares of Urbana.ca Enterprises Corp., a company engaged in
distribution of Linux based set top boxes which are used as an
alternative method of delivering internet content. Urbana.ca
Enterprises Corp. was incorporated November 18, 1998 in the
province of British Columbia.
In consideration for the acquisition, U.R.B.A. Holdings Inc.
issued 3,000,000 non-voting exchangeable shares. The holders of
these shares have been granted votes in the company on a basis of
one vote for each exchangeable share of U.R.B.A. Holdings Inc.
held. A holder of an exchangeable share may, at any time, require
U.R.B.A. Holdings Inc. to repurchase the exchangeable share for an
amount equal to the then current market value of a common share of
the company. U.R.B.A. Holdings Inc. may satisfy the resulting
obligation in cash or in company shares at its option.
Pursuant to the terms of the agreement, the company issued
3,000,000 common shares in trust to be held under the terms of a
trust agreement executed January 4, 2000 until such time as the
exchangeable shares are exchanged by their holders or all remaining
exchangeable shares are cancelled.
(2) E-Bill Direct, Inc.
By agreement dated January 10, 2000, the company's wholly-
owned subsidiary U.R.B.A. Holdings Inc., acquired 100% of the
outstanding shares of E-Bill Direct, Inc., a company engaged in
designing, developing and providing electronic presentment and
payment services to the business community. E-Bill Direct, Inc.
was incorporated May 27, 1999 in the province of Ontario.
In consideration for the acquisition, U.R.B.A. Holdings Inc.
issued 2,950,000 non-voting exchangeable shares. The holders of
these shares have been granted votes in the company on a basis of
one vote for each exchangeable share of U.R.B.A. Holdings Inc.
held. A holder of an exchangeable share may, at any time, require
U.R.B.A. Holdings Inc. to repurchase the exchangeable share for an
amount equal to the then current market value of a common share of
the company. U.R.B.A. Holdings Inc. may satisfy the resulting
obligation in cash or in company shares at its option.
Pursuant to the terms of the agreement, the company issued
2,950,000 common shares in trust to be held under the terms of a
trust agreement executed January 10, 2000 until such time as the
exchangeable shares are exchanged by their holders or all remaining
exchangeable shares are cancelled.
(3) Enersphere.com, Inc.
By agreement dated January 9, 2000, the company's wholly-owned
subsidiary U.R.B.A. Holdings Inc., acquired 100% of the outstanding
shares of Enersphere.com, Inc., a content company that utilizes set
top boxes as their medium to deliver internet and intranet-based
services to customers. Enersphere.com, Inc. was incorporated
September 28, 1999 in the province of Ontario.
In consideration for the acquisition, U.R.B.A. Holdings Inc.
paid $84,828 and issued 4,500,000 non-voting exchangeable shares.
The holders of these shares have been granted votes in the company
on a basis of one vote for each exchangeable share of U.R.B.A.
Holdings Inc. held. A holder of an exchangeable share may, at any
time, require U.R.B.A. Holdings Inc. to repurchase the exchangeable
share for an amount equal to the then current market value of a
common share of the company. U.R.B.A. Holdings Inc. may satisfy
the resulting obligation in cash or in company shares at its
option.
Pursuant to the terms of the agreement, the company issued
4,500,000 common shares in trust to be held under the terms of a
trust agreement executed January 9, 2000 until such time as the
exchangeable shares are exchanged by their holders or all remaining
exchangeable shares are cancelled.
Non-Cumulative Voting.
The holders of shares of common stock of the company do not have
cumulative voting rights, which means that the holders of more than
50% of such outstanding shares, voting for the election of
directors, can elect all of the directors to be elected, if they so
choose. In such event, the holders of the remaining shares will not
be able to elect any of the company's directors.
Dividends.
The company does not currently intend to pay cash dividends. The
company's proposed dividend policy is to make distributions of its
revenues to its stockholders when the company's board of directors
deems such distributions appropriate. Because the company does not
intend to make cash distributions, potential shareholders would
need to sell their shares to realize a return on their investment.
There can be no assurances of the projected values of the shares,
nor can there be any guarantees of the success of the company.
A distribution of revenues will be made only when, in the judgment
of the company's board of directors, it is in the best interest of
the company's stockholders to do so. The board of directors will
review, among other things, the investment quality and
marketability of the securities considered for distribution; the
impact of a distribution of the investee's securities on its
customers, joint venture associates, management contracts, other
investors, financial institutions, and the company's internal
management, plus the tax consequences and the market effects of an
initial or broader distribution of such securities.
Possible Anti-Takeover Effects of Authorized but Unissued Stock.
Upon the completion of this offering, assuming the maximum
offering of 47,083,029 shares is sold, the company's authorized
but unissued common capital stock will consist of 10,878,688 shares
of common stock (based on the issued and outstanding shares of
22,038,283 as of September 30, 2000). One effect of the existence
of authorized but unissued capital stock may be to enable the board
of directors to render more difficult or to discourage an attempt
to obtain control of the company by means of a merger, tender
offer, proxy contest, or otherwise, and thereby to protect the
continuity of the company's management. If, in the due exercise of
its fiduciary obligations, for example, the board of directors were
to determine that a takeover proposal was not in the company's best
interests, such shares could be issued by the board of directors
without stockholder approval in one or more private placements or
other transactions that might prevent, or render more difficult or
costly, completion of the takeover transaction by diluting the
voting or other rights of the proposed acquirer or insurgent
stockholder or stockholder group, by creating a substantial voting
block in institutional or other hands that might undertake to
support the position of the incumbent board of directors, by
effecting an acquisition that might complicate or preclude the
takeover, or otherwise.
Transfer Agent.
The company has engaged the services of Pacific Corporate Trust
Co., 625 Howe Street, Suite 830, Vancouver, British Columbia V6C
3B8, to act as transfer agent and registrar.
INTEREST OF NAMED EXPERTS AND COUNSEL
No named expert or counsel was hired on a contingent basis, will
receive a direct or indirect interest in the small business issuer,
or was a promoter, underwriter, voting trustee, director, officer,
or employee of the company.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Limitation of Liability.
No director of the company will have personal liability to the
Corporation or any of its stockholders for monetary damages for
breach of fiduciary duty as a director or officers involving any
act or omission of any such director or officer. The foregoing
provision shall not eliminate or limit the liability of a director:
for any breach of the director's duty of loyalty to the Corporation
or its stockholders
for acts of omissions not in good faith or, which involve
intentional misconduct or a knowing violation of law
under applicable Sections of the Nevada Revised Statutes
the payment of dividends in violation of Section 78.300 of the
Nevada Revised Statutes, or
for any transaction from which the director derived an improper
personal benefit.
Any repeal or modification of this Article by the stockholders of
the Corporation shall be prospective only and shall not adversely
affect any limitation on the personal liability of a director or
officer of the Corporation for acts or omissions prior to such
repeal or modification.
Indemnification.
The bylaws of the company provide the following with respect to
indemnification:
Every person who was or is a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the
fact that he or a person of whom he is the legal representative is
or was a director or officer of the corporation or is or was a
director or officer of the corporation or is or was serving at the
request of the corporation or for its benefit as a director or
officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise, shall be
indemnified and held harmless to the fullest extent legally
permissible under the General Corporation Law of the State of
Nevada from time to time against all expenses, liability and loss
(including attorneys' fees, judgments, fines and amounts paid or to
be paid in settlement) reasonably incurred or suffered by him in
connection therewith. The expenses of officers and directors
incurred in defending a civil or criminal action, suit or
proceeding must be paid by the corporation as they are incurred and
in advance of the final disposition of the action, suit or
proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately
determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation. Such right of
indemnification shall be a contract right which may be enforced in
any manner desired by such person. Such right of indemnification
shall not be exclusive of any other right which such directors,
officers or representatives may have or hereafter acquire and,
without limiting the generality of such statement, they shall be
entitled to their respective rights of indemnification under any
bylaw, agreement, vote of stockholders, provision of law or
otherwise, as well as their rights under this Article.
The board of directors may cause the corporation to purchase and
maintain insurance on behalf of any person who is or who was a
director or officer of the corporation, or is or was serving at the
request of the corporation as a director or officer of another
corporation, or as its representative in a partnership, joint
venture, trust or other enterprise against any liability asserted
against such person and incurred in any such capacity or arising
out of such status, whether or not the corporation would have the
power to indemnify such person.
The board of directors may from time to time adopt further Bylaws
with respect to indemnification and may amend these and such Bylaws
to provide at all times the fullest indemnification permitted by
the Nevada Revised Statutes.
(a) NRS 78.7502 Discretionary and mandatory indemnification of
officers, directors, employees and agents: General provisions.
(1) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or
in the right of the corporation, by reason of the fact that he is
or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good
faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and that, with
respect to any criminal action or proceeding, he had reasonable
cause to believe that his conduct was unlawful.
(2) A corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
against expenses, including amounts paid in settlement and
attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if
he acted in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as
to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be
liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which
the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
(3) To the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in
subsections 1 and 2, or in defense of any claim, issue or matter
therein, the corporation shall indemnify him against expenses,
including attorneys' fees, actually and reasonably incurred by him
in connection with the defense.
(b) NRS 78.751 Authorization required for discretionary
indemnification; advancement of expenses; limitation on
indemnification and advancement of expenses.
(1) Any discretionary indemnification under NRS 78.7502
unless ordered by a court or advanced pursuant to subsection 2, may
be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances. The determination
must be made:
(i) By the stockholders;
(ii) By the board of directors by majority vote of a quorum
consisting of directors who were not parties to the action, suit or
proceeding;
(iii) If a majority vote of a quorum consisting of directors who
were not parties to the action, suit or proceeding so orders, by
independent legal counsel in a written opinion; or
(iv) If a quorum consisting of directors who were not parties to
the action, suit or proceeding cannot be obtained, by independent
legal counsel in a written opinion.
(2) The articles of incorporation, the bylaws or an agreement
made by the corporation may provide that the expenses of officers
and directors incurred in defending a civil or criminal action,
suit or proceeding must be paid by the corporation as they are
incurred and in advance of the final disposition of the action,
suit or proceeding, upon receipt of an undertaking by or on behalf
of the director or officer to repay the amount if it is ultimately
determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation. The provisions of
this subsection do not affect any rights to advancement of expenses
to which corporate personnel other than directors or officers may
be entitled under any contract or otherwise by law.
(3) The indemnification and advancement of expenses
authorized in NRS 78.7502 or ordered by a court pursuant to this
section:
(i) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under
the articles of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either an
action in his official capacity or an action in another capacity
while holding his office, except that indemnification, unless
ordered by a court pursuant to or for the advancement of expenses
made pursuant to subsection 2, may not be made to or on behalf of
any director or officer if a final adjudication establishes that
his acts or omissions involved intentional misconduct, fraud or a
knowing violation of the law and was material to the cause of
action.
(ii) Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the heirs,
executors and administrators of such a person.
(c) NRS 78.752 Insurance and other financial arrangements against
liability of directors, officers, employees and agents.
(1) A corporation may purchase and maintain insurance or make
other financial arrangements on behalf of any person who is or was
a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise for any liability asserted
against him and liability and expenses incurred by him in his
capacity as a director, officer, employee or agent, or arising out
of his status as such, whether or not the corporation has the
authority to indemnify him against such liability and expenses.
(2) The other financial arrangements made by the corporation
pursuant to subsection 1 may include the following:
(i) The creation of a trust fund.
(ii) The establishment of a program of self-insurance.
(iii) The securing of its obligation of indemnification by granting
a security interest or other lien on any assets of the corporation.
(iv) The establishment of a letter of credit, guaranty or surety.
No financial arrangement made pursuant to this subsection may
provide protection for a person adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be
liable for intentional misconduct, fraud or a knowing violation of
law, except with respect to the advancement of expenses or
indemnification ordered by a court.
(3) Any insurance or other financial arrangement made on behalf of
a person pursuant to this section may be provided by the
corporation or any other person approved by the board of directors,
even if all or part of the other person's stock or other securities
is owned by the corporation.
(4) In the absence of fraud:
(i) The decision of the board of directors as to the propriety of
the terms and conditions of any insurance or other financial
arrangement made pursuant to this section and the choice of the
person to provide the insurance or other financial arrangement is
conclusive; and
(ii) The insurance or other financial arrangement:
(A) Is not void or voidable; and
(B) Does not subject any director approving it to personal
liability for his action, even if a director approving the
insurance or other financial arrangement is a beneficiary of the
insurance or other financial arrangement.
(5) A corporation or its subsidiary which provides self-insurance
for itself or for another affiliated corporation pursuant to this
section is not subject to the provisions of Title 57 of NRS.
Undertaking.
The company undertakes the following:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has
been advised that in the opinion of the U.S. Securities and
Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
ORGANIZATION WITHIN LAST FIVE YEARS
The names of the officers and directors as disclosed elsewhere
in this Form SB-2. None of these individuals, as promoters, have
received anything of value from the company.
DESCRIPTION OF BUSINESS
Company History.
The company was originally organized in the State of Delaware in
February 1993 under the name of PLR, Inc. In November 1997, the
company changed its name to Integrated Carbonics Corp. and moved
its domicile to the State of Nevada. On July 23, 1999, Integrated
Carbonics Corp. changed its name to Urbana.ca, Inc.
In 1997, the company entered into agreements with Da-Jung Resources
Corp. to acquire certain of Da-Jung's assets in the People's
Republic of China. These assets have been abandoned due to the
inability to raise project financing and, as such, have been
written off the investment in its Chinese joint ventures.
The company entered into three letters of intent during 1999 to
acquire one British Columbia corporation (Urbana.ca Enterprises
Corporation) and two Ontario corporations (Enersphere.com, Inc. and
E-Bill Direct, Inc.). In addition, the company established a
wholly owned subsidiary, U.R.B.A. Holdings Inc. (formerly known as
ICC Integrated Carbonics (Canada) Corp.) to facilitate the transfer
of shares pursuant to section 85 of the Income Tax Act (Canada) to
the shareholders of the acquired entities.
In January, 2000, the company formally completed the acquisition of
each of the acquired entities after entering into share exchange
and share purchase agreements with each company wherein the
shareholders of each acquired entity received exchangeable non-
voting shares in the capital of U.R.B.A. Holdings Inc. that are
exchangeable on a one-for-one basis to restricted common shares in
the capital of the company. The aggregate consideration paid for
the acquired entities was 10,450,000 common shares of the company
(after conversion) plus $84,828 CDN in cash payments to
Enersphere.com, Inc. All consideration has been paid in full.
In March 2000, the company undertook the merger of the three
acquired entities into Urbana Enterprises Corp., an Ontario
registered corporation wholly owned by the company. The resulting
corporate structure has the company, which operates as a financing
and holding company for its two wholly owned subsidiaries:
U.R.B.A. Holdings Inc. a non-operating subsidiary which facilitated
the acquisition of the subsidiaries, and
Urbana Enterprises Corp., an Ontario registered corporation which
is the operating, wholly owned subsidiary company established to
execute the business plan of the company.
The terms of each of these acquisitions is set forth below:
(a) Urbana Enterprises Corp.
Urbana Enterprises Corp. was incorporated November 18, 1998 in the
province of British Columbia. Urbana Enterprises Corp. is engaged
in the distribution of Linux based set top boxes used as an
alternative method of delivering Internet content. From inception
(second quarter in 1999) to the date of acquisition, losses totaled
$193,171.
In consideration of the acquisition, U.R.B.A. Holdings Inc. issued
3,000,000 non-voting exchangeable shares to the following:
Greg Alexanian * 1,102,500
Jason Cassis 1,102,500
Bill Little 100,000
Stonewall Capital Corp. 200,000
Phil Cassis 495,000
Total 3,000,000
* Out of this group, Mr. Alexanian, who is Vice President/Chief
Operating Officer/Director of the company, is affiliated with the
company.
The holders of these shares have been granted votes in the company
on a basis of one vote for each exchangeable share of U.R.B.A.
Holdings Inc. held. The holder of these shares at any time may
require U.R.B.A. Holdings Inc. to repurchase the shares at the then
current market value of the common shares. At its option, U.R.B.A.
Holdings Inc. may satisfy this obligation in cash or in company
shares. Any exchangeable share not exchanged within 25 years is to
be cancelled.
Pursuant to the terms of the agreement, the company issued
3,000,000 common shares in trust to be held under the terms of a
trust agreement executed January 4, 2000 until such time as the
exchangeable shares are exchanged by their holders or all remaining
exchangeable shares are cancelled. In connection with the
acquisition, the company signed five-year management contracts with
the two principals. The company agreed to grant a total of 400,000
stock options to these individuals.
(b) E-Bill Direct, Inc.
E-Bill was incorporated May 27, 1999 in the province of Ontario.
E-Bill Direct, Inc. is engaged in designing, developing and
providing electronic presentment and payment services to the
business community. From inception (second quarter in 1999) to the
date of acquisition, losses totaled $16,214.
In consideration of the acquisition, U.R.B.A. Holdings Inc. issued
2,950,000 non-voting exchangeable shares to the following:
David M. Groves ** 1,817,500
Henry Tyler ** 737,500
Questech Corporation 295,000
Rockrimmon Investment 100,000
Total 2,950,000
** Out of this group, Mr. Groves, who is President/Director of the
company, and Mr. Tyler, who is Vice President, Electronic Bill
Presentment, are affiliated with the company.
The holders of these shares have been granted votes in the company
on a basis of one vote for each exchangeable share of U.R.B.A.
Holdings Inc. held. The holder of these shares at any time may
require U.R.B.A. Holdings Inc. to repurchase the shares at the then
current market value of the common shares. At its option, U.R.B.A.
Holdings Inc. may satisfy this obligation in cash or in company
shares. Any exchangeable share not exchanged within 25 years is to
be cancelled
Pursuant to the terms of the agreement, the company issued
2,950,000 common shares in trust to be held under the terms of a
trust agreement executed January 10, 2000 until such time as the
exchangeable shares are exchanged by their holders or all remaining
exchangeable shares are cancelled. In connection with the
acquisition, the company signed three-year management contracts
with the two principals. The company agreed to grant a total of
200,000 stock options to these individuals.
(c) Enersphere.com, Inc.
Enersphere.com, Inc. was incorporated September 28, 1999 in the
province of Ontario. Enersphere.com, Inc. is a content company
that utilizes set top boxes as their medium to deliver internet and
intranet-based services to customers. From inception (third
quarter in 1999) to the date of acquisition, losses totaled $114,917.
In consideration of the acquisition, U.R.B.A. Holdings Inc. paid
$84,828 cash and issued 4,500,000 non-voting exchangeable shares to
the following:
John Cullen 1,125,000
Doris Cullen 1,125,000
Rick Whittaker 1,575,000
Barb Whittaker 675,000
Total 4,500,000
** Out of this group, all are affiliated with the company: (a) Mr.
Cullen, who is the Chief Technology Officer, is a five percent
shareholder; (b) Doris Cullen, who is the wife of Mr. Cullen, is a
five percent shareholder; (c) Rick Whittaker is the Vice President,
Business Development/Director of the company; and (d) Barb
Whittaker is the wife of Mr. Whittaker.
The holders of these shares have been granted votes in the company
on a basis of one vote for each exchangeable share of U.R.B.A.
Holdings Inc. held. The holder of these shares at any time may
require U.R.B.A. Holdings Inc. to repurchase the shares at the then
current market value of the common shares. At its option, U.R.B.A.
Holdings Inc. may satisfy this obligation in cash or in company
shares. Any exchangeable share not exchanged within 25 years is to
be cancelled
Pursuant to the terms of the agreement, the company issued
4,500,000 common shares in trust to be held under the terms of a
trust agreement executed January 9, 2000 until such time as the
exchangeable shares are exchanged by their holders or all remaining
exchangeable shares are cancelled. In connection with the
acquisition, the company signed two-year management contracts with
the two principals. The company agreed to grant a total of 200,000
stock options to these individuals.
General.
The company is an e-commerce, transaction and content company
that creates Intranet and Internet-based systems in conjunction
with local area governments and high profile corporations. The
company will provide local communities with community based
entertainment and information services widely used in all facets of
everyday life and deliver these services through a customized set-
top-box. Internet success is predicated on rich content delivery
and delivery mechanisms reaching a maximum target market on a one-
to-one basis through both PC's and to areas and viewers where PC
use is non-existent. The company's aim is to achieve that success
by delivering rich content through a set-top-box medium to non-PC
consumers.
As part of its business strategy, the company will seek
collaborative partners with experience in the development and
marketing of its products in the relevant market areas. The
intention is to select partners with both the human and financial
resources to spearhead the market penetration and development of
the company's products. The form of collaboration would depend in
part on the product candidate, the stage of development, and the
partner's expertise. The company would also expect any potential
partner to be involved in the market of the products. No assurance
can be given that any such proposed partnership arrangements will
be entered into, or, if entered into, will be successful in
completing the development programs for the products in any
particular jurisdiction. The company has entered into agreements
whereby two individuals have licensed two separate communities.
Notwithstanding the company's business strategy described above,
the company has no regular cash flow and is dependent, initially,
on generating required funds primarily by way of equity financing.
The company expects to continue to rely, in whole or in part, on
outside sources of financing to meet its capital requirements for
at least the next two years. There can be no assurance that the
company will be able to arrange and complete the required
financings on favourable terms. Such equity financings could be
highly dilutive.
The e-commerce industry is characterized by increasingly intense
and intense competition. Competition in the e-commerce industry is
based primarily on product performance, including efficacy, ease of
use and adaptability to various modes of administration, price,
marketing, and distribution. Barriers to entry into the market
include the availability of patent protection in the United States
and other jurisdictions of commercial interest, and the ability and
time needed and cost incurred obtaining governmental approval for
testing, manufacturing and marketing.
The company's products are in the late stages of development.
Therefore, any discussion of a market for the company's products is
of a preliminary nature. In addition, some of the company's
competitors may have substantially more financial and technical
resources, more extensive research and development capabilities,
products at a later stage of development, and greater marketing,
distribution, production and human resources than the company.
LocalNet Systems Technology.
The company's LocalNet systems technology utilizes set top boxes as
the medium to deliver various Internet and Intranet based community
services to consumers. The LocalNet framework operates with
community leaders and high profile corporations to create community
based intranet systems that utilize the Internet to provide
residents with current community activities, movies and other
entertainment based content as well as such value added services as
enhanced television, monitored smoke detectors, automatic meter
reading, health and community services. The heart of the LocalNet
business model is the set top box. In simplistic terms, the set top
box is an electronic device that connects the Internet to a
consumer's television through a connection provided by an Internet
Service Provider.
