UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended July 31, 2000
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission file number 000-25151
FETCHOMATIC GLOBAL INTERNET INC.
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(Name of small business issuer in its charter)
NEVADA 52-212549
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
444 VICTORIA STREET, SUITE 370
PRINCE GEORGE, BRITISH COLUMBIA,
CANADA V2L 2J7
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(Address of principal executive offices) (Zip Code)
Former Name: FOREST GLADE INTERNATIONAL INC.
Issuer's telephone number (250) 564-6868
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Securities registered under Section 12(b) of the Exchange Act:
None.
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, PAR VALUE $0.001
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] [ ] No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
<PAGE>
State issuer's revenues for its most recent fiscal year. Nil
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as of
a specified date within the past 60 days (see definition of affiliate in Rule
12b-2 of the Exchange Act.)
17,276,717 common shares @ $0.322(1) = $5,563,103
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(1) Average of bid and ask closing prices on December 12, 2000
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if the assumptions are stated.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
54,659,217 common shares, without par value outstanding as of December 12, 2000
--------------------------------------------------------------------------------
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
Documents Incorporated by Reference: See List of Exhibits
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
ANNUAL REPORT ON FORM 10-KSB
TABLE OF CONTENTS
PAGE
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PART I 3
ITEM 1. DESCRIPTION OF BUSINESS 3
ITEM 2. DESCRIPTION OF PROPERTY 20
ITEM 3. LEGAL PROCEEDINGS. 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 21
PART II 21
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 21
ITEM 6. MANAGEMENT'S PLAN OF OPERATION. 23
ITEM 7. FINANCIAL STATEMENTS 25
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 26
PART III 27
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT. 27
ITEM 10. EXECUTIVE COMPENSATION 30
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 32
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 34
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K 36
SIGNATURES 37
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
This Annual Report contains forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as "may",
"will", "should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors", that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
OVERVIEW
We were formed under the laws of the State of Nevada on August 27, 1998
under the name "Forest Glade International Inc." On November 17, 1998, the
Company acquired all the issued and outstanding shares of Forest Glade
Properties Inc. ("FGP"). We were inactive until December 1, 1998, when it
acquired beneficial control of certain assets and liabilities comprising the
Mountain View Park, a mobile home park in British Columbia, Canada, from 514592
BC Ltd., a company 50% beneficially controlled by Gil Rahier, one of our
directors, in exchange for the issuance of 200,000 shares of common stock. On
August 31, 1999, the terms of the acquisition were amended such that we acquired
the shares of 514592 BC Ltd. as opposed to the assets. As part of the
acquisition agreement, we repurchased and cancelled 100,000 shares of common
stock previously issued to two stockholders controlling 50% of the common stock
of 514592 BC Ltd. in exchange for approximately $287,000. As a result of the
share purchase, FGP became the sole shareholder of 514592 BC Ltd.
Our sole business activity was the operation of the Mountain View park
until November 1999, when we created a separate and distinct division upon
completion of the acquisition of 100% of the issued and outstanding shares of
SSA Coupon Ltd. (now Fetchomatic.com Online Inc.) in exchange for 19 million
shares of our common stock. Fetchomatic.com Online Inc. is a company engaged in
the development of a geographically enabled internet search engine
(www.fetchomatic.com), smart source database, internet portal and personalized
internet communications tool. To focus our activity and dedicate our resources,
in June 2000, we sold all of our interest in the Mountain View Park and 514592
BC Ltd. Our business is now focused solely on the development, launch and
commercial exploitation of www.fetchomatic.com. In connection with our change
in business focus, we changed our name to "Fetchomatic Global Internet Inc." on
June 2, 2000.
The share exchange with the stockholders of Fetchomatic.com Online Inc. was
accounted for as a reverse acquisition, since at the completion of the share
exchange the former stockholders of Fetchomatic.com Online Inc. controlled our
company. Following the accounting for reverse acquisitions, the financial
statements subsequent to closing of the share exchange agreement are presented
as a continuation of Fetchomatic.com Online Inc. consistent with the change of
business to web site development. Accordingly, our operations are consolidated
with those of Fetchomatic.com Online Inc. since the date of acquisition.
Presently, we conduct our operations through our subsidiary,
Fetchomatic.com Online Inc., in British Columbia, Canada. Our other subsidiary,
FGP, is inactive as a result of the sale of the Mountain View Park in June 2000.
<PAGE>
We intend to become a leading brand in on-line search services for Internet
users seeking businesses and services. By utilizing the unique search
capabilities of our search technology, consumers will be able to locate
categorized businesses in specific geographic locations and view a detailed map
of the neighborhood where the business is located. In July 2000, portions of
www.fetchomatic.com were launched. On December 1, 2000, we re-launched the web
portal, with improvements to back-end functionality and front-end usability,
including the addition of single-click pages, a targeted banner advertising
system and national and regional advertisers.
