U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO ______________
COMMISSION FILE NUMBER: 000-24723
URBANA.CA, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0393257
(State or jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
750 West Pender Street, Suite 804, Vancouver, British Columbia V6C 2T8
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (604) 682-8445
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) been subject to such filing
requirements for the past 90 days. Yes X No .
As of June 30, 2000, the Registrant had 22,038,283 shares of
common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET AS OF
JUNE 30, 2000 3
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS
ENDED JUNE 30, 2000 AND JUNE 30, 1999 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
AND JUNE 30, 1999 5
NOTES TO FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 21
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 21
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 21
ITEM 5. OTHER INFORMATION 22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 22
SIGNATURE 22
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCAL STATEMENTS.
URBANA.CA, INC.
(A development stage company)
CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30
2000
ASSETS
CURRENT ASSETS
Cash $ 43,869
Short term investments 100,195
Funds held in trust 158,998
Taxes recoverable 57,074
Prepaid expenses and deposits 116,369
476,505
FURNITURE AND EQUIPMENT, net of depreciation of $19,105 165,823
GOODWILL, net of amortization (Note 3) 3,271,932
3,914,260
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities 254,276
Loans payable (Note 4) 1,211,933
1,466,209
DUE TO RELATED PARTIES (Note 6) 15,439
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 (2,985,599)
Accumulated other comprehensive income (7,415)
2,432,612
3,914,260
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 Ended Six Months Ended February 23
June 30 June 30 June 30 June 30 1993
2000 1999 2000 1999 (inception)
to
June 30, 2000
EXPENSES
Consulting and
management $ 85,467 $ - $ 335,393 $ - $ 553,678
Depreciation and
Amortization 194,917 162 382,651 1,169 388,790
Technology
contract fees 292,447 - 348,095 - 348,095
Engineering costs - - - - 274,170
Interest expense 25,018 59 44,636 133 54,272
Office and
General 129,263 31,043 266,712 208,736 526,596
Professional
Fees 73,251 1,903 144,709 10,558 248,711
Rent 9,694 5,023 21,292 11,525 74,373
Salaries 120,698 - 164,802 - 248,506
Write-off of
interest in
mineral
property - - - - 15,000
Write-off of
Graphite
processing
joint venture - - - - 253,408
NET LOSS FOR THE
PERIOD $ 930,755 $ 38,190 $1,708,290 $232,121 $2,985,599
BASIC NET LOSS
PER SHARE $ 0.08 $ 0.01 $ 0.15 $ 0.02
WEIGHTED AVERAGE
NUMBER OF SHARES
OF COMMON STOCK
OUTSTANDING 11,588,293 10,275,850 11,503,964 10,355,350
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)
Six Six February 23
Months Months 1993
Ended Ended (Inception)
June 30 June 30 to
2000 1999 June 30, 2000
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss for the period $(1,708,290) $(232,121) $(2,985,599)
Adjustments to reconcile net
loss to net cash from operating
activities:
- depreciation and amortization 382,651 1,169 388,790
- imputed interest on
long term debt - - 9,000
- organization costs - - (308)
- loss on disposal of
furniture and equip. - - 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 (95,242) 56,797 270,750
CASH USED IN OPERATING ACTIVITIES (1,420,881) (174,155) (2,045,339)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of furniture and
Equipment (162,572) - (173,995)
Proceeds from sale of
furniture and equip. - - 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
Advances to related parties (167,806) - (145,575)
Payments on agreement payable - - (70,000)
Loan advances, net of
interest and repayments 1,151,933 - 1,211,933
Issuance of common stock - 173,502 662,446
Special warrant proceeds,
net of trust funds 727,407 - 727,407
CASH FROM FINANCING
ACTIVITIES 1,711,534 173,502 2,386,211
EFFECT OF EXCHANGE RATE
CHANGES ON CASH (9,145) - (7,415)
INCREASE (DECREASE) IN CASH 43,334 (653) 43,869
CASH, BEGINNING OF PERIOD 535 713 -
CASH, END OF PERIOD $ 43,869 $ 60 $ 43,869
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 Registrant 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 Registrant 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 Registrant 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 Registrant to continue as a going
concern is dependent on its ability to obtain additional
financing and ultimately to attain profitable operations.
During June, 2000 the Registrant entered into a financing
agreement to raise up to $3,500,000 of additional working capital
by way of a private placement of common stock on a best efforts
basis. To date no funds have been received from this proposed
financing.
