US SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
PeakSoft Multinet Corp.
AJAX, ONTARIO, CANADA
VANCOUVER, BRITISH COLUMBIA, CANADA
CALGARY, ALBERTA, CANADA
1801 Roeder Avenue, #144, Bellingham, Washington 98225 USA
Securities registered or to be registered pursuant to Section 12 (b) of the Act.
Title of each class: Common Shares
Name of each exchange on which registered: Alberta Stock Exchange, OTC BB
Securities registered or to be registered pursuant to Section 12 (g) of the
Act: Common Shares
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: None
Indicate the number of outstanding shares of each of the issuers classes of
capital or common stock as of the close of the period covered by the annual
report: 3,801,399 Common Shares
Indicate the check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Page 0 of 34file such
reports) and (2) has been subject to such filing requirement for the past 90
days. [X] Yes [] No
Indicate by check mark which financial statement item the Registrant has elected
to follow.
[X] Item 17 [ ] Item 18
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PAST FIVE YEARS)
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[X] N/A [ ] Yes [ ] No
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TABLE OF CONTENTS
PART I
ITEM 1 - THE CORPORATION AND DESCRIPTION OF BUSINESS
ITEM 2 - DESCRIPTION OF PROPERTY
ITEM 3 - LEGAL PROCEEDINGS
ITEM 4 - CONTROL OF REGISTRANT
ITEM 5 - NATURE OF TRADING MARKET
ITEM 6 - EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
ITEM 7 - TAXATION
ITEM 8 - SELECTED FINANCIAL DATA
ITEM 9 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ITEM 10 - DIRECTORS AND OFFICERS OF REGISTRANT
ITEM 11 - COMPENSATION OF OFFICERS AND DIRECTORS
ITEM 12 - OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
DIRECTORS, OFFICERS AND EMPLOYEES.
ITEM 13 - INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
PART II
ITEM 14 - DESCRIPTION OF SECURITIES TO BE REGISTERED - NOT APPLICABLE
PART III
ITEM 15 - DEFAULTS UPON SENIOR SECURITIES - NOT APPLICABLE
ITEM 16 - CHANGES IN SECURITIES, CHANGES IN SECURITY FOR REGISTERED SECURITIES
AND USE OF PROCEEDS. - NOT APPLICABLE.
PART IV
ITEM 17 - FINANCIAL STATEMENTS (Annual Report)
ITEM 18 - FINANCIAL STATEMENTS NOT APPLICABLE
ITEM 19 - FINANCIAL STATEMENTS - SEE ITEM 17
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PART I
ITEM 1 - DESCRIPTION OF BUSINESS
PeakSoft Corporation (hereinafter referred to variously as PeakSoft, Peak, or
the Corporation) was incorporated under the laws of the Province of British
Columbia on August 24, 1994 under the name Peak Technologies Inc., and was
continued in the Province of Alberta under the Business Corporations Act of that
province on August 16, 1996. The Canadian head office of the Corporation is
located at #501 - 675 West Hastings St. Vancouver, British Columbia. The
registered office of the Corporation is located at Suite 316-1167 Kensington
Crescent NW, Calgary, Alberta, Canada, T2N 1X7.
On October 27, 1997 at a Special General Meeting of the Corporation its
shareholders approved the change of the Corporations name from Peak Technologies
Inc. to PeakSoft Corporation.
At this point in time the Corporation has but one active wholly owned
subsidiary -- PeakSoft Corporation (USA) (PeakSoft USA), a Washington State
company. It has in the past had other active wholly owned subsidiaries:
(1) BREEZ Business Management Systems Inc. (BREEZ - currently inactive), a
Washington State company, which provided computer support services by
telephone and computer repair services from a depot facility;
(2) Peak Media, Inc. (currently inactive), another Washington State company
which was incorporated to develop and to publish multi-media CD-ROM works
for the consumer market; and
(3) Chameleon Bridge Technologies Corp. (CBT), a British Columbia company,
which was acquired for its computer software research and develop
capabilities, capabilities which have now been absorbed by PeakSoft, its
parent company.
PeakSoft is the main operating entity, which has utilized PeakSoft USA as its
U.S. marketing and operations division. CBT was acquired for its research and
development capabilities, which have now been transferred to PeakSoft, and is
currently not active. The Corporations senior management reside in different
localities in the United States and Canada with the focal point being the
Corporations head office in Bellingham, Washington where Mr. Douglas Foster,
PeakSofts Chief Executive Officer resides. Mr. Simon Arnison, Chief Technology
Officer, resides in the Ajax, Ontario area where he maintains a home office. The
senior management group maintains daily contact through phone, fax and e-mail.
In addition, management meetings are held at irregular intervals in Bellingham.
Background of the Corporation
The Corporation was founded by Mr. Douglas Foster in the summer of 1994 to
combine the operations of Peak Media, Inc. and BREEZ. For ease of exposition,
when used herein to describe the Corporations business, the terms PeakSoft or
the Corporation shall, unless otherwise indicated, include the activities of its
subsidiaries.
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In mid-1995, Peak launched its first CD-ROM product entitled Mt. Everest Quest
for The Summit of Dreams, Volume 1; The North Side. This multimedia title tells
the tale of eight international teams attempting to reach the summit of Mt.
Everest.
PeakSoft determined that its resources would be more profitably deployed in the
development of Internet products. The Corporation does not anticipate creating
any further content-based CD-ROM products.
PeakSoft (at the time still known as Peak Technologies Corporation) was listed
on The Alberta Stock Exchange, under the symbol PKT, on August 10, 1995.
In August 1995, Peak completed its initial public offering by exchange offering
prospectus. The Corporation issued 1,750,000 Common Shares at a price of
CDN$0.40 per common share for gross proceeds of CDN$700,000.
On November 18, 1996, Peak released its initial Internet software product
Net.Jet, since renamed and now called PeakJet. PeakJet is a Java-based
accelerator for the Internet. It is designed to reduce waiting time
significantly and to increase the speed with which a user can browse and view
pages and links within a website and travel from site to site on the World Wide
Web. Typically, browsers utilize less than 11 percent of the total available
throughput speed of a modem. With PeakJet, modem speeds of 50 percent to 90
percent of capacity are possible, resulting in reduced waiting times and faster
web browsing. PeakJet runs on any IBM-compatible computer system running Windows
95 or Windows NT. PeakJet works as an add-on for browsers like Netscape
Navigator, Microsoft Internet Explorer, Oracle Power Browser and other
Java-enabled browsers running on a PC.
In May 1996, Peak completed the arms length acquisition of all of the capital
stock of CBT by allotting 1,500,000 common shares to those persons having a
right to CBT shares at an issue price of CDN$1.11 per share for an aggregate
purchase price of CDN$1,665,000. The Common Shares issued to the shareholders of
CBT were subject to an escrow agreement which required that three milestones to
be met, two which were passed shortly following the completion of the agreement.
The final milestone was also expected to be met. It was represented to Peak that
by the time of the acquisition, CBT had invested approximately CDN$500,000 and 5
man-years in the development of certain Java-based proprietary technology which
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has proved useful in advancing functionality, interactive content, animation and
ease of use of the World Wide Web.
On May 10, 1996, Peak completed a private placement of 466,665 units at a price
of CDN$0.75 per unit, for gross proceeds of approximately CDN$350,000. Each unit
consisted of one common share and one share purchase warrant (the First
Warrants) which enabled the holder of it to purchase one common share at a price
of CDN$1.00. These warrants expired on May 9, 1998.
In May 1996, the Corporation acquired certain proprietary Java server technology
known as ExpressO in an arms length transaction from Mr. Charles T. Russell, who
was carrying on business as Innovative Desktop. This technology was purchased in
exchange for 133,890 Common Shares at an issue price of CDN$1.33 per common
share for an aggregate purchase price of US$130,000. 102,991 Common Shares were
issued in fiscal 1996. Two additional allotments of 15,449 shares each were to
be issued upon achievement of certain performance milestones.
These performance milestones were met in fiscal 1997 and these two allotments,
totaling 30,898, were issued in fiscal 1997.
Pursuant to a Software License and Joint Marketing Agreement dated June 5, 1996
and an Addendum dated June 24, 1996 between Peak and Infinop, Inc. (the Infinop
Agreement), the Corporation obtained an exclusive worldwide license with an
initial term of three years, subject to automatic one year renewals thereafter
(unless terminated earlier in accordance with the provisions of the Infinop
agreement), for the utilization, marketing and distribution of the Lightning
Strike program written in Java, which is a wavelet compression technology which
provides up to 200 to 1 compression for image transmission and increases the
speed of picture and graphics transmission over the Internet. Peak issued 35,700
Common Shares to Infinop for the license at a price of CDN$0.94 per common share
for an aggregate acquisition fee of CDN$33,558. Pursuant to the Infinop
agreement, Peak was required to make an advance royalty payment of CDN$68,095
and monthly payments of CDN$13,619 for ten months in the initial year. The
parties have subsequently reached an agreement to cancel this license, and Peak
has ceased making any payments thereunder, as the Lightning Strike program has
not ultimately been incorporated into any of PeakSofts products.
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On June 11, 1997 the Company issued and had accepted a prospectus in British
Columbia, Alberta, and Ontario and cleared the First, Second, and Third Special
Warrants. The prospectus was the means whereby shares were registered in order
to issue and deliver free trading shares to the holders of the First, Second,
and Third Special Warrants pursuant to the respective agreements. As a result on
June 11, 1997 the Company issued 2,775,667 Common Shares (1,466,667 to the First
Special Warrant Holders, 550,000 to the Second Special Warrant Holders, and
759,000 to the Third Special Warrant Holders) of these shares 63,942 were issued
for services provided to the Company, and the balance of 2,711,725 shares were
issued for cash. The Company became a reporting issuer in British Columbia,
Alberta, and Ontario at that time.
On August 11, 1997 PeakSoft announced the signing of a letter of intent for a
US$2 million financing commitment with Elliott Associates LP, (Elliott), the
manager of a New York Investment group, in consideration of promissory notes
bearing interest at 12 percent per annum and warrants to purchase Common Shares.
The first stage of the financing agreement of US$1,125,000 closed on September
9, 1997. The notes payable were issued in September, 1997 and represent 12
percent senior promissory notes held by Liverpool Limited Partnership and
Westgate International L.P. Attached to the issued notes are warrants to
purchase 3,120,075 common shares at a price of CDN$.50 per share expiring in
September 1999 and a right of first refusal on future capital raising
transactions. The notes reflect an effective interest rate of 18% per annum
and a value of CDN$173,759 has been attributed to the warrants issued and
recorded as other paid-in capital.
A second issuance of 12 percent senior promissory notes of CDN $1,207,500 (USD
$875,000) were to have been issued subject to certain terms and conditions, with
warrants attached to purchase 1,879,925 common shares of the Company at a price
of $0.64 per share expiring in February, 2000. The terms and conditions of this
second purchase of notes required the Company to attain certain targets which
were not achieved, in the result of which the amount of the second advance was
renegotiated downward to USD $140,000, this advance being made on March 19, 1998
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against the issuance of a second set of promissory notes and of 500,000 Share
Purchase Warrants which are convertible into Common Shares at a price of
CDN$0.40.
BUSINESS OF THE CORPORATION
Overview
1999 was a year of change for PeakSoft. During the year, the Company directed
significant resources towards its online small business community portal located
at http://www.peak.com. PeakSoft developed a plan to "facilitate the formation,
growth, and prosperity of small businesses globally through leading internet
communications solutions which empower small businesses to compile knowledge and
to develop e-commerce and other commercial relationships."
Using proprietary Java-based technology, PeakSoft is developing products that
address the Internet performance concerns of consumers and businesses.
The Technology
In early 1995, the Corporation made a research and development commitment to
develop products for the Internet. The result was the development of the
Corporations Java-based technology.
As a result of its acquisition of CBT developers who were employed by that
company, the Corporation secured the ability to develop applications utilizing
the Java programming language.
PeakSofts primary proprietary technology is based on the Java server ExpressO
and is complemented by other technologies, including Javalin, a Java based
development environment. ExpressO provides the Corporation with the benefits of
a complete Java server in developing Internet applications and, in particular,
those applications which address browsing speed and performance issues.
The acquisition of CBT brought new engineering staff and unfinished technology
to Peak. The technology known as Javalin had no guarantee of being merchantable
or completed, but in the opinion of management offered promise for the company
to establish itself in the Internet market. Approximately six months after the
acquisition Peak did, in fact, successfully commercialize the product and
continue to expand the core technology. As an example the company released Web
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Animator in 1996 which was re-named Jet Effects in 1997 and continues to be sold
by the company today. In addition the technology was applied to the creation of
NetJet in November 1996, now known as PeakJet and to the creation of NetMagnet
released in January 1998. While there is no guarantee that the technology will
continue to be marketable, the Company released PeakJet 2000 in July 1998 and
has five other products based upon this technology underdevelopment.
Products
PeakSofts core technology has been translated into a comprehensive product
strategy.
The company announced PeakJet 2000 and commenced sales of this product on July
2, 1998. PeakJet 2000 is a next generation of the company's original browser
accelerator offering new features and specific features for the International
marketplace.
The company licensed its technology to InfoBuild Networks Inc. InfoBuild has
released its first application targeted at the financial industry, BSmarter and
is in the process of launching its next product BFaster.
The company announced its first value added solution, LawTrack targeted at
providing Internet Research to the legal community on October 22, 1998. The
company announced Realty Tracer on January 13, 1999, its second value added
solution product targeted at the Real Estate market, based upon its core
technology.
Marketing Strategy
To capitalize on its technology, PeakSoft is addressing the needs of the rapidly
growing market of Internet users. The Corporation plans to apply its technology
to performance solutions for business in the emerging intranet marketplace, and
will shortly be releasing a product to assist members of the legal profession to
access and to organize the resources available to them on the Internet. In
addition, PeakSoft is proposing to license other companies to develop its
software for corporate and institutions
Since its inception PeakSoft has applied its core Java based technology to
solving problems associated with the speed, ease of use and information
management issues of the Internet. PeakSofts first products; NetJet, released in
November 1996, PeakJet 1.55 released in March 1997 and Jet Effects released in
March 1997 were marketed using traditional software sales strategies.
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These strategies included: 1) Sales through traditional distributors into major
retail locations across North America, 2) Bundling of the products with other
complimentary applications, 3) Offering trials of the products through
compatible distribution partnerships such as modems and other computer devices,
4) Creating a presence on the WWW for the offer to try or to purchase the
products, 5) Establishing International sales relationships, 6) Through
http://www.peak.com, the Company will provide products, services, information,
and forums (to name a few of our offerings) to the Small Business Community to
assist its members in the task of achieving profitability and prosperity.
Peak.com plans to drive revenues initially from several diverse sources: revenue
sharing, business-to-business (B2B) e-commerce, and advertising..
The number of users of the Internet is projected to continue to grow through the
next 5 years. In 1998 the emergence of E-Commerce and Electronic Software
Distribution has created opportunities for the company to expand its product
offering and establish new channels of distribution. In addition to our previous
strategies, which continue to be refined, PeakSoft is establishing Internet
partnerships and co-marketing alliances based upon a profit sharing model. The
Company opened the PeakStore on June 23, 1999 in order to focus on an e commerce
model.
Marketing activities and Public relations focus on the Internet as the primary
vehicle for creating interest in the companys products followed by traditional
press and print focus.
The company plans to release new applications focused on solving specific
industry problems and allowing them to gain maximum value from the Internet.
While there is no guarantee that these applications will be accepted, the
company sees an opportunity to increase its product pricing and specialize its
products for specific industries and tasks.
Management, Staff and Facilities
PeakSoft has 9 employees who work primarily from its leased office space in
Bellingham, Washington. Certain members of management also work from home
offices in the Vancouver area of British Columbia (see The Corporation). The
Corporations Bellingham facilities are used for its customer service,
accounting, legal, marketing and product quality assurance functions. PeakSofts
programmers work both from the Bellingham office and from home offices. The
Corporation had at one time a British Columbia office, but this was closed in
March 1997.
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Senior management of Peak possesses a strong industry background in business
management, finance, technology, sales and marketing. Peaks Board of Directors
provides a breadth of public company, software industry and corporate finance
experience. The organization and duties of the Corporations management are as
follows:
President & C.E.O. - Douglas Foster
Overall responsibility for the planning and execution of the Corporations
business with marketing being his primary focus. Mr. Foster reports to the
Board of Directors.
Chief Technology Officer - Simon Arnison
Mr. Arnison is responsible for keeping the Corporation abreast of current
technology developments and their impact on its current and impending products.
He proposes new product research and development. Mr. Arnison reports to the
Chief Operating Officer.
Chief Operations Officer - Timothy Metz
Mr. Metz is responsible for the financial operations and day-to-day management
of the Corporation.
Core Technology
Javalin Technology
PeakSofts initial investment in Java following its acquisition of CBT resulted
in the development of Javalin. Javalin is proprietary technology that allows
PeakSoft to quickly develop high performance Java applications. It incorporates
a real time multimedia enhancement for the Internet that is designed to animate
and increase the impact of content on the World Wide Web. Javalins Java-based
software framework will run in conjunction with all major browsers and Windows
95 and Windows NT computer platforms. Its modular structure requires no special
plug-ins or readers. Its layered architecture creates a steady multimedia
presentation flow. Even with todays Internet bandwidth limitations, the problems
of lengthy downloading delays are reduced.
Javalin has a graphic user interface for intuitive drag and drop authoring, and
a scripting language for simple but detailed control of the structure and
behavior of objects. Its layered architecture introduces presentation structures
in hypertext, vector metagraphics, scalable bitmaps and animation. Sequenced
effects such as movements, color and texture changes, zooms, rotations, fades,
and wipes can be applied to objects in each level. Conditional events such as
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collision detection between objects and user interaction can create independent
chains of sequences. Javalins modular construction can be layered to create
multi-stated, multifaceted graphics and environments. It can also be directed to
low level programming functions.
Javalin was developed specifically for web authors, a market the Corporation has
subsequently determined to be less attractive than Internet users who want
enhanced performance. For this reason, the Corporations Javalin technology has
not been developed into a completed consumer product, but rather is used
internally by the Corporation as a tool to develop its other products.
PeakSoft ExpressO
In May 1996, PeakSoft acquired ExpressO server technology from Innovative
Desktop Inc. ExpressO is a multi threaded server written entirely in Java and is
currently perceived as an architecture that may form the basis of many
applications to come. ExpressO has a well-defined architecture and has
programming interfaces, which make it a flexible software building block.
Since 1996, PeakSoft has developed additional technology in Java which includes
agents and caching capabilities complementary to ExpressO and Javalin. The
Corporation owns all technology outright.