To increase the general public's awareness of our company and our web-site,
we will continue to develop and implement a marketing program that will include
mass media advertising and sponsorships throughout the United States and Canada.
In connection therewith, we signed an agreement with Sivla, Inc. on March 30,
2000, whereby Sivla, Inc. would arrange media advertising (including print,
radio, billboard, television and sponsorships) for us in exchange for shares of
our common stock up to a value of $43.5 million to cover the initial launch of
www.fetchomatic.com. The media services agreement is segregated into two
components. The first component of the media services agreement is comprised of
$23.5 million of services and the balance of the agreement is covered by the
second component. From May through July 2000, we delivered 11,750,000 shares of
our common stock to Sivla, Inc. at a deemed price of $2.00 per share (being the
stock price on the agreement date) in connection with the first component of the
media services agreement. Sivla, Inc. has transferred these shares to various
entities to provide media and advertising services to us. We expect that we
will complete the first component of this agreement by the end of the first
quarter of calendar 2001. To November 22, 2000, $14,309,847 of advertising and
public relation services had been run or was in process, leaving a further
$9,190,153 of advertising to which we were entitled. On November 22, 2000, we
agreed to re-price the deemed value attached to the shares issued for
advertising not yet received such that the amount of advertising to which we are
entitled as of that date has been reduced by $4,377,813 to $4,812,340, of which
$1,005,000 has been committed. We have not committed for additional advertising
under the second component of the agreement with Sivla, Inc., nor are we
obligated to acquire advertising beyond the first component. Management is
presently reviewing various alternatives for media advertising in the next year.
Revenue is expected to be derived form two primary sources: advertising
from local, regional and national companies and from licensing the rights to our
technology. Additional sources of revenue potentially include: affiliate retail
and advertising programs, merchandising Fetchomatic branded products, and
reselling third party products and services.
On September 20, 2000, we entered into an agreement with the Kramer Group
LLC, a New York company that will perform marketing services on our behalf,
including the implementation of a direct sales organization responsible for
generating banner advertising fees. To date, with the significant refinements
and continuing development of the web site, we have not earned any revenue from
our Internet business and are considered to be in the development stage.
In our continuing attempt to implement our business model and improve our
operations, we also underwent significant internal reorganization in October
2000. On October 26, 2000, the Company held a special meeting of the Board of
Directors (the "Special Meeting"). At the Special Meeting, Maurice Simpson, one
of the founders of Fetchomatic.com Online Inc., resigned as an officer and
director of our company. In addition, our previous officers were replaced by
the following individuals: Wayne Loftus, Chairman of the Board of Directors;
Jeffrey Dale Welsh, Chief Executive Officer and President; Lindsay Lent, Vice
President (Marketing) and Secretary; Kevin Kosick, Vice President (Business
Development); Colin Fraser, Vice President (Technology); Alex Klenman, Vice
President (Communications); and Chris Harrington, Treasurer. On December 12,
2000, Dana Shaw resigned as a director of our company.
<PAGE>
PRODUCTS AND MEDIA PROPERTIES
Fetchomatic Main Site
Our main site consists of an Internet search engine and portal. The front
entry page has recently been modified to include a variety of options: links to
fetchOmatic Districts and Services; News Headlines; Entertainment; Health;
Curiosities; Product Service and Business Locator (the search engine feature),
with an optional Locate by Map service; Citizen Login and Registration; Business
Login and Registration and a Corporate information section. In addition, we
have added an animated graphical depiction of a city sky line that we call a
Cityscape. Portions of the Cityscape can be purchased for display of corporate
logos that can link directly to the corporation's site.
The links to Districts and Services connect to 11 districts consisting of
20 streets and 38 stores. We have entered into revenue sharing agreements with
all of the stores and purchases are fulfilled by a variety of vendors contracted
to the partner. In the event that a viewer links form our portal to a partner's
portal and makes a purchase, we share in a percentage of the revenue generated
by that purchase. Sales fulfilment is currently limited to the continental
United States. Agreements have been entered into with V-Stores, CarParts.com,
eMarket, Flipdog.com Employment Center, American Greetings.com, enews.com,
ProFlowers.com, Staples.com, Bid4vacations.com, HotelDiscounts.com,
NationalGeographic.com, Spiegel.com, Disnetstore.com, CDNow.com, Dell.com and
Ubrandit.com.
A downloadable version of the Search Engine is available via a link on the
front entry page. This version, known as MyfetchOmatic, lists results of the
search and will display both the results and a business' location on the map.