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 Registrant'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 Registrant'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 six
months ended June 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 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 Registrant
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 Registrant'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.
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 Registrant.
Because the Registrant does not have any potentially dilutive
securities, the accompanying presentation is only of basic loss
per share.
Stock-Based Compensation
The Registrant 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 25"). APB 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 Statements of Financial
Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), the Registrant provides pro-forma
disclosure of the impact of applying the fair value method of
SFAS 123.
NOTE 3 - ACQUISITIONS
Urbana Enterprises
By agreement dated January 4, 2000, the Registrant'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 Registrant 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 Registrant. URBA may satisfy the
resulting obligation in cash or in Registrant shares at its
option.
Pursuant to the terms of the agreement, the Registrant 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 Registrant 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 Registrant 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 $109,310 has
been recorded to June 30, 2000.
E-Bill
By agreement dated January 10, 2000, the Registrant'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 Registrant 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 Registrant. URBA may satisfy the
resulting obligation in cash or in Registrant shares at its
option.
Pursuant to the terms of the agreement, the Registrant 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 Registrant 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 Registrant 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 $81,264 has
been recorded to June 30, 2000.
Enersphere
By agreement dated January 9, 2000, the Registrant'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 Registrant 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 Registrant. URBA
may satisfy the resulting obligation in cash or in Registrant
shares at its option.
Pursuant to the terms of the agreement, the Registrant 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 Registrant 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 Registrant has also agreed to grant a total of
200,000 stock options to these individuals pursuant to the Stock
Option Plan implemented in 1999.
Goodwill arising on this acquisition is being amortized on a
straight-line basis over 5 years and amortization of $172,972 has
been recorded to June 30, 2000.
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
NOTE 4 - LOANS PAYABLE
The Registrant has outstanding loans totaling $1,184,162 plus
accrued interest of $27,771 calculated at an annual rate of 8%.
These loans were due and payable on March 15, 2000. During the
quarter, the Registrant repaid $100,000 of principal. For the
remainder of the unpaid loans, the Registrant has provided an
option to the lenders to convert the principal amount of the loan
into units of the Registrant at a price of $0.57 per unit. Each
unit will consist of one common share of the Registrant and one-
half share purchase warrant. Each whole share purchase warrant
entitles the holder to purchase an additional common share of the
Registrant at a price of $5.00 per share. This offer is to be
made by way of a prospectus to be filed with the applicable
Canadian and United States regulatory authorities.
NOTE 5 - CAPITAL STOCK
During the six month period ended June 30, 2000 the following
shares were issued:
Common Shares
The Registrant 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 Registrant 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 Registrant 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 Registrant 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 Registrant'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
Registrant 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 Registrant. URBA may satisfy the
resulting obligation in cash or in Registrant shares at its
option.
Special Warrant Proceeds
During the quarter ended June 30, 2000 the Registrant 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 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. 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 Registrant has adopted a Stock Option Plan which will provide
options to purchase up to 2,000,000 common shares of the
Registrant 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 June 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
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
Registrant, 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations.
During the six month period ended June 30, 2000, the
Registrant, through its wholly-owned subsidiary company, U.R.B.A.
Holdings Inc.("URBA"), 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. ("Urbana Enterprises"), E-Bill Direct
Inc. ("E-Bill"), and Enersphere.com, Inc. ("Enersphere"). On
March 10, 2000 these companies were amalgamated under the
statutory laws of the province of Ontario to form Urbana
Enterprises Corp.
For the six months ended June 30, 2000, the Registrant had a
net loss of $1,708,290 or $0.15 cents per share. This loss
compares with a net loss of $232,121 or $0.02 cents per share for
the corresponding six-month period ended June 30, 1999.
The net loss for the six months ended June 30, 2000 includes
expenses as follows: consulting and management of $335,393,
depreciation and amortization of $382,651, technology contract
fees of $348,095, office and general of $266,712, professional
fees of $144,709 and salaries of $164,802.
(a) Urbana Enterprises.
Urbana Enterprises was incorporated November 18, 1998 in the
province of British Columbia. Urbana Enterprises is engaged in
the distribution of Linux based set top boxes used as an
alternative method of delivering Internet content.