NetMagnet(TM) Technology
The following is an overview of the Company's core technology (NetMagnet(TM)):
The Internet's raw potential tantalizes us with the promise of information
retrieval at a keystroke. Memories of hours and days poring over spreadsheets,
photocopying reference books or tediously searching technical journals fade in
the rapidly evolving technical wonderland of the Internet.
The Internet has yet to deliver on the promise that has captivated the computer
world. Using the Internet is often inefficient, time-consuming and frequently
frustrating. Exponential growth of both users and Web sites compound the
organization and retrieval issues. Business users spend more time looking for
information than analyzing it...a phenomenon recognized by developers of a new
category of information technology called knowledge management.
More than a list of facts or numbers, knowledge can be defined as the
connections between disparate information. Knowledge workers, a growing
professional description, gather information, manage or organize it, and are
able to transmit and share it. The cumulative knowledge base built within an
organization becomes one of its most valuable assets.
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NetMagnet(TM) technology drives straight to the core of the knowledge management
challenge. Once content or information is retrieved from the Web or from a
database, a knowledge worker can begin the management and transmission process,
essentially completing the cycle that accounts for the accumulation of a
significant knowledge base.
Research and retrieval:
Information retrieval often begins with a keyword search. Keyword refinements
can reduce overwhelming hit lists, but typically, a research path through the
undifferentiated hypertext of the Web requires frequent backtracking. The random
paths created by following links can result in locating useful information or
lead the user completely off track. Assigning relative significance to data as
it is encountered on a Web search is nearly impossible prior to a completed
search, but browsers offer only rudimentary tools to cache content during the
collection process. The retrieval process is further complicated when only
selected elements on any Web page are relevant, but there is no tool to capture
and save only these elements. Collection of useful information from the Web is
handy, but what happens when the information you need is maintained on a
proprietary database? And how do you ever keep track of data that changes
frequently?
Managing information:
Lists become meaningful when built in priority order; a report is meaningful if
extraneous data has been deleted. Managing information blends the facts and
figures with human experience. The need to edit, revise, prioritize, and explain
is what turns information into knowledge.
Sharing knowledge:
After searching, retrieving, and managing all the information, conclusions are
shared with other users as part of the normal collaborative process. The
relevant knowledge includes the facts and figures and reflects the thought
processes, methods and conclusions developed during the management and analysis
process. The need to efficiently package, summarize, and deliver knowledge to
others, and, in turn, to receive feedback from the recipient, completes the
knowledge communication cycle.
What tools are available now:
Search engines. The portal sites that lead us into the maze are valuable tools,
but stop short. The results they return are often too coarse; different engines
offer different competencies; and few present organizational aids.
Push technologies. Channels seemed to be a solid answer to delivery of relevant
content, but in reality, they push undifferentiated editorial content, sometimes
on target but more often not. The broadcast methodology does not fulfill the
personalization potential of the Web.
Bookmarks and favorites. Simple to use, bookmarks let you put a virtual
paperclip on every page you think you'll want to visit again. But the overly
simplistic browser filing systems quickly become overrun with too many entries
often listed by obscure names.
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What is needed now:
NetMagnet, originally positioned as an Internet research assistant for the savvy
Web surfer, is finding a home in work groups and enterprise dependent on
critical knowledge management processes. Built to use existing technologies like
the browsers, NetMagnet technology extends Web interface functionality to enable
users to both create and consume knowledge.
Based on access to Web and database maintained content, NetMagnet technology
delivers content management options including:
. Chronological tracking of every visited page
. Managing interesting, but off-target, links for future retrieval and
consideration
. Storage system for grouping Web pages for regular, easy access
. Updating cached content from data sources on the Web at the user's
direction
. Scheduling cache updates
. Systems to capture and manage both Web based content and desktop files
in content organizers
. Transporting content organizers efficiently and easily
NetMagnet technology brings content management and delivery to the vast
resources of data migrating to electronic format. As content is enriched on a
multimedia stage, the user can fully explore the relevance of the content, blend
it with his or her own existing knowledge and share the results.
Real-life applications:
As the borders of the Internet are constantly nudged into new territory by
rapidly evolving hardware and software tools, whether the Internet is the means
to an end or the end itself isn't always apparent. If you subscribe to the
belief that people, with all their idiosyncrasies, preferences and
individuality, are driving the entire process, you'll see that what we want is a
medium that accommodates our unique needs. To that end, the trends are to
customization, personalization and one-to-one commerce.
The NetMagnet technology recognizes the individuality inherent on the Web and
that each link in the communication cycle builds relationships between senders
and recipients. Applications developed with this exciting technology can keep
agents in touch with clients and collaborative workgroups in constant
communication. As e-businesses recognize their abilities to efficiently design
and deliver personalized messages to provide service or market new products with
technologies like NetMagnet, we'll see the Web evolve beyond the broadcast model
to a new level of communication.
Intel recognizes NetMagnet:
Intel, world's leading chip maker, has recognized the value in NetMagnet
technology in the company's recently launched "Constant Computing" initiative.
With other leading software and Web based engines, NetMagnet was selected to
demonstrate the sophisticated work that could be accomplished with the latest
generation of Intel-powered PC's, the Web, and leading software packages.
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MARKETPLACE
Overview
According to a June, 1996 study by the Georgia Institute of Technology (reported
on the website of Forrester Research), in the first three months of 1996, nearly
35 million persons in the United States over the age of 16 used the Internet or
accessed on-line services. This represents a growth rate of 52 percent over
1995. According to Dataquest, the Internet is one of the fastest growing markets
in the world with 1997 growth of 71 percent to 82 million computers worldwide
online. Driven by increased business and international expansion the year 2001
is projected to exceed 268 million computers online.
Users expect the Internet to be fast and easy to use. While the Internet is the
fastest growing communications, entertainment and marketing medium in the world,
most people find it frustrating to use. Access is slow, content is static, and
information is often difficult to find and access.
According to Forrester Research, Internet software revenue will increase from an
estimated US$1.4 billion in 1997 to US$8.5 billion by 1999. These revenues will
be generated in the following market categories (according to a 1996 industry
study by I/PRO reported on the Forrester Research website):
Fast growth and transition to non-technical use has created technical
(bandwidth) problems for the Internet. As reported by most industry
publications, and confirmed by PeakSofts focus groups, the primary frustration
with the Internet is the slow speed of navigation followed by ease of access,
ease of searching for information and underwhelming content.
Users do not want to wait long minutes to view pages and graphics, and they are
not willing and often not capable of going through the tedious and confusing
process of down-loading and setting up plug-ins and players in order to view
interesting content. What they really want is the experience to be as easy as
dealing with other household appliances, with instantaneous results.
PeakSoft has recognized these problems, and has released Peak Net.Jet (now known
as PeakJet), PeakJet 2000, has announced LawTrack and Realty Tracer (Company's
first 2 knowledge management solutions) and is developing other products to
address aspects of the Internet opportunity.
According to the latest report from the Gartner Group world wide e-commerce is
expected to grow to S7.29 trillion by 2004.
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Target Markets
Primary - Consumers and Small Business vertical communities, Internet Research
The largest potential market for PeakSoft products is the large and growing
group of individuals who, and businesses and households which, want access to
the Internet. PeakSoft intends to address this market through traditional
consumer-based distribution channels, World Wide Web based distribution
programs, and direct to business marketing.
PeakSoft is launching a series of products targeted at solving key problems
which users are experiencing on the Web - those relating to speed of access,
ease of use and productivity. PeakJet addresses the biggest problem by
increasing the speed of information delivery to users. The Peak Jet Effects is
targeted to web-site authors and graphic artists. With the introduction of
PeakJet 2000 users now have a sophisticated intelligent caching web browser
accelerator.
High quality, Java-based products combined with impulse level pricing have
helped to reduce PeakSofts barriers to entry in the distribution channel. High
impact packaging, promotion and advertising programs lead retailers to place
PeakSofts products in high profile areas. Additionally, World Wide Web marketing
programs help develop the market and provide initial feedback as well as permit
the offering of limited use versions at little or no cost.
Corporate Intranet, Extranet and Research
PeakSofts technology is being targeted to the growing Internet, Intranet,
Extranet market as well. PeakSofts server technology is being bundled into a
product strategy, with the planned launch into the intranet market of work group
and information management products early in 2000. These products and tools will
be targeted at small business and corporations as well as Web service and site
providers.
PRODUCTS
The following is an overview of PeakSofts initial products.
PeakJet 1.5
PeakJet (formerly called Peak Net.Jet) is an accelerator for the Internet. It
directly addresses the primary problem with the Internet: lack of speed while
viewing the World Wide Web. PeakJet can significantly reduce the waiting time
and increase the speed with which a user can view pages and links within a site
and when traveling from site to site.
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PeakJets performance enhancement varies, depending upon the users activity.
Users will notice speed increases beyond their normal browser capacity, both for
sites browsed for the first time and for those previously visited and cached.
PeakJet reduces waiting time regardless of the content type being loaded whether
text, sound or images. PeakJet reduces access time to all sites, Java or
otherwise. Additional speed gains are realized when accessing sites utilizing
Peaks ExpressO Java server. PeakJet boosts Web surfing performance on both 14.4
and 28.8 modems, as well as on ISDN, T3 and TI connections.
PeakJet works with PC (Windows 95 and Windows NT) compatible systems and runs
with any Java-enabled browser, including Netscape 2.0 or later, Microsoft
Internet Explorer 3.0 or later, JavaSofts HotJava, and Oracles Power Browser.
PeakJet was released on November 18, 1996 at a suggested retail price of US
$29.95.
JetEffects
A Java-based tool for World Wide Web authors, JetEffects allows animations,
special effects and sounds to be added to text and graphics. JetEffects provides
a graphic user interface, allowing non-programmers to bring static Web sites to
life.
JetEffects began selling separately over the Internet for US $49.95 beginning in
November 1996 and was released into the retail channel on March 10, 1997. This
product also offers potential bundling and original equipment manufacturer
opportunities.
ExpressO from PeakSoft
ExpressO is a full-featured easily customized Java Web server that enables peer
to peer communication between users. Its small size and cross-platform
compatibility allows it to reside on a broad range of computer platforms
supporting a Java interpreter. Ideal for both Internet and intranet users,
ExpressO products include Commercial Web Server, a Lite Personal Web Server, the
ExpressO Programmer Kit and the Server Construction Kit.
ExpressO products will be sold to corporations, through original equipment
manufacturer agreements and to World Wide Web developers. These products are
expected to be released in 1999.
PeakJet 2000
A sophisticated Java-based utility that provides browser acceleration as well as
intelligent caching. PeakJet 2000 is compatible with Windows 95, 98 and NT 4.0
operating systems. It is also compatible with all current versions of both
Netscape Navigator and Microsoft Internet Explorer.
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LawTrack
PeakSoft announced LawTrack on October 22, 1998. LawTrack is a breakthrough
solution for anyone doing research in the legal arena because it's a knowledge
management tool designed to marry publicly available law content from federal,
state and local governments with proprietary subscription-based Web content and
even a company's internal intranet knowledge base, into a new breed of research
brief.
LawTrack enables legal researchers, administrators, librarians and paralegals to
save valuable research time and effort by efficiently organizing, adding value
to and sharing Web research results with colleagues.
LawTrack works with either the Netscape Navigator or Microsoft Internet Explorer
Web browser to provide nearly all Internet users in the legal profession the
capability to gather, annotate, present, view and publish hard copies of
Web-based research data electronically. LawTrack's self-contained research
presentations can be provided to end users of the information via e-mail or by
diskette for viewing using a browser, even without the LawTrack application
installed.
LawTrack includes PeakSoft's award-winning Java-based Web acceleration
capabilities, which can significantly improve browsing speeds. LawTrack uses
acceleration agents to "look-ahead" and pre-load links, and creates its own
intelligent cache so users can access them quickly. Users can more thoroughly
review the gathered information offline, which saves online access and expensive
proprietary research fees.
LawTrack's PageTracer provides a complete history of each browsing session,
which allows legal professionals to maintain accurate records of time spent on
Internet research on behalf of a particular client. Users can also quickly
retrieve a list of important Web page address listings from past searches for
faster access to a particular site. These lists can be edited by deleting,
reordering and annotating every citation in each browsing session's history.
Realty Tracer (CODE NAME)
RealtyTracer is the next installment in the PeakTrack series of vertical market
Internet information management applications for small- to medium-sized
businesses. The PeakTrack series is based on the NetMagnet core technology.
Current PeakTrack applications include Small Business, Law and Realty.
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Using RealtyTracer, real-estate professionals can quickly and easily find,
intelligently organize and clearly present information extracted from all
Web-accessible sources to provide the level of value-added service today's
increasingly sophisticated home buyers and sellers demand.
Standard Internet browsing tools lack powerful organization and presentation
features that are essential for today's realtors that strive to be competitive
in an increasingly 'wired' market RealtyTracer enables real- estate
professionals to quickly and efficiently utilize Web-based resources, including
multiple-listing data, internal agency information and specially, pre-loaded
real estate-specific Web sites.
RealtyTracer enables realtors to save valuable research, preparation and
presentation time and effort by efficiently organizing, adding value to and
sharing Web-based listing information with clients. RealtyTracer works with
either the Netscape Navigator or Microsoft Internet Explorer Web browsers to
provide real- estate professionals the capability to electronically gather,
view, annotate, present and publish hard copies of Web-based real-estate
information. RealtyTracer's self-contained research presentations can be
provided to clients via e-mail or on diskette for viewing on a PC using a Web
browser, even without the RealtyTracer application installed.
RealtyTracer includes PeakSoft's award-winning Java-based Web acceleration
capabilities, which can significantly improve browsing speeds. RealtyTracer uses
acceleration agents to "look-ahead" and pre-load links, and creates its own
intelligent cache so users can quickly and more intuitively access "saved" Web
pages. This enables realtors to more conveniently and thoroughly review the
gathered information off their hard drives rather than while connected to the
Internet. This feature keeps phone lines freed up, saves online access charges
and reduces expensive proprietary research fees.
RealtyTracer's PageTracer provides a complete history of each browsing session.
Realtors can also quickly retrieve a list of important Web page address listings
from past searches for faster access to a particular site. These lists can be
edited by deleting, reordering and annotating every citation in each browsing
session's history.
RealtyTracer users can share their Web research data with others using the
product's PagePresenter technology. It enables users to create slide shows of
pages they have gathered, add comments, and share with others. While viewing the
pre-selected Web pages, clients can choose to visit a particular Web site by
simply clicking a button to activate an online browsing session.
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MARKETING AND DISTRIBUTION
Main Channels
A number of trends are changing the face of distribution for software companies.
Since PeakSoft sells Internet solutions it is important to understand the trends
in this category as well. Below we will briefly introduce the trends and how
they effect PeakSoft strategies.
1. Growth of Internet Commerce in all markets. E-Commerce is experiencing
substantial growth as consumers become more confident about conducting
financial transactions over the Web. The Gartner Group forecasts that
global e-commerce will grow to $7.29 trillion by 2004. PeakSofts strategy is
to utilize its core technology in order to provide services and products to
the small business community. There are 85 million small businesses globally
that produce 50% of the global e-commerce revenue.
2. Internet software sales are increasing on the Web. It follows that
Internet users are tending to purchase software on the Web. The result has
been lower than expected performance of Internet software and utilities in
the traditional retail channel, and a corresponding increase in sales
on-line. PeakSoft has upgraded its e-commerce capability and opened the
PeakStore at www.peak.com to take advantage of this trend.
3. Increase in e-commerce has led to increase in Web based retail
opportunities. Non-traditional companies are entering the e-commerce market
as a way to increase profits. Firms that are not thought of as traditional
retailers are creating partnerships and profit sharing arrangements. As an
example, software and other products can be purchased at Web boutiques on
sites such as The Wall Street Journal, Ziff Davis, CBS and others. PeakSoft
has established an Alliance Program to increase its participation in these
forms of retail opportunities.
4. Retailers have moved to the Web, Egghead, Comp USA and others. Peak has
established over 20 retail locations so far and is seeking to improve its
terms of payment in these new markets.
5. Direct to Customer strategies are producing promising results, firms like
Dell, Gateway, RealNetworks and others have established substantial
improvement in margins and sales through these programs. PeakSoft alliance
programs are based upon a profit sharing strategy through partnerships that
can reach directly to potential customers.
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PeakSoft Web Site
The Corporation has developed and maintains high profile website:
www.peak.comand at www.peaksoft.com. This site, complete with product and
corporate information, is where visitors can see samples of PeakSofts products,
read press releases and critical reviews.
PeakSoft offers customer support, forums for feedback and links to other topical
sites. Guests can even get a current stock quote, view the Corporations chart or
calculate the value of their PeakSoft holdings. Since April 1996, the
Corporation has positioned teaser samples of Javalin animations on the site,
which have been very active and growing in popularity.
PeakSoft has developed well its presence into a showcase for its products and
technology and a gathering place for consumers. PeakSoft regards the Internet
and its websites as low cost marketing tools and has developed a focused plan to
take advantage of this opportunity.
All of PeakSofts current and planned products and offerings are World Wide
Web-enabled. This means that every PeakSoft software program has an automatic
launch capability to www.peak.com where it could be automatically updated with
minor releases of the software. Currently, upgrades have been unspecified and
are expected to be minimal and infrequent. This automatic update function
provides PeakSoft with a continuing access to its customer base.
Direct distribution software is one of the few products that can take advantage
of the low cost distribution channel of the Internet. Most PeakSoft products and
services can be sold and distributed via the Internet, (although PeakSofts more
advanced products will be sold by licensees dedicated to their professional and
institutional markets). PeakSoft provides direct consumer delivery for all of
its consumer products by the simple expedient of their being downloaded from one
of PeakSofts websites. ExpressO, the Corporations Java server, is also
deliverable via the Internet. Product upgrade programs requiring small program
extensions are promoted and delivered directly over the Internet as well, a
practice which will be extended to PeakSofts more sophisticated products.
Currently, upgrades have been unspecified and are expected to be minimal and
infrequent. While PeakSoft expects modest results in the short term, the
Corporation expects this area to grow into a significant revenue center in 1999
and 2000.
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Support
PeakSofts support programs are geared toward developing brand awareness in
addition to providing a high level of support. The first level and highest
priority for support calls will be through the World Wide Web sites. Users can
enter their support issues directly in the support area of the site.
Additionally, they can view the frequently asked questions area where most of
the common support issues will be answered. Responses to the customers support
issues are most commonly made via e-mail.