STRATEGIC ALLIANCES
In July 2000, we entered into an agreement with Strategic Investors Group
("SIG"), a business located in Florida. Jeffrey Dale Welsh, our current Chief
Executive Officer and President (as of October 26, 2000) was the President and
an indirect owner of SIG at the date of the Agreement. On October 15, 2000, Mr.
Welsh resigned as the President of SIG and sold his beneficial interest in SIG
to an unrelated party. Under the terms of the agreement, SIG will provide our
company with financial public relations services, including drafting and
publishing of press releases about the Company, and distributing investor
updates to members of the SIG database for a six-month term. Terms of the
agreement required us to pay SIG a one-time cash fee of $10,000 (which has been
paid) and 25,000 shares of our common stock for each of the first two months.
At the end of the second month of the contract, we had the opportunity to
terminate the agreement, but did not. Accordingly, pursuant to the contract,
SIG earned a one year option to purchase 50,000 shares at a price currently
under negotiation. SIG will receive 25,000 shares of our common stock per
month. Upon completion of the agreement, SIG will have earned a one-year option
to purchase 100,000 shares of common stock at a price currently under
negotiation.
At the time of entering the agreement with SIG, Jeffrey Dale Welsh, our
current President and CEO, was the President of SIG. Additionally, Mr. Welsh
owned seventy-five percent (75%) of Southern Financial Services, Inc., which
owned one hundred percent (100%) of The Southern Companies, Inc. At that time,
The Southern Companies, Inc. owned fifty percent (50%) of SIG. On October 15,
2000, Mr. Welsh resigned as President of SIG, and The Southern Companies, Inc.
sold its interest in SIG to Freemax Family Enterprises, Inc. Mr. Welsh no longer
has any interest, either direct or indirect, in SIG.
In September 2000, we entered into an agreement with the Kramer Group LLC
("Kramer") that resulted in the creation of an independent sales team of up to
200 people in the continental United States. Under the agreement, the Kramer
will provide marketing and sales services to our company for an initial
twelve-month period to develop our banner advertising fees and revenue. On
March 30, 2001, a performance review shall occur. If revenue earned under the
agreement does not exceed $677,000 by that date, we have the right to terminate
the agreement upon fifteen days notice. Should banner advertising revenue
earned under the agreement exceed $5,120,000 during the
<PAGE>
twelve months subsequent to the agreement date, the agreement will be extended
for an additional twelve month period. We are required to issue to the Kramer
Group LLC 200,000 restricted shares of common stock (which were issued in
November 2000), to pay Kramer a monthly consulting fee (subject to set-off
against commissions earned in an agreed upon schedule), as well as commissions
based on the level of sales generated by Kramer. We are also required to
reimburse Kramer for certain expenses incurred in connection with Kramer's
performance of services. Kramer Group LLC is also entitled to an additional
200,000 shares of restricted common stock should specified sales goals ($6.4
million in banner advertising revenue) be achieved prior to the end of the 12
month period subsequent to the agreement date.
In November 2000, we entered into an agreement with edaddywarbucks.com, a
major international barter organization. Pursuant to the agreement,
edaddywarbucks.com will promote www.fetchomatic.com through a mailing to members
within the barter organization. In turn, we will offer advertising for barter
based on market value. In exchange for barter credits, we will be able to
purchase goods and services from businesses that are members of the barter
exchange. A cash fee of 5% will be paid to the barter exchange when goods or
services are purchased.
PROPRIETARY RIGHTS
We regard our trademarks, trade dress, trade secrets and similar
intellectual property, including our rights to certain domain names, as critical
to our success. We rely upon trademark and copyright law, trade secret
protection and confidentiality or license agreements with our employees,
customers, partners and others to protect our proprietary rights. Protection of
the distinctive elements of Fetchomatic may not be available under copyright
law. We cannot guarantee that the steps we have taken or intend to take to
protect our proprietary rights will be adequate.
Many parties are actively developing search, indexing, e-commerce and other
Web-related technologies, as a well as a variety of online business models and
methods. We believe that these parties will continue to take steps to protect
these technologies, including but not limited to, seeking patent protection. As
a result, disputes regarding the ownership of these technologies and rights
associated with online business are likely to arise in the future. In addition
to existing patents and intellectual property rights, we anticipate that
additional third-party patents related to our services will be issued in the
future.
We may be unable to acquire or maintain web domain names relating to our
brand in the United States and other countries in which we may conduct business.
As a result, we may be unable to prevent third parties from acquiring and using
domain names relating to our brand. Such use could damage our brand and
reputation and take customers away from our web site. We currently hold
approximately 42 various relevant domain names, including the
"www.fetchomatic.com" domain name.