(a) The Vision of LocalNet.
Until now, the world-wide web has been primarily a way of bringing
together distant people and far-flung resources. Wired or unwired,
people live, work, spend and use the resources overwhelmingly
located right in their neighborhoods - and their information and
communications needs reflect that local bias. The company and
LocalNet focus on those in the community not utilizing the Web due
to lack of content and those without Internet access. The vision
of LocalNet is that regardless of what type of medium for access is
provided to this segment of the community, this segment will not
initiate access without focused content.
LocalNet is not distant, it's local schools, local doctors, local
entertainment, local grocery stores, local police, local
government, local sports and fitness, local kid's events, local
artists, local parks, local parents looking for local babysitters,
local patrons reviewing local restaurants and local businesses
going online for local customers. Five years from now the company
believes, local Web will be everywhere, and it will, the company
believes, be the dominant gateway to the electronic world.
Powerful local content plus expanded access creates a virtuous
circle: Better access generates more viewers which provides
additional revenue for more and better content.
(b) Strategy.
The business model and marketing strategy will be a leveraged
expansion of the Guelph Local Online Project which is currently in
the final beta-test stage in Guelph, Ontario, Canada.
About 50% of any community has computers in their homes and about
50% of this population subscribes to Internet services resulting in
a 25%-30% Internet penetration rate. This has severely restrained
the Internet's usefulness in a geographic area, limiting the
ability for residents to use the Internet as a local medium for
communication and limiting the ability for local advertisers to
benefit from advertising on the Internet. While local retail and
commercial vendors see value in promoting themselves locally, most
have seen little value in promoting their businesses on the
internet because of low access rate at the local level.
The company has developed a unique method of providing a low cost
portal connection (LocalNet) for every resident in a geographic
area. The company strategy calls for local communities to provide
a self-sustaining local Internet service where all residents are
provided a low cost set top box funded with revenue recouped
through local and national advertisers. Residents will be provided
with a home gateway which provides basic Internet services such as
communicating via e-mail and viewing of a community channel. These
two services will provide all residents of the community with the
ability to communicate with one another and with local service
providers within the community. As described above, more access
leads to more local Internet services. For example, teachers could
now send homework assignments home via e-mail, residents could
register for programs via the community channel and local merchants
could reach their customers via the Internet. The supporting
advertisement could take the form of banner ads on e-mail and
community channel pages with the ability to click on the banner ads
to go to the advertisers web page. The company and its consortium
of sponsors receive revenue from the ads, which pays for the home
gateways.
Once in the home, the set top box provides much more functionality
than just Internet service. It becomes a community gateway with the
ability to become a true smart home manager. For example, through
the Internet connection, the company can offer new services such as
direct linkage to the fire department and to utility monitoring.
These services are provided at a nominal fee which further defrays
the cost of the set top box.
(c) Growth Strategy.
Based on the success of the Guelph project, the company will
leverage its expertise as facilitator and project manager to gain
competitive advantage. The critical elements of compelling
content, access/penetration to local markets and new value added
services will attract strategic partners both locally and
internationally. Fiscal 2000 is planned to be highlighted by 2
internally funded LocalNet sites and 4 licensed sites in Canada and
the U.S.
Electronic Billing.
(a) Background.
The electronic bill presentment industry is poised to capitalize on
the new digital age by driving paper and processing costs from
$1.50 per bill to $0.40 - $0.50 per bill. According to a recent
report by Killen & Associates, a market research firm, U.S.
utilities could save $1.2 billion in billing costs by using
electronic bill presentment and payment.
(b) Product.
The company's product offering is the digital processing and
electronic transmission of high-volume data via e-mail with
embedded digital marketing tools offered to a myriad of end user
customers. The E-Bill Direct, Inc. process converts a standard
print image file to a proprietary format and integrates various
levels of security and unique digital marketing tools that include
sound, graphics and animation that can be custom designed to meet
client needs.
(c) Strategy.
The company's approach to bill presentment is as follows. Most
organizations are luring customers to their websites to pay bills.
This approach is time consuming for the recipient to locate the
website and the billing information. The company does not believe
that customers will continuously search for billing information
from a multitude of creditors. Other organizations send e-mail to
advise clients that their bill is ready for review. The company
will send the bill as e-mail and eliminate the unnecessary steps.
The company has the ability to offer our clients an outsourcing
alternative to electronic bill presentment in that we will transmit
their customer monthly data utilizing our server platform. The
structure of the electronic bill presentment market is predicated
on electronic delivery by pulling customers to web-centric sites.
The company's animated graphics with sound, voice and motion
provide an effective and unique advertising tool to attract
customers to purchase or link to a specific website.
Historically, Internet advertising has been governed by banner and
static advertising. To date, rich, powerful advertising content
has been restricted due to the adoption of high speed (high band-
width) Internet access. Allowing ads to incorporate audio, video
and other applications will allow the next development of
advertising to exceed the current 2% response rate generated from
banner ads.
The company has the ability to integrate this rich, powerful,
animated advertising. Compression techniques allow for statements
and digital advertising to be transmitted in tolerable download
times to customers without wide band-width transmission. The
company's billing capacity has the ability to send up to (r) million
e-mail transmissions per day thereby creating a just-in-time
current statement. As a result, just-in-time delivery eliminates
call center customer queries about why recent accounting activity
is missed. This reduction in call center activity can equate to
substantial dollar savings.
(d) Markets.
Management has identified 3 primary markets where client operating
costs will be cut and traditional cost centers will become revenue
producing entities. The three markets (loyalty programs, brokerage
and utilities) are unique by nature but have identical inherent
problems in the dissemination of date to clients.
The various loyalty/affinity card type programs initiated by major
petroleum, retail and transportation (airline/car rental) typically
issue monthly or quarterly statements reflecting account activity
and a bonus point balance summary. Most household (Canada and the
U.S.) carry multiple cards reflecting loyalty and usage. As an
example, "Airmiles" alone has a customer base of 6 million equating
to 24 million statements sent annually.
The brokerage industry not only mails monthly statements showing
account activity and balances in the various equity markets, but it
also sends daily settlement buy/sell slips by mail. The combined
total transactions of the Toronto Stock Exchange, New York Stock
Exchange, and National Association of Securities Dealers, Inc,
Automated Quotation system, including mutual funds, approximates
2.4 billion transactions. Much of the cost of this could
potentially be eliminated by eliminating the paper process of
mailing statements and trade confirmations.
(e) Major Competition.
The company's major competitors are as follows:
Canada Post: In pilot since 1999 with expected service offering in
late 2000.
E-Route: Consortium of large Canadian players including some major
banks with expected roll-out in 2000.
Xenos Group: Canadian software company offering electronic
presentment of documents.
Paytrust: a US based company with a web-based service offering
consumer bill delivery.
Others: Paysense, Edocs, Checkfree, Transpoint, Whitehill.
(f) Competitive Advantage.
The company has three competitive advantages over its competitors:
Management has years of multimedia, animation and advertising
experience combined with electronic processing expertise;
The company currently has a capacity to transmit 20,000 units per
hour; and
The set top boxes the company plans to distribute can be used to
reach the 75% of the current market that currently do not have
Internet service in their homes.
Set-Top Boxes.
(a) Description.
The set top box is a consumer electronics device that connects any
television to the Internet via a standard analog phone line. Once
connected, the end user of the set top box can easily access the
Internet and can enjoy most of the applications the Internet has to
offer such as e-mail, e-commerce, web surfing, video on demand,
video conferencing and on-line banking.
The company's approach to the set top box market is to offer
consumers a set top box, with a standard Internet browser, and
applications pre-loaded from the server at the internet service
provider. Adding, updating or changing applications is done
through the company or channel partner's networks, meaning the user
does not need to install new software in the set top box every time
a feature is added, enhanced or changed.
The company is currently distributing a set top box in its pilot
markets that is manufactured by Acer Corporation in Taiwan (Acer NT
150); however, the company has discovered that the Liberate
operating system used by Acer is overly proprietary to meet the
feature growth requirements of the company. The company therefore,
has decided to deploy the next generation of set top box utilizing
the Linux operating system and sourcing Eagle Wireless
International Inc. set top boxes as described below.
(b) Product and Manufacturing.
The company entered into an exclusivity agreement with Eagle
Wireless International Inc. in January 2000 wherein Eagle Wireless
International Inc. agreed to manufacture and sell set top boxes to
the company and granted the exclusive right to the company to sell
Eagle Wireless International Inc. manufactured set top boxes in
Canada and the non-exclusive right to sell the set top boxes in the
United States. The company has chosen Eagle Wireless
International, Inc. as its manufacturing and engineering partner
because of this company's ability to produce a unique feature set
with an operating system independent hardware platform that can
accommodate all the popular operating systems and readily accept
new software for different applications.
Eagle Wireless International Inc. has the first right to provide
the company's set top box requirements. The company must make
certain volume purchases to maintain its rights under the
exclusivity agreement. The company presently has no plans for
developing an in-house manufacturing capability for its set top
boxes.
Eagle Wireless International Inc. is a Texas corporation with
offices in League City, Texas. It was incorporated in Texas in May
1993 and began business in April 1996. Eagle Wireless
International Inc. is a worldwide supplier of telecommunications
equipment and related software used by service providers in the
paging and other wireless personal communications markets. In 1999,
Eagle Wireless International Inc. invested substantial resources in
a multi-media Internet appliance product line known as a set top
box in an effort to prepare it for the new era of wireless consumer
products and multimedia internet related products. Eagle Wireless
International Inc. announced sales of its first set top boxes in
early 2000. Eagle Wireless International Inc. will have contracted
the actual manufacturing of its set top box line to SCI Corp. of
Singapore.
(c) Product Features.
The company's set top box has the following features:
Linux operating system.
Fully compliant 4.0 internet browser.
Off-line e-mail/e-mail editor (optional depending on vertical
market).
Java Media Player for music and video.
Enhanced television tuner.
USB, PCI serial and parallel ports for expansion and accessories.
Built-in radio frequency modulator for connection to any
television, with audio and video in and out jacks.
Ethernet input.
Wireless keyboard and remote control.
"Flash" read only memory for remote set top box software updates
while in service.
Smartcard reader and writer for programming, loyalty and financial
operations.
(d) Market Summary and Target Market.
An set top box user can be anyone with a television set and a
desire to go on-line. The consumer target market consists of a
broad cross-section - from young families to senior citizens.
Demographics indicate that convenience is of great importance to
these market segments. They have moderate to average disposable
incomes and currently own a television and video cassette
recorder. They may have a satellite receiver and a computer.
These users are looking for true value in their purchases and are
not inclined to maneuver through the mass of information on the
world wide web to find exactly what they need.
The company's target markets are:
Baby boomers - 89 million in the United States and Canada people
born between 1946 and 1964.
Empty nesters - top 1/4 of the baby boomers and beyond.
Generation X group (born 1966 with young children).
The fundamental market components are:
99% of households in North America have at least one television
set.
75% have 2 or more television sets.
Cable/Satellite television broadcast is available to 75% of United
States households.
Worldwide units sales of set top box were US$0.80M in 1999 compared
to US$0.3M in 1996.
Sales are expected to reach US$8.0M in 2002 - and are expected to
dominate the marketplace by 10:1 according to "Cite eStats/Datamonitor".
Currently there are 75 million Internet users in North America and
that total is expected to climb to 95 million over the next year.
According to "Data Source", the end of 1999 will see 61 million of
these Internet users forming our target market. This presents an
incredible "viewing" audience that is using the Internet on an
average of 1.8 hours per day. Currently only the Grammy Awards and
Super Bowl attract audiences of this size.
(e) Industry Analysis and Trends.
"Datamonitor" predicts that interactive television will reach 67
million homes in the United States and Europe by 2003 - a large
increase from the 1998 level of 10.3 million. User options for
connectivity are not limited to fibre-optic or coaxial cable but
include satellite broadcast as well. Currently, competition is
limited to a few big electronics manufacturers that have so far
been unable to combine their product with a fully integrated and
localized user package. For example, Microsoft's WEBTV paints all
consumers of their service with a wide brush of viewer options.
Established set top box distributors have high overheads created by
current facilities, sales staff, inventory and shrinkage. To
operate profitably requires typical retail markups on
manufacturer's pricing - even for big box merchants. Launching an
e-commerce website to leverage their existing brand equity does not
impact the cost structure and markup requirements of established
retailers.
Advanced television set top boxes can connect to the Internet in
another way. In Europe, satellite standards are beginning to
compete with cable specifications signaling a possible trend in
North America. Some United States companies such as DirecTV
already offer satellite-based Internet connections, but these
technologies are proprietary. The trend is toward having the
standards process apply to satellite broadcasts and cable services.
Whatever the method of connectivity, it has been predicted that
this form of Internet access will rapidly provide such competition
that the traditional internet service providers will experience a
dramatic reduction in growth rate.
A change in lifestyle toward home-based business and "cocooning",
is one of the key contributors to the recent explosion of Internet
connectivity with a strong emphasis placed on ease of use and
content value. While it is difficult to predict exactly what the
future hold for Internet surfers, it is safe to say the speed at
which the mass public integrates Internet use into their overall
lifestyle will grow exponentially. These users will expect the
service providers and businesses with which they interact daily to
keep up with the times.
(f) Warranty, Technical Support and Service Policies.
The company's technical support team communicates directly to
customer technicians who, in turn, provide support to end-users.
All end-user information is held at the "customer" level. The
customer technicians are factory trained and supplemented with
follow-up training and information.
The company's technical support is provided by application
engineers hired on contract. They work with the customer during
the sales cycle to learn their needs. A toll free number has been
provided to all company customers to ensure a single point for
communications. All technical and reference materials are on-line
in a secure website for customer access.
(g) Direct Competition
The competition in the set top box market consists of approximately
87 manufacturers who are actively marketing a number of set top
boxes, and of these, approximately 12 are considered as being
direct competitors with the company:
WebTV
Sony
Philips
Thompson
DirectPC
EchoStar (partnered with WebTV)
Acer/Liberate
Neon
NetGem
WebSurfer
Paradise
AOL TV (marketed through K Mart and Wal Mart)
(i) Indirect Competition.
The major cable networks are deploying two-way interactive services
utilizing the Internet (e.g. AT&T, Rogers Cable and Cox
Communications. Also, there exist the National Internet Service
Providers and major portals (for example, America Online). The
company will rely on its flexibility as a small company, the use of
the Linux operating system and constant monitoring and upgrading to
meet customer driven requirements to remain competitive against
both its direct and indirect competitors.
(j) Operations and Fulfillment
Operations and fulfillment are managed in-house, although, most of
the physical work is contracted out. This approach reduces costs
related to overhead and employee payroll, provides access to state-
of-the-art technologies and gives Urbana the resources to be
successful in the market while incurring minimal costs.
(k) Engineering and Design
The company's engineering and design teams are limited to
application engineering and high-level specification technical
writers. The company is a sales and marketing company and has,
therefore, outsourced its product engineering and manufacturing to
Eagle Wireless International, Inc. This company's strengths are in
consumer and commercial product, and solution engineering, wireless
technologies and manufacturing.
Status.
The company has successfully completed a six month pilot project
known as the Guelph LocalNet. The purpose of the pilot was to
distribute 125 set top boxes to various local community target
markets such as schools, local government, local corporations and
individual users. The pilot is monitored for technical proficiency
to gain market intelligence and to test the effectiveness of the
Guelph LocalNet software. The company, upon the initial
indications of success of the pilot, agreed to move the product to
its next stage of development. The last stage of development will
enable the company to move toward the preparation of licensing its
product for sale in the fall of 2000. The preparation of the
product and sale of the product are contingent on many factors,
including, but not limited to, the raising of sufficient capital,
completion of the software, delivery by Eagle Wireless
International, Inc. of a merchandisable set-top box, etc.
In January, 2000, the company entered into an exclusivity agreement
with Eagle Wireless International, Inc. of League City, Texas.
Within the terms of this agreement, Eagle Wireless International,
Inc. has agreed to manufacture and sell set top boxes to the
company and granted exclusive right to the company to sell Eagle
Wireless International, Inc. manufactured set top boxes in Canada
in return for certain volume purchases by the company over a 24
month period. The company also entered into a license agreement
with USA Video of Mystic, Connecticut wherein certain compression
technology developed by USA Video will be embedded in set top boxes
manufactured by Eagle Wireless International, Inc. and sold by the
company. To date, Eagle Wireless International, Inc. has failed to
provide Urbana with a product that has met regulatory approval or
is marketable to the overall market. The company has taken steps
to ensure that it has alternative sources of set-top boxes if
necessary.
In March, 2000, the company entered into a non-binding letter of
intent to purchase 100% of the issued and outstanding shares of
J.D. Donahue & Associates, a private Maryland based company that is
the principal provider of financial payment systems, systems
application development and financial payment hardware/software and
systems integration programs to state and federal governments in
the United States. In the event the company proceeds with its
acquisition of J.D. Donahue & Associates, the consideration paid
will be a combination of cash and shares of common stock in the
capital of the company. The final terms and consideration will be
formalized following the completion of due diligence and financing.
The company's agreement to purchase the J.D. Donahue & Associates
shares is conditional upon its raising U.S. $25,000,000 in
financing, a sum the company does not at this time expect to raise.
The company has five potential revenue producing divisions:
LocalNet
advertising
electronic billing
set-top-box sales
corporate sponsorships
In the ordinary course of business, the company has entered into
the following agreements during the year 2000:
(a) Strategic Alliance with Learning Pay.com.
On June 5, 2000, the company entered into a strategic alliance with
Fort Lauderdale, Florida-based Learning Pays.com, an education
technology company focused on improving student achievement,
enhancing parental involvement and facilitating communication
across school communities. Learning Pays.com's core product, the
web-based School Tool, securely and privately links parents,
students, teachers and administrators online.
The strategic relationship is intended to enhance the educational
content area of the company's local net portal by offering its
users easy-to-use communications and education tools. The web-based
applications for the schools and their teachers, students,
administrators and parents will include personalized web pages, e-
mail, expansion of the company's homework online, individualized
and automatically-updated school and event calendars.
(b) Strategic Alliance with WSMI.com Inc. and Bee-Trade.com.
On June 26, 2000, the company formed a strategic alliance with
WSMI.com Inc. and Bee-Trade.com. The alliance is intended to
integrate the company's set-top box technology, local net portal
design, and proprietary content transference into WSMI.com/Bee-
Trade.com's e-enabler.net solution. The combined technologies of
e-enabler.net and the company is intended to provide a turnkey, e-
commerce network solution to both virtual and local communities for
use on a worldwide basis.
(c) License Agreements.
On July 17, 2000, the company has licensed LocalNet in two
communities in Canada. The company is targeting approximately
25,000 new customers for LocalNet within the first two communities.
Deployment of the portal technology and Internet set-top boxes is
expected to begin in the fall of 2000. The two licensed communities
are Haldiman Norfolk and Grey Bruce. Under the terms of each
license agreement, the company will receive a one-time fee per
household in the community and an ongoing royalty of 10% of total
revenue generated via LocalNet.
(d) Agreement with Bell Nexxia.
On August 31, 2000, the company completed an agreement to offer the
low priced internet connection in Canada. The agreement combines
the company's LocalNet software with Bell Nexxia's infrastructure.
The agreement is intended to enable the company to rapidly deploy
and expand its customer base across Canada. The company will offer
a suite of competitively priced services to the communities across
Canada. Through the agreement with Bell Nexxia, the company's
customers are intended to benefit from access to a full range of
advanced communications services to meet their individual needs.
The company intends to seek similar types of agreement with United
States communications companies.
(e) Letter of Intent with Communilink Canada Corp.
On November 8, 2000, the company entered into a letter of intent
with Communilink Canada Corp. to provide the company's LocalNet
portal in five new regions of Ontario, Canada. LocalNet provides
residents the ability to connect globally to the Internet through
an affordable set-top box and view meaningful community-specific
information on a real-time basis. Under the terms of the proposed
agreement, the company will receive a licensing fee and ongoing
royalties from each community. These territories bring the number
of LocalNets currently under development to nine and represent a
combined population of approximately 700,000 potential viewers and
over 50,000 local advertisers. The deployment of communities will
begin immediately in the Peel/Halton Hills region, followed by
expansion into four other communities, which are located primarily
in South Western Ontario.
(f) Licensing and Co-Marketing Agreement with Sage Systems.
On November 17, 3000, the company entered into a licensing and co-
marketing agreement with Sage Systems, creator of AladnT, a
narrowband home networking technology that connects home appliances
to each other and the Internet. Under the terms of agreement, the
company will license and deploy Sage System's narrowband networking
technology. The two companies have also signed a joint marketing
agreement with expectations of marketing the combined system to
electric companies and their customers.
Milestones for Business Plan.
ITEM BUSINESS PLAN Costs to Source of Anticipated Projected
INITIATIVES/ complete funding start date revenues
of revenues first year
(000's)
1 Portal Development/
Delivery
Phase 1
-Activation of
first 4 LocalNets
tier 2&3 cities)
-Guelph LocalNet Completed/ Not Nov-00 $ 314,822
$0 applicable
-Cambridge
LocalNet Completed/ Not Nov-00 87,459
$0 applicable
-Hanover LocalNet Completed/ Not Nov-00 267,115
$0 applicable
-Simcoe LocalNet Completed/ Not Nov-00 145,764
$0 applicable
Phase 2 (replication
tier 2&3 cities) 0
-Sudbury LocalNet $0 Not Nov-00 342,909
applicable
-Oxford County
LocalNet $0 Not Mar-01 208,051
applicable
-Richmond Hill
LocalNet $0 Not Jan-01 583,057
applicable
-Perth LocalNet $0 Not Jan-01 116,611
applicable
-Ozz utility Mar-01 TBD*
-ENAL electric
utility in Italy
(pilot LocalNet) Jan-01 TBD*
-Louisville
LocalNet $0 Not Dec-01 TBD*
applicable
Sub-total revenues
LocalNet/set top
box roll-out
estimates 2,065,788
2 Set-top-box roll
to first 4
LocalNets n/a Leasing Nov-00 Portion of
Program Phase 1
Portal roll
Out above
3 Electronic
Presentment
-pilots (Sudbury)
(hardware) *$ 50,000 Hewlett Dec-00 175,000
Packard
-roll-out
(hardware) *$150,000 Hewlett Feb-01 1,500,000
Packard
*Note: The company
has negotiated
with Hewlett
Packard's
Equipment
assistance
program 6 months
free capital with
payments over
further
18 months.