Phone calls for support, unless critical, receive a secondary priority behind
World Wide Web support calls. Whenever possible PeakSoft emails the response or
calls back if required. If the solution were available in the frequently asked
questions area or more easily attainable through the World Wide Web, PeakSoft
mentions that fact to urge the customer to use electronic support in the future.
Implementation of this plan addresses a number of issues. It provides an
efficient low cost support structure. Directing a response back to the customer
will be easier and faster as it will not be dependent on the customers
availability and doesn't require a long distance phone call. Additionally, it
brings people to the site where the Corporation can utilize each connection as
an opportunity to market additional products and services.
MANUFACTURING
PeakSoft Corporation delivers its software via downloads on the internet, thus
eliminating the cost associated with delivering "hardcopies" of its software.
COMPETITION
Browser Accelerators
Currently there are a small number of competitors that have entered the market
with software products that include some features similar to PeakJet. Speed
Surfer from ViaSoft, based in Australia, markets a shareware program that claims
to speed browser performance on the Web. Because Speed Surfer is designed to run
totally in the background and has no user interface, evaluating user benefit is
difficult. Speed Surfer is priced at about US$30. GoAhead from GotIt has similar
features to PeakJet, including look-ahead agents, cache fresheners and automatic
software updates. GotIt users can browse offline and the software will initiate
an Internet connection if a page is requested that is not in the cache. The user
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interface resembles a TV remote control that enables the user to determine the
benefit of the product. GotIt is available on-line only with no retail
distribution. Net Accelerator from IMSI was shipping in July to most retailers.
Priced at US $29.95 this product makes many claims similar to PeakJet. PeakSofts
testing indicates that this product does not contain caching technology.
PeakSofts tests show PeakJet is 5-15 times faster. A recent evaluation of
browser accelerator software by CNET, a major evaluator and purveyor of software
on the Internet, concluded unequivocally that PeakJet was the fastest product of
its type.
Animation Tools
JetEffects, the company has discontinued the sale of this product.
RESEARCH AND DEVELOPMENT
As of September 30, 1999 the Company had 3 hardware and software engineers
employed full time in research and development. It also contracted these
services out.
Research, development and associated expenses were CDN$282,099 for fiscal 99,
CDN$531,860 for fiscal 98, CDN$641,426 for fiscal 97, CDN$321,740 for fiscal 96,
and CDN$31,871 for fiscal 1995.
RISK FACTORS
The purchase of Common Shares of the Corporation must be considered highly
speculative due to the nature of the Corporations business, its relatively early
stage of development and the intensely competitive, rapidly changing nature of
the Internet industry which has a number of participants which possess greater
resources than the Corporation.
The Corporation is a development stage company, which has not yet achieved
profitability. Its accumulated deficit, in accordance with generally accepted
accounting principles in Canada, as of September 30, 1999 was CDN$11,090,720.
There can be no assurance that the Corporation will be able to achieve or
sustain profitable operations. The Corporation expects to continue to incur
significant operating losses as it continues to devote significant financial
resources to the commercialization of its products, the expansion of the
Corporations operations and product development activities. There can be no
assurance that the Corporation will successfully commercialize such products and
reach break-even or profitability in the near future, or ever. Due to extensive
development costs and marketing expenses for its proprietary products, there was
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a loss incurred for the fiscal year ended September 30, 1999 of CDN$1,895,013.
As a result of the foregoing, investors could lose their entire investment in
the Corporation.
While the Corporation has established sales revenues they should be considered
early stage. In September of 1997, the Corporation concluded a US$1.125 million
financing, a financing which was augmented by a second advance of US$140,000,
during the third week of March 1998. In February 1999, a debt conversion
occurred which eliminated approximately 93% of the Company's long term debt. The
Company received CDN $1,438,472 in additional working capital during the year in
the form of short term notes. The Company received CDN$67,563 shares from the
exercise of stock options. The Company also received an additional US$740,000 in
operating capital subsequent to the year end. The Company cancelled its accounts
receivable line of credit from Silicon Valley Bank in the amount of US$350,000.
The Corporations future capital requirements will depend on many factors,
including the amount and the timing of future revenues and continued progress in
its research and development. There can be no assurance that any necessary
additional financing will be available when required by the Corporation for
product commercialization on acceptable terms or at all. If adequate funds are
not available, the Corporation may be required to change, delay, reduce or
eliminate its planned product commercialization strategy or take other actions
to raise funds, which could have a materially adverse effect on the Corporations
business, the results of its operations, and hence its financial condition. To
date, the Corporation has relied on sales of its equity capital for the largest
measure of its financing, and is likely to remain reliant thereon in the near
term. To the extent further equity financings are available, they may result in
substantial dilution to existing shareholders.
The production of technology-based products such as computer software carries
with it a high risk of the emergence of new competitive products in the same
market niches as those being targeted by the Corporation. There is in this
industry a substantial risk of unforeseen change in the underlying technologies
during the development of technology-based products, which may have negative
effects on the marketability of such products. The Corporation has no
technological advantage over any other competitor. There can be no assurance of
market acceptance of the Corporations products, or if there is acceptance, that
such acceptance will be sustained. Internet markets are new and relatively
unproven, and thus carry higher risk than more established markets.
The technology involved in the development of software for Internet users is
subject to constant, often rapid, development. This technology and the products
developed therefrom may, even within a short time, become obsolete or superseded
by technology with a greater market acceptance. As a result, the Corporation
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could be required to expend significant amounts for research and development in
order to maintain its competitive edge. There can be no assurance that the
Corporation will be able to develop or improve its existing technology or to
develop new technology. Hence there can be no assurance that it will continue to
have access to adequate financial resources to fund necessary research and
development.
The market for the Corporations products is relatively new, and its potential
has not yet been determined. The Corporation believes that the market for its
products has significant growth potential, but whether that potential will be
realized depends upon numerous factors outside the Corporations control. Even if
the market for Internet products were to develop as anticipated, the success of
the Corporations products will depend upon the Corporations ability to
anticipate and to respond to trends in the demands of the marketplace for such
products.
The Internet products industry is ferociously competitive. The Corporation
competes against a large number of companies of varying size and resources,
including large companies with substantially greater financial, technical and
marketing resources than PeakSoft. The Corporation believes that competition in
its business depends largely upon sustained technological advancement and the
development of appropriate channels for the marketing of its products. The
Corporation is attempting to meet these needs through the expansion of its
technical expertise and by developing multiple sales channels for its products.
There can be no assurance, however, that the Corporation will be successful in
these efforts.
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when financial
statements are affected by conditions and events that cast substantial doubt on
the Companys ability to continue as a going concern, such as those described in
note 1 to the financial statements. The auditors report to the directors dated
January 15, 2000 is expressed in accordance with Canadian reporting standards
which do not permit a reference to such events and conditions in the auditors
report when these are adequately disclosed in the financial statements.
Accordingly, the auditors included a notice to US readers to this effect.
Existing external financing remains in place and has been increased. Management
is also seeking some additional external financing. The Company has obtained
financing aggregating to US$740,000 since September 30, 1999, and is attempting
to raise further financing at this time. Accordingly, the Company has concluded
that the going-concern assumption is appropriate.
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Management is aggressively taking steps to remedy its current financial
situation. Implemented cost reduction programs have reduced operating cost by
44% and fulfillment cost by 31% since December 31, 1997. Terms and conditions of
sales have been modified in order to enhance cash flow. Management is
implementing a new strategic marketing and sales program, both domestically and
internationally, to increase sales while reducing costs. The Company plans to
maximize the potential of its technology by simultaneously addressing both
vertical and horizontal markets with existing and new scheduled products.
The Corporation has not registered trademarks and service marks with respect to
all of its products. In June 1997, the Corporation settled a lawsuit alleging
infringement upon a trademark in connection with the use of the name Net.Jet.
See Legal Proceedings. There can be no assurance that others will not assert
infringement claims against the Corporation in the future. Such claims, even if
unfounded, can be costly to defend, and could have a materially adverse effect
upon the Corporations operations.
The Corporation is dependent upon the management and leadership skills of Mr.
Douglas Foster and its existing management. The Corporation is not party to
material contracts of employment with Mr. Foster or key members of current
management. There is intense competition for qualified personnel in the software
industry, and the loss of key personnel or an inability to attract, retain and
motivate key personnel could adversely affect the Corporations business. The
Corporation does maintain policy of key man insurance on the life of Mr. Foster
having a value of US$500,000. There is no assurance that the Corporation will be
able to retain its existing senior management personnel or to attract additional
qualified personnel.
Following the debt conversion, there are two principal shareholders, each of
which hold 905,636 post consolidated shares in the capital stock of the
Corporation. As a result, these shareholders may be able to influence materially
most matters requiring approval by the shareholders of the Corporation,
including the election of a majority of the directors. The voting power of the
principal shareholder under certain circumstances could have the effect of
delaying or preventing a change in control of the Corporation, which in turn
could affect the market price of the Common Shares.
There has been significant volatility in the market price of securities of
technology companies. Factors such as technology and product announcements by
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the Corporation or its competitors, disputes relating to proprietary rights and
variations in quarterly operating results have had, in the past, and may
continue to have in the future, a significant impact on the market price of the
Common Shares. In addition, the securities markets have experienced volatility,
which is often unrelated to the operating performance of particular companies.
To the extent that external sources of capital, including the issuance of
additional Common Shares, might be limited or become unavailable, PeakSofts
ability to make the necessary capital, development and marketing expenditures to
create and distribute new products will be impaired.
The Corporation has not paid any dividends since its inception and does not
contemplate that any dividends will be paid in the foreseeable future.
The Corporation sells a substantial part of its products and services outside of
the United States and Canada. Its profitability may therefore be subject to
fluctuations in exchange rates. The Company does not manage the risks related to
foreign currency, interest rates or inflation by using hedging arrangements.
There are potential conflicts of interest to which the directors of the
Corporation may be subject to, from time to time, in connection with the
operations of PeakSoft. Conflicts, if any, will be subject to the procedures and
remedies mandated by the Business Corporations Act (Alberta) and the common law
of Alberta.
ITEM 2 - DESCRIPTION OF PROPERTY
The executive offices and support facilities of PeakSoft USA, which are located
at 1801 Roeder Avenue, Suite 144, Bellingham, Washington, USA, occupy
approximately 2,000 square feet. These offices were leased, effective November
15, 1998, for a term of 12 months at an annual lease rate of US$25,200.
ITEM 3 - LEGAL PROCEEDINGS
On December 4, 1996, the Corporation was served with a formal complaint from
Netjet Communications, Inc., a California corporation, alleging trademark
infringement with respect to the Corporations Internet software product, Peak
Net.Jet, and commencing legal proceedings with respect thereto in the U.S.
District Court, Northern District of California. The complaint sought
unspecified damages, profits, injunctive and other equitable relief. A
settlement of the complaint, the terms of which are confidential, was reached by
the parties on June 10, 1997. Payment was made in full on September 13, 1997.
In the spring of 1997, the Corporation received a series of bills totaling
CDN$71,884.60 from its then general and securities counsel, the law firm of
Bennett Jones Verchere, now known simply as Bennett Jones in Calgary, Alberta,
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for legal services allegedly performed during the years 1995 and 1996. Following
a proceeding before a taxation officer of the court of Queen's Bench in Calgary,
the Corporation entered into an agreement to pay to Bennett Jones the sum of CDN
$105,588.65 at the rate of CDN $5,000 per month with the balance then
outstanding to be paid on June 20, 1999.
ITEM 4 - CONTROL OF REGISTRANT
PRINCIPAL SHAREHOLDERS
The only persons who own of record, or who are known to the directors of the
Corporation to own beneficially, directly or indirectly, more than 10 percent of
the issued and outstanding Common Shares, as at April 11, 2000 are:
Name and Municipality of Residence: Westgate International, L.P.,
Grand Cayman, Cayman Islands
Type of Ownership: Legal
Number of Shares: 905,636
Percent of Common Shares: 23.82
Name and Municipality of Residence: The Liverpool Limited Partnership,
Hamilton, Bermuda
Type of Ownership: Legal
Number of Shares: 905,636
Percent of Common Shares: 23.82
The directors and officers of the Corporation beneficially own directly and
indirectly 6.26 percent of the issued and outstanding Common Shares of the
Corporation.
Title of Class Identity of Person or Group Amount Owned Percent of Class
- --------------- --------------------------- ------------ -----------------
Common Stock D. Foster (Director/Officer) 190,743 ** .051
Common Stock Colin Morse (Director) 32,093 .008
Common Stock Peter Janssen (Director) 6,469 .002
Common Stock T.W. Metz (Officer) 8,679 .002
Common Shares All Directors/Officers 237,984 6.26
as a Group
**Includes number of shares that Mr. Foster as the sole shareholder, director,
and manager of Foster Murphy & Sons Holding Co. LTD., a British Columbia
company holds.
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ITEM 5 - NATURE OF TRADING MARKET
TRADING HISTORY OF COMMON SHARES
The Common Shares of PeakSoft are listed and posted for trading on The Alberta
Stock Exchange under the trading symbol PKT.A. The following table sets forth
the reported high and low sale prices and volume of trading of the Common Shares
as reported by The Alberta Stock Exchange for the periods indicated:
1996 Price Range Trading Volume
- ------ High $ Low $
------ -----
First Quarter 1.55 0.45 2,885,900
Second Quarter 1.85 1.20 1,615,806
Third Quarter 1.45 0.50 2,211,441
Fourth Quarter 1.60 0.60 3,659,653
1997
- ------
First Quarter 1.30 0.80 2,598,231
Second Quarter 1.18 0.57 1,714,955
Third Quarter 0.93 0.40 2,048,481
Fourth Quarter 0.90 0.40 1,160,214
1998
- ------
First Quarter 0.61 0.50 1,676,102
Second Quarter 0.60 0.20 1,842,227
Third Quarter 0.42 0.27 1,482,296
Fourth Quarter 0.30 0.11 1,133,505
1999
- ------
First Quarter 0.50 0.05 3,627,596
Second Quarter 3.85 0.90 914,746
Third Quarter 3.25 1.40 173,833
Fourth Quarter 1.65 0.66 381,111
The closing price of the Common Shares of PeakSoft on the Alberta Stock Exchange
on April 11, 2000 was CDN$1.42.
As of April 11, 2000, -29.2 percent of the registered shares were held in the
U.S.
ESCROW
Pursuant to an agreement dated July 12, 1995 among the Corporation, Montreal
Trust Company of Canada, Foster Murphy & Sons Holding Co. Ltd., McGillicutty
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Management Corp. - and - Eric Simonson and Kathy Simonson, (the Original Escrow
Agreement), an aggregate of 2,461,523 Common Shares owned by these shareholders
were placed in escrow with Montreal Trust Company of Canada. The Original Escrow
Agreement provides that the shares held in escrow are released as to 10 percent
immediately after the expiry of nine months from the date of the final receipt
of the initial exchange offering prospectus of the Corporation (July 12, 1995),
as to 20 percent at the end of each of the first, second and third anniversaries
from the date of the initial release of escrowed Common Shares and 30 percent at
the end of the fourth anniversary from the date of the initial release of
escrowed Common Shares. 37,4000 Common Shares remain in escrow under the
Original Escrow Agreement.
Pursuant to an agreement dated May 31, 1996 among the Corporation, Montreal
Trust Company of Canada and James Bickel, Gwen Cameron, Robert Casilio, Glenn
Guthrie, Elliot Holden, Ashley Holden, Cuthbert Huckvale, Edna Anne Judge, Cliff
Kondratiuk, Frank Lang, Stefan Liere, Carolyn May MacDonald, Dick McKenzie,
Allison McKenzie, Shonna McKenzie, Hashim Mitha, Sadru Mitha, Gulshan Mitha,
Joseph Gerard Monaghan, Alice Monaghan, Thomas Jacob Monaghan, Matthew John
Monaghan, Julie Marie Monaghan, Warwick Parker, John Taylor, Liam Taylor, Harry
Weatherill, Thomas Taylor, RBP Business Systems Inc., G.S.K. Investments Ltd.,
Hasker Management Ltd., Headline Technologies Ltd. and Wunderware Software Corp.
(the New Escrow Agreement), an aggregate of 897,568 Common Shares owned by these
shareholders were placed in escrow with Montreal Trust Company of Canada in
connection with the acquisition of CBT by the Corporation. The shares held in
escrow are to be released on the following basis:
(a) one-third of the Common Shares held by each shareholder shall be
releasable upon the confirmation by the Corporation to The Alberta Stock
Exchange of completion of a beta release of a product by the Corporation
employing the Javalin-based technology previously belonging to CBT;
(b) one-third of the escrowed Common Shares held by each shareholder shall be
releasable upon the confirmation by the Corporation to the ASE of commercial
release of a product by the Corporation employing the Javalin-based
technology previously belonging to CBT; and
(c) one-third of the escrowed Common Shares held by each shareholder shall be
releasable upon the Corporation achieving total revenues of CDN$1 million or
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greater in any six-month period. Notwithstanding the terms of paragraphs (a)
and (b) above, the maximum number of Common Shares to be released from
escrow to a shareholder from the original number of Common Shares held in
escrow on behalf of such shareholder shall be one-third within the first six
months from the date of the agreement, two-thirds during the first twelve
months from the date of the agreement and the total original number within
the first eighteen months from the date of the agreement. The first
two-thirds of the Common Shares escrowed under the New Escrow Agreement have
now been released.
ITEM 6 - EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
There are no governmental laws, decrees or regulations in Canada relating to
restrictions on the export or import of capital into Canada which affect the
remittances of interest, dividends or other payments to non-resident holders of
shares of the Companys stock. Any such remittances to US residents, however, are
subject to withholding tax under the Income Tax Act (Canada) (the Tax Act),
which is generally reduced to a rate of 15 percent pursuant to Articles X and XI
of the Canada-US Income Tax convention.
Except as provided in the Investment Canada Act (the Investment Act), as amended
by the Canada-United States Free Trade Agreement Implementation Act (Canada)
(the FTA Implementation Act), there are no limitations under the laws of Canada,
the Province of Alberta or in the charter of any other constituent documents of
the Company with respect to the right of foreigners to hold and/or vote the
shares of the Companys stock.