Governmental agencies and their designees generally regulate the
acquisition and maintenance of domain names. The regulation of domain names in
the United States and in foreign countries is subject to change in the near
future. Such changes in the United States are expected to include a transition
from the current system to a system that is controlled by a non-profit
corporation and the creation of additional top-level domains. Governing bodies
may establish additional top-level domains, appoint additional domain name
registrars or modify the requirements for holding domain names.
Trademark applications were filed with the United States Patent and
Trademark Office by Fetchomatic.com Online Inc. in or about September 2000 for
the marks fetchOmatic, fetchville and fetchOmatic Island.
EMPLOYEES
As of July 31, 2000, our staff consisted of 20 full-time employees, 15
full-time consultants and 2 part-time consultants.
<PAGE>
DEVELOPMENT
From inception to July 31, 2000, we have spent approximately $649,000
(including $610,000 during the year ended July 31, 2000) on construction of our
web site and on development of our search engine (excluding the costs of
computer hardware and equipment). To July 31, 2000, we have deferred on our
consolidated balance sheet approximately $495,000 of these development costs
(incurred in fiscal 2000) with the remaining development costs of $154,000
charged to our consolidated statement of operations, including $116,000 in
fiscal 2000.
BUSINESS STRATEGY
Our business strategy is based on four pillars:
- build out an active graphical portal incorporating animation, sound and
other rich media to take advantage of the growth in high-bandwidth access;
- achieve technical "excellence-by-design" resulting in assured online
accessibility of 99.8%;
- create and expand visits by offering relevant and unique content to
demographically targeted audiences; and
- empower local and regional businesses to advertise over the Internet by
offering them the opportunity to selectively and inexpensively reach their
target markets, while also creating an atmosphere for national brand
corporations to reach out to their customers in a targeted way.
To date, we have not earned any revenue. Future revenues are expected to
be derived from two primary sources: advertising from local, regional and
national companies using TABS and licensing the rights to use our technology and
data to internet service providers, portals, local and regional sites and
corporate clients. Additional sources of revenue may include: affiliate retail
and advertising programs, merchandising fetchOmatic branded products and
reselling third party products and services.
We have developed TABS (Targeted Advertising Banner System) that is
integrated with our business locator engine producing targeted advertising
whenever a consumer searches either a business category or name for a particular
locale. For example: If you want to find a business selling pizza in Tucson,
Arizona? After you input the search criteria, a list of pizza restaurants
appears with a banner highlighting a specific restaurant. The cost of such
banner advertising is only $5 per month. On the other side of the page is a
banner space displaying rotating banner ads, again targeted for the consumer's
search criteria. The cost for the rotating ad is $1 per month. In isolation,
the revenue expected to be derived from a $5 and/or $1 ad placement is minimal.
However considering that we use categories and zip codes to determine where the
ad is placed and that there are approximately 15,000 categories and over 20,000
zip codes in the United States, there is a possibility of generating significant
revenues. Further, early indications are that businesses are likely to
advertise for more than one category and in more than just their immediate zip
code region to reach all of their potential customers. Compared with the "Cost
per thousand" Internet advertising model (which is a variable cost model and
confusing for most small businesses), TABS offers the customer an easily
understood one-time fixed cost.
In addition to self-serve banner advertising, packages combining banner
advertising, Web site hosting, free e-mail, access to group benefits, a Las
Vegas vacation and an optional ISP package to be sold for $19.95 and $29.95
(option) per month. A team of direct sales people will sell these packages to
local businesses. The sales force is paid straight commission based on their
performance. This will help to keep our customer acquisition costs to a
minimum.
At the top of every fetchomatic page are Cityscapes that are truly unique
animated graphical depictions of Districts and Streets. Each Cityscape has
either a Cityscape Billboard or Cityscape Storefront that can be purchased
<PAGE>
by larger advertisers. The cost for each of the locations will be determined by
site traffic and negotiated with each advertiser. With 11 Districts, 20
Streets and at least six locations per Cityscape, the revenue potential is
substantial. Because we are using a per view model, we anticipate revenues to
increase simply through growth from our own promotional efforts.
As the site is further developed, the majority of the Cityscapes will be
targeted geographically based on the location of the viewer. In order to do so,
we will identify the location of the viewer either technologically or by means
of a registration process. One of the advantages of geographical targeting is
that advertisers can select and direct their advertisement to specific audiences
allowing them the opportunity to present focused campaigns. It will enable us
to further increase revenues, as each page will be unique within a specified
region resulting in a higher priced rate based on a targeted audience. It will
also enable us to serve different views of the same page thus increasing the
volume of pages served at any given moment.