4 Phase 3 Integration
Merger (tier 1
cities)
(Integration of
technologies for
tier 1 markets)
-Additional
applications for
tier 1,2,& 3
(data collection
health & safety,
video on demand,
meter reading,.)
-Set top boxes 2nd
Generation R&D $ 500,000 funds Apr-01 750,000
sourced
from merged
company
-Call center
activation
(completion
software dev) $400,000 " Feb-01 300,000
Total estimated
Integration
costs
Total projected
revenues for
first year
(to be absorbed
by merged company) 1,050,000
5 OEM Set Top Box
Sales (exclusive
of LocalNet)
15,000 units @
$330 Jan-01 4,950,000
Prospects include:
Multi Dwelling
Units-new home
builders/
Cable Co's/
Financial
Institutions
6 Premier Supplier Not Nov-00 Included in
of low cost Applicable Item #1
internet
connectivity
Agreement with
Bell Nexia (wholly
owned subsidiary of
Bell Canada) whereby
the company will
provide bundled
monthly connection
services and set
top boxes in LocalNet
environments across
Canada. Negotiated
connection cost as
low as $3.00 U.S.
per subscriber.
7 Acquisitions
Acquisition of
JD Donahue &
Associates $ 3.5 cash Term Debt/ 4,000,000
Secondary first year
Offering revenues
8 Applications &
Aggregation of
Content
License agreement
with Sage Systems
of Alameda,
California for the
purpose of
permitting the
company to have
designed and
integrated for
distribution of
SAGE Endpoint
Products $0 Technology 440,000
fees
$20,000
TOTAL $14,180,788
Proprietary Protection
(a) General.
The company's patent and trademark strategy is to pursue in
selected jurisdictions the broadest possible patent protection on
its proprietary products and technology. The company plans to
protect its technology, any inventions and improvements to its
inventions by filing patent applications in selected key countries
according to industry standard in a timely fashion.
In addition to its patents and licenses, the company also relies
upon trade secrets, know-how and continuing technological
innovations to develop its competitive position. It is the
company's policy to require its directors, employees, consultants,
members of its scientific advisory board and parties to
collaborative agreements to execute confidentiality agreements upon
the commencement of employment, consulting or collaborative
relationships with the company. These agreements provide that all
confidential information developed or made known during the course
of the relationship with the company is to be kept confidential
except in specific circumstances. In the case of employees and
consultants, the agreements provide that all inventions resulting
from work performed for the company utilizing property of the
company or relating to the company's business and conceived or
completed by the individual during employment are the exclusive
property of the company to the extent permitted by law.
(b) Patents, Copyrights and Trade Secrets.
Set top boxes manufactured for Urbana Enterprises Corp. by Eagle
Wireless International, Inc. incorporate "shelf" components and
technologies that are custom configured to the company's
specifications. This configuration will provide the consumer with
a unique set of entertainment, education, Internet and utility
monitoring features.
All components have multiple manufacturers and suppliers that Eagle
may use as sources of supply, therefore, Eagle Wireless
International, Inc. and the company are not reliant on single-
source, third party suppliers. This leaves the company with
minimal risk associated with parts and component supply.
The company, Eagle Wireless International, Inc. and USA Video
Technologies of Mystic, Connecticut have entered into a License
Agreement in January 2000 in which USA Video has licensed the use
of its proprietary Wavelet technology to the company to be embedded
into all set top box's manufactured for the company by Eagle
Wireless International, Inc. This ensures the company's right and
know-how to provide its customers with streaming video features.
Eagle Wireless International, Inc., the
technology licensor who has granted the company rights under an
agreement, has been granted patents or has filed patent
applications in the United States of America and other
jurisdictions in respect of certain core technologies utilized by
the company through its purchase of set top boxes from Eagle
Wireless International, Inc. Given that the patent applications
for these technologies involve complex legal, scientific and
factual questions, there can be no assurance that patent
applications relating to the technology used by the company will
result in patents being issued or that, if issued, the patents will
provide a competitive advantage or will afford protection against
competitors with similar technology, or will not be challenged
successfully or circumvented by competitors.
The company itself does not have patents or patents pending and it
is unlikely that the process by which the company produces its
contemplated products would itself be patentable.
(c) Trademark Applications.
The company is in the process of applying for Canadian and United
States protection for the trademark of "Urbana.ca". No filings
have yet been completed.
Organizational Structure and Facilities
The company currently has 15 full-time employees, 9 of which are
employed in research and development and 6 of which are engaged in
administration. At this time, none of the company's employees are
subject to collective bargaining agreements. A number of key
employees, officers and directors have in place management
agreements the terms of which protect the company from future
competition by these persons and against disclosure of confidential
information they come into contact with during the course of their
employment or other association with the company. The company
anticipates hiring 5 additional full-time personnel during the
remainder of 2000 in order to meet its business objectives, of
which 2 of the new personnel will fall within administration and 3
will fall within product research and development.
Risks in Connection with Plan of Business.
(a) No Assurance of Regulatory Approval - Potential Delays.
In order for a product developed by the company or its
collaborators to be marketed and sold in a particular country, it
must receive all relevant regulatory approvals or clearances. The
regulatory process, which includes extensive studies and trials of
each product in order to establish its efficacy, is uncertain, can
take many years and requires the expenditure of substantial
resources. Data obtained from a trial and activities are
susceptible to varying interpretations which could delay, limit or
prevent regulatory approval or clearance. In addition, delays or
rejections may be encountered based upon changes in regulatory
policy during the period of product development and/or the period
of review of any application for regulatory approval or clearance
for a product. Delays in obtaining regulatory approvals or
clearances would adversely affect the marketing of any products
developed by the company or its collaborators, impose significant
additional costs on the company and its collaborators, diminish any
competitive advantages that the company or its collaborators may
attain and adversely affect the company's ability to receive
royalties and generate revenues and profits. There can be no
assurance that, even after such time and expenditures, any required
regulatory approvals or clearances will be obtained for any
products developed by or in collaboration with the company.
Any regulatory approval or clearances granted may entail
limitations on the indicated uses for which the new product may be
marketed that could limit the potential market for such product.
In addition, product approvals or clearances, once granted, may be
withdrawn if problems occur after initial marketing. Furthermore,
manufacturers of approved products are subject to pervasive review,
including compliance with detailed regulation governing good
manufacturing practices. Failure to comply with applicable
regulatory requirements can result in actions such as warning
letters, fines, injunctions, civil penalties, recall or seizure of
products, total or partial suspension of production and refusal of
the government to renew marketing applications or criminal
prosecution.
The company is also subject to numerous federal, state and local
laws, regulations and recommendations relating to safe working
conditions, manufacturing practices, research and development
activities. The company is unable to predict the extent of
government regulations which might have an adverse effect on the
discovery, development, production and marketing of the company's
products. Also, there can be no assurance that the company will
not be required to incur significant costs to comply with current
or future laws or regulations or that the company will not be
adversely affected by the cost of such compliance.
(b) Acceptance And Effectiveness Of Internet Electronic Commerce.
The company's success in establishing an e-commerce business
web site will be dependent on consumer acceptance of e-retailing
and an increase in the use of the Internet for e-commerce. If the
markets for e-commerce do not develop or develop more slowly than
the company expects, its e-commerce business may be harmed. If
Internet usage does not grow, the company may not be able to
increase revenues from Internet advertising and sponsorships which
also may harm both our retail and e-commerce business. Internet use
by consumers is in an early stage of development, and market
acceptance of the Internet as a medium for content, advertising and
e-commerce is uncertain. A number of factors may inhibit the
growth of Internet usage, including inadequate network
infrastructure, security concerns, inconsistent quality of service,
and limited availability of cost-effective, high-speed access. If
these or any other factors cause use of the Internet to slow or
decline, our results of operations could be adversely affected.
(c) Competition In Internet Commerce.
Increased competition from e-commerce could result in reduced
margins or loss of market share, any of which could harm both our
retail and e-commerce businesses. Competition is likely to
increase significantly as new companies enter the market and
current competitors expand their services. Many of the company's
present and potential competitors are likely to enjoy substantial
competitive advantages, including larger numbers of users, more
fully-developed e-commerce opportunities, larger technical,
production and editorial staffs, and substantially greater
financial, marketing, technical and other resources. If the
company does not compete effectively or if it experiences any
pricing pressures, reduced margins or loss of market share
resulting from increased competition, the company's business could
be adversely affected.
(d) Unreliability Of Internet Infrastructure.
If the Internet continues to experience increased numbers of
users, frequency of use or increased bandwidth requirements, the
Internet infrastructure may not be able to support these increased
demands or perform reliably. The Internet has experienced a variety
of outages and other delays as a result of damage to portions of
its infrastructure, and could face additional outages and delays in
the future. These outages and delays could reduce the level of
Internet usage and traffic on the company website. In addition,
the Internet could lose its viability due to delays in the
development or adoption of new standards and protocols to handle
increased levels of activity. If the Internet infrastructure is
not adequately developed or maintained, use of the company website
may be reduced. Even if the Internet infrastructure is adequately
developed, and maintained, the company may incur substantial
expenditures in order to adapt its services and products to
changing Internet technologies. Such additional expenses could
severely harm the company's financial results.
(e) Transactional Security Concerns.
A significant barrier to Internet e-commerce is the secure
transmission of confidential information over public networks. Any
breach in our security could cause interruptions in the operation
of our website and have an adverse effect on the company's
business.
(f) Patents, Permits and Licenses.
The company considers patent protection and proprietary technology
to be materially significant to its business. The company relies
on certain patents and pending applications relating to various
aspects of its potential products and technology. These patents
and patent applications are either owned by or exclusively licensed
to the company. There can be no assurance that the company will be
able to obtain and retain all necessary patents, licenses and
permits that may be required to carry out the research and
development, manufacturing, testing, obtaining regulatory approvals
and marketing of commercial products. There can also be no
assurance that others will not independently develop similar
technologies, duplicate any technology developed by the company,
the company's technology will not infringe upon patents or other
rights owned by others, that any of the company's patents will not
be challenged, invalidated or circumvented, or that the rights
granted thereunder will provide competitive advantages to the
company. Litigation, which could result in substantial cost to the
company, may be necessary to enforce the company's rights provided
by its patents or to determine the scope and validity of others'
proprietary rights.
There have been no patent infringement claims filed by or against
the company, and the company is not aware of any potential claims.
(g) No Assurance Regarding Licensing of Proprietary Technology
Owned by Others.
The manufacture and sale of any products developed by the company
will involve the use of processes, products, or information, the
rights to certain of which are owned by others. Although the
company has obtained licenses or rights with regard to the use of
certain of such processes, products, and information, there can be
no assurance that such licenses or rights will not be terminated or
expire during critical periods, that the company will be able to
obtain licenses or other rights which may be important to it, or,
if obtained, that such licenses will be obtained on favorable
terms. Some of these licenses provide for limited periods of
exclusivity that may be extended only with the consent of the
licensor. There can be no assurance that extensions will be
granted on any or all such licenses. This same restriction may be
contained in licenses obtained in the future.
(h) No Assurance of Protection of Proprietary Information.
Certain of the company's know-how and proprietary technology may
not be patentable. To protect its rights, the company requires
management personnel, employees, consultants, advisors and
collaborators to enter into confidentiality agreements. There is
no assurance, however, that these agreements will provide
meaningful protection for the company's trade secrets, know-how or
other proprietary information in the event of any unauthorized use
or disclosure.
(i) No Assurance of Market Acceptance.
There can be no assurance that any products successfully developed
by the company or its corporate collaborators, if approved for
marketing, will ever achieve market acceptance. The company's
products, if successfully developed, may compete with a number of
traditional products manufactured and marketed by major e-commerce
and technology companies, as well as new products currently under
development by such companies and others. The degree of market
acceptance of any products developed by the company or its
corporate collaborators will depend on a number of factors,
including the establishment and demonstration of the efficacy of
the product candidates, their potential advantage over alternative
methods and reimbursement policies of government and third party
payors. There can be no assurance that the marketplace in general
will accept and utilize any products that may be developed by the
company or its corporate collaborators.
(j) No Assurance of Successful Manufacturing.
The company has no experience manufacturing commercial quantities
of products and does not currently have the resources to
manufacture any products that it may develop. The company presently
has no plans for developing an in-house marketing or manufacturing
capability. Accordingly, the company will be dependent upon
securing a contract manufacturer or other third party to
manufacture such products. There can be no assurance that the
terms of any such arrangement would be favorable enough to permit
the products to compete effectively in the marketplace.
(k) Dependence on Outsourced Manufacturing.
The risks of association with Eagle Wireless International, Inc.
are related to aspects of this company's operations, finances and
suppliers. Although there are clear and understandable reasons to
choose Eagle Wireless International, Inc. as an outsourced
manufacturer and fulfillment center, the company will suffer losses
if Eagle Wireless International, Inc. fails to perform its
obligations to manufacture and ship the set top boxes. Eagle
Wireless International, Inc.'s financial affairs may also affect
the company's ability to obtain product from this firm in a timely
fashion should it fail to continue to obtain sufficient financing
during a period of incremental growth. The company maintains a
strong relationship with Eagle Wireless International, Inc. to
ensure that any issues this firm may face are dealt with in a
timely manner. Although the company is currently reliant on Eagle
Wireless International, Inc., it does not intend to develop its own
manufacturing capability.
(l) Competition.
There are inherent difficulties for any new company seeking to
enter an established field. The company may experience substantial
competition in its efforts to locate and attract customers for its
services. Many competitors in the company's field have greater
experience, resources, and managerial capabilities than the company
and may be in a better position than the company to attract such
customers. There are a number of larger companies which may
directly compete with the company. Such competition could have a
material adverse effect on the company' profitability or viability.
(m) Dependence on and Management of Future Corporate Collaborations.
The success of the company's business strategy is largely dependent
on its ability to enter into collaborations such as research
alliances and licensing arrangements with universities, e-commerce
companies and large technological companies, and to effectively
manage the relationships that may come to exist as a result of this
strategy. The company is currently seeking corporate
collaborators, but there can be no assurance that such efforts will
lead to the establishment of any favorable collaboration. There
can be no assurance that any of the company's future or existing
collaborators will commit sufficient resources to the company's
research and development programs or the commercialization of its
products. Also, there can be no assurance that such collaborators
will not pursue existing or other development-stage products or
alternative technologies in preference to those being developed in
collaboration with the company, or that disputes will not arise
with respect to ownership of technology developed under any such
collaborations. Management of the company's collaborative
relationships will require significant time and effort from the
company's management team and effective allocation of the company's
resources.
(n) Currency Fluctuations.
The company reports its financial position and results of
operations in United States dollars in its annual financial
statements. The company's operations result in exposure to foreign
currency fluctuation and such fluctuations may materially affect
the company's financial position and results of operations. The
company does not currently take any steps to hedge against currency
fluctuations.
(o) Influence of Other External Factors.
The Internet industry in general is a speculative venture
necessarily involving some substantial risk. There is no certainty
that the expenditures to be made by the company will result in a
commercially profitable business. The marketability of its
services will be affected by numerous factors beyond the control of
the company. These factors include market fluctuations, and the
general state of the economy (including the rate of inflation and
local economic conditions), which can affect peoples' discretionary
spending. Factors which leave less money in the hands of potential
customers of the company will likely have an adverse affect on the
company. The exact effect of these factors cannot be accurately
predicted, but the combination of these factors may result in the
company not receiving an adequate, or any, return on invested
capital.
(p) Dependence Upon Key Personnel.
The company is dependent upon a relatively small number of key
management personnel and key employees and the loss of any of these
key management personnel and key employees could have an adverse
effect on the company. Competition among e-commerce companies for
qualified employees is intense, and the ability to retain and
attract qualified individuals is critical to the success of the
company. In order to reduce its risk regarding key employees, the
company has entered into an employment agreement with each of its
key employees. The company is also dependent, to some extent, on
the guidance of certain members of its advisory board, none of
whom is obligated, or will devote his full-time efforts, to the
business of the company. There can be no assurance that the
company will be able to attract and retain such individuals
currently or in the future on acceptable terms, or at all. In
addition, the company does not maintain "key person" life insurance
on any officer, employee or consultant of the company. The company
also has relationships with scientific collaborators at academic
and other institutions, some of whom conduct research at the
company's request or assist the company in formulating its research
and development strategy. These collaborators are not employees of
the company and may have commitments to, or consulting or advisory
contracts with, other entities that may limit their availability to
the company. In addition, these collaborators may have
arrangements with other companies to assist such other companies in
developing technologies that may prove competitive to those of the
company.
In addition, all decisions with respect to the management of
the company will be made exclusively by the officers and directors
of the company. Investors will only have rights associated with
minority ownership interest rights to make decisions which effect
the company. The success of the company, to a large extent, will
depend on the quality of the directors and officers of the company.
Accordingly, no person should invest in the shares unless he is
willing to entrust all aspects of the management of the company to
the officers and directors.
(q) Inexperience of Management.
Senior management has limited direct experience in the sale of set
top boxes and the other related businesses of the company.
Management will rely on senior employees, consultants and strategic
alliances to assist with project management. The company has every
intention to continue adding experienced management commensurate
with the growth of the company.
(r) Management of Growth.
The company's future growth, if any, may cause a significant strain
on its management, operational, financial and other resources. The
company's ability to manage its growth effectively will require it
to implement and improve its operational, financial, manufacturing
and management information systems and to expand, train, manage and
motivate its employees. These demands may require the addition of
new management personnel and the development of additional
expertise by management. Any increase in resources devoted to
research, product development and marketing and sales efforts
without a corresponding increase in the company's operational,
financial, manufacturing and management information systems could
have a material adverse effect on the company's business, financial
condition, and results of operations.
(s) Control of the Company by Officers and Directors.
The company's officers and directors beneficially own
approximately 39% of the outstanding shares of the company's common
stock. As a result, such persons, acting together, have the
ability to exercise significant influence over all matters
requiring stockholder approval. Accordingly, it could be difficult
for the investors hereunder to effectuate control over the affairs
of the company. Therefore, it should be assumed that the officers,
directors, and principal common shareholders who control the
majority of voting rights will be able, by virtue of their stock
holdings, to control the affairs and policies of the company.
(t) Limitations on Liability, and Indemnification, of Directors
and Officers.
Although neither the articles of incorporation nor the bylaws
of the company provide for indemnification of officer or directors
of the company, the Nevada Revised Statutes provides for permissive
indemnification of officers and directors and the company may
provide indemnification under such provisions. Any limitation on
the liability of any director, or indemnification of directors,
officer, or employees, could result in substantial expenditures
being made by the company in covering any liability of such persons
or in indemnifying them.
(u) Potential Conflicts of Interest.
The officers and directors of the company have other interests to
which they devote time, either individually or through partnerships
and corporations in which they have an interest, hold an office, or
serve on boards of directors. As a result, certain conflicts of
interest may exist between the company and its officers and/or
directors which may not be susceptible to resolution. In addition,
an employee of the company's corporate counsel in Canada, Heenan
Blaike, has a beneficial interest in or the right to acquire, up to
250,000 common shares of the company (which was previously issued
in exchange for services rendered to the company).
In addition, conflicts of interest may arise in the area of
corporate opportunities. All of the potential conflicts of
interest will be resolved through exercise by the directors of such
judgment as is consistent with their fiduciary duties to the
company. It is the intention of management, so as to minimize any
potential conflicts of interest, to present first to the board of
directors of the company, any proposed investments for its
evaluation.
(v) No Cumulative Voting.
Holders of the shares are not entitled to accumulate their votes
for the election of directors or otherwise. Accordingly, the
holders of a majority of the shares present at a meeting of
shareholders will be able to elect all of the directors of the
company, and the minority shareholders will not be able to elect a
representative to the company's board of directors.
(w) Absence of Cash Dividends.
The board of directors does not anticipate paying cash dividends on
the shares for the foreseeable future and intends to retain any
future earnings to finance the growth of the company's business.
Payment of dividends, if any, will depend, among other factors, on
earnings, capital requirements, and the general operating and
financial condition of the company, and will be subject to legal
limitations on the payment of dividends out of paid-in capital.
(x) Limited Public Market for Company's Securities.
Prior to this offering, there has been only a limited public market
for the shares of common stock being offered. There can be no
assurance that an active trading market will develop or that
purchasers of the shares will be able to resell their securities at
prices equal to or greater than the respective initial public
offering prices.
The market prices for the securities of technology companies have
historically been highly volatile. The market has from time to
time experienced significant price and volume fluctuations that are
unrelated to the operating performance of any particular company.
The market price of the shares may be affected significantly by
factors such as announcements by the company or its competitors,
variations in the company's results of operations, and market
conditions in the retail, electron commerce, and internet
industries in general. The market price may also be affected by
movements in prices of stock in general. As a result of these
factors, purchasers of the shares offered hereby may not be able to
liquidate an investment in the shares readily or at all.
(y) No Assurance of Continued Public Trading Market; Risk of Low
Priced Securities.
There has been only a limited public market for the common
stock of the company. The common stock of the company is currently
quoted on the Over the Counter Bulletin Board. As a result, an
investor may find it difficult to dispose of, or to obtain accurate
quotations as to the market value of the company's securities. In
addition, the common stock is subject to the low-priced security or
so called "penny stock" rules that impose additional sales practice
requirements on broker-dealers who 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, according to recent
regulations adopted by the U.S. Securities and Exchange Commission,
any equity security that has a market price of less than $5.00 per
share, subject to certain exceptions), including the delivery,
prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated
therewith. The regulations governing low-priced or penny stocks
sometimes limit the ability of broker-dealers to sell the company's
common stock and thus, ultimately, the ability of the investors to
sell their securities in the secondary market.
(z) Effects of Failure to Maintain Market Makers.
If the company is unable to maintain at least one National
Association of Securities Dealers, Inc. member broker/dealers as a
market maker, the liquidity of the common stock could be impaired,
not only in the number of shares of common stock which could be
bought and sold, but also through possible delays in the timing of
transactions, and lower prices for the common stock than might
otherwise prevail. Furthermore, the lack of market makers could
result in persons being unable to buy or sell shares of the common
stock on any secondary market. There can be no assurance the
company will be able to maintain such market makers.