The Investment Act requires a non-Canadian making an investment to acquire
control of a Canadian business, the gross assets of which exceed certain defined
threshold levels, to file an application for review with Investment Canada, the
federal agency created by the Investment Act. Under the provisions of the
Investment Act, an investment by a non-Canadian (other than an American, as
defined in the Investment Act) in a Canadian business is reviewable if it is (i)
a direct acquisition, which is defined as the acquisition of the assets or
voting shares of a Canadian business or control of its Canadian parent in Canada
or a Canadian business with assets of CDN$5,000,000 or more, or (ii) an indirect
acquisition, which is defined as the acquisition of control of a Canadian
business with assets of CDN$50,000,000 or more, where the assets of the Canadian
30
<PAGE>
business represent 50 percent or less of the value of the total assets acquired,
through control of its Canadian parent entity outside Canada. Where the value of
the assets of the Canadian business represents 50 percent or more of the value
of the total assets acquired, the direct acquisition threshold applies. As a
result of the FTA Implementation Act, the threshold for review of acquisition by
Americans has been increased. The threshold is presently CDN$25,000,000 for
direct acquisitions and CDN$100,000,000 for indirect acquisitions. Acquisitions
of control of certain types of Canadian businesses are excluded from these
higher thresholds. An acquisition of a Canadian business, the gross assets of
which do not exceed the above-threshold amounts, will not be subject to review
and the non-Canadian will simply be required to notify Investment Canada within
certain prescribed time limits.
The Investment Act also requires the filing of a notice with Investment Canada
by a non-Canadian making an investment to establish a Canadian business. Where
the business activity is, in Investment Canadas opinion, related to Canadas
cultural heritage or national identity, an order can be issued making the
investment renewable.
If Investment Canada is satisfied that the investment is likely to be of net
benefit to Canada (as compared with the test under the prior investment act that
the investment is of significant benefit to Canada), then the non-Canadian may
proceed to complete the investment. If Investment Canada is not satisfied that
the investment is likely to be of net benefit to Canada, then the non-Canadian
may not make the proposed investment or, if the investment has been implemented,
shall divest itself of control of the Canadian business that is the subject of
the investment.
ITEM 7 - TAXATION
The following discussion summarizes some of the primary Canadian income tax
considerations to non-residents of Canada owning Common Shares of a corporation
resident in Canada. The comments are confined to consideration of the Tax Act,
the regulations thereunder and PeakSofts counsels understanding of the current
administrative practices of Revenue Canada Taxation.
31
<PAGE>
Cash dividends paid by a corporation resident in Canada on Common Shares held by
non-residents of Canada will generally be subject to Canadian withholding tax
under the Tax Act. This withholding tax is levied at the basic rate of 25
percent, but may be reduced by the terms of any applicable tax treaty. For
residents of the United States not having a permanent establishment in Canada,
the Canada-US Income Tax Convention reduces the rate of withholding tax to 15
percent generally and to 6 percent for corporations owning at least 25 percent
of the voting stock of the payer corporation.
Stock dividends paid by Canadian public companies are treated as taxable
dividends and are subject to withholding tax as discussed above. The amount of a
stock dividend paid by a corporation is deemed to be equal to the amount of the
increase in the paid-up capital of the corporation arising by virtue of the
payment of the stock dividend. A shareholder receiving a stock dividend is
deemed to acquire the shares that are the subject of the dividend at a cost
equal to the amount of the dividend.
A non-resident of Canada who holds Common Shares as capital property will not be
subject to tax in Canada under the Tax Act on capital gains realized on the
disposition of the shares, unless the shares are taxable Canadian property
within the meaning of the Tax Act. Generally, the Common Shares of a public
company would not be taxable Canadian property unless the non-resident used the
shares in carrying on a business in Canada, the non-resident was previously a
resident of Canada and elected to deem the Common Shares to be taxable Canadian
property on ceasing to be a Canadian resident or, at any time during the five
years before the disposition of the shares, the non-resident owned, together
with other persons with whom he did not deal at arms length, greater than 25
percent of the issued shares of any class of the capital stock of the public
company. The Canada-US Income Tax Convention provides that US residents will be
subject to tax in Canada under the Tax Act on capital gains realized on the
disposition of shares in a Canadian resident public company where such shares
comprise taxable Canadian property as discussed above and where more than 50
percent of the share value is derived from real property situated in Canada.
ITEM 8 - SELECTED FINANCIAL DATA
Set forth below is certain selected consolidated financial data of the Company
for the three months ended of December 31, 1999, and the comparable period in
1998.
The selected consolidated financial information is derived from the Companys
unaudited consolidated financial statements for such periods. The Companys
consolidated financial statements are prepared in accordance with Canadian GAAP.
The information set forth below should be read in conjunction with Managements
Discussion and Analysis of Financial Condition and Results of Operations.
32
<PAGE>
SUMMARY OF OPERATIONS (unaudited)
Stated in Canadian Dollars
THREE MONTHS ENDED DECEMBER 31
1999 1998
Sales $ 41,833 148,029
Net Earnings (Loss) from $ 388,301 342,273
Continuing Operations
Earnings (Loss per Share)
From Continuing Operations $ 0.10 0.16
SUMMARY OF BALANCE SHEET (unaudited)
Stated in Canadian Dollars
THREE MONTHS ENDED DECEMBER 31
1999 1998
Working Capital* (2,586,606) (1,120,315)
Total Assets 163,674 535,656
Total Current Liabilities 2,687,259 1,273,707
Long Term Debt and
Obligations Under Capital Leases 0 18,707
Shareholders Equity (Deficit) (2,523,577) (756,753)
Set forth below is certain selected consolidated financial data of the Company
for each year in its existence ended September 30, 1999. The selected
consolidated financial information is derived from the Companys audited
consolidated financial statements for such periods. The Companys consolidated
financial statements are prepared in accordance with Canadian GAAP. The
information set forth below should be read in conjunction with Managements
Discussion and Analysis of Financial Condition and Results of Operations and the
Companys audited financial statements.
<TABLE>
SUMMARY OF OPERATIONS
Stated in Canadian Dollars
FISCAL YEAR ENDED SEPTEMBER 30
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Sales 536,339 1,246,381 1,340,200 784,900 556,096
Net Earnings (Loss) from
Continuing Operations (1,895,013) (2,780,307) (4,091,490) (927,480) (55,794)
Earnings (Loss Per Share)
from Continuing Operations *(0.50) (.22) (.33) (.11) .02
*Post Consolidation
</TABLE>
33
<PAGE>
<TABLE>
SUMMARY OF BALANCE SHEET
Stated in Canadian Dollars
FISCAL YEAR ENDED SEPTEMBER 30
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Working Capital* (2,204,478) (931,391) 341,546 (445,693) 88,060
Total Assets 196,283 522,533 2,402,271 2,118,027 570,303
Total Current Liabilities 2,329,661 1,063,977 1,042,639 523,681 288,858
Long Term Debt and
Obligation Under Capital Leases 1,897 28,639 1,421,918 64,044 36,164
Shareholders Equity (Deficit) (2,135,275) (570,083) (62,286) 1,530,302 245,281
</TABLE>
Had the Companys consolidated financial statements been prepared in accordance
with generally accepted accounting principles in the United States (see Note 12
to the audited financial statements), selected consolidated financial
information would have been as follows:
<TABLE>
SUMMARY OF OPERATIONS
Stated in Canadian Dollars
FISCAL YEAR ENDED SEPTEMBER 30
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Sales 536,339 1,246,381 1,340,200 784,900 556,096
Net Earnings (Loss) from
Continuing Operations (1,895,013) (1,958,178) (3,354,661) (2,577,078) 55,794
Earnings (Loss Per Share)
from Continuing Operations *(.65) (.14) (.35) (.31) .02
*Post Consolidation
SUMMARY OF BALANCE SHEET
Stated in Canadian Dollars
FISCAL YEAR ENDED SEPTEMBER 30
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Working Capital* (2,133,378) (931,391) 341,546 (445,693) 88,060
Total Assets 196,283 522,533 1,579,972 473,429 570,303
Total Current Liabilities 2,329,661 1,063,977 1,042,639 523,681 288,858
Long Term Debt and Obligation
Under Capital Leases 1,897 28,639 1,369,576 12,702 36,164
Shareholders Equity (Deficit) (2,135,275) (570,083) (975,055) (118,688) 245,281
</TABLE>
34
<PAGE>
(a) CANADIAN AND US DOLLAR EXCHANGE RATES
A history of US-Canadian dollar exchange rates, as of September 30, for the
indicated years is set forth below. All amounts shown represent noon buying
rates for cable transfers in New York City certified funds for customs purposes
by the Federal Reserve Bank of New York. The source for this data is the Federal
Reserve Bulletin and Digest.
HIGH SCAN LOW SCAN AVERAGE
CAN/US US/CAN CAN/US US/CAN CAN/US US/CAN
------ ------ ------ ------ ------ ------
1991 1.1229 .8906 1.1589 .8628 1.1457 .87283
1992 1.1748 .8512 1.2858 .7777 1.214 .8237
1993 1.2497 .8002 1.3367 .7481 1.2901 .7751
1994 1.3408 .7458 1.4086 .7099 1.3736 .7280
1995 1.3507 .7404 1.4074 .7105 1.3686 .7307
1996 1.3852 .7219 1.3290 .7525 1.3630 .7337
1997 1.4395 .6947 1.3364 .7483 1.3850 .7220
1998 1.5845 .7304 1.3686 .6307 1.4598 .6857
1999 1.5465 .6917 1.4447 .6463 1.4849 .6731
(b) DIVIDENDS
The Company has not paid any cash dividends since its inception. The Company
does not intend to pay any cash dividends in the foreseeable future, but intends
to retain all earnings, if any, for use in its business operations.
ITEM 9 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and notes thereto.
The Companys financial statements are prepared in accordance with generally
accepted accounting principles in Canada and are presented in Canadian dollars.
Significant differences between generally accepted accounting principles in
Canada and the United States are disclosed in note 15 to the financial
statements.
35
<PAGE>
LETTER TO SHAREHOLDERS Year Ended 30 September 1999
The only constant is change.
PeakSoft Multinet Corp. has continued to evolve its business plan, seeking to
align the important components that can create a winning business model. In 1999
the Company adopted an internet business model and focused its efforts on the
creation of a powerful community at http://www.peak.com/, a Web portal dedicated
to helping small business develop and grow in an internet economy. For the plan
to succeed we need to develop strong alliances for capital, membership and
revenue creation.
PeakSoft has demonstrated its ability to innovate and to deliver finished
products to market. Its original CD-ROM products won accolades and awards. Its
browser accelerator, PeakJet, was described as a "killer app", and was a runner
up for PC Computing Internet Utility of the Year. It created an entirely new
class of Internet utility products
Looking back through previous annual reports it is clear that liquidity and
capital have always been at the forefront of management's concerns. Often the
issue of its under-capitalization has forced the company to "make a bet" on one
strategy or another, eliminating the alternative of implementing a full
strategy. This is going to change in 2000.
The Company intends to bring in new management at a senior level, adding
business, finance and marketing experience to the team.
The Company intends to leverage its U.S. fully reporting issuer status, OTC and
CDNX listings, and to seek acquisitions, which will add shareholder value and
critical mass.
The Company is investigating joint venture, strategic investment, privatisation
of a business unit, and other forms of capital funding in order to afford
peak.com the greatest opportunity of success without impacting negatively upon
PeakSoft's share capital structure.
About Peak.com
In 1999 PeakSoft developed a plan to create a small business internet portal at
peak.com. We identified the market opportunity presented by e-business and by
business-to-business e-commerce. The small business community, largely lacking
in technical expertise, is ripe for solutions that will enable its members to
compete in the internet economy. A prototype website was developed over the
spring and summer of 1999, with the second generation of it subsequently having
been launched in October of 1999.
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<PAGE>
Peak.com is nearing completion. As a shareholder you should visit the site,
register, and form your own opinion concerning this opportunity. The site
includes many powerful features. It is completely dynamic in design, allowing
users to customize it to their needs and interests. We have developed a
proprietary Peak News Division and have begun to deliver great original news and
content at peak.com. The site uses some of our best technology and concepts to
create powerful business libraries and search capabilities. We have developed a
vertical industry community structure that will allow the creation of many
individual, trading and business communities.
The Company is establishing powerful relationships and partnerships for
peak.com. Its objectives in entering into these partnerships are (a) to develop
infrastructure and capability, (b) to drive membership, and (c) to capture
revenue. Peak.com is ready to implement the commerce and revenue components of
the site and if properly capitalized can begin to deliver all the elements of
the business plan within one quarter.
I would like to thank all of you for your support over the years. PeakSoft has
always endeavoured to succeed and has never faltered in its dedication to the
task. PeakSoft and its shareholders have demonstrated a tenacity that should
produce positive results in 2000.
Best wishes
/s/ Doug Foster
- -------------------
Doug Foster
37
<PAGE>
LETTER TO SHAREHOLDERS Period Ended December 31, 1999
1999 was a year of change for PeakSoft inasmuch as the Company directed
significant time and resources towards its online small business community
portal located at http://www.peak.com. PeakSoft developed a plan to "facilitate
the formation, growth, and prosperity of small businesses globally through
leading internet communications solutions which empower small businesses to
compile knowledge, and to develop e-commerce and other commercial
relationships."
Through http://www.peak.com, we will provide products, services,
information, and forums (to name a few of our offerings) to the Small Business
Community to assist its members in the task of achieving profitability and
prosperity. Peak.com plans to drive revenues initially from several diverse
sources: revenue sharing, business-to-business (B2B) e-commerce, and
advertising.
The Company remains committed to the vertical portal strategy adopted early last
year. We believe this strategy has great potential. Electronic commerce is
growing at a staggering rate, particularly in the business-to-business (B2B)
sector. Peak.com will continue to be the major focus of the Company during the
coming year. New alliances are being formed and existing ones are being
expanded, such as Novell and others. Operating capital continues to be difficult
to obtain. Management is investigating all possible avenues to raise sufficient
operating capital in order to commercialize http://www.peak.com in the shortest
time to the greatest benefit of the shareholders.
The Company expects that the activity level for PeakSoft will continue to
increase with operating expenses in excess of income until the third quarter of
calendar 2000. In order to reduce the overall costs of maintaining its presence
in the retail sales channel, we have entered into agreements with Real Networks,
Inc.; Software Builders, LLC; Peruzzo Informatica in Italy; Softline AG in
Germany; Boomerang Software Inc.; Cyenta, NetSales, Inc. and Group Micro Serve
in Belgium and Luxembourg as well as others.
During this quarter, the beta version of http://www.peak.com was released. We
invite you to visit this site at http://www.peak.com/ and register.
Sincerely yours,
/s/ T.W. Metz
- --------------------
Timothy W. Metz
Chief Operating Officer
February 10, 2000
38
<PAGE>
QUARTERLY REVIEW Period Ended December 31, 1999 Compared to December 31, 1998.
The first quarter of fiscal year 2000 shows a continuation of expense cutbacks
in most areas of operation. Overall operating expenses decreased from CDN
$482,206 for the quarter ended December 31, 1998 to CDN $400,541 in the
comparable quarter in 1999 mainly because of significant cost reductions in
marketing as well as research and development. Loss from the quarter increased
from CDN $342,273 for the quarter ended December 31, 1998 to CDN $388,301 in the
comparable quarter in 1999. This was largely due to an increase in interest
expense on outstanding promissory notes as well as a decrease in net sales.
During the first quarter of fiscal year 1999, the Company relocated its premises
to its current location. This move had a large impact on operations as it saved
the Company approximately USD $100,000 in operating expenses per year. Under the
terms of the lease agreement on the former premises, the Company remains liable
for the lease payments until the end of the lease, which expires on March 31,
2002. The maximum liability is USD $310,000. During the first quarter of fiscal
year 2000, the Company negotiated a settlement with the former landlord for USD
$50,000, which eliminated the Company's largest liability.
General and administrative expenses increased modestly from CDN $299,059 for the
quarter ended December 31, 1998 to CDN $327,898 in the comparable period in
1999, an increase of CDN $28,839. This increase of 8.8% is mostly comprised of
continued professional and consulting services involved with the development of
our small business community portal, http://www.peak.com.
Selling and marketing expenses decreased from CDN $91,724 for the quarter ended
December 31, 1998 to CDN $38,303 in the comparable period in 1999, a decline of
CDN $53,421. This decrease of 58% was primarily due to management's continued
expense reductions along with the developmental stage of its planned new
products and services, while continuing to focus on e-commerce/partnering as the
preferred method of software distribution.
Research and development expenses declined from CDN $78,682 for the quarter
ended December 31, 1998 to CDN $26,122 in the comparable period in 1999, a
decrease of CDN $52,560 or 67%. This decline was due to reductions in staff and
non-essential expenses.
During the quarter, the Company received USD $350,000 in operating capital.
Subsequent to the end of the first quarter, the Company received an additional
USD $100,000, both of which were supported by promissory notes.
Year 2000
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue and has
developed an implementation plan to resolve the issue. The Year 2000 problem is
the result of computer programs being written using two digits rather than four
to define the applicable year. Time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in a
major system failure or the making of miscalculations. The Company completed
modifications to existing software and the conversion to new software. The
Company obtained Year 2000 compliance statements from vendors, suppliers, and
all other third parties that do business with the Company.
39
<PAGE>
Subsequent to the end of the first quarter, the Company has not experienced any
operational problems relating to the "Year 2000" issue.
For the reasons set out above, PeakSoft has not incurred, and does not expect to
incur, any costs relating to the remediation of Y2K issues.
PeakSoft has concluded that it faces no material Y2K implications to its
business operations because its computers and the programs being run on them are
of recent vintage, marketed as being Y2K compliant.
Year Ended September 30, 1999 Compared to Year Ended September 30, 1998
1999 was a year of change for PeakSoft. During the year, the Company directed
significant resources towards its online small business community portal located
at http://www.peak.com. PeakSoft developed a plan to "facilitate the formation,
growth, and prosperity of small businesses globally through leading internet
communications solutions which empower small businesses to compile knowledge and
to develop e-commerce and other commercial relationships." Through
http://www.peak.com, the Company will provide products, services, information,
and forums (to name a few of our offerings) to the Small Business Community to
assist its members in the task of achieving profitability and prosperity.
Peak.com plans to drive revenues initially from several diverse sources: revenue
sharing, business-to-business (B2B) e-commerce, and advertising. Management
remains convinced that the vertical portal strategy adopted by the Company early
in the year has great potential. Electronic commerce is growing at a staggering
rate, particularly in business-to-business (B2B) sector. Peak.com will continue
to be the major focus of the Company during the coming year. New alliances are
being formed and existing ones are being expanded, such as Novell and others.
Operating capital continues to be difficult to obtain. Management is
investigating all possible avenues to raise sufficient operating capital in
order to commercialize http://www.peak.com in the shortest time to the greatest
benefit of the shareholders.
Management expects that the activity level for the Company will continue to
increase with operating expenses in excess of income until the third quarter of
calendar 2000. In order to reduce the overall costs of maintaining its presence
in the retail sales channel, the Company has entered into agreements with Real
Networks, Inc.; Software Builders, LLC; Peruzzo Informatica in Italy; Softline
AG in Germany; Boomerang Software Inc.; Cyenta, NetSales, Inc. and Group Micro
Serve in Belgium and Luxembourg as well as others.