Licensing our core search engine technology is another potential key source
of revenue for us. As Internet use and broadband accessibility expands, more
companies will be formed to take advantage of this expected growth. Although we
believe domestic growth still remains as our primary source of revenue, we
expect much of the new growth to occur in expanding markets such as Latin
America. And with the high cost of development and reduction in the time to
launch a new site into the marketplace, we anticipate demand for cost effective
toolsets and 'off-the-shelf' solutions will increase. The fetchomatic core
technology is ideal for immediately transforming a new site into one with added
value based on being able to easily locate businesses and organizations from the
over 16 million listed in our database. A 'Portal Agreement' is currently being
undertaken with Acxiom Corporation (suppliers of the original data) with the
intent of allowing fetchomatic to sublicense the data to other companies as part
of our licensing agreement. The 'Portal Agreement' stipulates that we will pay
Acxiom 25% of any revenues derived from the licensing of the data. Acxiom will
also refer, on a non-exclusive or compulsory basis, enquiries for licensed
products as they occur.
As an integral part of our site development, we have entered into affiliate
agreements with over 16 partner businesses. They include: V-Stores,
CarParts.com, eMarket, Flipdog.com Employment Center, American Greetings.com,
enews.com, ProFlowers.com, Staples.com, Bid4Vacations.com, HotelDiscounts.com,
NationalGeographic.com, Spiegel.com, Disneystore.com, CDNow.com, Dell.com and
Ubrandit.com. Our partners provide us with our retail stores and fulfill orders
from our online customers.
As we grow, merchandising a fetchomatic branded product line develop
revenue, but we do not believe that this will become a major source of revenue,
however, it may prove to be effective as a tool for enhancing brand awareness.
It will be implemented as market demand increases.
We intend on entering into agreements to sell other products and services
outside of our affiliate partners. The products and services will be selected
based on the value that they have to our audience. Like the above-mentioned
programs, the third party products will provide us with a commission based on
sales.
RISK FACTORS
An investment in our common stock involves a number of very significant
risks. You should carefully consider the following risks and uncertainties in
addition to other information in this Annual Report in evaluating Fetchomatic
and its business before purchasing shares of common stock. Our business,
operating result and financial condition could be seriously harmed due to any of
the following risks. The trading price of the shares of our common stock could
decline due to any of these risks, and you could lose all or part of your
investment.
<PAGE>
IF WE DO NOT RAISE ADDITIONAL FUNDS FROM THIRD PARTY SOURCES OR BEGIN TO EARN
REVENUES, THEN WE MAY BE UNABLE TO CONTINUE OPERATING.
Our recurring operating losses and growing working capital needs will
require us to obtain additional capital to operate our business before we have
established that our business will generate significant revenue. As of December
1, 2000, we have recognized no revenues and accumulated significant losses from
our business operations. The continuation of our company is dependent upon the
successful completion of our web site and search engine, the continuing
financial support of our creditors and stockholders, obtaining long-term
financing, the favorable settlement of contingent liabilities and achieving a
profitable level of operations. While we are expending our best efforts to meet
our financing needs, there can be no assurance that we will be successful in
raising capital from third parties or generating sufficient funds for operations
and continued development. In the event that we do not raise sufficient funds
from third parties, we may not have adequate financial resources to continue our
business. If additional financing is obtained, the terms of the financing may
be adverse to the interests of existing stockholders, including the possibility
of substantially diluting their ownership position. These circumstances raise
substantial doubt about our ability to continue a going concern as described in
the explanatory paragraph to our Independent Auditors' opinion on the July 31,
2000 consolidated financial statements.
THE CONSULTING AGREEMENTS BETWEEN THE FETCHOMATIC.COM ONLINE INC. AND MAURICE
SIMPSON, DANA SHAW AND WILLIAM MURRAY CONTAIN PAYMENT PROVISIONS WHICH, IF
ENFORCED, WOULD DEPLETE ALL OF OUR CASH
Each of Maurice Simpson, Dana Shaw and William Murray is a party to a
consulting agreement with Fetchomatic.com Online Inc. Pursuant to the terms of
their particular agreement, in the event that the agreements are terminated,
Messrs. Simpson, Shaw and Murray are entitled to receive a payment from the
Company in the amount of CDN$2,000,000, CDN$500,000 and CDN$500,000
(approximately $1,340,000, $335,000 and $335,000), respectively, in addition to
the monthly payments due under the term of the agreements. As discussed below
in Item 3, "Legal Matters," Fetchomatic.com Online Inc. has filed a writ of
summons in the Supreme Court of British Columbia against Mr. Simpson and Mr.