(aa) Escrowed Proceeds
A portion of the gross proceeds of the private placement were
placed into escrow pursuant to an escrow agreement between the
company, Groome Capital.com, Inc., and Pacific Corporate Trust
Company (as escrow agent) on the closing of the private placement.
The proceeds will be released to the company on the earlier to
occur of 4:30 p.m. on April 26, 2001, or the date on which the
escrow agent receives written notice from Groome Capital.com, Inc.
that both a receipt for the final prospectus has been issued by
each of the Canadian securities commissions where qualification is
required (and the confirmation has been received) and this Form SB-
2 is declared effective by the U.S. Securities and Exchange
Commission.
(bb) Offering Price.
The offering price of the shares will be determined in relation to
the then current market price of the shares on the Over the Counter
Bulletin Board. Because of market fluctuations, there can be no
assurance that the shares will maintain market values commensurate
with the offering price.
(cc) "Shelf" Offering.
The shares are offered directly by the company on a delayed basis.
No assurance can be given that any or all of the shares will be
issued. No broker-dealer has been retained as an underwriter and
no broker-dealer is under any obligation to purchase any of the
shares. In addition, the officers and directors of the company,
collectively, have limited experience in the offer and sale of
securities on behalf of the company.
(dd) Use of Proceeds Not Specific.
The proceeds of this offering have been allocated only generally.
Proceeds from the offering have been allocated generally to legal
and accounting, and working capital. Accordingly, investors will
entrust their funds with management in whose judgment investors may
depend, with only limited information about management's specific
intentions with respect to a significant amount of the proceeds of
this offering.
(ee) Shares Eligible For Future Sale.
All of the 8,572,500 shares of common stock which are currently
held, directly or indirectly, by management have been issued in
reliance on the private placement exemption under the Securities
Act of 1933. Such shares will not be available for sale in the
open market without separate registration except in reliance upon
Rule 144 under the Securities Act of 1933. In general, under Rule
144 a person (or persons whose shares are aggregated) who has
beneficially owned shares acquired in a non-public transaction for
at least one year, including persons who may be deemed affiliates
of the company (as that term is defined under that rule) would be
entitled to sell within any three-month period a number of shares
that does not exceed the greater of 1% of the then outstanding
shares of common stock, or the average weekly reported trading
volume during the four calendar weeks preceding such sale, provided
that certain current public information is then available. If a
substantial number of the shares owned by these shareholders were
sold pursuant to Rule 144 or a registered offering, the market
price of the common stock could be adversely affected.
(ff) Uncertainty Due to Year 2000 Problem.
The Year 2000 issue arises because many computerized systems
use two digits rather than four to identify a year. Date sensitive
systems may recognize the year 2000 as 1900 or some other date,
resulting in errors when information using the year 2000 date is
processed. In addition, similar problems may arise in some systems
which use certain dates in 1999 to represent something other than
a date. The effects of the Year 2000 issue may be experienced
before, on, or after January 1, 2000, and if not addressed, the
impact on operations and financial reporting may range from minor
errors to significant system failure which could affect the
company's ability to conduct normal business operations. This
creates potential risk for all companies, even if their own
computer systems are Year 2000 compliant. It is not possible to be
certain that all aspects of the Year 2000 issue affecting the
company, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
The company currently believes that its systems are Year 2000
compliant in all material respects. Although management is not
aware of any material operational issues or costs associated with
preparing its internal systems for the Year 2000, the company may
experience serious unanticipated negative consequences (such as
significant downtime for one or more of its suppliers) or material
costs caused by undetected errors or defects in the technology used
in its internal systems. Furthermore, the purchasing patterns of
customers may be affected by Year 2000 issues. The company does
not currently have any information about the Year 2000 status of
its potential material suppliers. The company's Year 2000 plans
are based on management's best estimates.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
financial statements of the company and notes thereto contained
elsewhere in this prospectus.
Results of Operations.
(a) Nine Months Ended September 30, 2000 and 1999.
For the nine months ended September 30, 2000, the company had
a net loss of $2,309,452 or $0.20 cents per share. This loss
compares with a net loss of $132,890 or $0.01 cents per share for
the corresponding nine-month period ended September 30, 1999.
The net loss for the nine months ended September 30, 2000
includes expenses as follows: consulting and management of
$452,135, depreciation and amortization of $579,782, technology
contract fees of $412,068, office and general of $292,614,
professional fees of $236,600 and salaries of $239,710.
During the nine month period ended September 30, 2000, the
company, through its wholly-owned subsidiary company, U.R.B.A.
Holdings Inc., acquired all of the outstanding shares of three
Canadian companies which are in the business of developing and
marketing internet based products and services through the
distribution of set top boxes. The companies acquired were
Urbana.ca Enterprises Corp., E-Bill Direct Inc., and
Enersphere.com, Inc.. On March 10, 2000 these companies were
amalgamated under the statutory laws of the province of Ontario to
form Urbana Enterprises Corp.
The business combination with Urbana.ca Enterprises Corp. was
accounted for using the purchase method of accounting. The
3,000,000 shares issued on acquisition have been valued at $0.30
per share for a purchase price of $900,000. Goodwill arising on
this acquisition is being amortized on a straight-line basis over
5 years with amortization of $54,655 recorded during the quarter.
The business combination with E-Bill Direct Inc. was accounted for
using the purchase method of accounting. The 2,950,000 shares
issued on the acquisition have been valued at $0.27 per share for
a purchase price of $796,500. Goodwill arising on this acquisition
is being amortized on a straight-line basis over 5 years with
amortization of $40,632 recorded during the quarter.
The business combination with Enersphere.com, Inc. was accounted
for using the purchase method of accounting. The 4,500,000 shares
issued on the acquisition have been valued at $0.34 per share for
a purchase price of $1,614,828, including the cash payment.
Goodwill arising on this acquisition is being amortized on a
straight-line basis over 5 years with amortization of $86,486
recorded during the quarter.
During the quarter, a wholly-owned subsidiary company, changed its
name from ICC Integrated Carbonics (Canada) Corp. to U.R.B.A.
Holdings Inc.
(b) Fiscal Years Ended December 31, 1999 and 1998.
During the last quarter of the fiscal year 1999, the company
continued with its program to develop the firm into an operating
company. For the 12 months ended December 31, 1999, the company
had a net loss of $568,750 or $0.06 cents per share. This loss
compares with a loss of $667,601 or $0.07 cents per share for the
corresponding 12- month period ended December 31, 1998.
During the year, the company continued to seek financing for its
joint ventures in China. In this regard, the company engaged
consultants to assist the company concerning structuring
development plans, financing strategies, shareholder
communications, and creating awareness with the brokerage community
by electronic means. While continuing with efforts to obtain
financing for the company's China graphite projects, management
implemented a diversification strategy to reduce the risk of being
unable to raise the necessary funding. As the company was unable
to raise the funding, the joint ventures were abandoned and the
company has written off its investment resulting in a loss of $253,408.
During the year, a wholly owned subsidiary company, URBA, was
incorporated in the province of British Columbia for the purpose of
facilitating acquisitions in Canada. During the year the company
entered into agreements to acquire, through U.R.B.A. Holdings Inc.,
all of the outstanding shares of three companies in Canada: Urbana
Enterprises, E-Bill Direct Inc., and Enersphere.com, Inc.; the
acquisitions were completed subsequent to the year-end.
Liquidity and Capital Resources.
(a) Nine Months Ended September 30, 2000 and 1999.
The company is a development stage enterprise. The company
has no revenue and is continuing to incur substantial costs in
connection with pursuing the development of its business. The
company's continued existence is dependent on its ability to obtain
sufficient financing to meet its financial needs and ultimately to
attain profitable operations. At September 30, 2000 the company
had a working capital deficiency of $1,398,403 inclusive of loans
payable. This compares with a working capital deficiency of
$195,985 at September 30, 1999.
(1) Debt Conversion.
During the period the company settled debts of $40,000 due to
a relative of a director of the company by the issuance of 100,000
restricted shares of common stock at $0.40 per share. The company
settled a total of $99,900 of accounts payable by the issuance of
333,000 restricted shares of common stock at $0.30 per share and
$9,190 of accounts payable by the issuance of 22,975 restricted
shares of common stock at $0.40 per share. The company issued
50,000 restricted shares of common stock at $0.40 per share as a
retainer on a media relations contract. As consideration for the
acquisition of the three subsidiaries during the period, U.R.B.A.
Holdings Inc. issued a total of 10,450,000 exchangeable shares.
(2) Loan Conversions.
At September 30, 2000 loans of $1,174,162 plus accrued
interest of $51,213 were outstanding. These loans bear interest at
an annual rate of 8% and were due and payable on March 15, 2000.
Subsequent to March 15, 2000 $110,000 of principal has been
repaid. The company has provided an option to the lenders for the
remainder of the unpaid loans to convert the principal amount of
the loans into units of the company at a price of $0.57 per unit.
Each unit is comprised of one common share of the company and one-
half share purchase warrant. Each whole share purchase warrant
entitles the holder to purchase an additional common share of the
company at a price of $5.00 per share. This offer is to be made by
way of a prospectus which has been filed with the applicable
Canadian and United States regulatory authorities.
During the quarter the company received additional loans
totaling $107,218. Accrued interest totals $615 to September 30,
2000. These loans bear interest at rates from 8% to 10% per annum.
(3) Units Offering.
The company entered into an agency agreement effective April
10, 2000 with Groome Capital.com Inc. whereby the company and this
firm engaged in a best efforts offering of up to 20,000,000 special
warrants at a price of $1.25 per special warrant. Each special
warrant is convertible into one common share and one-half share
purchase warrant exercisable for a period of two years at a price
of $5.00 per whole share purchase warrant. Groome Capital.com Inc.
received an agent's fee equal to 8% of the total amount raised
(reduced to 4% for investors on a president's list). In addition,
Groome Capital.com Inc. has been granted non-assignable warrants to
acquire, without payment of additional consideration, 1 year
compensation options providing the right to purchase, at $1.25 per
unit, a number of units equal to 10% of the number of special
warrants sold under this offering. This offering, which has been
closed as of May 11, 2000, resulted in total subscriptions for
847,989 units with total proceeds of $1,059,986 from a total of
nine investors in Canada. A similar offering was undertaken in the
United States, but no sales resulted from this offering. Pursuant
to an agreement dated April 27, 2000, 15% of the gross proceeds of
the private placement ($158,997.90) were placed into escrow
pursuant to an escrow agreement between the company, Groome
Capital.com, Inc., and Pacific Corporate Trust Company (as escrow
agent) on the closing of the private placement.
(4) LocalNet Development.
During the quarter ended on September 30, 2000, the company
completed and launched the first generation portal to serve several
communities in Ontario, Canada. Development is ongoing to add
additional user features and refine the current product. The
company is continuing to develop its plans for entering its first
revenue cycle by the licensing of LocalNet.
(5) Proposed Merger.
By a letter of intent dated September 8, 2000, the company
agreed to a proposed merger with World Sales & Merchandising Inc.,
an Ontario company. In connection with this proposed merger, the
shareholders of World Sales & Merchandising Inc. would receive 65%
of the post-merger fully diluted common stock of the company.
(6) Capital Expenditures.
No capital expenditures were made during the quarter ended on
September 30, 2000
(b) Fiscal Years Ended December 31, 1999 and 1998.
During the year, the company continued its status as a development
stage company. The company has no revenue and is continuing to
incur substantial costs in pursuing business opportunities. The
company's continued existence is dependent on its ability to obtain
sufficient financing to meet its financial needs.
At December 31, 1999 the company had a working capital deficiency
of $195,985. This compares with a working capital deficiency of
$283,305 at December 31, 1998. During the year the company settled
debts of $86,268 to a private company of which an officer is a
relative of a Director of the company by the issuance of 215,665
restricted shares at $0.40 per share. The company settled its
agreement payable of $130,000 and various of its trade payables of
$127,576 by the issuance of restricted shares at $0.40 per share
for 325,000 shares and 510,303 shares respectively.
During the year the company received loans totaling $60,000 and
further loans of $1,224,162 subsequent to December 31, 1999 for
total loans of $1,284,162. These amounts are due March 15, 2000
and bear interest at an annual rate of 8%. If the company defaults
on these loans the lender has the right to convert the amount of
principal borrowed into shares of the company at $0.50 per share
subject to a 15% market price adjustment.
In January, 2000, the company entered into an exclusivity agreement
with Eagle Wireless International Corp. of League City, Texas
wherein this firm agreed to manufacture and sell set-top boxes to
the company and granted exclusive right to the company to sell
Eagle Wireless International Corp. manufactured set-top boxes in
Canada.
Forward Looking Statements.
The foregoing Management's Discussion and Analysis contains
"forward looking statements" within the meaning of Rule 175 of the
Securities Act of 1933, as amended, and Rule 3b-6 of the Securities
Act of 1934, as amended, including statements regarding, among
other items, the company's business strategies, continued growth in
the company's markets, projections, and anticipated trends in the
company's business and the industry in which it operates. The
words "believe," "expect," "anticipate," "intends," "forecast,"
"project," and similar expressions identify forward-looking
statements. These forward-looking statements are based largely on
the company's expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the company's control.
The company cautions that these statements are further qualified
by important factors that could cause actual results to differ
materially from those in the forward looking statements, including,
among others, the following: reduced or lack of increase in demand
for the company's products, competitive pricing pressures, changes
in the market price of ingredients used in the company's products
and the level of expenses incurred in the company's operations. In
light of these risks and uncertainties, there can be no assurance
that the forward-looking information contained herein will in fact
transpire or prove to be accurate. The company disclaims any
intent or obligation to update "forward looking statements."
DESCRIPTION OF PROPERTY
The company and Urbana.ca Enterprises Corp. currently lease
10,000 square feet of office space for administration, product
research and product development in Cambridge, Ontario. The term
of the lease is 30 months and commenced on February 1, 2000. The
lease has been pre-paid for its term. The Vancouver, British
Columbia offices of the company are provided to the company without
charge by Mr. Tyson; this office space consists of approximately
100 square feet within a larger office. These offices are suitable
for the purposes of the company at this time (there is adequate
insurance coverage on the assets of the company at these
locations).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the past two years, there have not been any transaction that
have occurred between the company and its officers, directors, and
five percent or greater shareholders, except as follows:
By virtue of the acquisition of the three acquired entities
(Urbana.ca Enterprises Corp., Enersphere.com, Inc. and E-Bill
Direct, Inc.), and the fact that all directors and officers, except
Robert Tyson, are shareholders of one of the acquired entities,
said directors and officer beneficially own a cumulative total of
10,450,000 shares in the capital of the company. As such, these
individuals are in a position to elect members of the board of
directors, set their own compensation and approve affiliated
transactions. Although the company's principals intend to act
fairly and in full compliance with their fiduciary obligations,
there can be no assurance that the company will not, as a result of
the conflict of interest described above, possibly enter into
arrangements under terms less favorable than it could have obtained
had it been dealing with other persons.
The Vancouver, British Columbia offices of the company are
provided to the company without charge by Mr. Tyson; this office
space consists of approximately 100 square feet within a larger
office. This office is, in conjunction with other offices of the
company, suitable for the purposes of the company at this time
(there is adequate insurance coverage on the assets of the company
at this location).
Certain of the officers and directors of the company are
engaged in other businesses, either individually or through
partnerships and corporations in which they have an interest, hold
an office, or serve on a board of directors. As a result, certain
conflicts of interest may arise between the company and its
officers and directors. The company will attempt to resolve such
conflicts of interest in favor of the company. The officers and
directors of the company are accountable to it and its shareholders
as fiduciaries, which requires that such officers and directors
exercise good faith and integrity in handling the company's
affairs. A shareholder may be able to institute legal action on
behalf of the company or on behalf of itself and other similarly
situated shareholders to recover damages or for other relief in
cases of the resolution of conflicts is in any manner prejudicial
to the company.
MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Market Information.
The company's common stock is traded in the Over-the-Counter
Bulletin Board (symbol "URBA"), having commenced trading on
February 13, 1997. The range of closing prices shown below is as
reported by this market. The quotations shown reflect inter-dealer
prices, without retail mark-up, markdown or commission and may not
necessarily represent actual transactions.
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ending on December 31, 2000
High Low
Quarter Ended March 31, 2000 12.94 1.12
Quarter Ended June 30, 2000 7.50 1.19
Quarter Ended September 30, 2000 2.69 0.69
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended on December 31, 1999
High Low
Quarter Ended March 31, 1999 1.19 0.37
Quarter Ended June 30, 1999 1.00 0.32
Quarter Ended September 30, 1999 0.75 0.25
Quarter Ended December 31, 1999 1.37 0.37
Per Share Common Stock Bid Prices by Quarter
For the Fiscal Year Ended December 31, 1998
High Low
Quarter Ended March 31, 1998 2.37 1.50
Quarter Ended June 30, 1998 4.62 1.06
Quarter Ended September 30, 1998 1.37 0.50
Quarter Ended December 31, 1998 0.69 0.25
Holders of Common Equity
As of September 30, 2000, there were approximately 43 shareholders
of record of the company's common stock. A number of shareholders
hold their shares through intermediaries such as American
Depository. As a result, the company does not know the exact
number of shareholders of its common shares.
Dividend Information.
The company has not declared or paid a cash dividend to
stockholders since it was incorporated in February 1993. The board
of directors presently intends to retain any earnings to finance
company operations and does not expect to authorize cash dividends
in the foreseeable future. Any payment of cash dividends in the
future will depend upon the company's earnings, capital
requirements and other factors.
EXECUTIVE COMPENSATION
(a) Prior to the year 2000, none of the officers and
directors received any compensation from the company. All
directors, officers and key employees have been retained under
Management Contracts, with an effective date of January 1, 2000.
None of these individual's total compensation under these
contracts, including special allowances or bonuses, will exceed
$70,000 CDN this year (approximately $47,000 as of August 16,
2000). All officers and directors will be reimbursed for expenses
incurred on behalf of the company including director expenses
pertaining to attendance at meetings. It is anticipated that
additional management will be hired as the company develops and
revenue is generated. The salaries paid to new employees will be
consistent with the salaries of others in similar positions in the
industry.
(b) During the year 1999, the company cancelled its previous
stock option plan along with all outstanding stock options
previously granted to directors, officers, and employees of the
company. A new stock option plan was adopted during the year and
received shareholders' approval. To date, no options have been
granted under this plan. There are no other compensation plans of
the company.
(c) There are no annuity, pension or retirement benefits
proposed to be paid to officers, directors, or employees of the
company in the event of retirement at normal retirement date as
there is no existing plan provided for or contributed to by the
company.
FINANCIAL STATEMENTS
URBANA.CA, INC.
(A development stage company)
CONSOLIDATED BALANCE SHEET
(Unaudited)
September 30
2000
ASSETS
CURRENT ASSETS
Cash $ -
Funds held in trust 163,022
Taxes recoverable 8,511
Prepaid expenses and deposits 110,712
282,245
DUE FROM RELATED PARTIES -
FURNITURE AND EQUIPMENT, net of depreciation of
$38,864 150,465
GOODWILL, net of amortization of $545,319 (Note 3) 3,090,159
$3,522,869
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 221
Accounts payable and accrued liabilities 347,219
Loans payable (Note 4) 1,333,208
1,680,648
DUE TO RELATED PARTIES (Note 6) 33,156
COMMITMENTS AND CONTINGENCIES (Notes 1 and 7)
STOCKHOLDERS' EQUITY (DEFICIT)
Capital stock (Note 5)
Authorized
Common stock, $0.0001 par value,
70,000,000 shares
Preferred stock, $0.001 par value,
10,000,000 shares
Issued and outstanding 11,588,283
(1999 - 11,082,318) shares of common stock 11,588
Additional paid-in capital 1,301,133
Special warrant proceeds (Note 5) 886,405
Exchangeable shares (Note 5) 3,226,500
Deficit accumulated during development stage (3,586,761)
Accumulated other comprehensive income (loss) (29,800)
1,809,065
$3,522,869
The accompanying notes are an integral part of these consolidated
financial statements
URBANA.CA, INC.
(A development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months February 23
Ended Ended 1993
September 30 September 30 (inception)
2000 1999 2000 1999 to
September 30
2000
REVENUE
Interest income 4,024 - 4,024 - 4,024
EXPENSES
Consulting and
management 116,742 - 452,135 - 670,420
Depreciation and
Amortization 197,131 584 579,782 1,753 585,921
Technology contract fees 63,973 - 412,068 - 412,068
Engineering costs - - - - 274,170
Interest expense 22,557 133 67,193 266 76,829
Office and general
(recovery) 25,902 (110,904) 292,614 97,832 552,498
Professional fees 91,891 5,933 236,600 16,491 3,440,602
Rent 12,082 5,023 33,374 16,548 86,455
Salaries 74,908 - 239,710 - 323,414
Write-off of interest
in mineral property - - - - 15,000
Write-off of Graphite
processing joint venture - - - - 253,408
605,186 (99,231)2,313,476 132,890 3,590,785
NET INCOME (LOSS)
FOR THE PERIOD (601,162) (99,231)(2,309,452)(132,890) (3,586,761)
BASIC NET INCOME (LOSS)
PER SHARE (0.05) 0.01 (0.20) (0.01)
WEIGHTED AVERAGE NUMBER
OF SHARES OF COMMON
STOCK OUTSTANDING 11,588,293 9,465,900 11,532,074 10,229,583
The accompanying notes are an integral part of these consolidated
financial statement
URBANA.CA, INC.