Subsequent to the 1999 year-end, the beta version of http://www.peak.com was
released. We invite you to visit us at http://www.peak.com/ and to register.
The following discussion should be read in conjunction with the financial
statements and the notes thereto:
40
<PAGE>
Operations
Revenue decreased from CDN $1,246,381 for the year ended September 30, 1998 in
the comparable period in 1999 to CDN $536,339. This decrease is primarily due to
the change in product distribution from retail to e-commerce/partnering and the
focus of resources on peak.com. By utilizing e-commerce/partnering, cost of
goods sold decreased substantially from CDN $233,763 for the year ended
September 30, 1998 in the comparable period in 1999 to CDN $12,943, a 94.46%
decrease. Costs of goods sold accounted for 18.76% of gross sales for the year
ended September 30, 1998, this ratio plummeting to 2.41% during the comparable
period of 1999.
Amortization decreased from CDN $991,017 for the year ended September 30, 1998
to CDN $50,694 during the comparable period in 1999. This 94.88% decrease was
primarily due to the amortization of the research and development acquired from
Chameleon Bridge Technologies Corp., which expired in 1998. Amortization in 1999
consisted of normal amortization of fixed assets such as computer hardware and
furniture and fixtures.
General and administration expenses increased from CDN $1,392,633 for the year
ended September 30, 1998 in the comparable period in 1999 to CDN $1,502,132, an
increase of 7.29%. This increase was primarily due to consulting and
professional services used to develop our small business community portal,
http://www.peak.com. During the year, the Company entered into employment
contracts with three key management personnel with the approval of the
directors.
Selling and marketing expenses decreased from CDN $951,724 for the year ended
September 30, 1998 in the comparable period in 1999 to CDN $314,723 a decrease
of 66.93%. This was primarily due to management's continued reduction in
expenses and the developmental stage of its planned new products and services,
while continuing to focus on e-commerce/partnering as the preferred method of
software distribution.
Research and development expenses decreased from CDN $531,860 for the year ended
September 30, 1998 in the comparable period in 1999 to CDN $282,099, a decrease
of 46.96%. This decline was primarily due to management's continued focus on
reduction of expenses.
The loss for 1999 was CDN $1,895,013 ($0.50 per share post-consolidation) down
from, CDN $2,780,307 ($ 1.60 per share post-consolidation), a decrement of CDN $
885,294 or $ 1.10 per share post-consolidation. This decrease in the loss
resulted primarily from reduced expenses associated with the Company's
redirected sales activity focus of its utility products toward e-commerce and
strategic alliances, such as Real Networks, Software Builders and others, as
well as reductions in overall expenses. The post-consolidation loss of $0.50 per
share for the year 1999 includes a one-time loss on the sale of investment in
InfoBuild for CDN $217,500. Excluding this loss on the sale of investment, the
Company's loss per share would have been $0.44 for the year 1999.
Liquidity and Capital Resources
As of September 30, 1999, the Company had a cash balance of CDN $55,995. During
the year, the Company issued promissory notes for cash proceeds of USD $890,000.
Subsequent to the year-end, an additional USD $450,000 was received and
supported by promissory notes.
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<PAGE>
During the year, the Company wrote off and destroyed all obsolete inventory.
With the Company's focus of software distribution using e-commerce/partnering,
raw materials that were used to create the software were no longer necessary.
Capital assets decreased from CDN $105,947 for the year ended September 30, 1998
in the comparable period in 1999 to CDN $71,100 due to amortization.
Net assets were reduced from CDN $522,533 for the year ended September 30, 1998
in the comparable period in 1999 to CDN $196,283. This decrease was primarily
due to the sale of our investment in InfoBuild which produced a one time loss on
investment of CDN $217,850. Overall current assets remained mostly unchanged.
Accounts payable and accrued liabilities decreased from CDN $1,034,312 for the
year ended September 30, 1998 to CDN $782,972 in the comparable period of 1999,
an abatement of 24.30%. This was primarily due to the reductions in overall
expenses along with debt settlement with creditors of CDN $131,463.
In November 1998, the Company relocated its premises to its current location.
This move had a large impact on operations as it saved the Company approximately
USD $100,000 in operating expenses per year. Under the terms of the lease
agreement on the former premises, the Company is liable for the lease payments
until the end of the lease, which expires on March 31, 2002. The maximum
liability is USD $310,000. Subsequent to the end of the year, the company
negotiated a settlement with the former landlord for USD $50,000, which
eliminated the Company's largest liability.
YEAR 2000
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue and has
developed an implementation plan to resolve the issue. The Year 2000 problem is
the result of computer programs being written using two digits rather than four
to define the applicable year. Time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in a
major system failure or the making of miscalculations. The Company completed
modifications to existing software and the conversion to new software. The
Company obtained Year 2000 compliance statements from vendors, suppliers, and
all other third parties that do business with the Company.
The Company experienced no operational problems relating to the "Year 2000"
issue.
For the reasons set out above, PeakSoft has not incurred, and does not expect to
incur, any costs relating to the remediation of Y2K issues.
PeakSoft has concluded that it faces no material Y2K implications to its
business operations because its computers and the programs being run on them are
of recent vintage, marketed as being Y2K compliant.
/s/ Tim Metz
- --------------------
Tim Metz
Chief Operating Officer
42
<PAGE>
Third and Fourth Quarter 1998 Financing:
On April 27, 1998 the Company received a loan of US$22,000 from a private
individual. The loan bears 12% interest per annum and is in the form of a demand
promissory note. As further consideration for the loan, the Company granted the
lender warrants to purchase 105,515 shares of the Companys stock at an exercise
price of CDN$0.30 per share. The warrants expire April 27, 2000.
On April 27, 1998 the Company received another loan of US$22,000 from a second
private individual. The loan bears 12% interest per annum and is in the form of
a demand promissory note. As further consideration for the loan, the Company
granted the lender warrants to purchase 105,515 shares of the Companys stock at
an exercise price of CDN$0.30 per share. The warrants expire April 27, 2000.
On April 27, 1998 the Company received another loan of US$22,000 from a third
private individual. The loan bears 12% interest per annum and is in the form of
a demand promissory note. As further consideration for the loan, the Company
granted the lender warrants to purchase 105,515 shares of the Companys stock at
an exercise price of CDN$0.30 per share. The warrants expire April 27, 2000.
On April 27, 1998 the Company received another loan of US$22,000 from a fourth
private individual. The loan bears 12% interest per annum and is in the form of
a demand promissory note. As further consideration for the loan, the Company
granted the lender warrants to purchase 105,515 shares of the Companys stock at
an exercise price of CDN$0.30 per share. The warrants expire April 27, 2000.
On June 10, 1998 the Company received a loan US$75,000 from The Liverpool
Limited Partnership. The loan bears 12% interest per annum and is in the form of
a senior promissory note due June 10, 2000.
On June 10, 1998 the Company received another loan US$75,000 from Westgate
International, L.P.. The loan bears 12% interest per annum and is in the form of
a senior promissory note due June 10, 2000.
On June 30, 1998 the deferment of management, Douglas Foster, Calvin Patterson,
and Timothy Metz, salaries, from March 15, 1998 through June 30, 1998,
aggregating to US$30,333.36 was converted to a no interest loan to the Company.
The loans are in the form of demand promissory notes.
On September 21, 1998 the Company reached agreement in principle with The
Liverpool Limited Partnership and Westgate International, L.P., entities under
common management (not common control) with Elliott Associates, L.P., and
individuals to convert their senior notes and interest owing of CDN $2,752,477
($1,781,403 US) at a rate of CDN $0.18 per share for a total of 15,291,538
shares, and to purchase new notes in the aggregate principal amount of CDN
$231,750 ($150,000 US). Two members of management, Calvin Patterson and Timothy
Metz, also agreed on September 21, 1998 to convert a portion, aggregating to
CDN$24,993.72 ($18,000 US) in partial satisfaction of their demand promissory
notes owing at a rate of CDN $0.18 per share for a total of 138,854 shares. The
agreements have received shareholder approval. Regulatory approval was received
February 24,1999.
On September 24, 1998 the Company received another loan US$30,000 from Westgate
International, L.P., per the agreement reached on September 21, 1998. The loan
bears 12% interest per annum and is in the form of a demand promissory note.
43
<PAGE>
On September 24, 1998 the Company received another loan US$30,000 from The
Liverpool Limited Partnership, per the agreement reached on September 21, 1998.
The loan bears 12% interest per annum and is in the form of a demand promissory
note.
On October 13, 1998 the Company received another loan US$45,000 from Westgate
International, L.P., per the agreement reached on September 21, 1998. The loan
bears 12% interest per annum and is in the form of a demand promissory note.
On October 13, 1998 the Company received another loan US$45,000 from The
Liverpool Limited Partnership, per the agreement reached on September 21, 1998.
The loan bears 12% interest per annum and is in the form of a demand promissory
note.
On November 13, 1998 the Company $24,015 through a private placement. Per the
agreement, the subscriber agreed to purchase 171,600 shares. The subscriber also
received warrants allowing the subscriber to purchase one common share at $.20.
On December 15, 1998, the shareholders approved a debt conversion of CDN
$2,802,735 at CDN $0.18, a 1 for 8 share consolidation, and a name change to
PeakSoft Multinet Corp. All of which received regulatory approval.
On January 15, 1999 the Company received a loan of US$125,000 from The Liverpool
Limited Partnership. The loan bears 12% interest per annum and is in the form of
a senior promissory note due June 10, 2000.
On January 15, 1999 the Company received a loan of US$125,000 from Westgate
International, L.P. The loan bears 12%interst per annum and is in the form of a
senior promissory note due June 10, 2000.
On February 11, 1999 the Company cancelled all outstanding (active) stock
options.
On March 9, 1999 the Company received a loan of US$125,000 from The Liverpool
Limited Partnership. The loan bears 12% interest per annum and is in the form of
a senior promissory note due June 10, 2000.
On March 9, 1999 the Company received a loan of US$125,000 from Westgate
International, L.P. The loan bears 12%interst per annum and is in the form of a
senior promissory note due June 10, 2000.
On May 28, 1999 the Company received a loan of US$50,000 from The Liverpool
Limited Partnership. The loan bears 12%interst per annum and is in the form of a
senior promissory note due June 11, 1999.
On July 27, 1999 the Company received a loan of US$50,000 from Westgate
International, L.P. The loan bears 12%interst per annum and is in the form of a
senior promissory note due August 31, 1999.
On August 6, 1999 the Company received a loan of US$50,000 from Westgate
International, L.P. The loan bears 12%interst per annum and is in the form of a
senior promissory note due August 31, 1999.
On August 19, 1999 the Company received a loan of US$75,000 from Westgate
International, L.P. The loan bears 12%interst per annum and is in the form of a
senior promissory note due August 31, 1999.
44
<PAGE>
On September 29, 1999 the Company received a loan of US$50,000 from Westgate
International, L.P. The loan bears 12%interst per annum and is in the form of a
senior promissory note due October 14, 1999.
Subsequent Events after September 30, 1999
On October 14, 1999 the Company received a loan of US$100,000 from The Liverpool
Limited Partnership. The loan bears 12%interst per annum and is in the form of a
senior promissory note due October 31, 1999.
On October 29, 1999 the Company received a loan of US$75,000 from Westgate
International, L.P. The loan bears 12%interst per annum and is in the form of a
senior promissory note due November 15, 1999.
On November 30, 1999 the Company received a loan of US$75,000 from The Liverpool
Limited Partnership. The loan bears 12%interst per annum and is in the form of a
senior promissory note due December 15, 1999.
On December 16, 1999 the Company received a loan of US$100,000 from Westgate
International, L.P. The loan bears 12%interst per annum and is in the form of a
senior promissory note due January 15, 2000.
On January 13, 2000 the Company received a loan of US$125,000 from The Liverpool
Limited Partnership. The loan bears 12%interst per annum and is in the form of a
senior promissory note due January 24, 2000.
On February 9, 2000 the Company received a loan of US$100,000 from IncuLab.com,
Inc. The loan bears 12%interst per annum and is in the form of a senior
promissory note due April 1, 2000.
On March 30, 2000 the Company received a loan of US$95,000 from Burlington
Capital Markets, Inc. The loan bears 12%interst per annum and is in the form of
a senior promissory note due July 1, 2000.
On March 31, 2000 the Company received a loan of US$95,000 from The Liverpool
Limited Partnership. The loan bears 12%interst per annum and is in the form of a
senior promissory note due April 14, 2000.
Expenses:
The Management of the Company continued to reduce operating costs. As of the end
of fiscal year ending September 30, 1999 compared to fiscal year end September
30, 1998, expenses have been reduced 44.41 percent and end of first quarter
December 31, 1999 compared to end of first quarter December 31, 1998, expenses
have been reduced approximately 16.94%.
Management believes reducing operating and fulfillment costs enables the Company
to be more cost effective. It is reasonably likely that this will improve
results of operations and cash on hand.
45
<PAGE>
Business Address:
On November 7, 1998, the Company moved its business and mailing address to 1801
Roeder Avenue; Suite 144; Bellingham, WA 98225.
Business:
On October 22, 1998, the Company announced the released the Beta version of
LawTrack, a knowledge management solution for the legal profession.
On October 26, 1998, the Company announced the signing of an e commerce
agreement with Xoom.com to market and sell the Companys products over the
Internet.
On January 13, 1999, the Company announced Realty Tracer (CODE NAME), a
knowledge management solution for the realty profession.
On March 11, 1999, the Company resumed trading on the OTC-BB as PeakSoft
Multinet Corp. under the symbol "PEAMF".
On March 29, 1999, PeakSoft Multinet Corp. (ASE:PKS;
OTC-BB:PEAMF) and Novell, Inc. (Nasdaq: NOVL) jointly announced
the formation of a co-marketing alliance to provide superior software
and Internet solutions to the small business market.
On April 5, 1999, PeakSoft Multinet Corp. (ASE: PKS; OTC-BB: PEAMF) reports that
Mssrs. Carl Conti and William Baker have retired from the Company's board of
directors and have been replaced by Mr. Simon Arnison and Mr. Colin Morse.
On April 19, 1999, PeakSoft Multinet Corp. (ASE: PKS; OTC-BB PEAMF) reported
today that Herzog Heine Guduld, Hill Thompson Magid and Sharpe Capital have
become market makers for the Company's stock trades under the symbol PEAMF.
On May 11, 1999, PeakSoft Multinet Corp. (ASE: PKS; OTC-BB PEAMF) announced
today the development of Peak.Com, a new content rich online business community.
On May 12, 1999, PeakSoft Multinet Corp. (ASE: PKS; OTC-BB PEAMF)launches
internet solution enhancing productivity for professionals in law, real estate,
travel and small businesses.
On June 15, 1999, PeakSoft Multinet Corp. (ASE: PKS; OTC-BB PEAMF) appoints
Terry Haas as Vice President of Business Development.
On July 6, 1999, PeakSoft Multinet Corp. (ASE: PKS; OTC-BB PEAMF) appoints Rocky
Botts as Creative Director of Peak.com and Steve Minor as Project Director of
Peak.com.
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<PAGE>
On September 2, 1999, PeakSoft Multinet Corp. (ASE: PKS; OTC-BB PEAMF) and the
National Computer Association jointly announced today the signing of a
co-marketing agreement.
On September 23, 1999, PeakSoft Multinet Corp. (ASE: PKS; OTC-BB PEAMF)
announces the resignation of Donald McInnes from the Board of Directors.
Subsequent Events after September 30, 1999
On October 26, 1999, PeakSoft Multinet Corp. (ASE: PKS; OTC-BB PEAMF) announced
the next generation online small business community is live at
http://www.peak.com.
On October 29, 1999, PeakSoft Multinet Corp. (ASE: PKS; OTC-BB PEAMF) announced
an exclusive agreement with the Kodiak Chamber of Commerce to jointly develop a
broad commercial fisheries business community with the Peak.com small business
site.
On November 9, 1999, PeakSoft Multinet Corp. (ASE: PKS; OTC-BB PEAMF) announced
its intention to seek shareholder approval to change the name of the company to
Peak.com Inc. at its next Annual General Meeting.
On November 16, 1999, PeakSoft Multinet Corp. (ASE: PKS; OTC-BB PEAMF) announces
that the company has launched the Peak.com news division and that the first
issue of its online small business news magazine has now been published at
peak.com
On February 9, 2000, PeakSoft Multinet Corp. (CDNX: PKS.V; OTC-BB PEAMF) enters
into agreement in principle to spin off its Peak.com business unit and to
purchase shares of Inculab.com Inc. in a USD $4.5 million (CDN $6.51M) deal.
On March 16, 2000, PeakSoft Multinet Corp. (CDNX: PKS.V; OTC-BB PEAMF) and Hot
Office sign Co-marketing service integration and revenue sharing agreement.
Peak.com small business portal to offer top-ranked HotOffice virtual office
services, while HotOffice will add Peak.com to its business center.
On March 24, 2000, PeakSoft Multinet Corp. (CDNX: PKS. V; OTC-BB PEAMF)and
Kodiak Chamber of Commerce announce the development of the new commercial
fisheries site on Peak.com.
On March 27, 2000, PeakSoft Multinet Corp. (CDNX: PKS.V; OTC-BB PEAMF) selects
Google and Searchbutton.com to provide powerful business focused search
capability at Peak.com small business portal.
On April 3, 2000, PeakSoft Multinet Corp. (CDNX: PKS.V; OTC-BB PEAMF) doubles
its proposed investment in Inculab.com Inc. to USD $1,000,000.
On April 5, 2000, PeakSoft Multinet Corp. (CDNX: PKS.V; OTC-BB PEAMF) announced
a new distribution agreement with Softvianet Ltd. of the United Kingdom to offer
local-language versions of the PeakJet 2000 web-browsing accelerator in the
United Kingdom, France and other countries.
47
<PAGE>
Auditor:
On February 2, 1999 the Company appointed Gordon K. W. Gee, Chartered Accountant
as auditor, as disclosed in the 6-K filed with the United States Securities and
Exchange Commission via EDGAR on February 5, 1999.
ITEM 10 - DIRECTORS AND OFFICERS OF REGISTRANT
Directors and Officers
The current directors and officers of the Corporation, their respective
positions held with the Corporation and the principal occupation of each are set
forth in the table below. The directors were elected at the annual general
meeting of the Corporation held March 16, 1998, to hold office until the close
of the first annual meeting of shareholders following their election: Business
Corporations Act (Alberta) subsection 101(6). Officers of the Corporation hold
office at the pleasure of the board of directors.