Shaw, among others, alleging a failure to adequately discharge contractual and
fiduciary duties. Mr. Murray is not named a party to this lawsuit, however, we
are investigating our options for setting aside the termination provisions of
his agreement. There can be no assurance that we will prevail in our legal
action or that the consulting agreements with Mr. Simpson, Mr. Shaw and Mr.
Murray will be set aside. In the event of an adverse determination, the Company
may be required to pay substantially all of its current cash reserves to Mr.
Simpson and Mr. Shaw (and potentially to Mr. Murray as well), which would leave
the Company with inadequate capital to conduct its business.
THE LIMITED OPERATING HISTORY OF OUR ONLINE BUSINESS MAKES IT DIFFICULT TO
EVALUATE WHETHER WE WILL OPERATE PROFITABLY.
Historically, we were in the business of owning and operating a mobile home
park in Canada. On June 2, 2000 we completed the process of divesting ourselves
of our real estate holdings and interest in the mobile home park and began to
focus our operations on the development, marketing and commercial exploitation
of our Internet search engine. Our Internet business operations have a limited
history upon which an evaluation of our company can be based. Our prospects are
subject to the risks, expenses and uncertainties frequently encountered by
companies in their early stage of development, especially in the new and rapidly
evolving markets for Internet products and services. There can be no assurance
that we will be able to address any of these challenges.
SINCE WE HAVE A HISTORY OF NET LOSSES, WE EXPECT TO INCUR NET LOSSES IN THE
FUTURE.
Our consolidated financial statements reflect that we have not yet earned
any revenue and have incurred significant net losses since inception, including
a net loss of $16,780,359 (including a loss from discontinued operations of
$567,502) in the year ended July 31, 2000. As of July 31, 2000, we had an
accumulated deficit of $17,015,713. We expect to have continuing net losses and
negative cash flows for the foreseeable future. The size of
<PAGE>
these net losses will depend, in part, on the commencement of and the rate of
growth in our revenues. It is critical to our success that we continue to expend
financial and management resources to develop brand loyalty through marketing
and promotion.
With the acquisition of Fetchomatic.com Online Inc. on November 3, 1999,
and our entrance into the competitive Internet business market, we significantly
increased our operating expenses and we expect that our operating expenses will
continue to increase in the future. To the extent that any such expenses are not
timely followed by increased revenues, our business, results of operations,
financial condition and prospects would be materially adversely affected.
WE ARE IN A HIGHLY COMPETITIVE INDUSTRY AND SOME OF OUR COMPETITORS MAY BE MORE
SUCCESSFUL IN ATTRACTING AND RETAINING CUSTOMERS.
The market for Internet products and services is highly competitive and we
expect that competition will continue to intensify. Negative competitive
developments could prevent our business from being successful.
We compete with many other providers of online navigation, information,
entertainment, business, community, electronic commerce and broadcast services.
As we expand the scope of our Internet offerings, we will compete directly with
a greater number of Internet sites, media companies, and companies providing
business services across a wide range of different online services, including:
- companies offering communications services either on a stand alone basis
or integrated into other products and media properties;
- vertical markets where competitors may have advantages in expertise, brand
recognition, and other factors;
- manufacturers of personal computers who may develop their own Internet
portals to which they would direct their customers;
- online merchant hosting services; and
- online broadcasting of business events.
In particular, we face significant competition from Yahoo!, Inc., America
Online Inc. and Microsoft Corporation. To a less significant extent, we face
competition from other companies that have combined a variety of services under
one brand in a manner similar to Yahoo! including CMGI Inc. (through Alta
Vista), the Walt Disney Company (through The GO Network), At Home Corporation
(through Excite@Home), and Lycos, Inc.
In certain of these cases, our competition has a direct billing
relationship with the user, which we generally lack. This relationship permits
our competitors to have several potential advantages including the potential to
be more effective than us in targeting services and advertisements to the
specific taste of their users. America Online and Time Warner Inc. announced the
proposed merging of their companies. If completed, the merger will provide
America Online with content from Time Warner's movie and television, music,
books and periodicals, news, sports and other media holdings; access to a
network of cable and other broadband delivery technologies; and considerable
resources for future growth and expansion. The proposed America Online and Time
Warner combination will also provide America Online with access to a broad
potential customer base consisting of Time Warner's current customers and
subscribers of its various media properties. We also face competition from web
sites focused on vertical markets where expertise in a particular segment of the
market may provide a competitive advantage. We must continue to obtain more
knowledge about our users and their preferences as well as increase our branding
and other marketing activities in order to remain competitive.