In consideration of the acquisition, URBA issued 3,000,000
non-voting exchangeable shares. The holders of these shares have
been granted votes in the Registrant on a basis of one vote for
each exchangeable share of URBA held. The holder of these shares
at any time may require URBA to repurchase the shares at the then
current market value of the common shares. At its option, URBA
may satisfy this obligation in cash or in Registrant shares. Any
exchangeable share not exchanged within 25 years is to be
cancelled.
The terms of the acquisition agreement required the
Registrant to issue 3,000,000 common shares to ensure URBA has
sufficient shares of the Registrant to satisfy its repurchase
obligations. The common shares are held under a trust agreement
until such time as the exchangeable shares are exchanged or
cancelled. In connection with the acquisition, the Registrant
signed five-year management contracts with the two principals
The Registrant agreed to grant a total of 400,000 stock options
to these individuals.
The business combination has been 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.
(b) E-Bill.
E-Bill was incorporated May 27, 1999 in the province of
Ontario. E-Bill is engaged in designing, developing and
providing electronic presentment and payment services to the
business community.
In consideration of the acquisition, URBA issued 2,950,000
non-voting exchangeable shares. The holders of these shares have
been granted votes in the Registrant on a basis of one vote for
each exchangeable share of URBA held. The holder of these shares
at any time may require URBA to repurchase the shares at the then
current market value of the common shares. At its option, URBA
may satisfy this obligation in cash or in Registrant shares. Any
exchangeable share not exchanged within 25 years is to be
cancelled
The terms of the acquisition agreement required the
Registrant to issue 2,950,000 common shares to ensure URBA has
sufficient shares of the Registrant to satisfy its repurchase
obligations. The common shares are held under a trust agreement
until such time as the exchangeable shares are exchanged or
cancelled. In connection with the acquisition, the Registrant
signed three-year management contracts with the two principals.
The Registrant agreed to grant a total of 200,000 stock options
to these individuals.
The business combination has been 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.
(c) Enersphere.
Enersphere was incorporated September 28, 1999 in the
province of Ontario. Enersphere is a content company that
utilizes set top boxes as their medium to deliver internet and
intranet-based services to customers.
In consideration of the acquisition, URBA paid $84,828 cash
and issued 4,500,000 non-voting exchangeable shares. The holders
of these shares have been granted votes in the Registrant on a
basis of one vote for each exchangeable share of URBA held. The
holder of these shares at any time may require URBA to repurchase
the shares at the then current market value of the common shares.
At its option, URBA may satisfy this obligation in cash or in
Registrant shares. Any exchangeable share not exchanged within
25 years is to be cancelled
The terms of the acquisition agreement required the
Registrant to issue 4,500,000 common shares to ensure URBA has
sufficient shares of the Registrant to satisfy its repurchase
obligations. The common shares are held under a trust agreement
until such time as the exchangeable shares are exchanged or
cancelled. In connection with the acquisition, the Registrant
signed two-year management contracts with the two principals.
The Registrant agreed to grant a total of 200,000 stock options
to these individuals.
The business combination has been 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.
Liquidity and Capital Resources.
(a) General Statement.
The Registrant is a development stage enterprise. The Registrant has no
revenue and is continuing to incur substantial costs in
connection with pursuing the development of its business. The
Registrant's continued existence is dependent on its ability to
obtain sufficient financing to meet its financial needs. At June
30, 2000 the Registrant had a working capital deficiency of
$989,704 inclusive of loans payable. This compares with a
working capital deficiency of $340,757 at June 30, 1999.
(b) Debt Conversions.
During the period the Registrant settled debts of $40,000 due to
a relative of a director of the Registrant by the issuance of
100,000 restricted shares at $0.40 per share. The Registrant
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 Registrant 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 period, URBA issued a total of 10,450,000 exchangeable
shares.
(c) Loan Conversions.
At June 30, 2000 loans of $1,184,162 plus accrued interest of
$27,771 were outstanding. During the period loans totaling
$100,000 were repaid and $10,000 was repaid subsequent to June
30, 2000. These loans bear interest at an annual rate of 8% and
were due and payable on March 15, 2000. The Registrant has
provided an option to the lenders to convert the loan into units
of the Registrant at a price of $0.57 per unit. Each unit is
comprised of one common share of the Registrant and one-half
share purchase warrant. Each whole share purchase warrant
entitles the holder to purchase an additional common share at a
price of $5.00 per share. This offer is to be made by way of a
prospectus that is filed with the applicable Canadian and United
States regulatory authorities.
(d) Units Offering.