Name and Municipality Positions Held with
Of Residence the Corporation
Douglas H. Foster President, Chief Executive Officer
Bellingham, Washington and Director
Principal Occupation: President and Chief Executive Officer of PeakSoft
Simon Arnison Chief Technology Officer and Director
Ontario, Canada
Principal Occupation: President of Classwave.com, a software development
company.
Peter Janssen Director
Seattle, WA
Principal Occupation: President of Peter Janssen & Associates, a private
consulting firm
Colin Morse Director
Vancouver, British Columbia
Principal Occupation: President of Feel Free Charters, LTD
Timothy W. Metz Chief operating Officer
Bellingham, Washington
Principal Occupation: Chief Operating Officer of PeakSoft.
A detailed summary of the background of each director and officer of the
Corporation setting forth their principal occupation within the five preceding
years is set forth below.
48
<PAGE>
Doug Foster, President and Chief Executive Officer, since 1994
Mr. Foster is one of the founders of the Corporation and has been President,
Chief Executive Officer and a director of the Corporation since its
incorporation in August 1994. Mr. Foster has over 16 years of sales and
management experience in the computer industry. From 1991 to 1994, Mr. Foster
was President of BREEZ. From 1989 to 1991, Mr. Foster was a director and
President of Lynxx Microsystems Inc., a systems integration company, which had
operations in Vancouver, British Columbia, Seattle, Washington and San Francisco
California. Prior to 1989, Mr. Foster was Western Region Financial Branch
Manager with Unisys Corporation and a Senior Sales Representative with AES Data
Inc. and Xerox Corporation.
Peter Janssen, Secretary and Director, since 1999
Simon Arnison, Director and Chief Technology Officer since 1999
Mr. Arnison has held positions as a computer software developer and product
manager since 1982. During the past 17 years, Mr. Arnison has held positions as
Product Marketing Manager, Technical Director, VP Research and Development, and
more recently Chief Technology Officer for Innotech Multimedia Corporation. He
was one of the founders of Innotech, which has been a leading producer of
information technology software for CD-ROM and the Inernet and Java based search
applications.
Peter Janssen, Director, since 1997
Peter Janssen has spent the last thirty years in a series of marketing,
merchandising, and sales roles for both retailers and technology manufacturers.
Mr. Janssen runs a consulting firm focused on helping high tech companies bring
their products to market. This includes providing services to Software
Publishers, PC and Peripheral manufacturers in the areas of product marketing,
marketing strategies and tactics, and sales and distribution strategies. During
the past year, Peter Janssen & Associates have completed consulting assignments
for both small companies and major corporations including: Acer, Toshiba,
Capital One Financial Corporation, Design Intelligence, Netscape, HumanCAD
Systems, Motorola, and Phillips.
Colin Morse, Director, since 1999
Mr. Morse is currently president of Feel Free Charter Ltd., (formerly Combat
Sound Ltd.). Mr. Morse has experience in a broad range of business activities.
He has during the past decade focused his activities on real estate development
and finance.
49
<PAGE>
Tim Metz, Chief Operating Officer since 1998
Mr. Metz joined PeakSoft as the Chief Operations Officer in January 1998,
bringing with him 30 years of experience in operations, business development and
financing for manufacturing and high technology companies. Mr. Metz founded,
financed and owned D&J Manufacturing (1976-1983) and ALKIRK Corporation
(1990-1992). For both companies, he developed state-of-the-art high tech
automated agile manufacturing and assembly plants, and managed operations,
finance, business development, engineering, manufacturing, purchasing and R&D
departments. Through successful contract negotiations Metz increased profits
dramatically while reducing costs. In 1992, Mr. Metz joined Leading-Edge Earth
Products in Seattle, Washington as President/CEO/Director. There he prepared and
completed a successful registration of common stock and listed the company on
the NASDAQ OTC-BB. From 1995-1997, Mr. Metz worked as a private consultant with
various manufacturing companies and an international trading company.
ITEM 11 - COMPENSATION OF DIRECTORS AND OFFICERS
Executive Compensation
PeakSoft currently has two executive officers (following the resignation of one
executive officer in April 1997), none of whom received, directly or indirectly,
compensation exceeding US$100,000. The aggregate cash compensation paid to the
two executive officers of PeakSoft, directly or indirectly, during the year
ended September 30, 1999 was US$$163,200. There are no funds set aside or
accrued by the Company for pension, retirement, or similar benefits.
Compensation Summary
The table below sets forth information concerning the compensation of the
Corporations Chief Executive Officer for the fiscal years ended September 30,
1998, 1997, 1996, 1995 and 1994.
Annual Compensation
Name and ------------------- All Other
Principal Position Year Salary Bonus Compensation
- ------------------- ---- ------ ----- ------------
1999 82,200
Douglas H. Foster 1998 90,538
President and 1997 85,000 - -
Chief Executive 1996 82,800 - -
Officer & Director 1995 82,800 - -
1994 70,400
Long-Term Compensation Awards:
Securities Under Options/SARs Granted:
1999 308,438
1998 320,000
1997 302,000
1996 321,250
1995 250,000
1994 -
50
<PAGE>
On February 11, 1999 the Company cancelled all outstanding (active) stock
options. Re-issued 308,438 stock options.
Restricted Shares or Restricted Share Units: none
Payouts:
LTIP Payouts: none
All Other Compensation: none
The following information concerns individual grants of options to purchase or
acquire securities of the Corporation made during the year ended September 30,
1999 to the Corporations Chief Executive Officer.
Name Securities Percent of Total Exercise or
Under Options Options Granted Option Price
Granted (#) to Employees in ($/Security)
Financial Year
- --------------------------------------------------------------------------------
Douglas H. Foster 50,000 100.00 percent $1.77
Common Shares per share
Market Value of Securities Underlying Options on Date of Grant ($/Security):
$1.77 per share
Expiration date: February 23, 2001
The following information concerns the cash exercise of options during the year
ended September 30, 1998 by the Corporations Chief Executive Officer and the
year-end value of unexercised options held, on an aggregate basis.
Name Securities Acquired on Aggregate Value Realized
Exercise (#)
- --------------------------------------------------------------------------------
Douglas H. Foster 22,313 39,494
Unexercised Options Value of Unexercised in
at Year End (#) the Money Options at
Year-end ($)
- --------------------------------------------------------------------------------
27,687 49,005.99
Payments to Directors: None.
51
<PAGE>
ITEM 12 - OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
Stock Option Plan
On February 7, 1996, the shareholders of the Corporation approved a stock option
plan (the Stock Option Plan), pursuant to which options to acquire an aggregate
of 318,438 Common Shares have been issued and are currently outstanding, The
Company having cancelled all of the then outstanding stock options on February
11, 1999. Under the terms of the Stock Option Plan, options to acquire Common
Shares may be granted by the directors of the Corporation, subject to the
restriction that the aggregate number of Common Shares issuable upon the
exercise of options granted under the Stock Option Plan shall not exceed 10
percent of the outstanding Common Shares. The exercise price associated with any
options granted under the Stock Option Plan shall be determined by the directors
in compliance with the applicable laws, rules and regulations and shall not be
less than the market price of the Common Shares on the Canadian Venture Exchange
less the discount permitted by the rules of the Canadian Venture Exchange. The
options vest on the date of grant and expire at the time set by the directors,
being not more than 2 years from the date of grant, provided that any
outstanding options will expire on the 90th day following the date that the
holder ceases to be an officer, director, employee or consultant of the
Corporation or six months following the death of the holder. Options granted are
non-assignable. Outstanding options granted under the Stock Option Plan may be
adjusted in certain events, as to exercise price and number of Common Shares, to
prevent dilution.
At April 11, 1999, the following options to acquire Common Shares are
outstanding:
GROUP NO. OF SHARES DATE OF EXPIRY EXERCISE PRICE
UNDER OPTION GRANT DATE PER SHARE
- --------------------------------------------------------------------------------
Management, 110,000 02-24-99 02-23-01 $1.44
employees 63,741 02-24-99 02-23-01 $1.77
and directors 73,000 03-19-99 03-18-01 $2.38
10,000 12-21-99 12-20-01 $0.42
Consultants 10,000 06-17-99 06-16-00 $1.80
20,000 06-28-99 06-27-00 $1.99
31,697 07-23-99 07-22-00 $1.50
52
<PAGE>
ITEM 13 - INTEREST OF MANAGEMENT IN MATERIAL CERTAIN TRANSACTIONS
The directors, officers and principal shareholders of the Corporation (and the
known associates and affiliates of such persons) have had no direct or indirect
interest in any material transaction involving the Corporation during the 36
month period preceding the date hereof not otherwise disclosed herein, except as
follows:
1. During the 1997 fiscal year, consulting fees and expense reimbursements
totaling CDN$64,000 were paid by the Corporation to directors. A salary of
CDN$33,000 was also paid by the Corporation to an administrative employee
who is also a relative of one of the directors.
2. During the 1998 fiscal year, consulting fees and expense reimbursements
totaling CDN$92,600 were paid by the Corporation to directors. A salary of
CDN$54,500 was also paid by the Corporation to an administrative employee
who is also a relative of one of the directors.
Director/Officer Indebtedness: None.
PART II
ITEM 14 - DESCRIPTION OF SECURITIES TO BE REGISTERED - NOT APPLICABLE
PART III
ITEM 15 - DEFAULTS UPON SENIOR SECURITIES - NOT APPLICABLE
ITEM 16 - CHANGES IN SECURITIES, CHANGES IN SECURITY FOR REGISTERED SECURITIES
AND USE OF PROCEEDS- NOT APPLICABLE
PART IV
ITEM 17 - Financial Statements
PEAKSOFT CORPORATION FIRST QUARTER REPORT (unaudited) For the Three Months Ended
December 31,1999
53
<PAGE>
Letter to Shareholders
1999 was a year of change for PeakSoft inasmuch as the Company directed
significant time and resources towards its online small business community
portal located at http://www.peak.com. PeakSoft developed a plan to "facilitate
the formation, growth, and prosperity of small businesses globally through
leading internet communications solutions which empower small businesses to
compile knowledge, and to develop e-commerce and other commercial
relationships."
Through http://www.peak.com, we will provide products, services, information,
and forums (to name a few of our offerings) to the Small Business Community to
assist its members in the task of achieving profitability and prosperity.
Peak.com plans to drive revenues initially from several diverse sources: revenue
sharing, business-to-business (B2B) e-commerce, and advertising.
The Company remains committed to the vertical portal strategy adopted early last
year. We believe this strategy has great potential. Electronic commerce is
growing at a staggering rate, particularly in the business-to-business (B2B)
sector. Peak.com will continue to be the major focus of the Company during the
coming year. New alliances are being formed and existing ones are being
expanded, such as Novell and others. Operating capital continues to be difficult
to obtain. Management is investigating all possible avenues to raise sufficient
operating capital in order to commercialize http://www.peak.com in the shortest
time to the greatest benefit of the shareholders.
The Company expects that the activity level for PeakSoft will continue to
increase with operating expenses in excess of income until the third quarter of
calendar 2000. In order to reduce the overall costs of maintaining its presence
in the retail sales channel, we have entered into agreements with Real Networks,
Inc.; Software Builders, LLC; Peruzzo Informatica in Italy; Softline AG in
Germany; Boomerang Software Inc.; Cyenta, NetSales, Inc. and Group Micro Serve
in Belgium and Luxembourg as well as others.
During this quarter, the beta version of http://www.peak.com was released. We
invite you to visit this site at http://www.peak.com/ and register.
Sincerely yours,
/s/ TIMOTHY W. METZ
- -----------------------
Timothy W. Metz
Chief Operating Officer
February 10, 2000
54
<PAGE>
Consolidated Balance Sheet (in Canadian dollars)
(Prepared by Management - Unaudited)
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1999 1998
$ $
- --------------------------------------------------------------------------------
Assets
Current Assets:
Cash 36,516 -
Accounts receivable 46,682 88,921
Inventories - 43,373
Prepaids and deposits 17,446 21,098
---------------------------------------------------------------------
100,644 153,392
Capital assets 63,030 98,264
Investment in InfoBuild - 284,000
- --------------------------------------------------------------------------------
163,674 535,656
================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Bank Indebtedness - 5,660
Accounts payable and accrued liabilities 582,956 1,235,097
Notes Payable 1,950,857 -
Interest payable 139,932 -
Current portion of obligations under
capital leases 13,505 32,950
---------------------------------------------------------------------
2,687,250 1,273,707
Obligations under capital leases - 18,702
Shareholders' Equity:
Share capital 8,955,445 8,781,227
Accumulated deficit 11,479,021 9,537,980
---------------------------------------------------------------------
(2,523,577) (756,753)
- --------------------------------------------------------------------------------
163,674 535,656
================================================================================
55
<PAGE>
Consolidated Statement of Operations and Deficit (in Canadian dollars)
(Prepared by Management - Unaudited)
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1999 1998
$ $
- --------------------------------------------------------------------------------
Sales 41,833 148,029
Cost of goods sold 1,922 8,096
- --------------------------------------------------------------------------------
39,911 139,933
Operating Expenses:
General and administration 327,898 299,059
Selling and marketing 38,303 91,724
Research and development 26,122 78,682
Amortization 8,217 12,741
---------------------------------------------------------------------
400,540 482,206
- --------------------------------------------------------------------------------
Earnings (loss) before the undernoted (360,629) (342,273)
Interest on short-term notes (50,510)
Debt settlement with creditors 22,838
- --------------------------------------------------------------------------------
Earnings (loss) from operations (388,301) (342,273)
- --------------------------------------------------------------------------------
Loss 388,301 342,273
Accumulated deficit, beginning of period 11,090,720 9,195,707
- --------------------------------------------------------------------------------
Accumulated deficit, end of period 11,479,021 9,537,980
================================================================================
Loss per common share 0.10 0.16
Shares Outstanding 3,801,399 2,139,206
56
<PAGE>
Statement of Changes in Financial Position (in Canadian dollars)
(Prepared by Management - Unaudited)
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1999 1998
$ $
- --------------------------------------------------------------------------------
Cash provided by (used in):
Operations:
Net earnings (loss) (388,301) (342,273)
Items not involving cash:
Amortization 8,217 12,741
Change in non-cash operating (149,883) 160,440
working capital
---------------------------------------------------------------------
(529,967) (169,092)
---------------------------------------------------------------------
Financing:
Repayments of notes payable (6,535) -
Increase (decrease) in
Obligation under capital leases (1,897) (9,937)
Issuance of notes payable 518,920 -
Issuance of share capital - 155,603
---------------------------------------------------------------------
510,488 145,666
---------------------------------------------------------------------
Investments:
Purchase of capital assets - (5,058)
---------------------------------------------------------------------
- --------------------------------------------------------------------------------
Increase (decrease) in cash position (19,479) (28,484)
Cash, beginning of period 55,995 22,824
- --------------------------------------------------------------------------------
Cash, end of period 36,516 (5,660)
================================================================================
57
<PAGE>
QUARTERLY REVIEW
The first quarter of fiscal year 2000 shows a continuation of expense cutbacks
in most areas of operation. Overall operating expenses decreased from CDN
$482,206 for the quarter ended December 31, 1998 to CDN $400,541 in the
comparable quarter in 1999 mainly because of significant cost reductions in
marketing as well as research and development. Loss from the quarter increased
from CDN $342,273 for the quarter ended December 31, 1998 to CDN $388,301 in the
comparable quarter in 1999. This was largely due to an increase in interest
expense on outstanding promissory notes as well as a decrease in net sales.
During the first quarter of fiscal year 1999, the Company relocated its premises
to its current location. This move had a large impact on operations as it saved
the Company approximately USD $100,000 in operating expenses per year. Under the
terms of the lease agreement on the former premises, the Company remains liable
for the lease payments until the end of the lease, which expires on March 31,
2002. The maximum liability is USD $310,000. During the first quarter of fiscal
year 2000, the Company negotiated a settlement with the former landlord for USD
$50,000, which eliminated the Company's largest liability.
General and administrative expenses increased modestly from CDN $299,059 for the
quarter ended December 31, 1998 to CDN $327,898 in the comparable period in
1999, an increase of CDN $28,839. This increase of 8.8% is mostly comprised of
continued professional and consulting services involved with the development of
our small business community portal, http://www.peak.com.
Selling and marketing expenses decreased from CDN $91,724 for the quarter ended
December 31, 1998 to CDN $38,303 in the comparable period in 1999, a decline of
CDN $53,421. This decrease of 58% was primarily due to management's continued
expense reductions along with the developmental stage of its planned new
products and services, while continuing to focus on e-commerce/partnering as the
preferred method of software distribution.
Research and development expenses declined from CDN $78,682 for the quarter
ended December 31, 1998 to CDN $26,122 in the comparable period in 1999, a
decrease of CDN $52,560 or 67%. This decline was due to reductions in staff and
non-essential expenses.
During the quarter, the Company received USD $350,000 in operating capital.
Subsequent to the end of the first quarter, the Company received an additional
USD $100,000, both of which were supported by promissory notes.
58
<PAGE>
Year 2000
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue and has
developed an implementation plan to resolve the issue. The Year 2000 problem is
the result of computer programs being written using two digits rather than four
to define the applicable year. Time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in a
major system failure or the making of miscalculations. The Company completed
modifications to existing software and the conversion to new software. The
Company obtained Year 2000 compliance statements from vendors, suppliers, and
all other third parties that do business with the Company.
Subsequent to the end of the first quarter, the Company has not experienced any
operational problems relating to the "Year 2000" issue.
For the reasons set out above, PeakSoft has not incurred, and does not expect to
incur, any costs relating to the remediation of Y2K issues.
PeakSoft has concluded that it faces no material Y2K implications to its
business operations because its computers and the programs being run on them are
of recent vintage, marketed as being Y2K compliant.
59
<PAGE>
Dear Shareholders,
The only constant is change.
PeakSoft Multinet Corp. has continued to evolve its business plan, seeking to
align the important components that can create a winning business model. In 1999
the Company adopted an internet business model and focused its efforts on the
creation of a powerful community at http://www.peak.com/, a Web portal dedicated
to helping small business develop and grow in an internet economy. For the plan
to succeed we need to develop strong alliances for capital, membership and
revenue creation.
PeakSoft has demonstrated its ability to innovate and to deliver finished
products to market. Its original CD-ROM products won accolades and awards. Its
browser accelerator, PeakJet, was described as a "killer app", and was a runner
up for PC Computing Internet Utility of the Year. It created an entirely new
class of Internet utility products
Looking back through previous annual reports it is clear that liquidity and
capital have always been at the forefront of management's concerns. Often the
issue of its under-capitalization has forced the company to "make a bet" on one
strategy or another, eliminating the alternative of implementing a full
strategy. This is going to change in 2000.