(A development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended February 23
1993
September, 30 (inception) to
2000 1999 September 30
2000
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Income (loss) for the
period $(2,309,452) $(132,890) $(3,590,785)
Adjustments to
reconcile net loss to net
cash from operating
activities:
depreciation and amortization 579,782 1,753 585,921
accrued interest income (4,024) - (4,024)
imputed interest on
long term debt - - 9,000
organization costs - - (308)
loss on disposal of
furniture and equipment - - 3,620
write-off of interest
in mineral property - - 15,000
write-off of investment
in graphite processing
joint venture - - 253,408
net changes in non-
cash working capital 152,116 90,704 518,108
CASH USED IN OPERATING
ACTIVITIES (1,581,578) (40,433) (2,206,036)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of furniture
and equipment (162,572) - (173,995)
Proceeds from sale of
furniture and equipment - - 1,972
Acquisitions of
subsidiaries, net
of cash acquired
(Note 3) (75,602) - (75,602)
Investment in graphite
processing joint venture - - (37,463)
Purchase of other assets - - (4,500)
CASH USED IN INVESTING
ACTIVITIES (238,174) - (289,588)
CASH FLOWS FROM
FINANCING ACTIVITIES
Bank overdraft 221 - 221
Advances from (to)
related parties (150,089) - (127,858)
Payments on agreement
Payable - - (70,000)
Loan advances, net of
interest and repayments 1,273,208 - 1,333,208
Issuance of common
Stock - 39,780 662,446
Special warrant
proceeds, net of trust
funds 727,407 - 727,407
CASH FROM FINANCING
ACTIVITIES 1,850,747 39,780 2,525,424
EFFECT OF EXCHANGE RATE
CHANGES ON CASH (31,530) - (29,800)
INCREASE (DECREASE) IN
CASH (535) (653) -
CASH, BEGINNING OF PERIOD 535 713 -
CASH, END OF PERIOD - 60 -
Non-cash activities: Refer to Notes 3 and 5.
The accompanying notes are an integral part of these consolidated
financial statement
URBANA.CA, INC.
(A development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
The Company was organized on February 23, 1993 under the laws of
the State of Delaware as PLR, Inc. On October 3, 1997, it changed
its name to Integrated Carbonics Corp. and on October 30, 1997,
changed its jurisdiction of incorporation to Nevada. On April 15,
1999 a wholly-owned subsidiary company, U.R.B.A. Holdings Inc.
("URBA"), was incorporated under the laws of British Columbia to
facilitate acquisitions in Canada.
During January, 2000, the Company acquired, through URBA, 100% of
the outstanding shares of Urbana.ca Enterprises Corp. ("Urbana
Enterprises"), E-Bill Direct Inc. ("E-Bill"), and Enersphere.com,
Inc. ("Enersphere"), which are in the business of developing and
marketing internet based products and services through the
distribution of set top boxes.
The consolidated financial statements have been prepared on the
basis of a going concern which contemplates the realization of
assets and satisfaction of liabilities in the normal course of
business. The Company is a development stage enterprise and as such
has no revenue and is incurring substantial costs in connection
with the development of its business and requires additional
working capital to fund ongoing losses from operations. The ability
of the Company to continue as a going concern is dependent on its
ability to obtain additional financing and ultimately to attain
profitable operations.
By a Letter of Intent dated September 8, 2000, the Company agreed
to a proposed merger with World Sales & Merchandising Inc., an
Ontario Company ("WSMI"). In connection with this merger, the
shareholders of WSMI would receive 65% of the post-merger fully
diluted common stock of the Company.
The accompanying unaudited interim financial statements have been
prepared in accordance with the rules and disclosure requirements
of Regulation S-B and Form 10-QSB. They do not necessarily include
all information and footnotes required by generally accepted
accounting principles applicable to the Company's annual audited
financial statements. However, except as disclosed herein, there
has been no material change in accounting principles used or the
information disclosed in the notes to the financial statements for
the year ended December 31, 1999 included in the Company's Annual
Report on Form 10-KSB filed with the Securities and Exchange
Commission. The interim unaudited financial statements should be
read in conjunction with those financial statements included in the
Form 10-KSB. In the opinion of Management, all adjustments
considered necessary for a fair presentation have been made.
Operating results for the nine months ended September 30, 2000 are
not necessarily indicative of the results that may be expected for
the year ending December 31, 2000.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation.
These financial statements are expressed in US dollars and have
been prepared in accordance with accounting principles generally
accepted in the United States ("US GAAP"). There are no material
measurement differences between US GAAP and Canadian GAAP.
Principles of Consolidation.
The financial statements include the accounts of the Company and
its wholly-owned subsidiaries U.R.B.A. Holdings Inc. and Urbana
Enterprises Corp. which was formed effective March 10, 2000, when
Urbana Enterprises, Enersphere and E-Bill were amalgamated under
the statutory laws of the Province of Ontario. All significant
intercompany balances and transactions are eliminated on
consolidation.
Use of Estimates and Assumptions.
Preparation of the Company's financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ
from those estimates.
Goodwill.
The company amortizes goodwill on a straight-line basis over five
years.
Fair Value of Financial Instruments.
The Company estimates the fair value of financial instruments in
accordance with the requirements of SFAS No. 107 - Disclosures
about Fair Value of Financial Instruments. The estimated fair value
amounts have been determined by the Company, using available market
information and appropriate valuation methodologies. The fair
value of financial instruments classified as current assets or
liabilities including cash and cash equivalents and notes and
accounts payable approximate carrying value due to the short-term
maturity of the instruments.
Foreign Currency Translation.
The financial statements are presented in United States dollars.
In accordance with Statement of Financial Accounting Standards No.
52, "Foreign Currency Translation", foreign denominated monetary
assets and liabilities are translated to their United States dollar
equivalents using foreign exchange rates which prevailed at the
balance sheet date. Revenue and expenses are translated at average
rates of exchange during the period. Related translation
adjustments are reported as a separate component of stockholders'
equity, whereas gains or losses resulting from foreign currency
transactions are included in results of operations.
Net Loss per Common Share.
Basic earnings per share includes no dilution and is computed by
dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period.
Dilutive earnings per share reflects the potential dilution of
securities that could share in the earnings of the Company.
Because the Company does not have any potentially dilutive
securities, the accompanying presentation is only of basic loss per
share.
Stock-based Compensation.
The Company accounts for stock-based compensation using the
intrinsic value based method in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees ("APB No.25"). APB No. 25 requires that compensation cost
be recorded for the excess, if any, of the quoted market price of
the common stock over the exercise price at the date the options
are granted. In addition, as required by SFAS No. 123, the company
provides pro-forma disclosure of the impact of applying the fair
value method of SFAS No. 123.
NOTE 3 - ACQUISITIONS
Urbana Enterprises.
By agreement dated January 4, 2000, the Company's wholly-owned
subsidiary URBA, acquired 100% of the outstanding shares of Urbana
Enterprises, a company engaged in distribution of Linux based set
top boxes which are used as an alternative method of delivering
internet content. Urbana Enterprises was incorporated November 18,
1998 in the province of British Columbia.
In consideration for the acquisition, URBA issued 3,000,000 non-
voting exchangeable shares. The holders of these shares have been
granted votes in the Company on a basis of one vote for each
exchangeable share of URBA held. A holder of an exchangeable share
may, at any time, require URBA to repurchase the exchangeable share
for an amount equal to the then current market value of a common
share of the Company. URBA may satisfy the resulting obligation in
cash or in Company shares at its option.
Pursuant to the terms of the agreement, the Company issued
3,000,000 common shares in trust to be held under the terms of a
trust agreement executed January 4, 2000 until such time as the
exchangeable shares are exchanged by their holders or all remaining
exchangeable shares are cancelled.
In anticipation of this acquisition, two shareholders of Urbana
Enterprises, each holding a 36.75% interest in Urbana Enterprises,
became directors of the Company effective July 21, 1999 and,
subsequent to the acquisition, entered into five year management
contracts for an aggregate of Cdn$120,000 in year 1 and for amounts
to be negotiated for years 2 through 5. In addition, the Company
has also agreed to grant a total of 400,000 stock options to these
individuals pursuant to the Stock Option Plan implemented in 1999.
This business combination has been accounted for using the purchase
method of accounting. The purchase price has been allocated as
follows:
Assets acquired at fair value:
Current assets $ 17,716
Capital assets 7,387
Goodwill 1,093,102
1,118,205
Liabilities assumed at fair value:
Accounts payable (87,474)
Due to related parties (130,731)
Purchase price 3,000,000 shares at
$0.30 per share $ 900,000
Urbana Enterprises had net losses totaling $193,171 for the period
from May 1, 1999 (inception) to the date of acquisition.
Goodwill arising on this acquisition is being amortized on a
straight-line basis over 5 years and amortization of $163,962 has
been recorded to September 30, 2000.
Effective September 13, 2000, a former shareholder of Urbana
Enterprises resigned as a director of the Company thus forfeiting
all further management compensation and 200,000 stock options
pursuant to this acquisition agreement.
Effective October 20, 2000, a former shareholder of Urbana
Enterprises resigned as a director of Urbana Enterprises Corp. thus
forfeiting all further management compensation pursuant to this
acquisition agreement.
E-Bill.
By agreement dated January 10, 2000, the Company's wholly-owned
subsidiary URBA, acquired 100% of the outstanding shares of E-Bill,
a company engaged in designing, developing and providing electronic
presentment and payment services to the business community. E-Bill
was incorporated May 27, 1999 in the province of Ontario.
In consideration for the acquisition, URBA issued 2,950,000 non-
voting exchangeable shares. The holders of these shares have been
granted votes in the Company on a basis of one vote for each
exchangeable share of URBA held. A holder of an exchangeable share
may, at any time, require URBA to repurchase the exchangeable share
for an amount equal to the then current market value of a common
share of the Company. URBA may satisfy the resulting obligation in
cash or in Company shares at its option.
Pursuant to the terms of the agreement, the Company issued
2,950,000 common shares in trust to be held under the terms of a
trust agreement executed January 10, 2000 until such time as the
exchangeable shares are exchanged by their holders or all remaining
exchangeable shares are cancelled.
E-Bill had losses totaling $16,214 for the period from May 27, 1999
(inception) to the date of acquisition.
Subsequent to the acquisition, the Company signed three year
management contracts with the two principals of E-Bill in the
aggregate of Cdn$120,000 in year 1, Cdn$160,000 in year 2 and
Cdn$120,000 in year 3. In addition, the Company has also agreed to
grant a total of 200,000 stock options to these individuals
pursuant to the Stock Option Plan implemented in 1999.
This business combination has been accounted for using the purchase
method of accounting. The purchase price has been allocated as
follows:
Assets acquired at fair value:
Current assets $ 9
Capital assets 4,646
Goodwill 812,645
817,300
Liabilities assumed at fair value:
Accounts payable (4,021)
Due to related parties (16,779)
Purchase price 2,950,000 shares at
$0.27 per share $ 796,500
Goodwill arising on this acquisition is being amortized on a
straight-line basis over 5 years and amortization of $121,896 has
been recorded to September 30, 2000.
Enersphere.
By agreement dated January 9, 2000, the Company's wholly-owned
subsidiary URBA, acquired 100% of the outstanding shares of
Enersphere, a content company that utilizes set top boxes as their
medium to deliver internet and intranet-based services to
customers. Enersphere was incorporated September 28, 1999 in the
province of Ontario.
In consideration for the acquisition, URBA paid $84,828 and issued
4,500,000 non-voting exchangeable shares. The holders of these
shares have been granted votes in the Company on a basis of one
vote for each exchangeable share of URBA held. A holder of an
exchangeable share may, at any time, require URBA to repurchase the
exchangeable share for an amount equal to the then current market
value of a common share of the Company. URBA may satisfy the
resulting obligation in cash or in Company shares at its option.
Pursuant to the terms of the agreement, the Company issued
4,500,000 common shares in trust to be held under the terms of a
trust agreement executed January 9, 2000 until such time as the
exchangeable shares are exchanged by their holders or all remaining
exchangeable shares are cancelled.
Enersphere had net losses totaling $114,917 for the period from
September 28, 1999 (inception) to the date of acquisition.
Subsequent to the acquisition, the Company signed two year
management contracts with the two principals of Enersphere in the
aggregate Cdn$160,000 in year 1 and Cdn$250,000 in year 2. In
addition, the Company has also agreed to grant a total of 200,000
stock options to these individuals pursuant to the Stock Option
Plan implemented in 1999.
This business combination has been accounted for using the purchase
method of accounting. The purchase price has been allocated as
follows:
Assets acquired at fair value:
Current assets $ 3,540
Capital assets 10,324
Goodwill 1,729,731
1,743,595
Liabilities assumed at fair value:
Accounts payable (28,995)
Due to related parties (99,772)
Purchase price $84,828 and 4,500,000
shares at $0.34 per share $1,614,828
Goodwill arising on this acquisition is being amortized on a
straight-line basis over 5 years and amortization of $259,461 has
been recorded to September 30, 2000.
NOTE 4 - LOANS PAYABLE
The Company has outstanding loans totaling $1,174,162 plus accrued
interest of $51,213 calculated at an annual rate of 8%. These loans
were due and payable on March 15, 2000. Subsequent to March 15,
2000 the Company has repaid $110,000 of principal. For the
remainder of the unpaid loans, the Company has provided an option
to the lenders to convert the principal amount of the loan into
units of the Company at a price of $0.57 per unit. Each unit will
consist of one common share of the Company and one-half share
purchase warrant. Each whole share purchase warrant entitles the
holder to purchase an additional common share of the Company at a
price of $5.00 per share. This offer is to be made by way of a
prospectus which has been filed with the applicable Canadian and
United States regulatory authorities.
During the quarter, the Company received additional loans totaling
$107,218 plus accrued interest of $615. These loans are payable on
demand and bear interest at rates from 8% to 10% per annum.
NOTE 5 - CAPITAL STOCK
During the nine month period ended September 30, 2000 the following
shares were issued:
Common Shares.
The Company settled $40,000 due to a relative of a director by the
issuance of 100,000 restricted shares of common stock at a price of
$0.40 per share.
The Company settled a total of $99,900 of accounts payable by the
issuance of 333,000 restricted shares of common stock at a price of
$0.30 per share.
The Company settled $9,190 of accounts payable by the issuance of
22,975 restricted shares of common stock at a price of $0.40 per
share.
The Company issued 50,000 restricted shares of common stock, at a
price of $0.40 per share, as a retainer pursuant to a media
relations contract dated December 15, 1999.
Exchangeable Shares.
The Company's subsidiary, URBA, issued a total of 10,450,000
exchangeable shares as consideration for the acquisitions of Urbana
Enterprises, E-Bill and Enersphere as described in Note 3. The
holders of these shares have been granted votes in the Company on
a basis of one vote for each exchangeable share of URBA held and
may, at any time, require URBA to repurchase the exchangeable share
for an amount equal to the then current market value of a common
share of the Company. URBA may satisfy the resulting obligation in
cash or in Company shares at its option.
Special Warrant Proceeds.
During the second quarter of 2000 the Company completed a Special
Warrant offering for 847,989 Special Warrants at $1.25 per Special
Warrant for proceeds, net of offering costs, of $886,405. Currently
$158,998 of these proceeds, plus accrued interest, are being held
in trust until the earlier of one year or approval of a Prospectus
in the applicable jurisdictions in Canada and a Registration with
the Securities and Exchange Commission on Form SB-2, both of which
have been filed. Each Special Warrant is convertible into one
common share and one-half share purchase warrant exercisable for a
period of two years at a price of $5.00 per whole share purchase
warrant. In addition, the Agent has been granted non-assignable
warrants to acquire, without payment of additional consideration,
1 year Compensation Options providing the right to purchase, at
$1.25 per unit, a number of units equal to 10% of the number of
Special Warrants sold under this offering.
Stock Option Plan.
The Company has adopted a Stock Option Plan which will provide
options to purchase up to 2,000,000 common shares of the Company
for its employees, officers and directors. The options that will
be granted pursuant to the Stock Option Plan are exercisable at a
price of $0.50 which is equal to the fair value of the common
shares at the time of adoption of the plan. As at September 30,
2000, no stock-based compensation cost has been recorded for any
period and no stock options have been issued under this plan.
Refer to Notes 3.
NOTE 6 - RELATED PARTY TRANSACTIONS
All amounts due to and from related parties are unsecured, non-
interest bearing, and have no specific terms of repayment.
Refer to Notes 3 and 5.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
During the period the Company entered into a three year lease
agreement on additional premises at annual rates of CDN $24,000,
$25,000 and $26,000 respectively.
AUDITORS' REPORT
To the Board of Directors of Urbana.ca, Inc.
We have audited the consolidated balance sheet of Urbana.ca, Inc.
(a development stage company) as at December 31, 1999 and the
consolidated statements of operations, changes in stockholders'
equity and cash flows for the year then ended. 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 generally accepted
auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance 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.
In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the
company as at December 31, 1999 and the results of its operations
and the changes in stockholders' equity and cash flows for the year
then ended in accordance with generally accepted accounting
principles in the United States.
The company's financial statements as at December 31, 1998 and for
the year then ended were audited by other auditors who expressed an
opinion without reservation on those statements in their report
dated March 17, 1999.
/s/ La Bonte & Co.
LaBonte & Co.
Chartered Accountants
February 23, 2000, except as to Note 11 which is as of March 13, 2000
Vancouver, B.C.
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA-UNITED STATES
REPORTING DIFFERENCES
In the United States, reporting standards for auditors' would
require the addition of an explanatory paragraph following the
opinion paragraph when the financial statements are affected by a
significant uncertainty such as referred to in Note 1 regarding the
company's ability to continue as a going concern. Our report to
the directors dated February 23, 2000 is expressed in accordance
with Canadian reporting standards which do not permit a reference
to such uncertainties in the auditors' report when the
uncertainties are adequately disclosed in the financial statements.
/s/ La Bonte & Co.
LaBonte & Co.
Chartered Accountants
February 23, 2000
Vancouver, B.C
Auditors' Report
To the Board of Directors and Shareholders of Integrated Carbonics
Corp.
We have audited the balance sheets of Integrated Carbonics Corp. (a
development stage company) as at December 31, 1998 and 1997 and the
statements of operations, stockholders' equity and cash flows for
the years then ended and for the period from February 23, 1993
(date of incorporation) to December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance 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.
In our opinion, these financial statements present fairly, in all
material respects, the financial position of the Company as at
December 31, 1998 and 1997 and the results of its operations, its
cash flows and changes in shareholders' equity for the years then
ended and for the period from February 23, 1993 (date of
incorporation) to December 31, 1998 in accordance with generally
accepted accounting principles in the United States of America.
The Company's financial statements for the year ended December 31,
1996 and for the period from February 23, 1993 (date of
incorporation) through December 31, 1996 were audited by other
auditors whose report, dated November 19, 1997, expressed an
unqualified opinion on those statements.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Chartered Accountants
Vancouver, British Columbia
March 17, 1999
Comments by Auditors for U.S. Readers on Canada - United States
Reporting Differences
In the United States, reporting standards for auditors would
require the addition of an explanatory paragraph following the
opinion paragraph when the financial statements are affected by a
significant uncertainty such as referred to in Note 2 regarding the
Corporation's ability to continue as a going concern. Our report
to the shareholders dated March 17, 1999 is expressed in accordance
with Canadian reporting standards which do not permit a reference
to such uncertainties in the auditors' report when the
uncertainties are adequately disclosed in the financial statements.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Chartered Accountants
Vancouver, British Columbia
March 17, 199
URBANA.CA, INC.
(Formerly Integrated Carbonics Corp.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
December 31 December 31
1999 1998
ASSETS
CURRENT ASSETS
Cash $ 535 $ 713
Prepaid expenses 7,667 2,342
8,202 3,055
DUE FROM RELATED PARTIES (Note 7) 64,037 -
FURNITURE AND EQUIPMENT, net of
Depreciation - 4,784
INVESTMENT IN GRAPHITE PROCESSING
JOINT VENTURE (Note 3) - 253,408
$ 72,239 $ 261,247
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
Liabilities $ 144,187 $ 156,360
Agreement payable (Note 4) - 130,000
Loans payable (Note 6) 60,000 -
204,187 286,360
COMMITMENTS AND CONTINGENCIES
(Notes 1 and 10)
STOCKHOLDERS' EQUITY (DEFICIT)
Capital stock (Note 6)
Authorized
Common stock, $0.0001 par value,
70,000,000 shares
Preferred stock, $0.001 par value,
10,000,000 shares
Issued and outstanding
11,082,318 (1998 - 9,856,350) shares
of common stock 11,082 9,856
Additional paid-in capital 1,132,549 673,590
Deficit accumulated during
development stage (1,277,309) (708,559)
Accumulated other comprehensive
Income 1,730 -
(131,948) (25,113)
$ 72,239 $261,247
The accompanying notes are an integral part of these consolidated
financial statements
URBANA.CA, INC.
(Formerly Integrated Carbonics Corp.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended Year ended February 23, 1993
December 31 December 31 (inception) to
1999 1998 December 31, 9999
EXPENSES
Consulting $ 218,285 $ - $ 218,285
Depreciation 1,753 4,078 6,139
Engineering costs - 274,170 274,170
Interest expense - 9,549 9,636
Office and general 43,390 195,298 259,884
Professional fees 23,497 49,752 81,099
Transfer agent and filing fees 9,953 5,556 22,903
Rent 18,464 30,494 53,081
Salaries - 83,704 83,704
Write-off of interest in mineral
Property - 15,000 15,000
Write-off of Graphite processing
joint venture (Note 3) 253,408 - 253,408
NET LOSS FOR THE PERIOD $ 568,750 $ 667,601 $ 1,277,309
BASIC NET LOSS PER SHARE $ 0.06 $ 0.07
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 10,299,764 9,168,248
The accompanying notes are an integral part of these consolidated
financial statements
URBANA.CA, INC.
(Formerly Integrated Carbonics Corp.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM FEBRUARY 23,1993 (INCEPTION) TO DECEMBER 31, 1999
Deficit Accumu
Accumu lated
Common Stock lated other
Number Additional During Compre
Of Paid In Develop hensive
Shares Amount Capital ment Income
Stage Total
Common stock
issued for
cash 105,000 $ 105 $ 2,895 $ - $ - $3,000
Net loss,
period ended
December 31
1993 - - - (2,746) - (2,746)
Balance
December 31
1993 105,000 105 2,895 (2,746) - 254
Net loss
year ended
December 31
1994 - - - (61) - (61)
Balance
December 31
1994 105,000 105 2,895 (2,807) - 193
Net loss
year ended
December 31
1995 - - - (61) - (61)
Balance
December 31
1995 105,000 105 2,895 (2,868) - 132
Net loss
year ended
December 31
1996 - - - (861) - (861)
Balance
December 31
1996 105,000 105 2,895 (3,729) - (729)
Issued for
interest in
mineral
property 150,000 150 14,850 - - 15,000
Issued for
Graphite
Processing
Joint Venture
Investment
(Note 3) 6,000,000 6,000 - - - 6,000
Common
stock issued
for cash 540,000 540 53,460 - - 54,000
Net loss
year ended
December 31
1997 - - - (37,229) - (37,229)
Balance
December 31
1997 6,795,000 6,795 71,205 (40,958) - 37,042
Common
stock issued
for cash 3,061,350 3,061 602,385 - - 605,446
Net loss
year ended
December 31
1998 - - - (667,601) - (667,601)
Balance
December 31
1998 9,856,350 9,856 673,590 (708,559) - (25,113)
Issued for
consulting
services 535,000 535 172,992 - - 173,527
Shares
Reacquired
on
cancellation
of contract (360,000) (360) (133,362) - - (133,722)
Issued on
Settlement
of debts 1,050,968 1,051 419,329 - - 420,380
Net loss
year ended
December 31
1999 - - - (568,750) - (568,750)
Currency
translation
adjustment - - - - 1,730 1,730
Balance
December 31
1999 11,082,318 11,082 1,132,549 (1,277,309) 1,730 (131,948)
The accompanying notes are an integral part of these consolidated
financial statements
URBANA.CA, INC.