The Registrant entered into an agency agreement effective
April 10, 2000 with Groome Capital.com Inc. whereby the
Registrant 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 Registrant and Groome Capital with reference to the
market price of the common shares of the Registrant, dilution,
and the capital needs of the Registrant. Each special warrant is
convertible 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 Registrant 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 Registrant of $1,059,986 from
a total of nine investors (a similar offering was undertaken in
the United States, but no sales resulted from this offering).
Groome received an agent's fee equal to 8% of the total
amount raised (reduced to 4% for investors on the 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 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.
(1) 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
Registrant 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 Registrant, 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 Registrant
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
(2) 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 Registrant 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
Registrant subdivides its outstanding common shares into a
greater number or common shares or where the Registrant 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 Registrant with or
into any other corporation
no fractional shares will be issued upon the exercise of the
purchase warrants.
(3) 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 Registrant of any securities to
its shareholders, including rights, options, or warrants or
securities convertible or exchangeable into common shares of the
Registrant 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 Registrant, or any sale or conveyance to another
corporation of the property and assets of the Registrant 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
Registrant.
(4) 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 Registrant,
the Agent and Pacific Corporate Trust Company (as escrow agent)
on the closing of the private placement. The proceeds will be
released to the Registrant on the earlier of the Expiry Time.
Change of Business Model.
During the period, the Registrant implemented a partial change in
its business model as strictly a retail/infrastructure
development business to a software development/licensing revenue
business. The change reflects the Registrant's efforts to claim
a more defined niche market in light of the current financial
climate and expanding competition within the industry. This
approach has enabled the Registrant to streamline its business
and reduce monthly overhead by 60 percent. The Registrant
continues to maintain its core product development and its plans
for entering the Registrant's first revenue cycle by the
licensing of LocalNet.
Capital Expenditures.
No material capital expenditures were made during the quarter
ended on June 30, 2000.
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 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 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
Registrant'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
Registrant, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
The Registrant 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 Registrant
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 consumers may be affected by Year 2000
issues. The Registrant does not currently have any information
about the Year 2000 status of its potential material suppliers.
The Registrant's Year 2000 plans are based on management's best
estimates.
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 Registrant's business
strategies, continued growth in the Registrant's markets,
projections, and anticipated trends in the Registrant'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 Registrant's
expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Registrant's
control. The Registrant 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 Registrant's products,
competitive pricing pressures, changes in the market price of
ingredients used in the Registrant's products and the level of
expenses incurred in the Registrant'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 Registrant disclaims any
intent or obligation to update "forward looking statements."
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Registrant is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or against the Registrant has been threatened.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On May 11, 2000, the Registrant completed a private
placement of 847,989 special warrants pursuant to exemptions from
prospectus requirements of applicable securities laws in Canada,
at a price of $1.25 per special warrant, resulting in gross
proceeds to the Registrant of $1,059,986 from a total of nine
investors (a similar offering was undertaken in the United
States, but no sales resulted from this offering). Groome
Capital.com, Inc. received an agent's fee equal to 8% of the
total amount raised, 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 this firm. The special warrants and
agent's special warrants have the specific terms and conditions
as set out under Management Discussion and Analysis of Financial
Condition and Results of Operations.
The offering in Canada was made under the exemption from the
registration requirements under the Securities Act of 1933 under
Regulation S; the U.S. offering was made under the exemption
under Rule 506 of Regulation D. 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 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 13, 2000, the annual meeting of shareholders of the
Registrant was held. At this meeting, the following matters were
voted on and approved:
(a) The election of following five (5) nominees as Directors of
the Registrant until the next annual meeting of shareholders and
until their respective successors shall be elected and qualified:
Jason Cassis, David Groves, Greg Alexanian, Robert Tyson, and
Rick Whittaker;
(b) The appointment of LaBonte & Co. as the Registrant's
independent auditors for the new fiscal year commencing on
January 1, 2000;
(c) The Director's and Employees Option Plan; and
4. An increase in the authorized common stock of the Registrant
from 70,000,000 to 80,000,000
Of the 22,038,283 shares eligible to vote at this meeting, a
total of 16,023,500 votes in favor of each of the proposals and
for each of the nominated directors. There were no negative
votes and no abstentions on any of the voting.