The Company intends to bring in new management at a senior level, adding
business, finance and marketing experience to the team.
The Company intends to leverage its U.S. fully reporting issuer status, OTC and
CDNX listings, and to seek acquisitions, which will add shareholder value and
critical mass.
The Company is investigating joint venture, strategic investment, privatisation
of a business unit, and other forms of capital funding in order to afford
peak.com the greatest opportunity of success without impacting negatively upon
PeakSoft's share capital structure.
About Peak.com
In 1999 PeakSoft developed a plan to create a small business internet portal at
peak.com. We identified the market opportunity presented by e-business and by
business-to-business e-commerce. The small business community, largely lacking
in technical expertise, is ripe for solutions that will enable its members to
compete in the internet economy. A prototype website was developed over the
spring and summer of 1999, with the second generation of it subsequently having
been launched in October of 1999.
60
<PAGE>
Peak.com is nearing completion. As a shareholder you should visit the site,
register, and form your own opinion concerning this opportunity. The site
includes many powerful features. It is completely dynamic in design, allowing
users to customize it to their needs and interests. We have developed a
proprietary Peak News Division and have begun to deliver great original news and
content at peak.com. The site uses some of our best technology and concepts to
create powerful business libraries and search capabilities. We have developed a
vertical industry community structure that will allow the creation of many
individual, trading and business communities.
The Company is establishing powerful relationships and partnerships for
peak.com. Its objectives in entering into these partnerships are (a) to develop
infrastructure and capability, (b) to drive membership, and (c) to capture
revenue. Peak.com is ready to implement the commerce and revenue components of
the site and if properly capitalized can begin to deliver all the elements of
the business plan within one quarter.
I would like to thank all of you for your support over the years. PeakSoft has
always endeavoured to succeed and has never faltered in its dedication to the
task. PeakSoft and its shareholders have demonstrated a tenacity that should
produce positive results in 2000.
Best wishes
/s/ Doug Foster
- --------------------
Doug Foster
Chief Executive Officer
61
<PAGE>
Consolidated Financial Statements
PEAKSOFT MULTINET CORP.
(in Canadian dollars)
Years ended September 30, 1999 and 1998
<PAGE>
PEAKSOFT MULTINET CORP.
Consolidated Financial Statements
(in Canadian dollars)
Years ended September 30, 1999 and 1998
Auditor's Report 7
Financial Statements
Consolidated Balance Sheet 9
Consolidated Statement of Operations and Deficit 10
Consolidated Statement of Changes in Financial Position 11
Notes to the Consolidated Financial Statements 12
2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
1999 was a year of change for PeakSoft. During the year, the Company directed
significant resources towards its online small business community portal located
at http://www.peak.com. PeakSoft developed a plan to "facilitate the formation,
growth, and prosperity of small businesses globally through leading internet
communications solutions which empower small businesses to compile knowledge,
and to develop e-commerce and other commercial relationships."
Through http://www.peak.com, the Company will provide products, services,
information, and forums (to name a few of our offerings) to the Small Business
Community to assist its members in the task of achieving profitability and
prosperity. Peak.com plans to drive revenues initially from several diverse
sources: revenue sharing, business-to-business (B2B) e-commerce, and
advertising.
Management remains convinced that the vertical portal strategy adopted by the
Company early in the year has great potential. Electronic commerce is growing at
a staggering rate, particularly in business-to-business (B2B) sector. Peak.com
will continue to be the major focus of the Company during the coming year. New
alliances are being formed and existing ones are being expanded, such as Novell
and others. Operating capital continues to be difficult to obtain. Management is
investigating all possible avenues to raise sufficient operating capital in
order to commercialize http://www.peak.com in the shortest time to the greatest
benefit of the shareholders.
Management expects that the activity level for the Company will continue to
increase with operating expenses in excess of income until the third quarter of
calendar 2000. In order to reduce the overall costs of maintaining its presence
in the retail sales channel, the Company has entered into agreements with Real
Networks, Inc.; Software Builders, LLC; Peruzzo Informatica in Italy; Softline
AG in Germany; Boomerang Software Inc.; Cyenta, NetSales, Inc. and Group Micro
Serve in Belgium and Luxembourg as well as others.
Subsequent to the 1999 year-end, the beta version of http://www.peak.com was
released. We invite you to visit us at http://www.peak.com/ and to register.
The following discussion should be read in conjunction with the financial
statements and the notes thereto:
3
<PAGE>
Operations
Revenue decreased from CDN $1,246,381 for the year ended September 30, 1998 in
the comparable period in 1999 to CDN $536,339. This decrease is primarily due to
the change in product distribution from retail to e-commerce/partnering and the
focus of resources on peak.com. By utilizing e-commerce/partnering, cost of
goods sold decreased substantially from CDN $233,763 for the year ended
September 30, 1998 in the comparable period in 1999 to CDN $12,943, a 94.46%
decrease. Costs of goods sold accounted for 18.76% of gross sales for the year
ended September 30, 1998, this ratio plummeting to 2.41% during the comparable
period of 1999.
Amortization decreased from CDN $991,017 for the year ended September 30, 1998
to CDN $50,694 during the comparable period in 1999. This 94.88% decrease was
primarily due to the amortization of the research and development acquired from
Chameleon Bridge Technologies Corp., which expired in 1998. Amortization in 1999
consisted of normal amortization of fixed assets such as computer hardware and
furniture and fixtures.
General and administration expenses increased from CDN $1,392,633 for the year
ended September 30, 1998 in the comparable period in 1999 to CDN $1,502,132, an
increase of 7.29%. This increase was primarily due to consulting and
professional services used to develop our small business community portal,
http://www.peak.com. During the year, the Company entered into employment
contracts with three key management personnel with the approval of the
directors.
Selling and marketing expenses decreased from CDN $951,724 for the year ended
September 30, 1998 in the comparable period in 1999 to CDN $314,723 a decrease
of 66.93%. This was primarily due to management's continued reduction in
expenses and the developmental stage of its planned new products and services,
while continuing to focus on e-commerce/partnering as the preferred method of
software distribution.
Research and development expenses decreased from CDN $531,860 for the year ended
September 30, 1998 in the comparable period in 1999 to CDN $282,099, a decrease
of 46.96%. This decline was primarily due to management's continued focus on
reduction of expenses.
The loss for 1999 was CDN $1,895,013 ($0.50 per share post-consolidation) down
from, CDN $2,780,307 ($ 1.60 per share post-consolidation), a decrement of CDN $
885,294 or $ 1.10 per share post-consolidation. This decrease in the loss
resulted primarily from reduced expenses associated with the Company's
redirected sales activity focus of its utility products toward e-commerce and
strategic alliances, such as Real Networks, Software Builders and others, as
well as reductions in overall expenses. The post-consolidation loss of $0.50 per
share for the year 1999 includes a one-time loss on the sale of investment in
InfoBuild for CDN $217,500. Excluding this loss on the sale of investment, the
Company's loss per share would have been $0.44 for the year 1999.
4
<PAGE>
Liquidity and Capital Resources
As of September 30, 1999, the Company had a cash balance of CDN $55,995. During
the year, the Company issued promissory notes for cash proceeds of USD $890,000.
Subsequent to the year-end, an additional USD $450,000 was received and
supported by promissory notes.
During the year, the Company wrote off and destroyed all obsolete inventory.
With the Company's focus of software distribution using e-commerce/partnering,
raw materials that were used to create the software were no longer necessary.
Capital assets decreased from CDN $105,947 for the year ended September 30, 1998
in the comparable period in 1999 to CDN $71,100 due to amortization.
Net assets were reduced from CDN $522,533 for the year ended September 30, 1998
in the comparable period in 1999 to CDN $196,283. This decrease was primarily
due to the sale of our investment in InfoBuild which produced a one time loss on
investment of CDN $217,850. Overall current assets remained mostly unchanged.
Accounts payable and accrued liabilities decreased from CDN $1,034,312 for the
year ended September 30, 1998 to CDN $782,972 in the comparable period of 1999,
an abatement of 24.30%. This was primarily due to the reductions in overall
expenses along with debt settlement with creditors of CDN $131,463.
In November 1998, the Company relocated its premises to its current location.
This move had a large impact on operations as it saved the Company approximately
USD $100,000 in operating expenses per year. Under the terms of the lease
agreement on the former premises, the Company is liable for the lease payments
until the end of the lease, which expires on March 31, 2002. The maximum
liability is USD $310,000. Subsequent to the end of the year, the company
negotiated a settlement with the former landlord for USD $50,000, which
eliminated the Company's largest liability.
YEAR 2000
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue and has
developed an implementation plan to resolve the issue. The Year 2000 problem is
the result of computer programs being written using two digits rather than four
to define the applicable year. Time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in a
major system failure or the making of miscalculations. The Company completed
modifications to existing software and the conversion to new software. The
Company obtained Year 2000 compliance statements from vendors, suppliers, and
all other third parties that do business with the Company.
5
<PAGE>
The Company experienced no operational problems relating to the "Year 2000"
issue.
For the reasons set out above, PeakSoft has not incurred, and does not expect to
incur, any costs relating to the remediation of Y2K issues.
PeakSoft has concluded that it faces no material Y2K implications to its
business operations because its computers and the programs being run on them are
of recent vintage, marketed as being Y2K compliant.
/s/ Tim Metz
- ------------------
Tim Metz
Chief Operating Officer
6
<PAGE>
GORDON K.W. GEE
CHARTERED ACCOUNTANT 488 - 625 Howe Street
An incorporated professional Vancouver, BC V6C 2T6
- --------------------------------------------------------------------------------
Telephone: (604) 689-8815
Facsimile: (604) 689-8838
AUDITOR'S REPORT
To The Shareholders of PeakSoft Multinet Corporation (formerly PeakSoft
Corporation):
I have audited the consolidated balance sheet of PeakSoft Multinet Corporation
as at 30 September 1999 and 1998, the consolidated statements of operations and
deficit and changes in financial position for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these consolidated
financial statements based on my audit.
I conducted the audit in accordance with generally accepted auditing standards.
Those standards require that I 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 my opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at 30 September 1999
and 1998 and the consolidated results of its operations and the changes in its
financial position for the years then ended in accordance with generally
accepted accounting principles.
The consolidated financial statements as at 30 September 1997 were audited by
other auditors who expressed an opinion without reservation on those statements
in their report dated 12 December 1997.
Accounting principles generally accepted in Canada vary in certain significant
respects from accounting principles generally accepted in the United States.
Application of accounting principles generally accepted in the United States
would have affected results of operations for the year ended 30 September 1999
and shareholders' equity to the extent summarized in note 12 to the financial
statements.
/s/ Gordon K.W. Gee
- -------------------------
Gordon K.W. Gee
Chartered Accountant
Vancouver, B.C., Canada
15 January 2000
7
<PAGE>
GORDON K.W. GEE
CHARTERED ACCOUNTANT 488 - 625 Howe Street
An incorporated professional Vancouver, BC V6C 2T6
- --------------------------------------------------------------------------------
Telephone: (604) 689-8815
Facsimile: (604) 689-8838
COMMENTS BY AUDITOR FOR U.S. READERS ON CANADIAN-U.S.
REPORTING DIFFERENCE
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the Company's ability to continue as a going concern, such as those described in
note 1 to the financial statements. My report to the shareholders dated 15
January 2000 is expressed in accordance with Canadian reporting standards which
do not permit a reference to such events and conditions in the auditor's report
when these are adequately disclosed in the financial statements.
/s/ Gordon K.W. Gee
- -------------------------
Gordon K.W. Gee
Chartered Accountant
Vancouver, B.C., Canada
15 January 2000
8
<PAGE>
PEAKSOFT MULTINET CORPORATION
Consolidated Balance Sheet (In Canadian dollars)
As at 30 September
===========================================================================
1999 1998
$ $
- ---------------------------------------------------------------------------
ASSETS
Current Assets
Cash 55,995 22,824
Accounts receivable 36,168 26,479
Inventory - 43,284
Prepaids and deposits 33,020 39,999
------------------------------
125,183 132,586
Investment in InfoBuild (Note 2) - 284,000
Capital assets (Note 3) 71,100 105,947
- ---------------------------------------------------------------------------
196,283 522,533
===========================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities 782,972 1,034,312
Interest payable on short-term debts 89,746 -
Notes payable (Note 5) 1,438,472 -
Current portion of obligations under 18,471 29,665
capital leases (Note 6)
------------------------------
2,329,661 1,063,977
Obligations under capital leases (Note 6) 1,897 28,639
------------------------------
2,331,558 1,092,616
------------------------------
Shareholders' Equity:
Share capital 8,955,445 6,555,704
Other Paid in Capital - 2,069,920
------------------------------
8,955,445 8,625,624
Accumulated deficit 11,090,720 9,195,707
------------------------------
(2,135,275) (570,083)
- ---------------------------------------------------------------------------
196,283 522,533
===========================================================================
ON BEHALF OF THE BOARD:
/s/ Doug Foster /s/ Pete Janssen
------------------------ ------------------
Doug Foster Pete Janssen
Director Director
-------------------------------------------------------
(See accompanying notes to the financial statements)
9
<PAGE>
<TABLE>
PEAKSOFT MULTINET CORPORATION
Consolidated Statement of Operations and Deficit (In Canadian dollars)
For the years ending 30 September
=====================================================================================
<CAPTION>
1999 1998 1997
$ $ $
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales 536,339 1,246,381 1,340,200
Cost of goods sold 12,943 233,763 448,537
------------------------------------------------
523,396 1,012,618 891,663
------------------------------------------------
Operating Expenses:
Amortization 50,694 991,017 1,050,965
General and administration 1,502,132 1,392,633 1,245,114
Selling and marketing 314,723 951,724 1,682,437
Research and development 282,099 531,860 641,426
------------------------------------------------
2,149,648 3,867,234 4,619,942
------------------------------------------------
Earnings (loss) before the undernoted (1,626,252) (2,854,616) (3,728,279)
Debt settlement with creditors 131,463 259,618 -
Loss on inventory abandonment (42,234) - -
Interest on short-term debt (140,140) (237,188) -
Loss on sale of investment (217,850) - -
Gain on sale of subsidiary - 51,879 -
Loss on settlement of lawsuit - - (310,042)
Write-off assets - - (53,169)
-------------------------------------------------
Loss 1,895,013 2,780,307 4,091,490
Accumulated deficit, beginning of period 9,195,707 6,415,400 2,323,910
- ------------------------------------------------------------------------------------
Accumulated deficit, end of period 11,090,720 9,195,707 6,415,400
====================================================================================
</TABLE>
10
<PAGE>
<TABLE>
PEAKSOFT MULTINET CORPORATION
Consolidated statement of Changes in Financial Position (In Canadian dollars)
as at 30 September
===========================================================================================
<CAPTION>
1999 1998 1997
$ $ $
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN):
Operations:
Net earnings (loss) (1,895,013) (2,780,307) (4,091,490)
Items not involving cash:
Amortization 50,694 991,017 1,050,965
Write-off of assets - 53,169
Loss on sale of investment 217,850
Change in non-cash operating (132,214) 181,719 253,980
working capital
---------------------------------------------
(1,758,683) (1,607,571) (2,733,376)
---------------------------------------------
Financing:
Repayments of long-term debt (1,179,805) (1,380,991) (21,273)
Increase (decrease) in
obligation under capital leases - (12,288) (1,661)
Issuance of long-term debt - 1,896,161 1,554,750
Increase (decrease) in
obligation to issue shares (26,742) (399,900) (55,408)
Issuance of share capital 2,948,098 776,249 2,380,551
---------------------------------------------
1,741,551 879,231 3,856,959
---------------------------------------------
Investments:
Acquisition of investment - (284,000) -
Proceeds of sale of investment 66,150
Purchase of capital assets (15,847) (36,202) (82,180)
---------------------------------------------
50,303 (320,202) (82,180)
---------------------------------------------
Increase (decrease) in cash position 33,171 (1,048,542) 1,041,403
Cash, beginning of period 22,824 1,071,366 29,963
---------------------------------------------
Cash, end of period 55,995 22,824 1,071,366
(See accompanying notes to the financial statements)
</TABLE>
11
<PAGE>
PEAKSOFT MULTINET CORPORATION
Notes to the Consolidated Financial Statements
Years ended 30 September 1999 and 1998
- --------------------------------------------------------------------------------
The Company is incorporated under the laws of Alberta and its principal business
activities are providing Internet software to corporate and individual users,
and providing internet portal facility.
1. Continuing operations:
These consolidated financial statements have been prepared using generally
accepted accounting principles that are applicable to a going concern, not-
withstanding that the Company incurred significant operating losses in the
current and prior years. This basis of preparation may be inappropriate because
significant doubt exists about the appropriateness of the going concern
assumption. The Company's ability to continue as a going concern is dependent
upon obtaining additional external financing and on the attainment of profitable
operations. Management is of the opinion that external financing will remain in
place and that as a result of their current product launches and concentration
on providing software for vertical markets, sufficient profits will be obtained
to meet the Company's obligations and commitments as they become due. For this
reason, the financial statements do not reflect adjustments in the carrying
values of the assets and liabilities, the reported revenues and expenses and the
balance sheet classifications used that would be necessary if the going concern
assumption were not appropriate.
2. Significant accounting policies:
(a) Principles of consolidation:
The consolidated financial statements include the accounts of the Company and
its wholly-owned American subsidiaries, PeakSoft Multinet Corporation (U.S.A.),
Peak Media, Inc. and its wholly-owned Canadian subsidiary Chameleon Bridge
Technologies Corporation. All significant inter-company transactions and
balances have been eliminated on consolidation.
(b) Revenue recognition:
Revenue from product sales is recognized as the products are sold and title to
the product is transferred. Revenue from service contracts is recognized when
the work is completed.
(c) Foreign currency translation:
Foreign currency transactions entered into directly by the Company as well as
the financial statements of the integrated foreign operations are translated
using the temporal method. Under this method, monetary assets and liabilities
are translated at year end exchange rates. Other balance sheet items are
translated at historical exchange rates. Income statement items are translated
at average rates of exchange prevailing during the year except for depreciation
expense which is translated at historical rates. Translation gains and losses
are included in income Except for unrealized gains and losses arising from the
translation of long-term monetary assets and liabilities which are deferred and
amortized over the remaining lives of related items.
12
<PAGE>
PEAKSOFT MULTINET CORPORATION
Notes to the Consolidated Financial Statements (Continued)
Years ended 30 September 1999 and 1998
- --------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(d) Capital assets:
Capital assets are recorded at cost. Amortization is provided on the straight
line basis using the following annual rates:
- --------------------------------------------------------------------------------
Asset Rate
- --------------------------------------------------------------------------------
Furniture and equipment 4 years
Computer equipment 4 years
Computer software 3 years
Leasehold improvements 4 years
(e) Inventory:
Inventories are valued at the lower of cost and net realizable value. Cost is
determined on a first-in, first-out basis.