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A large number of those web sites and online services as well as
high-traffic e-commerce merchants such as Amazon.com, Inc. also offer or are
expected to offer informational and community features that may be competitive
with the services that we offer or intend to offer in the future. In order to
effectively compete, we may need to expend significant internal engineering
resources or acquire other technologies and companies to provide or enhance such
capabilities. Any of these efforts could have a material adverse effect on our
business, operating results and financial condition and be dilutive to our
stockholders.
WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY BECAUSE WE ARE IN THE PROCESS OF
ESTABLISHING OUR NAME RECOGNITION AND BECAUSE OUR COMPETITORS ARE MORE
ESTABLISHED AND HAVE GREATER RESOURCES THAN WE DO.
Many of our existing competitors, such as Yahoo!, America Online and
Microsoft (MSN) have longer operating histories, greater name recognition,
larger customer bases and significantly greater financial, technical and
marketing resources than we do. This may allow them to devote greater resources
than we can to the development and promotion of their products and services. In
addition, many of these competitors offer a wider range of services than we do.
Our competitors' services may attract users to their sites and may consequently
result in decreased visits to our site.
Our competitors may also engage in more extensive research and development,
adopt more aggressive pricing policies and make more attractive offers to
existing and potential employees, partners, advertisers and electronic commerce
partners. Our competitors may develop products and services that are equal or
superior to ours or that achieve greater market acceptance. In addition, current
and potential competitors may establish relationships among themselves or with
third parties to better address the needs of advertisers and businesses engaged
in electronic commerce. As a result, it is possible that existing or new
competitors may emerge and rapidly acquire a significant market share.
WE WILL RELY HEAVILY ON REVENUES DERIVED FROM INTERNET ADVERTISING, WHICH MAY
PROVE TO BE AN INEFFECTIVE MEANS OF ADVERTISING FOR OUR CURRENT AND POTENTIAL
CLIENTS.
We expect to generate the majority of our revenues from advertisements
displayed on our online properties. Our ability to continue to achieve
substantial advertising revenue depends upon:
- growth of our user base;
- our user base being attractive to advertisers;
- our ability to derive better demographic and other information from our
users;
- acceptance by advertisers of the Internet as an advertising medium; and
- our ability to transition and expand into other forms of advertising.
If we are unsuccessful in adapting to the needs of our advertisers, our
ability to generate revenues may be significantly reduced.
WE EXPECT TO DERIVE THE MAJORITY OF OUR REVENUES FROM THE SALE OF ADVERTISEMENTS
UNDER SHORT-TERM CONTRACTS, WHICH ARE DIFFICULT TO FORECAST ACCURATELY.
We expect that most or all of our revenues will be derived from agreements
with advertisers or sponsorship arrangements. Agreements for advertising and
sponsorship arrangements on the Internet are customarily for short terms. We
expect that the advertising and sponsorship agreements that we enter will have
terms of less than three
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years. In cases where the advertiser is providing services, the agreements will
often have payments contingent on usage levels. Accordingly, it is difficult to
accurately forecast these revenues. However, our expense levels are based in
part on expectations of future revenues and, to a large extent, are fixed. We
may be unable to adjust spending quickly enough to compensate for any unexpected
revenue shortfall. Accordingly, the cancellation or deferral of advertising or
sponsorship (once obtained) may impede our future growth. Because our operating
expenses are likely to increase significantly over the near term, to the extent
that expenses increase but our revenues do not, we may be required to seek funds
from third parties to finance our continued operations.
THE RATE STRUCTURE OF SOME OF OUR PLANNED SPONSORSHIP ARRANGEMENTS SUBJECTS US
TO FINANCIAL RISK.
A key element of our strategy is to generate advertising revenues through
sponsored services and placements by third parties in our online media
properties in addition to banner advertising. We expect to receive sponsorship
fees or a portion of transaction revenues in return for minimum levels of user
impressions to be provided by us. These arrangements expose us to potentially
significant financial risks in the event our usage levels decrease, including
the following:
- fees we are entitled to receive may be adjusted downwards;
- we may be required to "make good" on our obligations by providing
alternative services;
- sponsors may not renew the agreements or may renew at lower rates; and
- arrangements may not generate anticipated levels of shared transaction
revenues, or sponsors may default on the payment commitments in such agreements.
Accordingly, any leveling off or decrease of our future user base or the
failure to generate anticipated levels of shared transaction revenues could
result in a significant decrease in our revenue levels.
WE MAY NOT BE SUCCESSFUL IN EXPANDING THE NUMBER OF USERS OF OUR ELECTRONIC
COMMERCE SERVICES AND OUR ABILITY TO EFFECTIVELY PROVIDE THESE SERVICES IS
LIMITED BECAUSE WE DO NOT HAVE A DIRECT BILLING RELATIONSHIP WITH OUR CUSTOMERS.