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Reports on Form 8-K. A report on Form 8-K was filed during
the second quarter of the fiscal year covered by this Form 10-
QSB, as follows:
A Form 8-K was filed on June 12, 2000 which reflected that,
effective on March 26, 2000, Pacific Corporate Trust Co. is the
new transfer agent for the Registrant, with an address of 625
Howe Street, Suite 830, Vancouver, British Columbia V6C 3B8.
(b) Exhibits. Exhibits included or incorporated by
reference herein: See Exhibit Index.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Urbana.ca, Inc.
Dated: August 18, 2000 By: /s/ Jason Cassis
Jason Cassis, Chief Executive Officer
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
(incorporated by reference to Exhibit 3.3 of the Form SB-2 filed
on August 18, 2000).
3.4 Certificate of Amendment of Articles of Incorporation
(incorporated by reference to Exhibit 3.4 of the Form SB-2 filed
on August 18, 2000).
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 Registrant and investors (incorporated by reference to
Exhibit 4.2 of the Form SB-2 filed on August 18, 2000).
4.3 Form of Unit Warrants to Subscribe for Common Shares issued
by the Registrant to investors on April 27, 2000 (incorporated
by reference to Exhibit 4.3 of the Form SB-2 filed on August 18,
2000).
4.4 Form of Non-Assignable Agent's Compensation Options to
Acquire Units, issued by the Registrant to Groome Capital.com,
Inc. on April 27, 2000 (incorporated by reference to Exhibit 4.4
of the Form SB-2 filed on August 18, 2000).
4.5 Form of Non-Assignable Agent's Warrants to Acquire Common
Shares, issued by the Registrant to Groome Capital.com, Inc. on
April 27, 2000 (incorporated by reference to Exhibit 4.5 of the
Form SB-2 filed on August 18, 2000).
4.6 Non-Assignable Agent's Warrants to Acquire Compensation
Options, issued by the Registrant to Groome Capital, Inc. on
April 27, 2000 (incorporated by reference to Exhibit 4.6 of the
Form SB-2 filed on August 18, 2000).
4.7 Form of Unit Warrants to Subscribe for Common Shares to be
issued by the Registrant to holders of converted loans
(incorporated by reference to Exhibit 4.7 of the Form SB-2 filed
on August 18, 2000).
4.8 Form of Common Stock Purchase Warrant to be issued by the
Registrant to Ladenburg Thalmann & Co. Inc. (incorporated by
reference to Exhibit 4.8 of the Form SB-2 filed on August 18,
2000).
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
Registrant, 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
Registrant, 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 Registrant and Jason
Cassis, dated January 4, 2000 (incorporated by reference to
Exhibit 10.8 of the Form SB-2 filed on August 18, 2000).
10.9 Share Exchange and Share Purchase Agreement between the
Registrant, 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 Registrant, Eagle
Wireless International, Inc., and USA Video Interactive Corp.,
dated January 13, 2000 (incorporated by reference to Exhibit
10.10 of the Form SB-2 filed on August 18, 2000).
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 Registrant and Groome
Capital.com, Inc., dated April 10, 2000 (incorporated by
reference to Exhibit 10.12 of the Form SB-2 filed on August 18,
2000).
10.13 Administration and Services Agreement between the
Registrant, Groome Capital.com, Inc., and InvestIn.com
Securities Corp., dated April 10, 2000 (incorporated by
reference to Exhibit 10.13 of the Form SB-2 filed on August 18,
2000).
10.14 Special Warrant Agreement between the Registrant and
Pacific Corporate Trust Company, dated April 27, 2000
(incorporated by reference to Exhibit 10.14 of the Form SB-2
filed on August 18, 2000).
10.15 Share Purchase Warrant Agreement between the
Registrant and Pacific Corporate Trust Company, dated April 27,
2000 (incorporated by reference to Exhibit 10.15 of the Form SB-
2 filed on August 18, 2000).
10.16 Escrow Agreement between the Registrant, Groome
Capital.com, Inc., and Pacific Corporate Trust Company, dated
April 27, 2000 (incorporated by reference to Exhibit 10.16 of
the Form SB-2 filed on August 18, 2000).
10.17 Letter Agreement between the Registrant and Ladenburg
Thalmann & Co. Inc., dated June 15, 2000 (incorporated by
reference to Exhibit 10.17 of the Form SB-2 filed on August 18,
2000).
21 Subsidiaries of the Registrant (incorporated by reference
to Exhibit 21 of the Form 10-KSB filed on March 31, 2000).
27 Financial Data Schedule (see below).