(f) Research and development:
Research costs are expensed as incurred. Development costs are expensed as
incurred unless they meet the criteria for deferral under generally accepted
accounting principles.
(g) Use of estimates:
The presentation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Significant areas requiring the use of management estimates relate to the
determination of net recoverable value of assets, in particular as it relates to
acquired research and development, useful lives for amortization, recognition of
revenue and the determination of deferred revenue.
(h) Financial instruments:
The Company has applied retroactively the new accounting standard with respect
to the presentation of financial instruments.
13
<PAGE>
PEAKSOFT MULTINET CORPORATION
Notes to the Consolidated Financial Statements (Continued)
Years ended 30 September 1999 and 1998
- --------------------------------------------------------------------------------
3. Capital assets:
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
Accumulated Net book Net book
Cost amortization value value
$ $ $ $
--------------------------------------------------------
Furniture and equipment 86,065 74,523 11,542 32,598
Computer equipment 157,299 115,191 42,108 57,398
Computer software 47,145 44,971 2,174
Leasehold improvements 24,194 8,918 15,276 15,951
--------------------------------------------------------
314,703 243,603 71,100 105,947
- --------------------------------------------------------------------------------
Assets acquired under capital leases included in furniture and equipment as well
as computer equipment are fully amortized.
4. Acquired research and development:
On May 16, 1996, the Company acquired research in the amount of $1,644,598
through the acquisition of Chameleon Bridge Technologies Corp. The Company
acquired all of the 1,950,000 issued and outstanding shares of Chameleon Bridge
Technologies Corporation in exchange for 1,500,000 shares of Peak Technologies
Inc. The fair market value of Peak Technologies Inc.'s shares at the date of
regulatory approval and exchange of shares was $1.11 per share. Accordingly, the
research and development is calculated as follows, and has been fully amortized:
Purchase value based on shares issued in May, 1996 1,665,000
Other net assets acquired (20,402)
- --------------------------------------------------------------------------------
Acquired research and development 1,644,598
================================================================================
14
<PAGE>
PEAKSOFT MULTINET CORPORATION
Notes to the Consolidated Financial Statements
Years ended 30 September 1999 and 1998
- --------------------------------------------------------------------------------
5. Notes Payable: 1999 1998
$ $
- --------------------------------------------------------------------------------
Notes Payable, bearing interest at 12% per annum
and paid quarterly. 1,438,472 2,025,740
Less: other paid-in capital - (2,025,740)
- --------------------------------------------------------------------------------
1,438,472 -
- --------------------------------------------------------------------------------
6. Obligations under capital leases:
The Company has capital leases on equipment expiring at various dates through
2000 requiring the following minimum lease payments:
- -----------------------------------------------------------------------------
1999 1998
$ $
- -----------------------------------------------------------------------------
1999 - 39,385
2000 21,645 28,575
- -----------------------------------------------------------------------------
Total minimum lease payments 21,645 67,960
Less imputed interest at varying rates (1,277) (9,656)
- -----------------------------------------------------------------------------
Present value of net minimum capital lease payments 20,368 58,304
-------------------------
Current portion of obligations under capital lease 18,471 29,665
- -----------------------------------------------------------------------------
1,897 28,639
- -----------------------------------------------------------------------------
15
<PAGE>
PEAKSOFT MULTINET CORPORATION
Notes to the Consolidated Financial Statements (Continued)
Years ended 30 September 1999 and 1998
- --------------------------------------------------------------------------------
7. Share Capital:
- --------------------------------------------------------------------------------
Shares Amount
# $
================================================================================
Authorized:
Unlimited voting common shares without par value
Unlimited non-voting preferred shares without par value
Issued:
Balance, 01 October 1994: 82,036 94,580
Issued amount year ended 30 September 1995:
Issued to founders 293,018 -
Issued for cash 324,287 948,865
Issue for services and technology 19,407 45,700
Less share issuance costs - (193,278)
Issued amount year ended 30 September 1996:
Issued for cash 143,893 667,500
Issued for services and technology 213,026 1,835,537
Issued amount year ended 30 September 1997:
Issued for cash 443,158 2,496,498
Issued for services and technology 11,855 75,969
Less share issuance costs - (191,916)
Issued amount year ended 30 September 1998:
Issued for cash 211,497 623,281
Issued amount year ended 30 September 1999:
Issued for cash 2,059,222 2,981,847
Less share issuance costs - (429,128)
- --------------------------------------------------------------------------------
3,801,399 8,955,455
- --------------------------------------------------------------------------------
Included in shares issued for cash during 1999 are 67,563 (1998 - 390,000,
1997 - 833,541) shares for approximately $113,858 (1998 - $102,400, 1997 -
$556,898) issued pursuant to the exercise of management, employees and
directors' stock options. The remaining shares of 1,991,659 (1998 - 1,301,976,
1997 -2,711,725) for $2,867,989 (1998 - $520,881, 1997 - $1,940,000) were issued
pursuant to private placements.
16
<PAGE>
PEAKSOFT MULTINET CORPORATION
Notes to the Consolidated Financial Statements (Continued)
Years ended 30 September 1999 and 1998
- --------------------------------------------------------------------------------
7. Share Capital (continued):
(a) Management, employees and directors' stock options:
At September 30, 1999, the Company had 379,492 management, employees and
directors' options outstanding:
<TABLE>
<S> <C> <C>
10,000 options expiring 16 June 2000, exercisable to acquire 10,000 shares at $1.80 each
20,000 options expiring 27 June 2000, exercisable to acquire 20,000 shares at $1.99 each.
31,697 options expiring 22 July 2000, exercisable to acquire 31,697 shares at $1.50 each.
135,000 options expiring 23 February 2001, exercisable to acquire 135,000 shares at $1.44 each.
99,795 options expiring 23 February 2001, exercisable to acquire 99,795 shares at $1.77 each.
73,000 options expiring 18 March 2001, exercisable to acquire 73,000 shares at $2.38 each.
10,000 options expiring 20 December 2001, exercisable to acquire 10,000 shares at $0.35 each.
</TABLE>
(b) Warrants:
At September 30, 1999, the Company had 123,302 warrants outstanding.
62,500 warrants from a debt conversion entitling the holder to acquire one
additional share for $3.20 each. The warrants expire in March 2000.
52,758 warrants entitling the holder to acquire one additional share at $2.40
each. The warrants expire April 2000.
8,044 warrants from a private placement entitling the holder to acquire one
additional share at $12.80 each. The warrants expire April 2000.
8. Fair value of financial instruments:
The methods and assumptions used to estimate the fair value of each class of
financial instruments for which it is practical to estimate a value are as
follows:
(a) Short-term financial assets and liabilities:
The carrying amount of these financial assets and liabilities are a reasonable
estimate of the fair values because of the short maturity of these instruments.
Short-term financial assets comprise cash and accounts receivable. Short-term
financial liabilities comprise accounts payable and accrued liabilities.
(b) Long-term financial liabilities:
The carrying value of long-term financial assets and liabilities are a
reasonable estimate of the fair values. Long-term financial liabilities comprise
long-term debt and obligations under capital leases and other paid-in capital
(see note 6).
17
<PAGE>
PEAKSOFT MULTINET CORPORATION
Notes to the Consolidated Financial Statements (Continued)
Years ended 30 September 1999 and 1998
- --------------------------------------------------------------------------------
9. Subsequent events:
In November 1998, the Company relocated its premises. Under the Lease Agreement
for the abandoned premises, the Company is liable for the lease payments of the
abandoned premises until the premises are released by the landlord. Under this
Agreement, the minimum lease payments are USD $90,963 per annum until 31, March
2002.
In October of 1999, the Company settled this matter with the Leassor for
$50,000.
Subsequent to the year end, the Company has signed promissory notes for $660,240
(USD S450,000).
10. Loss per common share:
Loss per common share is based on the weighted average number of common shares
outstanding during the year.
1999 1998 1997
Loss per common share (Pre-Consolidation)* Non-comparable 0.20 0.33
Loss per common share (Post-Consolidation)** 0.50 1.60 2.67
*Loss per common share calculated on shares outstanding before consolidation.
**Loss per common share if calculated on shares outstanding after consolidation.
NUMBER OF SHARES OUTSTANDING # # #
Pre-Consolidation Non-comparable 13,937,439 12,245,463
Post-Consolidation 3,801,399 1,742,180 1,530,683
11. Related party transactions:
The following are related party transactions, not already disclosed elsewhere in
the notes to the financial statements:
- --------------------------------------------------------------------------------
1999 1998
$ $
================================================================================
Salaries to directors and officers 300,470 94,000
Consulting fees and expense reimbursements to directors 49,416 92,600
Salary paid to a relative of one of the directors 40,564 54,500
- --------------------------------------------------------------------------------
390,450 241,100
================================================================================
These transactions are in the normal course of operations and are measured at
the exchange amount which is the amount of consideration established and agreed
to by related parties.
18
<PAGE>
PEAKSOFT MULTINET CORPORATION
Notes to the Consolidated Financial Statements (Continued)
Years ended 30 September 1999 and 1998
- --------------------------------------------------------------------------------
12. United States GAAP reconciliation:
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") in Canada. These principles
differ in the following material respects from those in the United States, as
summarized below:
(a) Loss and loss per share:
- --------------------------------------------------------------------------------
1999 1998 1997
$ $ $
================================================================================
Loss in accordance with Canadian GAAP (1,895,013) (2,780,307) (4,091,490)
Difference in accounting for acquired - 822,299 822,299
research and development (note d)
Stock options (note e) - - (85,470)
- --------------------------------------------------------------------------------
Loss in accordance with
United States GAAP (1,895,013) (1,958,008) (3,354,661)
================================================================================
Loss per common share 0.65 1.15 2.79
- --------------------------------------------------------------------------------
Weighted average number of shares used
for calculation 2,910,854 1,701,618 1,201,909
- --------------------------------------------------------------------------------
(b) Balance sheet:
The amounts in the consolidated balance sheet that differ from those reported
under Canadian GAAP are as follows:
================================================================================
September 30, 1999 September 30, 1998
Canadian United States Canadian United States
GAAP GAAP GAAP GAAP
$ $ $ $
---------------------------------------------------------------------------
Liabilities:
Other paid-in capital 173,759 264,229
Accumulated deficit 11,090,720 10,268,491 9,195,707 8,373,478
==========================================================================
(c) Statement of financial position (continued):
Cash used in operations and cash provided by financing activities would decrease
by 1999 - $nil and 1998 - $nil.
19
<PAGE>
PEAKSOFT MULTINET CORPORATION
Notes to the Consolidated Financial Statements (Continued)
Years ended 30 September 1999 and 1998
- --------------------------------------------------------------------------------
12. United States GAAP reconciliation (continued):
(d) Research and development:
In accordance with United States GAAP, research and development costs, including
the costs of research and development acquired in a business combination are
expensed as it is incurred.
(e) Stock based compensation
The Company records compensation expense for United States GAAP purposes
following the intrinsic value principles of Accounting Principles Board Opinion
25, "Accounting for Stock Issued to Employees" (APB 25), in accounting for the
options issued under the Company's stock option plan. Under APB 25, no
compensation expense has been recognized for its stock based compensation plans
in 1999 (1998 - nil, 1997 - $85,470).
The Company has elected the disclosure provisions of Statement of Financial
Accounting Standards No. 123 ("FAS 123"), "Accounting for Stock-Based
Compensation", for United States GAAP purposes. Had compensation cost for the
Company's stock option plan been determined based on the fair value at the grant
date for awards under those plans consistent with the measurement provisions of
FAS 123, the Company's loss and loss per share under United States GAAP would
have been adjusted as follows:
- --------------------------------------------------------------------------
1999 1998 1997
$ $ $
- --------------------------------------------------------------------------
Loss - as reported 1,895,013 1,958,008 3,354,661
Loss - stock option value adjusted 2,545,486 2,052,578 3,475,718
Loss per common share - as reported 0.50 1.15 2.79
Loss per common share - adjusted 0.61 1.21 2.89
- --------------------------------------------------------------------------
================================================================================
The fair value of each option grant is estimated on the date of the grant using
the following assumptions:
================================================================================
1999 1998 1997
- --------------------------------------------------------------------------------
Expected dividend yield 0% 0% 0%
Expected stock price volatility 70% 70% 70%
Risk-free interest rate 5.5% 5.5% 5.5%
Expected life of options 1 yr. 2 yrs. 1 yr.
================================================================================
The weighted average fair value of the options granted is 1998 - $ and 1997 -
$0.26 per option.
20
<PAGE>
PEAKSOFT MULTINET CORPORATION
Notes to the Consolidated Financial Statements (continued)
Years ended 30 September 1999 and 1998
- --------------------------------------------------------------------------------
(f) Taxation:
For U.S. GAAP purposes, income taxes are accounted for in accordance with
Statement of Financial Accounting Standards No. 109 ("FAS 109"), "Accounting for
Income Taxes". FAS 109 requires the asset and liability method whereby deferred
tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which those temporary differences are expected to be
recovered or settled. A valuation allowance is provided on deferred tax assets
to the extent it is not more likely than not that such deferred tax assets will
be realized. Under FAS 109, the effect on deferred tax assets and liabilities of
a change in tax rates are recognized in income in the period that includes the
enactment date.
The Company has deferred tax assets of approximately $5,000,000 (1998 -
$3,000,000 and 1997 - $2,140,000 ) arising from losses carried forward (see note
15). The Company has provided a valuation allowance against the entire deferred
tax asset amount as it is more likely than not that they will not be realized.
13. Debt Settlement with Creditors:
During the year, management negotiated with trade and other creditors to realize
a reduction of liabilities.
14. Commitments:
The Company has entered into a one year operating lease for facilities expiring
November 1999 for which the annual lease payments are USD $28,449. The lease is
renewable on an annual basis.
21
<PAGE>
PEAKSOFT MULTINET CORPORATION
Notes to the Consolidated Financial Statements
Years ended 30 September 1999 and 1998
- --------------------------------------------------------------------------------
15. Income taxes:
The Company has non-capital losses from foreign and Canadian operation available
for offset against future taxable income totaling approximately USD $4,743,000
in the United States and CDN $4,281,000 in Canada.
16. Comparative figures:
Certain of the comparative amounts have been reclassified to conform with the
financial presentation adopted in the current year.
17. 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 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 01
January 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect the company's ability to conduct normal business operations. However,
management does not anticipate difficulties with the company's compliance. 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.
22
<PAGE>
Company Information:
Corporate Headquarters
PeakSoft Multinet Corp.
1801 Roeder Ave., Suite 144
Bellingham, WA 98225
USA
Tel: (360)752-1100 Toll Free: (888)377-7325
Fax: (360)752-1110 / (360) 752-0086
http://www.peak.com
- -------------------
Investor Relations
PeakSoft Multinet Corp.
(360) 752-1100
[email protected]
- ---------------
Stock Listing
PeakSoft Multinet Corp. common stock is traded on the Canadian Venture Exchange
under symbol PKS.V and in the US on the OTC:BB under the symbol PEAMF.
Auditor
Gordon K. W. Gee, Chartered Accountant
488-625 Howe Street
Vancouver, BC V6C 2T6
Tel: (604) 689-8815 Fax: (604) 689-8838
Transfer Agent and Registrar
Montreal Trust, Calgary Alberta
Directors
Douglas Foster, Chairman of the Board
Colin Morse, Director
Peter Janssen, Director
Simon Arnison, Director
Management
Douglas Foster, Chief Executive Officer
Timothy Metz, Chief Operating Officer
Calvin Patterson, Corporate Counsel
Simon Arnison, Chief Technical Officer
23
<PAGE>
ITEM 18 - Financial Statements See Item 17.
ITEM 19 - Financial Statements and Exhibits
(A) Financial Statements
Peaksoft Multinet Corp.
Supplementary Data: Quarterly Financial Data (unaudited)
Report of Independent Auditors
Comments by Auditor for US readers on Canadian - US reporting
difference
Consolidated Balance Sheets as of September 30, 1999 and 1998
Consolidated Statements of Operations and Deficit for the Years
Ended September 30, 1999, 1998 and 1997
Consolidated Statement of Changes in Financial Position for the
Years Ended September 30, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
(B) Exhibits
*Exhibit 1 - Articles and By-Laws
*Exhibit 2 - Registration Rights Agreement - September 9, 1997
*Exhibit 3 - PeakSoft Corporation Register of Options - June 8, 1998
*Exhibit 4 - Opinion of Legal Counsel Regarding Shares of Registrant -
July 23, 1998
*Exhibit 5 - Valuation of Chameleon Bridge Technologies Corp. -
April 26, 1996
*Exhibit 6 - Security Agreement - September 9, 1997
*Exhibit 7 - Note Purchase Agreement - September 9, 1997
*Exhibit 8 - Escrow Agreement - September 9, 1997
*Exhibit 9 - Senior Promissory Note - September 9, 1997
24
<PAGE>
*Exhibit 10 - Senior Promissory Note - September 9, 1997
*Exhibit 11 - Guaranty of Peak Media Inc. - September 9, 1997
*Exhibit 12 - Amendment Agreement - March 1998
*Exhibit 13 - Amendment to Note Purchase Agreement - March 1998
*Exhibit 14 - Senior Promissory Note - March 1998
*Exhibit 15 - Guaranty of PeakSoft Corporation (USA) Inc. - March
1998
*Exhibit 16 - Note Purchase Agreement - June 10, 1998
*Exhibit 17 - Senior Promissory Note - June 10, 1998
*Exhibit 18 - Senior Promissory Note - June 10, 1998
*Exhibit 19 - Guaranty of PeakSoft Corporation (USA) Inc. - June 1998
*Exhibit 20 - Guaranty of PeakSoft Corporation (USA) Inc. and the
Liverpool Limited Partnership - June 1998
* AS PREVIOUSLY FILED IN OUR FORM 20-F/A FILED ON 090498.
**Exhibit 21 - Demand Promissory Note - October 13, 1998
**Exhibit 22 - Demand Promissory Note - October 13, 1998
**Exhibit 23 - Demand Promissory Note - January 14, 1999
**Exhibit 24 - Demand Promissory Note - January 14, 1999
**Exhibit 25 - Demand Promissory Note - March 8, 1999
**Exhibit 26 - Demand Promissory Note - March 8, 1999
** AS PREVIOUSLY FILED IN OUR FORM 20-F/A FILED ON March 30, 1999
25