(Formerly Integrated Carbonics Corp.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended Year ended February 23, 1993
December 31 December 31 (inception) to
1999 1998 December 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $(568,750) $ (667,601) $ (1,277,309)
Adjustments to reconcile net
loss to net cash from operating
activities:
- depreciation 1,753 4,078 6,139
- imputed interest on long term
debt - 9,000 9,000
- organization costs - - (308)
- loss on disposal of furniture
and equipment 2,031 1,589 3,620
- write-off of interest in
mineral property - 15,000 15,000
- write-off of investment in
graphite processing joint
venture 253,408 - 253,408
- net changes in non-cash working
capital 226,419 108,496 365,992
CASH USED IN OPERATING ACTIVITIES (85,139) (529,438) (624,458)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and
equipment - (11,423) (11,423)
Proceeds from sale of furniture
and Equipment 1,000 972 1,972
Investment in graphite
processing joint venture - (2,420) (37,463)
Purchase of other assets - - (4,500)
CASH FLOWS FROM (USED IN)
INVESTING ACTIVITIES 1,000 (12,871) (51,414)
CASH FLOWS FROM FINANCING
ACTIVITIES
Advances from related parties 22,231 - 22,231
Payments on agreement payable - (70,000) (70,000)
Loan advances 60,000 - 60,000
Issuance of common stock - 568,446 662,446
CASH FLOWS FROM FINANCING
ACTIVITIES 82,231 498,446 674,677
EFFECT OF EXCHANGE RATE
CHANGES ON CASH 1,730 - 1,730
(DECREASE) INCREASE IN CASH (178) (43,863) 535
CASH, BEGINNING OF PERIOD 713 44,576 -
CASH, END OF PERIOD 535 713 535
Non-cash activities: Refer to Notes 3, 4, 6 and 7.
The accompanying notes are an integral part of these consolidated
financial statements
URBANA.CA, INC.
(Formerly Integrated Carbonics Corp.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
The company was organized on February 23, 1993 under the laws of
the State of Delaware as PLR, Inc. On October 3, 1997, it changed
its name to Integrated Carbonics Corp. and on October 30, 1997,
changed its jurisdiction of incorporation to Nevada. On April 15,
1999 a wholly-owned subsidiary company, ICC Integrated Carbonics
(Canada) Corp. ("ICC"), was incorporated under the laws of British
Columbia to facilitate acquisitions in Canada. The company
subsequently changed its name to Urbana.ca, Inc.
The company signed joint venture agreements in 1998 and 1997 for
the construction and operation of two graphite processing plants in
the People's Republic of China. During the fourth quarter of 1999,
due to the inability of the company to raise project funding, these
joint venture interests were abandoned (Refer to Note 3).
Concurrently, the company entered into agreements to acquire,
through ICC, 100% of the outstanding shares of Urbana.ca
Enterprises Corp. ("Urbana Enterprises"), (formerly HomeNet100.com
Enterprises, Inc.), E-Bill Direct Inc. ("E-Bill"), and
Enersphere.com, Inc. ("Enersphere"). Each of these acquisitions
was completed subsequent to year end. (Refer to Note 11)
The consolidated financial statements have been prepared on the
basis of a going concern which contemplates the realization of
assets and satisfaction of liabilities in the normal course of
business. The company is a development stage enterprise and as such
has no revenue and is incurring substantial costs in connection
with pursuing business opportunities. At December 31, 1999 the
company has a working capital deficiency of $195,985 and has losses
of $568,750 for the year then ended. The ability of the company to
continue as a going concern is dependent on its ability to obtain
additional financing and ultimately to attain profitable
operations.
As of December 31, 1999, $60,000 has been raised through loans to
the company. Subsequent to year end, the company has received
additional loans totaling approximately $1,224,162. (Refer to Notes
5 and 11).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCONTING POLICIES
Basis of Presentation
These financial statements are expressed in U.S. dollars and have
been prepared in accordance with accounting principles generally
accepted in the United States.
Principles of Consolidation
The financial statements include the accounts of the company and
its wholly-owned subsidiary ICC Integrated Carbonics (Canada) Corp.
All significant intercompany balances and transactions are
eliminated on consolidation.
Use of Estimates and Assumptions
Preparation of the company's financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ
from those estimates.
Investment in Joint Ventures
The company records its investment in joint ventures at cost until
such time as the venturers contribute in full their initial capital
contribution at which time they are recorded on the equity basis.
The investment in joint ventures will be written down when an
impairment in value has been determined and will be written off
when abandoned.
Foreign Currency Translation
The financial statements are presented in United States dollars.
In accordance with Statement of Financial Accounting Standards No.
52, "Foreign Currency Translation", foreign denominated monetary
assets and liabilities are translated to their United States dollar
equivalents using foreign exchange rates which prevailed at the
balance sheet date. Revenue and expenses are translated at average
rates of exchange during the year. Related translation adjustments
are reported as a separate component of stockholders' equity,
whereas gains or losses resulting from foreign currency
transactions are included in results of operations.
Net Loss Per Common Share
Basic earnings per share includes no dilution and is computed by
dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period.
Dilutive earnings per share reflects the potential dilution of
securities that could share in the earnings of the company.
Because the company does not have any potentially dilutive
securities, the accompanying presentation is only of basic loss per
share.
Stock-Based Compensation
The company accounts for stock-based compensation using the
intrinsic value based method in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees ("APB No.25"). APB No. 25 requires that compensation cost
be recorded for the excess, if any, of the quoted market price of
the common stock over the exercise price at the date the options
are granted. In addition, as required by SFAS No. 123, the company
provides pro-forma disclosure of the impact of applying the fair
value method of SFAS No. 123.
Recent Accounting Policies.
In June 1998, the FASB issued Statement No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities".
SFAS 133 establishes standards for accounting for derivative
instruments. SFAS 133 is effective for fiscal years beginning
after June 15, 1999. The adoption of SFAS 133 does not have a
material effect on the company's financial statements.
NOTE 3 - INVESTMENT IN GRAPHITE PROCESSING JOINT VENTURE
Liumao Graphite Mine
On October 7, 1997, the company entered into an agreement with Da-
Jung Resource Corp., a company controlled by certain directors of
the company, to acquire 100% of its rights and obligations pursuant
to an "Agreement on Establishment of a Sino Foreign Equity Joint
Venture" with Jixi Liumao Graphite Mine, of Heilongjiang Province,
the People's Republic of China. Consideration for this agreement
was 6,000,000 restricted shares of the company's common stock, plus
$200,000 of which $70,000 has been paid and $130,000 was settled by
the issuance of 325,000 restricted shares of common stock.
On November 10, 1997, the company entered into a formal agreement
with the Liumao Graphite Mine to form a joint venture company named
ICC Liumao Graphite Products, Ltd. The purpose of the joint
venture company is to establish value added graphite processing
facilities at the Liumao Mine in China to produce high purity
graphite, expandable graphite, graphite sheet or other graphite
products.
The total investment of the company in the joint venture company is
stipulated as 80% of anticipated joint venture construction costs
of $28 million, and the company will obtain an 80% share of the
profits over a thirty year period. Further investment in the joint
venture by the company is contingent on the completion of
additional financing arrangements. Due to the inability of the
company to raise project funding, the joint venture has been
abandoned and the company has written off its investment resulting
in a loss of $253,408.
YiChang
On September 21, 1998, the company entered into an interim
agreement with YiChang Heng Da Graphite Group Company Ltd.
("YiChang") to obtain a 55% interest in a proposed joint venture
between YiChang and the company. Due to the inability of the
company to raise project funding, the joint venture project was
abandoned without any financial loss to the company.
NOTE 4 - AGREEMENT PAYABLE
1999 1998
Amount payable to Da-Jung Resource
Corp. on acquisition of its
interest in the graphite processing
joint venture $ - $130,000
During the year this amount has been settled with the issuance of
325,000 shares of common stock of the company at a price of $0.40
per share.
NOTE 5 - LOANS PAYABLE
During the year the company received loans totaling $60,000. These
amounts are due March 15, 2000 and bear interest at an annual rate
of 8%. If the company defaults on these loans, the lender has the
right to convert the amount of principal borrowed into shares of
capital stock of the company at $0.50 per share subject to a 15%
market price adjustment.
Refer to Note 11.
NOTE 6 - CAPITAL STOCK
The company has given retroactive effect and restated share numbers
to give effect to the following capital transactions:
On March 15, 1996, the company changed its authorized common stock
of 15,000 shares with $5.00 par value, to 50,000,000 common shares
with par value $.001 and 10,000,000 preferred shares with a par
value $.001. The company also approved a forward stock split on
the basis of 3,500:1, increasing the number of outstanding shares
of common stock from 600 shares to 2,100,000 shares.
On January 17, 1997, the company completed a forward stock split of
5:1, increasing the number of shares of common stock outstanding
from 2,100,000 shares outstanding to 10,500,000 shares outstanding.
On October 31, 1997, at a special meeting of the Shareholders, the
Shareholders approved a reverse stock split of 1:100 thus reducing
the number of common shares outstanding from 25,500,000 shares to
255,000 shares of common stock.
On October 31, 1997, the Shareholders authorized a Regulation
D Rule 504 offering of a maximum of 2,300,000 units at $.10 per
unit consisting of one common share and one warrant exercisable at
$.33 per share for six months. Pursuant to this financing, the
company issued 540,000 shares for proceeds of $54,000 during the
year ended December 31, 1997 and 1,760,000 shares for proceeds of
$176,000 during the year ended December 31, 1998. In addition,
during the year ended December 31, 1998, 1,301,350 of the related
share purchase warrants were exercised for proceeds of $429,446 and
the remaining share purchase warrants expired.
In January 1999, the company entered into a one-year corporate
finance advisory agreement, cancellable at any time on 30 days
written notice, and agreed to issue 350,000 restricted shares of
common stock at predetermined dates over the course of the
contract. 175,000 shares were issued at a value of $39,780 and
subsequently the agreement was cancelled.
Also in January 1999, the company entered into a consulting
agreement and issued 360,000 restricted common shares at a value of
$133,722. No services were provided under this contract and the
parties subsequently agreed to terminate the agreement in August
1999 and the 360,000 shares were reacquired by the company at no
cost and returned to treasury.
On May 7, 1999, at the company's Annual General Meeting, the
shareholders approved an increase in the number of authorized
shares of common stock from 50,000,000 shares to 70,000,000 shares.
During the year the following transactions were completed:
The company settled debts of $86,268 to a private company of which
an officer is a relative of a director of the company, and a
director of Urbana Enterprises, by the issuance of 215,670
restricted shares of common stock at a price of $0.40 per share.
As described in Note 4, the company settled its agreement payable
by the issuance of 325,000 restricted shares of common stock at a
price of $0.40 per share.
The company settled certain of its trade accounts payable by the
issuance of 510,305 restricted shares of common stock at a price of
$0.40 per share
Refer to Note 11.
NOTE 7 - RELATED PARTY TRANSACTIONS
As of December 31, 1998, accounts payable includes $3,929 due to
certain directors of the company and companies under their control.
During the year the these parties incurred $43,070 of expenses on
behalf of the company and the company made net repayments of
$20,109 leaving $26,890 due to these parties at December 31, 1999.
During the year, net advances were made directly and indirectly on
behalf of the company to Enersphere and Urbana Enterprises, two
companies subsequently acquired by the company, totaling $16,266
and $114,661 respectively. (Refer to Note 11)
During the year the company incurred $40,000 of consulting fees to
a private company controlled by a relative of a director. In
addition, the company incurred $3,335 of consulting fees to a
private company of which an officer is a relative of a director of
the company and this private company made advances on behalf of the
company to Enersphere and Urbana Enterprises totaling $82,933.
During the year $86,268 of these amounts were settled by the
issuance of 215,670 restricted shares of common stock, leaving
$40,000 payable at December 31, 1999 (Refer to Note 11).
All amounts due to and from related parties are unsecured, non-
interest bearing, and have no specific terms of repayment.
NOTE 8 - STOCK BASED COMPENSATION
During the year, the company cancelled its previous stock option
plan and all options granted thereon. A new Stock Option Plan was
adopted which will provide options to purchase up to 2,000,000
common shares of the company for its employees, officers and
directors. The options that will be granted pursuant to the Stock
Option Plan are exercisable at a price of $0.50 which is equal to
the fair value of the common shares at the time of adoption of the
plan.
As at December 31, 1999, no stock-based compensation cost has been
recorded for any period and no stock options have been issued under
this plan.
Refer to Note 11.
NOTE 9 - INCOME TAXES
The company has net operating loss carryforwards which result in
deferred tax assets. The realization of the benefits from these
deferred tax assets appears uncertain due to the company's limited
operating history and continuing losses. Accordingly, no benefit has
been recorded for deferred tax assets.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No.
107. Disclosures about Fair Value of Financial Instruments. The
estimated fair value amounts have been determined by the company,
using available market information and appropriate valuation
methodologies. The fair value of financial instruments classified
as current assets or liabilities including cash and cash
equivalents and notes and accounts payable approximate carrying
value due to the short-term maturity of the instruments.
Uncertainty Due to the Year 2000 Issue
The Year 2000 issue arises because many computerized systems use
two digits rather than four to identify a year. Date-sensitive
systems may recognize the year 2000 as 1900 or some other date,
resulting in errors when information using year 2000 dates is
processed. In addition, similar problems may arise in some systems
which use certain dates in 1999 to represent something other than
a date. Although the change in date has occurred, it is not
possible to conclude that all aspects of the Year 2000 issue that
may affect the company, including those related to customers,
suppliers, or other third parties, have been fully resolved.
NOTE 11 - SUBSEQUENT EVENTS
Loans Payable
During January and February 2000, the company received additional
loans of $1,224,162 resulting in a total to date of $1,284,162.
These amounts are due March 15, 2000 and bear interest at an annual
rate of 8%. If the company defaults on these loans, the lender has
the right to convert the amount of principal borrowed into shares
of capital stock of the company at $0.50 per share subject to a 15%
market price adjustment.
Capital Stock
The company settled $40,000 due to a relative of a director by the
issuance of 100,000 restricted shares of common stock at a price of
$0.40 per share.
The company settled a total of $99,900 of accounts payable by the
issuance of 333,000 restricted shares of common stock at a price of
$0.30 per share relating to consulting agreements dated July 14,
1999 and July 19, 1999.
The company settled $9,190 of accounts payable by the issuance of
22,975 restricted shares of common stock at a price of $0.40 per
share.
The company issued $50,000 restricted shares of common stock, at a
price of $0.40 per share, as a retainer pursuant to a media
relations contract dated December 15, 1999.
Acquisitions
Subsequent to year end, the company completed the following
acquisitions:
(a) Urbana Enterprises
By agreement dated January 4, 2000, the company's wholly-owned
subsidiary ICC, acquired 100% of the outstanding shares of Urbana
Enterprises, a company engaged in distribution of Linux based set
top boxes which are used as an alternative method of delivering
internet content. Urbana Enterprises was incorporated November 18,
1998 in the province of British Columbia.
In consideration for the acquisition, ICC issued 3,000,000 non-
voting exchangeable shares. The holders of these shares have been
granted votes in the company on a basis of one vote for each
exchangeable share of ICC held. A holder of an exchangeable share
may, at any time, require ICC to repurchase the exchangeable share
for an amount equal to the then current market value of a common
share of the company. ICC may satisfy the resulting obligation in
cash or in company shares at its option. Any exchangeable share not
exchanged within 25 years is to be cancelled.
Pursuant to the terms of the agreement, the company issued
3,000,000 common shares in trust to be held under the terms of a
trust agreement executed January 4, 2000 until such time as the
exchangeable shares are exchanged by their holders or all remaining
exchangeable shares are cancelled.
In anticipation of this acquisition, two shareholders of Urbana
Enterprises, each holding a 36.75% interest in Urbana Enterprises,
became directors of the company effective July 21, 1999 and,
subsequent to the acquisition, entered into five year management
contracts for an aggregate of Cdn$120,000 in year 1 and for amounts
to be negotiated for years 2 through 5. In addition, the company
has also agreed to grant a total of 400,000 stock options to these
individuals pursuant to the Stock Option Plan implemented in 1999.
Urbana Enterprises had net losses totaling $193,171 for the period
from May 1, 1999 (inception) to December 31, 1999.
This business combination will be accounted for using the purchase
method of accounting. The purchase price has been allocated as
follows:
Assets acquired at fair value:
Current assets $ 17,716
Capital assets 7,387
Goodwill 1,093,102
1,118,205
Liabilities assumed at fair value:
Accounts payable (87,474)
Due to related parties (130,731)
Purchase price 3,000,000 shares at
$0.30 per share $900,000
Goodwill arising on this acquisition will be amortized on a
straight-line basis over 5 years.
(b) E-Bill
By agreement dated January 10, 2000, the company's wholly-owned
subsidiary ICC, acquired 100% of the outstanding shares of E-Bill,
a company engaged in designing, developing and providing electronic
presentment and payment services to the business community. E-Bill
was incorporated May 27, 1999 in the province of Ontario.
In consideration for the acquisition, ICC issued 2,950,000 non-
voting exchangeable shares. The holders of these shares have been
granted votes in the company on a basis of one vote for each
exchangeable share of ICC held. A holder of an exchangeable share
may, at any time, require ICC to repurchase the exchangeable share
for an amount equal to the then current market value of a common
share of the company. ICC may satisfy the resulting obligation in
cash or in company shares at its option. Any exchangeable share not
exchanged within 25 years is to be cancelled.
Pursuant to the terms of the agreement, the company issued
2,950,000 common shares in trust to be held under the terms of a
trust agreement executed January 10, 2000 until such time as the
exchangeable shares are exchanged by their holders or all remaining
exchangeable shares are cancelled.
This business combination will be accounted for using the purchase
method of accounting. The purchase price has been allocated as
follows:
Assets acquired at fair value:
Current assets $ 9
Capital assets 4,646
Goodwill 812,645
817,300
Liabilities assumed at fair value:
Accounts payable (4,021)
Due to related parties (16,779)
Purchase price 2,950,000 shares at
$0.27 per share $796,500
Goodwill arising on this acquisition will be amortized on a
straight-line basis over 5 years.
E-Bill had losses totaling $16,214 for the period from May 27, 1999
(inception) to December 31, 1999.
Subsequent to the acquisition, the company signed three year
management contracts with the two principals of E-Bill in the
aggregate of Cdn$120,000 in year 1, Cdn$160,000 in year 2 and
Cdn$120,000 in year 3. In addition, the company has also agreed to
grant a total of 200,000 stock options to these individuals
pursuant to the Stock Option Plan implemented in 1999.
(c) Enersphere
By agreement dated January 9, 2000, the company's wholly-owned
subsidiary ICC, acquired 100% of the outstanding shares of
Enersphere, a content company that utilizes set-top boxes as their
medium to deliver internet and intranet-based services to
customers. Enersphere was incorporated September 28, 1999 in the
province of Ontario.
In consideration for the acquisition, ICC paid $84,828 and issued
4,500,000 non-voting exchangeable shares. The holders of these
shares have been granted votes in the company on a basis of one
vote for each exchangeable share of ICC held. A holder of an
exchangeable share may, at any time, require ICC to repurchase the
exchangeable share for an amount equal to the then current market
value of a common share of the company. ICC may satisfy the
resulting obligation in cash or in company shares at its option.
Any exchangeable share not exchanged within 25 years is to be
cancelled.
Pursuant to the terms of the agreement, the company issued
4,500,000 common shares in trust to be held under the terms of a
trust agreement executed January 9, 2000 until such time as the
exchangeable shares are exchanged by their holders or all remaining
exchangeable shares are cancelled.
This business combination will be accounted for using the purchase
method of accounting. The purchase price has been allocated as
follows:
Assets acquired at fair value:
Current assets $ 3,540
Capital assets 10,324
Goodwill 1,729,731
1,743,595
Liabilities assumed at fair value:
Accounts payable (28,995)
Due to related parties (99,772)
Purchase price $84,828 and 4,500,000
shares at $0.34 per share $1,614,828
Goodwill arising on this acquisition will be amortized on a
straight-line basis over 5 years.
Enersphere had net losses totaling $114,917 for the period from
September 28, 1999 (inception) to December 31, 1999.
Subsequent to the acquisition, the company signed two year
management contracts with the two principals of Enersphere in the
aggregate Cdn$160,000 in year 1 and Cdn$250,000 in year 2. In
addition, the company has also agreed to grant a total of 200,000
stock options to these individuals pursuant to the Stock Option
Plan implemented in 1999.
Financing Agreement
Subsequent to December 31, 1999 the company entered into an
agreement with an Agent to raise up to US$25,000,000 by a private
placement offering of Special Warrants. The company will issue up
to 5,555,555 Special Warrants at a price of US$4.50 per Special
Warrant pursuant to a best efforts offering by the Agent. A cash
commission of 8% of the capital raised by the Special Warrants is
payable along with Compensation Options equal to 10% of the units
issued. Each Special Warrant will entitle the holder to receive,
for no additional consideration, one common share of the company
and one half of one Common Share Purchase Warrant. Each whole
Common Share Purchase Warrant will entitle the holder to purchase
one common share at a price of US$10.00 for a period of 24 months
from the date of closing of the offer which would result in further
funding of US$27,777,777 if all the Common Share Purchase Warrants
were exercised. Closing of the financing is to be April 26, 2000
or such other date as agreed by the company and the Agent.
Amalgamation
Effective March 10, 2000, Urbana Enterprises, Enersphere and E-Bill
were amalgamated under the statutory laws of the Province of
Ontario into a new company named Urbana Enterprises Corp.
Name change
Effective February 22, 2000, ICC changed its name to U.R.B.A.
Holdings Inc.
Proforma Consolidated Financial Information
The following pro-forma consolidated financial information,
consisting of the pro-forma consolidated balance sheet as at
December 31, 1999, has been prepared to illustrate the estimated
effect of ICC's acquisitions of Urbana Enterprises, Enersphere and
E-Bill, as described in note 11, as if they had occurred on
December 31, 1999. The pro-forma consolidated balance sheet
presents the effect on the consolidated balance sheet of the
company based on the following pro-forma adjustments:
The acquisition of Urbana Enterprises as described in Note 11 and
the allocation of the purchase price thereon.
The acquisition of Enersphere as described in Note 11 and the
allocation of the purchase price thereon.
The acquisition of E-Bill as described in Note 11 and the
allocation of the purchase price thereon.
The reallocation and elimination of certain intercompany balances.
COMPILATION REPORT
To the Board of Directors of Urbana.ca, Inc.
We have reviewed, as to compilation only, the accompanying pro-
forma balance sheets of Urbana.ca, Inc. (a development stage
company) as at December 31, September 30 and June 30, 1999 and the
pro-forma consolidated statements of loss and deficit for the year
ended December 31, 1999, the nine months ended September 30, 1999
and the six months ended June 30, 1999. In our opinion, these pro-
forma consolidated financial statements have been properly compiled
to give effect to the transactions and assumptions described in the
notes thereto.
/s/ La Bonte & Co.
LaBonte & Co.
Chartered Accountants
April 21, 2000
Vancouver, B.C.
URBANA.CA, INC.
(Formerly Integrated Carbonics Corp.)
(A Development Stage Company)
PRO FORMA CONSOLIDATED BALANCE SHEET
Pro-Forma Adjustments
Pro Forma
Consoli
Urbana dated
Urbana.ca Enter- Enersphere E-Bill Urbana.ca,
Inc. prises Inc.
(1) (2) (3) (4)
ASSETS
CURRENT
ASSETS 8,202 17,716 3,540 9 29,467
DUE FROM
RELATED
PARTIES 64,037 - - - (64,037) -
FURNITURE
AND
EQUIPMENT
net of
depreciation - 7,387 10,324 4,646 - 22,357
GOODWILL - 1,093,102 1,729,731 812,645 - 3,635,478
72,239 1,118,205 1,743,595 817,300 (64,037) 3,687,302
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
LIABILITIES 204,187 87,474 28,995 4,021 - 324,677
DUE TO RELATED
PARTIES - 130,731 184,600 16,779 (64,037) 268,073
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 11,082 - - - - 11,082
Additional paid
In Capital 1,132,549 - - - - 1,132,549
Exchangeable
Shares - 900,000 1,530,000 796,500 - 3,226,500
Deficit
Accumulated
during
development
stage (1,277,309) - - - - (1,277,309)
Accumulated
other
comprehensive
income 1,730 - - - - 1,730
(131,948) 900,000 1,530,000 796,500 - 3,094,552
72,239 1,118,205 1,743,595 817,300 (64,037) 3,687,302
URBANA.CA, INC.
(Formerly Integrated Carbonics Corp.)
(A development stage company)
NOTES AND ASSUMPTIONS TO PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, SEPTEMBER 30 AND JUNE 30, 1999
(Unaudited - See Compilation Report)
NOTE 1 - BASIS OF PRESENTATION
In January 2000, the Company's wholly-owned subsidiary, ICC
Integrated Carbonics (Canada) Corp. ("ICC"), acquired 100% of the
outstanding shares of Urbana.ca Enterprises Corp. ("Urbana
Enterprises"), E-Bill Direct Inc. ("E-Bill"), and Enersphere.com,
Inc. ("Enersphere"). In consideration for these acquisitions, ICC
issued exchangeable shares which are exchangeable on a 1 for 1
basis for shares of the Company.
The pro-forma consolidated financial statements have been prepared
to reflect the financial position of the Company as at December 31,
September 30 and June 30, 1999 and the results of its operations
for the year ended December 31, the nine months ended September 30
and the six months ended June 30, 1999 assuming the acquisitions of
Urbana Enterprises, E-Bill and. Enersphere had occurred on the date
of incorporation for E-Bill and Enersphere and the date of
commencement of operations for Urbana Enterprises. The goodwill
resulting from these acquisitions has been amortized from the
assumed date of acquisition. (Refer to Note 3)
The pro-forma consolidated financial statements are based on the
audited financial statements of the Company, Urbana Enterprises, E-
Bill and Enersphere as at December 31, 1999 and the unaudited
financial statements of the Company, Urbana Enterprises, E-Bill and
Enersphere as at September 30 and June 30, 1999.
These consolidated pro-forma financial statements should be read in
conjunction with Company's December 31, 1999 audited consolidated
financial statements.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These pro-forma financial statements are expressed in US dollars.
Principles of Consolidation
These pro-forma financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions are eliminated on
consolidation.
Goodwill
The company amortizes goodwill on a straight-line basis over five years.
NOTE 3 - ACQUISITIONS
Urbana Enterprises
By agreement dated January 4, 2000, the Company's wholly-owned
subsidiary ICC, acquired 100% of the outstanding shares of Urbana
Enterprises, a company engaged in distribution of Linux based set
top boxes which are used as an alternative method of delivering
internet content. Urbana Enterprises was incorporated November 18,
1998 in the Province of British Columbia, Canada. For purposes of
these pro-forma consolidated financial statements, it is assumed
that this acquisition took place on May 1, 1999, the date of
commencement of operations of Urbana Enterprises.
In consideration for the acquisition, ICC issued 3,000,000 non-
voting exchangeable shares. The holders of these shares have been
granted votes in the Company on a basis of one vote for each
exchangeable share of ICC held. A holder of an exchangeable share
may, at any time, require ICC to repurchase the exchangeable share
for an amount equal to the then current market value of a common
share of the Company. ICC may satisfy the resulting obligation in
cash or in Company shares at its option. Any exchangeable share not
exchanged within 25 years is to be cancelled.
This business combination has been accounted for using the purchase
method of accounting. The purchase price has been allocated as
follows as at the actual and assumed acquisition dates:
January 4 May 1, 1999
2000
(Actual) (Pro-Forma)
Assets acquired at fair value:
Current assets $ 17,716 $ 68
Capital assets 7,387 -
Goodwill 1,093,102 899,932
1,118,205 900,000
Liabilities assumed at fair value:
Accounts payable (87,474) -
Due to related parties (130,731) -
Purchase price 3,000,000 shares at
$0.30 per share $ 900,000 $ 900,000
E-Bill
By agreement dated January 10, 2000, the Company's wholly-owned
subsidiary ICC, acquired 100% of the outstanding shares of E-Bill,
a company engaged in designing, developing and providing electronic
presentment and payment services to the business community. E-Bill
was incorporated May 27, 1999 in the Province of Ontario, Canada.
For purposes of these pro-forma consolidated financial statements,
it is assumed that this acquisition took place on the date of
incorporation of E-Bill.
In consideration for the acquisition, ICC issued 2,950,000 non-
voting exchangeable shares. The holders of these shares have been
granted votes in the Company on a basis of one vote for each
exchangeable share of ICC held. A holder of an exchangeable share
may, at any time, require ICC to repurchase the exchangeable share
for an amount equal to the then current market value of a common
share of the Company. ICC may satisfy the resulting obligation in
cash or in Company shares at its option. Any exchangeable share not
exchanged within 25 years is to be cancelled.
This business combination has been accounted for using the purchase
method of accounting. The purchase price has been allocated as
follows as at the actual and assumed acquisition dates:
January 4 May 1, 1999
2000
(Actual) (Pro-Forma)
Assets acquired at fair value:
Current assets $ 9 $ 69
Capital assets 4,646 -
Goodwill 812,645 796,431
817,300 796,500
Liabilities assumed at fair value:
Accounts payable (4,021) -
Due to related parties (16,779) -
Purchase price 2,950,000 shares at
$0.27 per share 796,500 796,500
Enersphere
By agreement dated January 9, 2000, the Company's wholly-owned
subsidiary ICC, acquired 100% of the outstanding shares of
Enersphere, a content company that utilizes set-top boxes as their
medium to deliver internet and intranet-based services to
customers. Enersphere was incorporated September 28, 1999 in the
Province of Ontario, Canada. For purposes of these pro-forma
consolidated financial statements, it is assumed that this
acquisition took place on the date of incorporation of Enersphere.
In consideration for the acquisition, ICC paid $84,828 and issued
4,500,000 non-voting exchangeable shares. The holders of these
shares have been granted votes in the Company on a basis of one
vote for each exchangeable share of ICC held. A holder of an
exchangeable share may, at any time, require ICC to repurchase the
exchangeable share for an amount equal to the then current market
value of a common share of the Company. ICC may satisfy the
resulting obligation in cash or in Company shares at its option.
Any exchangeable share not exchanged within 25 years is to be
cancelled.
This business combination has been accounted for using the purchase
method of accounting. The purchase price has been allocated as
follows as at the actual and assumed acquisition dates:
January 4 Sept 28, 1999
2000
(Actual) (Pro-Forma)
Assets acquired at fair value:
Current assets $ 3,540 $ 13
Capital assets 10,324 -
Goodwill 1,729,731 1,614,815
1,743,595 1,614,828
Liabilities assumed at fair value:
Accounts payable (28,995) -
Due to related parties (99,772) -
Purchase price $84,828 and 4,500,000
shares at $0.34 per share 1,614,828 1,614,828
NOTE 4 - GOODWILL
Goodwill and amortization resulting from each acquisition has been
recorded for the periods ended December 31, September 30 and June
30, 1999 as follows:
December September June 30
31 1999 30 1999 1999
Goodwill on acquisition $3,311,178 $3,311,178 $1,696,363
Amortization (293,652) (128,091) (43,272)
Goodwill, net of
Amortization $3,017,526 $3,183,087 $1,653,091
NOTE 5 - PRO-FORMA ADJUSTMENTS
The pro-forma consolidated financial statements reflect the
following pro-forma adjustments to the financial statements of the
Company, Urbana Enterprises, E-Bill and Enersphere as at December
31, 1999 September 30, 1999 and June 30, 1999:
(1) Record the acquisitions of Urbana Enterprises, E-Bill, and
Enersphere, and the issuance of exchangeable shares of ICC as
described in Note 3.
(2) Record goodwill on acquisitions, elimination of capital stock
of subsidiaries, and Elimination of the Company's Investment in
Subsidiaries of $3,311,328 at December 31, 1999 and September 30,
1999 and $1,696,500 at June 30, 1999 and allocation of the purchase
price as described in Note 3.
(3) Record amortization of Goodwill as described in Note 4.
(4) Record the write-off of the Investment in Graphite Joint
Venture upon acquisition of Urbana Enterprises and change in
business.
AUDITORS' REPORT
To the Directors of Urbana.ca Enterprises Corp.
We have audited the balance sheet of Urbana.ca Enterprises Corp. as
at January 3, 2000 and the statements of loss and deficit, and cash
flows for the initial period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance 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.
In our opinion, these financial statements present fairly, in all
material respects, the financial position of the Company as at
January 3, 2000 and the results of its operations and its cash
flows for the initial period then ended in accordance with
generally accepted accounting principles.
/s/ La Bonte & Co.
LaBonte & Co.
Chartered Accountants
March 31, 2000
Vancouver, B.C.
URBANA.CA ENTERPRISES CORP.
BALANCE SHEET
January 3
2000
ASSETS
CURRENT
Cash $ 11,871
Accounts receivable 11,949
Other assets 1,750
25,570
CAPITAL ASSETS, net of amortization 10,662
$ 36,232
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 21,187
Due to related parties (Note 4) 293,749
314,936
CAPITAL DEFICIENCY
SHARE CAPITAL (Note 3) 100
DEFICIT (278,804)
(278,704)
$ 36,262
The accompanying notes are an integral part of these financial
statements
URBANA.CA ENTERPRISES CORP.
STATEMENT OF LOSS AND DEFICIT
May 1, 1999
(inception) to
January 3, 2000
EXPENSES
Amortization $ 2,204
Consulting and management fees 181,853
Office and general 85,313
Professional fees 5,684
Rent 3,750
NET LOSS FOR THE PERIOD 278,804
DEFICIT, BEGINNING OF PERIOD -
DEFICIT, END OF PERIOD $ 278,804
The accompanying notes are an integral part of these financial
statements
URBANA.CA ENTERPRISES CORP.
STATEMENT OF CASH FLOWS
May 1, 1999
(inception) to
January 3,
2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (278,804)
Adjusted for item not involving cash:
- amortization 2,204
(276,600)
Net changes in non-cash working capital items 7,488
Cash flows used in operating activities (269,112)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of capital assets (12,866)
Cash flows used in investing activities (12,866)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of shares 100
Advances from related parties 293,749
Cash flows from financing activities 293,849
INCREASE IN CASH 11,871
CASH, BEGINNING OF PERIOD -
CASH, END OF PERIOD 11,871
The accompanying notes are an integral part of these financial
statements
URBANA.CA ENTERPRISES CORP.
NOTES TO FINANCIAL STATEMENT
JANUARY 3, 2000
NOTE 1- NATURE AND CONTINUANCE OF OPERATIONS
The Company was incorporated November 18, 1998 in the Province of
British Columbia. Effective July 26, 1999 the Company changed its
name from Home.net100.com Enterprises, Inc. to Urbana.ca
Enterprises Corp. The Company is engaged in distribution of Linux
based set-top boxes which are used as an alternative method of
delivering internet content and commenced operations May 1, 1999.
These financial statements have been prepared on the basis of a
going concern which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
Company has losses for the initial period ended January 3, 2000
which were financed primarily by advances from related parties. The
ability of the Company to continue as a going concern is dependent
on its ability to obtain additional financing and ultimately to
obtain profitable operations.
Effective January 4, 2000, 100% of the outstanding shares of the
Company were acquired by U.R.B.A. Holdings Inc. ("URBA"), a British
Columbia company which is a wholly-owned subsidiary of Urbana.ca,
Inc., a publicly traded Nevada company listed on the OTC Bulletin
Board which has raised funding to finance the development of the
Company's business.
In addition, effective March 10, 2000, the Company was amalgamated
with E-Bill Direct Inc., a private Ontario company and
Enersphere.com, Inc., a private Ontario company, both of which were
also acquired by URBA. The companies were amalgamated into a new
company named Urbana Enterprises Corp. under the statutory laws of
the Province of Ontario.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These financial statements are expressed in Canadian dollars and
have been prepared in accordance with accounting principles
generally accepted in Canada.
Capital Assets
Capital assets are recorded at cost and are amortized over their
estimated useful lives at the following rates: Computer hardware -
straight-line basis over two years; Office furniture - straight-
line basis over five years; Computer software - straight-line basis
over one year.
Foreign Currency Translation
The financial statements are presented in Canadian dollars.
Foreign denominated monetary assets and liabilities are translated
to their Canadian dollar equivalents using foreign exchange rates
which prevailed at the balance sheet date. Non-monetary items are
translated at historical exchange rates, except for items carried
at market value, which are translated at the rate of exchange in
effect at the balance sheet date. Revenue and expenses are
translated at average rates of exchange during the period. Exchange
gains or losses arising on foreign currency translation are
included in the determination of operating results for the period.
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 during the period.
Actual results could differ from those estimates.
Financial Instruments
The fair value of the Company's current assets and current
liabilities were estimated to approximate their carrying values due
to the immediate or short-term maturity of these financial
instruments.
NOTE 3 - SHARE CAPITAL
Authorized:
100,000,000 Common Shares, no par value
Shares Value
Issued and outstanding:
Common Shares 10,000,000 $ 100
NOTE 4 - RELATED PARTY TRANSACTIONS
During the period the Company incurred $152,824 in consulting and
management fees to two directors of the Company. In addition,
$56,772 was paid by these directors and a relative of a director on
behalf of the Company for general and administrative expenses. A
total of $105,064 of these amounts are unpaid as of the end of the
period.
The Company received net advances totaling $111,905 from Urbana.ca,
Inc., U.R.B.A. Holdings Inc. and Enersphere.com, Inc. and $76,780
from a private company controlled by a relative of a director.
All amounts are unsecured, non-interest bearing and have no
specified terms of repayment.
NOTE 5 - UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 issue arises because many computerized systems use
two digits rather than four to identify a year. Date-sensitive
systems may recognize the year 2000 as 1900 or some other date,
resulting in errors when information using year 2000 dates is
processed. In addition, similar problems may arise in some systems
which use certain dates in 1999 to represent something other than
a date. Although the change in date has occurred, it is not
possible to conclude that all aspects of the Year 2000 issue that
may affect the Company have been fully resolved.
AUDITORS' REPORT
To the Directors of E-Bill Direct Inc.
We have audited the balance sheet of E-Bill Direct Inc. as at
January 9, 2000 and the statements of loss and deficit, and cash
flows for the initial period then ended. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance 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.
In our opinion, these financial statements present fairly, in all
material respects, the financial position of the Company as at
January 9, 2000 and the results of its operations and its cash
flows for the initial period then ended in accordance with
generally accepted accounting principles.
/s/ La Bonte & Co.
LaBonte & Co.
Chartered Accountants
March 31, 2000
Vancouver, B.C.
E-BILL DIRECT INC.
BALANCE SHEET
January 9, 2000
ASSETS
CURRENT
Accounts receivable $ 13
CAPITAL ASSETS, net of amortization 6,705
$ 6,718
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 5,803
Due to related parties (Note 4) 24,217
30,020
CAPITAL DEFICIENCY
SHARE CAPITAL (Note 3) 100
DEFICIT (23,402)
(23,302)
$ 6,718
The accompanying notes are an integral part of these financial
statements
E-BILL DIRECT INC.
STATEMENT OF LOSS AND DEFICIT
May 27, 1999
(inception) to
January 9, 2000
EXPENSES
Amortization $ 1,145
Office and general 16,617
Professional fees 5,640
NET LOSS FOR THE PERIOD 23,402
DEFICIT, BEGINNING OF PERIOD -
DEFICIT, END OF PERIOD $ 23,402
The accompanying notes are an integral part of these financial
statements
E-BILL DIRECT INC.
STATEMENT OF CASH FLOWS
May 27, 1999
(inception) to
January 9, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (23,402)
Adjusted for item not involving cash:
- amortization 1,145
(22,257)
Net changes in non-cash working capital items 5,790
Cash flows used in operating activities (16,467)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of capital assets (7,850)
Cash flows used in investing activities (7,850)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of shares 100
Advances from shareholders 24,217
Cash flows from financing activities 24,317
INCREASE IN CASH -
CASH, BEGINNING OF PERIOD -
CASH, END OF PERIOD -
The accompanying notes are an integral part of these financial
statements
E-BILL DIRECT INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 9, 2000
NOTE 1- NATURE AND CONTINUANCE OF OPERATIONS
The Company was incorporated May 27, 1999 in the Province of
Ontario and is engaged in designing, developing and providing
electronic presentment services to the business community.
These financial statements have been prepared on the basis of a
going concern which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
Company has losses for the initial period ended January 9, 2000
which were financed primarily by advances from related parties. The
ability of the Company to continue as a going concern is dependent
on its ability to obtain additional financing and ultimately to
obtain profitable operations.
Effective January 10, 2000, 100% of the outstanding shares of the
Company were acquired by U.R.B.A. Holdings Inc. ("URBA"), a British
Columbia company which is a wholly-owned subsidiary of Urbana.ca,
Inc., a publicly traded Nevada company listed on the OTC Bulletin
Board which has raised funding to finance the development of the
Company's business.
In addition, effective March 10, 2000, the Company was amalgamated
with Urbana.ca Enterprises Corp., a private British Columbia
company and Enersphere.com, Inc., a private Ontario company, both
of which were also acquired by URBA. The companies were amalgamated
into a new company named Urbana Enterprises Corp. under the
statutory laws of the Province of Ontario.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These financial statements are expressed in Canadian dollars and
have been prepared in accordance with accounting principles
generally accepted in Canada.
Capital Assets
Capital assets are recorded at cost and are amortized over their
estimated useful lives at the following rates: Computer software -
straight-line basis over three years.
Foreign Currency Translation
The financial statements are presented in Canadian dollars.
Foreign denominated monetary assets and liabilities are translated
to their Canadian dollar equivalents using foreign exchange rates
which prevailed at the balance sheet date. Non-monetary items are
translated at historical exchange rates, except for items carried
at market value, which are translated at the rate of exchange in
effect at the balance sheet date. Revenue and expenses are
translated at average rates of exchange during the period. Exchange
gains or losses arising on foreign currency translation are
included in the determination of operating results for the period.
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 during the period.
Actual results could differ from those estimates.
Financial Instruments
The fair value of the Company's current assets and current
liabilities were estimated to approximate their carrying values due
to the immediate or short-term maturity of these financial
instruments.
NOTE 3 - SHARE CAPITAL
Authorized:
Unlimited Common Shares, no par value
Unlimited Class "A" Preference shares, no par value
Shares Value
Issued and outstanding:
Common Shares 2,950,000 $ 100
NOTE 4 - RELATED PARTY TRANSACTIONS
During the period $16,467 of expenses were incurred by a director
on behalf of the Company and a total of $7,850 of computer software
was acquired from another director of the Company.
Amounts due to related parties are unsecured, non-interest bearing
and have no specified terms of repayment.
NOTE 5 - UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 issue arises because many computerized systems use
two digits rather than four to identify a year. Date-sensitive
systems may recognize the year 2000 as 1900 or some other date,
resulting in errors when information using year 2000 dates is
processed. In addition, similar problems may arise in some systems
which use certain dates in 1999 to represent something other than
a date. Although the change in date has occurred, it is not
possible to conclude that all aspects of the Year 2000 issue that
may affect the Company have been fully resolved.
AUDITORS' REPORT
To the Directors of Enersphere.com, Inc.
We have audited the balance sheet of Enersphere.com, Inc. as at
January 8, 2000 and the statements of loss and deficit, and cash
flows for the initial period then ended. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance 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.
In our opinion, these financial statements present fairly, in all
material respects, the financial position of the Company as at
January 8, 2000 and the results of its operations and its cash
flows for the initial period then ended in accordance with
generally accepted accounting principles.
/s/ La Bonte & Co.
LaBonte & Co.
Chartered Accountants
March 31, 2000
Vancouver, B.C.
ENERSPHERE.COM, INC.
BALANCE SHEET
January 8, 2000
ASSETS
CURRENT
Cash $ 1,445
Accounts receivable 3,664
5,109
CAPITAL ASSETS, net of amortization 14,900
$ 20,009
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 41,848
Due to related parties (Note 4) 144,000
185,848
CAPITAL DEFICIENCY
SHARE CAPITAL (Note 3) 20
DEFICIT (165,859)
(165,839)
$ 20,009
The accompanying notes are an integral part of these financial
Statements.
ENERSPHERE.COM, INC.
STATEMENT OF LOSS AND DEFICIT
September 28, 1999
(inception) to
January 8, 2000
EXPENSES
Amortization $ 3,003
Consulting and management fees 18,613
Office and general 146
Research and development 144,097
NET LOSS FOR THE PERIOD 165,859
DEFICIT, BEGINNING OF PERIOD -
DEFICIT, END OF PERIOD $ 165,859
The accompanying notes are an integral part of these financial
statements
ENERSPHERE.COM, INC.
STATEMENT OF CASH FLOWS
September 28, 1999
(inception) to
January 8, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the year $ (165,859)
Adjusted for items not involving cash:
- amortization 3,003
- research and development 94,097
(68,759)
Net changes in non-cash working capital items 38,184
Cash flows used in operating activities (30,575)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from related parties 32,000
Proceeds from issuance of shares 20
Cash flows from financing activities 32,020
INCREASE IN CASH 1,445
CASH, BEGINNING OF YEAR -
CASH, END OF YEAR 1,445
The accompanying notes are an integral part of these financial
statements
ENERSPHERE.COM, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 8, 2000
NOTE 1- NATURE AND CONTINUANCE OF OPERATIONS
The Company was incorporated September 28, 1999 in the Province of
Ontario and is a content company that utilizes set-top boxes as
their medium to deliver internet and intranet-based services to
customers.
These financial statements have been prepared on the basis of a
going concern which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
Company has losses for the initial period ended January 8, 2000
which were financed primarily by advances from related parties. The
ability of the Company to continue as a going concern is dependent
on its ability to obtain additional financing and ultimately to
obtain profitable operations.
Effective January 9, 2000, 100% of the outstanding shares of the
Company were acquired by U.R.B.A. Holdings Inc. ("URBA"), a British
Columbia company which is a wholly-owned subsidiary of Urbana.ca,
Inc., a publicly traded Nevada company listed on the OTC Bulletin
Board which has raised funding to finance the development of the
Company's business.
In addition, effective March 10, 2000, the Company was amalgamated
with Urbana.ca Enterprises Corp., a private British Columbia
company and E-Bill Direct Inc., a private Ontario company, both of
which were also acquired by URBA. The companies were amalgamated
into a new company named Urbana Enterprises Corp. under the
statutory laws of the Province of Ontario.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These financial statements are expressed in Canadian dollars and
have been prepared in accordance with accounting principles
generally accepted in Canada.
Capital Assets
Capital assets are recorded at cost and are amortized over their
estimated useful lives at the following rates: Computer hardware -
straight-line basis over two years.
Research and development costs
Ongoing research and development costs are expensed as incurred.
Foreign Currency Translation
The financial statements are presented in Canadian dollars.
Foreign denominated monetary assets and liabilities are translated
to their Canadian dollar equivalents using foreign exchange rates
which prevailed at the balance sheet date. Non-monetary items are
translated at historical exchange rates, except for items carried
at market value, which are translated at the rate of exchange in
effect at the balance sheet date. Revenue and expenses are
translated at average rates of exchange during the period. Exchange
gains or losses arising on foreign currency translation are
included in the determination of operating results for the period.
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 during the period.
Actual results could differ from those estimates.
Financial Instruments
The fair value of the Company's current assets and current
liabilities were estimated to approximate their carrying values due
to the immediate or short-term maturity of these financial
instruments.
NOTE 3 - SHARE CAPITAL
Authorized:
Unlimited Common Shares, no par value
Shares Value
Issued and outstanding:
Common Shares 2,123,000 $ 20
NOTE 4 - RELATED PARTY TRANSACTIONS
During the period the Company acquired form shareholders computer
equipment for $17,903 and intellectual property rights for $94,097
representing reimbursement of research and development costs
incurred. At January 8, 2000 these amounts were outstanding and
payable to the shareholders.
During the period $12,000 of advances were made to the Company and
$20,000 of accounts payable was paid on behalf of the Company by
Urbana.ca Enterprises Corp.
A total of $8,833 of management fees were paid to directors of the
Company.
Amounts due to related parties are unsecured, non-interest bearing
and have no specified terms of repayment.
NOTE 5 - UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 issue arises because many computerized systems use
two digits rather than four to identify a year. Date-sensitive
systems may recognize the year 2000 as 1900 or some other date,
resulting in errors when information using year 2000 dates is
processed. In addition, similar problems may arise in some systems
which use certain dates in 1999 to represent something other than
a date. Although the change in date has occurred, it is not
possible to conclude that all aspects of the Year 2000 issue that
may affect the Company have been fully resolved.
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
(a) Effective on March 31, 1999, the independent accountants
who were previously engaged as the principal accountants to audit
the company's financial statements, Deloitte & Touche LLP,
resigned. The accountants' reports on the financial statements for
the fiscal years ended December 31, 1997 and December 31, 1998
neither contained an adverse opinion or a disclaimer of opinion,
nor was qualified or modified as to uncertainty, audit scope, or
accounting principles, except that these reports were modified as
to uncertainty that the company will continue as a going concern.
The decision to change accountants was approved by the board of
directors.
(b) Effective on January 26, 2000, the independent accountant
who was previously engaged as the principal accountant to audit the
company's financial statements, Kurt D. Saliger, C.P.A., resigned.
This accountant did not issue any financial statements for the
company. The decision to change the accountant was approved by the
Board of Directors.
During the company's two most recent fiscal years and any
subsequent interim period preceding such resignation, there were no
disagreements with the former accountants on any matter of
accounting principles or practices, financial statement disclosure,
or auditing scope or procedure. In addition, there were no
"reportable events" as described in Item 304(a)(1)(iv)(B)1 through
3 of Regulation S-B that occurred within the company's two most
recent fiscal years and the subsequent interim period preceding the
former accountants' dismissal.
(c) Effective on January 27, 2000, the firm of LaBonte
& Co. was engaged to serve as the new principal accountants to
audit the company's financial statements. The decision to retain
the new firm was approved by the board of directors. During the
company's two most recent fiscal years, and the subsequent interim
period prior to engaging those accountants, neither the company
(nor someone on its behalf) consulted the newly engaged accountants
regarding any matter.
AVAILABLE INFORMATION
The company has filed with the U.S. Securities and Exchange
Commission, Washington, D.C. 20549, a Registration Statement on
Form SB-2 under the Securities Act of 1933 with respect to the
shares of common stock offered by this prospectus. This prospectus
does not contain all of the information set forth in the
registration statement and the exhibits and schedules filed with
the registration statement. Certain items are omitted in accordance
with the rules and regulations of the Commission. For further
information with respect to the company and the common stock
offered by this prospectus, reference is made to the registration
statement and the exhibits and schedules filed with the
registration statement. Statements contained in this prospectus as
to the contents of any contract or any other document referred to
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.
A copy of the registration statement, and the exhibits and
schedules filed with it, may be inspected without charge at the
public reference facilities maintained by the Commission in Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and the
Commission's regional offices located at the Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago Illinois 60661
and Seven World Trade Center, 13th Floor, New York, New York 10048,
and copies of all or any part of the registration statement may be
obtained from such offices upon the payment of the fees prescribed
by the Commission. The public may obtain information on the
operation of the public reference room by calling the Commission at
1 (800) SEC-0330. The Commission maintains a World Wide Web site
that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission, including the company. The address of the site is
http://www.sec.gov. The registration statement, including all its
exhibits and any amendments, has been filed electronically with the
Commission.
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Information on this item is set forth in the propsectus under the
heading "Disclosure of Commission Position on Indemnification for
Securities Act Liabilities."
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the fees and expenses in connection
with the issuance and distribution of the securities being
registered hereunder, all of which are being paid by the Company:
Securities and Exchange Commission
registration fee $ 8,546
Transfer agent's fees 1,000
Printing and engraving expenses 1,000
Legal fees and expenses 25,000
Accounting fees and expenses 5,000
State blue sky fees 5,000
Total $ 45,546*
* All fees, except the Securities and Exchange Commission
registration fee, are estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Other than as set forth below, during the last three years
there have not been any sales of unregistered securities of the
company. Except as noted below, no commissions or fees were paid
in connection with these sales. Except as noted below, all of the
these sales were undertaken pursuant to the limited offering
exemption from registration under the Securities Act of 1933 as
provided in Regulation D as promulgated by the U.S. Securities and
Exchange Commission. In addition, all the sales were made to the
following class of persons: sophisticated investors; that is,
investor either alone or with their purchaser representative(s)
have such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of
the prospective investment, or the issuer reasonably believes
immediately prior to making any sale that such purchasers comes
within this description.
Fiscal Year 1997.
On October 7, 1997, the company entered into an agreement with
Da-Jung Resource Corp. to acquire 100% of its interest under an
agreement on establishment of a Sino foreign equity joint venture,
China-Canada Liumao Graphite Products Co., Ltd., dated September 7,
2000. Consideration for this acquisition agreement was 6,000,000
restricted shares of the company's common stock, plus $200,000 of
which $70,000 has been paid and $130,000 was settled by the
issuance of 325,000 restricted shares of common stock (in 1999).
On October 31, 1997, the shareholders authorized a Regulation
D Rule 504 offering of a maximum of 2,300,000 units at $.10 per
unit consisting of one common share and one warrant exercisable at
$.33 per share for six months. Pursuant to this financing, the
company issued 540,000 shares for proceeds of $54,000 between
October 31, 1997 and December 31, 1997.
Fiscal Year 1998.
As a continuation of the offering commenced in 1997, the company
issued 1,760,000 shares at $0.10 per share at varying times
throughout 1998 for proceeds of $176,000. In addition, at varying
times during the year ended December 31, 1998, 1,301,350 of the
related share purchase warrants were exercised for proceeds of
$429,446 and the remaining share purchase warrants expired.
Fiscal Year 1999.
During the fiscal year ended December 31, 1999 the following
transactions were completed:
In January 1999, the company entered into a one-year corporate
finance advisory agreement, cancelable at any time on 30 days
written notice, and agreed to issue 350,000 restricted shares of
common stock at predetermined dates over the course of the
contract. 175,000 shares were issued at a value of $39,780 and
subsequently the agreement was cancelled.
Also in January 1999, the company entered into a consulting
agreement and issued 360,000 restricted common shares at a value of
$133,722. No services were provided under this contract and the
parties subsequently agreed to terminate the agreement in August
1999 and the 360,000 shares were reacquired by the company at no
cost and returned to treasury.
The company settled debts of $86,268 to Hound Pound Equities Inc.,
a private company, by the issuance of 215,670 restricted shares of
common stock at a price of $0.40 per share.
The company settled its amount payable of $130,000 to Da-Jung
Resources, a major shareholder in the company, on acquisition of
its interest in a graphite processing joint venture by the issuance
of 325,000 restricted shares of common stock at a price of $0.40
per share.
The company also settled its trade payables of $204,122 by the
issuance of restricted shares at $0.40 per share for 510,305
shares.
Quarter Ended March 31, 2000.
During the quarter ended March 31, 2000, the company settled debts
of $40,000 due to a relative of a director of the company by the
issuance of 100,000 restricted shares at $0.40 per share. The
company settled a total of $99,900 of accounts payable by the
issuance of 333,000 restricted shares at $0.30 per share and $9,190
of accounts payable by the issuance of 22,975 restricted shares at
$0.40 per share. The company issued 50,000 restricted shares at
$0.40 per share as a retainer on a media relations contract. As
consideration for the acquisition of the three subsidiaries during
the quarter, URBA Holdings Inc. issued a total of 10,450,000
exchangeable shares.
During fiscal year ended December 31, 1999, the company
received loans totaling $60,000. For the quarter ended March 31,
2000, the company received additional loans of $1,224,162, for
total loans of $1,284,162. These loans bear interest at an annual
rate of 8% and were due and payable on March 15, 2000. The company
did not repay these loans and as a result has offered the lenders
the right to convert the principal into units of the company at a
price of $0.57 per unit. Each unit is comprised of one common
share of the company and one-half share purchase warrant. Each
whole share purchase warrant entitles the holder to purchase an
additional share at a price of $5.00 per share. This offer is to
be made by way of a prospectus that is being conducted in Ontario,
Quebec and British Columbia in Canada.
Quarter Ended June 30, 2000.
The company entered into an agency agreement effective April
10, 2000 with Groome Capital.com Inc. whereby the company and
Groome engaged in a best efforts offering of up to 20,000,000
special warrants at a price of $1.25 per special warrant. Each
special warrant is convertible into one common share and one-half
share purchase warrant exercisable for a period of two years at a
price of $5.00 per whole share purchase warrant. Groome received an
Agent's Fee equal to 8% of the total amount raised (reduced to 4%
for investors on the President's List). In addition, Groome has
been granted non-assignable warrants to acquire, without payment of
additional consideration, 1 year Compensation Options providing the
right to purchase, at $1.25 per unit, a number of units equal to
10% of the number of Special Warrants sold under this offering.
This offering, which has been closed as of May 11, 2000,
resulted in total subscriptions for 847,989 units with total
proceeds of $1,059,986 from a total of nine investors in Canada;
these transactions were exempt from the registration requirements
under the Securities Act of 1933 based on Regulation S. A similar
offering under Rule 506 of Regulation D was undertaken in the
United States, but no sales resulted from that offering. These
offerings were made only to sophisticated investors; that is, the
investor either alone or with his purchaser representative(s) has
such knowledge and experience in financial and business matters
that he is capable of evaluating the merits and risks of the
prospective investment, or the issuer reasonably believes
immediately prior to making any sale that such purchaser comes
within this description
ITEM 27. EXHIBITS
The Exhibits required by Item 601 of Regulation S-B, and an index
thereto, are attached.
ITEM 28. UNDERTAKINGS
The undersigned company hereby undertakes to:
(a) (1) File, during any period in which it offers or sells
securities, 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;
(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 Notwithstanding the
forgoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed
that which was registered) and any deviation From the low or high
end of the estimated maximum offering range may be reflected in the
form of prospects filed with the U.S. Securities and Exchange
Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in the volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
(iii) Include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Securities Act of 1933,
treat each post-effective amendment as a new registration statement
of the securities offered, and the offering of the securities at
that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering.
(d) Provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and
registered in such names as required by the underwriter to permit
prompt delivery to each purchaser.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has
been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses
incurred or paid by a director, officer or controlling person of
the small business issuer 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 small business issuer will, unless in the opinion
of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
the company certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form SB-2 and
authorized this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorize, in the City of
Cambridge, Province of Ontario, Canada, on December 11, 2000.
Urbana.ca, Inc.
By: /s/ David M. Groves
David M. Groves, President
Special Power of Attorney
The undersigned constitute and appoint David M. Groves their true
and lawful attorney-in-fact and agent with full power of
substitution, for him and in his name, place, and stead, in any and
all capacities, to sign any and all amendments, including post-
effective amendments, to this Form SB-2 registration statement, and
to file the same with all exhibits thereto, and all documents in
connection therewith, with the U.S. Securities and Exchange
Commission, granting such attorney-in-fact the 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 and to
all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorney-in-fact may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in
the capacities and on the date indicated:
/s/ David M. Groves
David M. Groves
President/Chief Executive Officer/Director
December 11, 2000
/s/ Greg Alexanian
Greg Alexanian
Vice President/Chief Operating Officer/Director
December 11, 2000
/s/ Robert S. Tyson
Robert S. Tyson
Vice President/Secretary/Director
December 11, 2000
/s/ Rick Whittaker
Rick Whittaker
Vice President, Business Development/Director
December 11, 2000
EXHIBIT INDEX
Number Exhibit Description
2.1 Articles of Merger and Merger Agreement of Foreign
Corporation into Integrated Carbonics Corp. (incorporated by
reference to Exhibit 2 to the Registration Statement on Form 10-
SB/A filed on December 17, 1998).
2.2 Amalgamation Agreement between Urbana.ca Enterprises Corp.,
Enersphere.com, Inc., and E-Bill Direct Inc., dated March 3,
2000 (incorporated by reference to Exhibit 2.2 of the Form 10-
QSB filed on May 17, 2000).
3.1 Articles of Incorporation (incorporated by reference to
Exhibit 3.1 of the Registration Statement on Form 10-SB/A filed
on December 17, 1998.
3.2 Certificate of Amendment to Articles of Incorporation
(incorporated by reference to Exhibit 3.2 of the Form 10-QSB
filed on November 15, 1999).
3.3 Certificate of Amendment of Articles of Incorporation (see below).
3.4 Certificate of Amendment of Articles of Incorporation (see below).
3.5 Bylaws (incorporated by reference to Exhibit 3.2 of the
Registration Statement on Form 10-SB/A filed on December 17, 1999).
4.1 Integrated Carbonics Corp. 1999 Stock Option Plan
(incorporated by reference to Exhibit 4 to the Form 10-QSB filed
on November 15, 1999).
4.2 Form of Private Placement Subscription Agreement between
the company and investors (see below).
4.3 Form of Unit Warrants to Subscribe for Common Shares issued
by the company to investors on April 27, 2000 (see below).
4.4 Form of Non-Assignable Agent's Compensation Options to
Acquire Units, issued by the company to Groome Capital.com, Inc.
on April 27, 2000 (see below).
4.5 Form of Non-Assignable Agent's Warrants to Acquire Common
Shares, issued by the company to Groome Capital.com, Inc. on
April 27, 2000 (see below).
4.6 Non-Assignable Agent's Warrants to Acquire Compensation
Options, issued by the company to Groome Capital, Inc. on April
27, 2000 (see below).
4.7 Form of Unit Warrants to Subscribe for Common Shares to be
issued by the company to holders of converted loans (see below).
4.8 Form of Common Stock Purchase Warrant to be issued by
the company to Ladenburg Thalmann & Co. Inc. (see below).
5 Opinion Re: Legality (see below).
10.1 Agreement on Establishment of Sino Equity Joint Venture,
China-Canada Liumao Graphite Products Co. Ltd., dated September
9, 1997 (incorporated by reference to Exhibit 10.3 of the
Registration Statement on Form 10-SB/A filed on December 17, 1998).
10.2 Cooperative Joint Venture Agreement between Da-Jung
Resource Corp. and Heilongjiang Geological and Mining Technology
Development Corp., dated September 9, 1997 (incorporated by
reference to Exhibit 10.5 of the Registration Statement on Form
10-SB/A filed on December 17, 1998).
10.3 Agreement between PLR, Inc. and Da-Jung Resource Corp.,
dated September 22, 1997 and PLR, Inc. (incorporated by
reference to Exhibit 10.1 of the Registration Statement on Form
10-SB/A filed on December 17, 1998).
10.4 Agreement between Integrated Carbonics Corp. and Da-Jung
Resource Corp., dated October 7, 1997 (incorporated by reference
to Exhibit 10.2 of the Registration Statement on Form 10-SB/A
filed on December 17, 1998).
10.5 Equity Joint Venture Agreement between Integrated Carbonics
Corp. and Liumao Graphite Mine, dated November 10, 1997
(incorporated by reference to Exhibit 10.4 of the Registration
Statement on Form 10-SB/A filed on December 17, 1998).
10.6 Share Exchange and Share Purchase Agreement between the
company, ICC Integrated Carbonics (Canada) Corp., and
Enersphere.com, Inc., dated December 1, 1999 (incorporated by
reference to Exhibit 10.6 of the Form 10-QSB filed on May 17, 2000).
10.7 Share Exchange and Share Purchase Agreement between the
company, ICC Integrated Carbonics (Canada) Corp., and Urbana.ca
Enterprises Corp., dated January 4, 2000 (incorporated by
reference to Exhibit 10.7 of the Form 10-QSB filed on May 17, 2000).
10.8 Management Contract between the company and Jason Cassis,
dated January 4, 2000 (see below).
10.9 Share Exchange and Share Purchase Agreement between the
company, ICC Integrated Carbonics (Canada) Corp., and E-Bill
Direct, Inc., dated January 10, 2000 (incorporated by reference
to Exhibit 10.8 of the Form 10-QSB filed on May 17, 2000).
10.10 License Agreement between the company, Eagle Wireless
International, Inc., and USA Video Interactive Corp., dated
January 13, 2000 (see below).
10.11 Exclusivity Agreement between Urbana.ca Enterprises
Corp. and Eagle Wireless International, Inc., dated January 17,
2000 (incorporated by reference to Exhibit 10.9 of the Form 10-
QSB filed on May 17, 2000).
10.12 Agency Agreement between the company and Groome
Capital.com, Inc., dated April 10, 2000 (see below).
10.13 Administration and Services Agreement between the
company, Groome Capital.com, Inc., and InvestIn.com Securities
Corp., dated April 10, 2000 (see below).
10.14 Special Warrant Agreement between the company and
Pacific Corporate Trust Company, dated April 27, 2000 (see below).
10.15 Share Purchase Warrant Agreement between the company
and Pacific Corporate Trust Company, dated April 27, 2000 (see below).
10.16 Escrow Agreement between the company, Groome
Capital.com, Inc., and Pacific Corporate Trust Company, dated
April 27, 2000 (see below).
10.17 Letter Agreement between the company and Ladenburg
Thalmann & Co. Inc., dated June 15, 2000 (see below).
10.18 Letter of Intent between the company and World Sales and
Marketing, Inc., dated September 8, 2000 (incorporated by
reference to Exhibit 10.18 of the Form 10-QSB filed on
November 14, 2000).
16.1 Letter on change in certifying accountant (incorporated by
reference to Exhibit 16 of the Form 8-K/A filed on
October 25, 2000.
16.2 Letter on change in certifying accountant (incorporated by
reference to Exhibit 16 of the Form 8-K filed on
October 26, 2000).
21 Subsidiaries of the company (incorporated by reference to
Exhibit 21 of the Form 10-KSB filed on March 31, 2000).
23.1 Consent of Accountants (see below).
23.2 Consent of Accountants (see below).
23.3 Consent of Counsel (see below).
27 Financial Data Schedule (see below).