We have focused, and intend to continue to focus, significant resources on
the development and enhancement of our electronic commerce properties. These
properties link users with a network of retailers with which we have
relationships. However, we merely provide a means through which our users can
access the sellers of the products such users may wish to purchase and do not
establish a direct billing relationship with our users as a result of any such
purchase. In addition, a large number of our users currently utilize our online
shopping services simply to gather information for future offline purchases. We
will need to effectively induce information gatherers to make purchases in order
for our electronic commerce properties to be successful. The revenue that we
derive from our electronic commerce services is typically in the form of a
bounty or commission paid by the retailer from whom our user purchased a
product. If the user had a favorite buying experience with a particular
retailer, the user may subsequently contact that retailer directly rather than
through our service. If our users bypass our electronic commerce properties and
contact retailers directly, we will not receive any revenue for purchases made
through such direct contact. Competing providers of online shopping, including
merchants with whom we have relationships, may be able to provide a more
convenient and comprehensive online shopping experience due to their singular
focus on electronic commerce. As a result, we may have difficulty competing with
those merchants for users of electronic commerce services. The inability of our
electronic commerce properties to generate significant revenues could have a
material adverse effect on our business.
GROWTH OF OUR BUSINESS MAY STRAIN OUR MANAGERIAL, FINANCIAL AND OPERATIONAL
RESOURCES.
<PAGE>
We may experience rapid growth, which will place a significant strain on
our managerial, financial and operational resources. Any growth we may
experience will result in increased responsibility for existing and new
management personnel. Our effective growth management will depend on our ability
to:
- integrate new personnel into our corporate structure;
- improve our operational, management and financial systems and controls;
and
- retrain, train, motivate and manage employees.
We cannot assure you that our systems, procedures or controls will be
adequate to support our operations or that we will be able to manage any growth
effectively. If we do not manage our growth effectively, then our expenses may
exceed our revenues.
OUR DEPENDENCE ON THIRD PARTY SOURCES FOR OUR DATABASES MAY INHIBIT THE GROWTH
AND SUCCESS OF OUR WEB SITE.
We currently have the right to use a database of approximately 16,000,000
U.S. business and 1,800,000 Canadian business listings under the terms of a
non-exclusive license from Acxiom Corporation. The license agreement is for an
initial term of one year that expires on October 29, 2000, but is automatically
renewed for additional one year periods unless either party to the agreement
provides 90 days prior written notice of termination. The agreement with Acxiom
Corporation was renewed for an additional one year term.
We received a non-exclusive license from Chicago Map Corporation. Under the
terms of the license we have a right to install and set up their mapping
software on our server. We also have the right to allow our customers to have
access to Chicago Map's software through our web site.
The database and mapping technology are integral components to our web site
and our ability to operate our web site and search engine as intended depends on
our ability to maintain the licenses and continue to use the licensed materials.
There can be no assurance that we will be able to use the database from
Acxiom Corporation or the mapping technology of Chicago Map Corporation for a
long-term period. In the event that we are unable to utilize the database or
mapping technology in the future, we would be required to obtain similar
licenses from other sources. There can be no assurances that we will be able to
obtain similar licenses from other sources, or in the event that we can obtain
such similar licenses, that we will be able to do so on favorable terms.
SYSTEM FAILURE COULD SIGNIFICANTLY REDUCE OUR REVENUES.
The servers that host our web site are backed-up by remote servers, but we
cannot be certain that the back-up servers will not fail or cause an
interruption in our service. Our web site could also be effected by computer
viruses, electronic break-ins or other similar disruptions. Our users depend on
Internet service providers, online service providers and other web site
operators for access to our web sites. Each of these providers has experienced
significant outages in the past and could experience outages, delays and other
difficulties due to system failures unrelated to our systems. Further, our
systems are vulnerable to damage or interruption from fire, flood, power loss,
telecommunications failure, break-ins, earthquake and similar events. Any system
failure, including network, software or hardware failure, that causes an
interruption in our service could result in reduced visits to our web sites and,
therefore, reduced revenues.
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A LOSS OF ANY KEY PERSONNEL COULD IMPAIR OUR ABILITY TO SUCCEED.
In part, our future success depends on the continued service of our key
management personnel, particularly: (1) Jeffrey D. Welsh, our Chief Executive
Officer and President, (2) Kevin Kosick, Vice President (Business Development),
(3) Lindsay Lent, Vice President (Marketing) and a Director, (4) Colin Fraser,
Vice President (Technology), (5) Alex Klenman, Vice President (Communications),
and (6) Wayne E. Loftus, the Chairman of our Board of Directors and the sole
director and officer of Fetchomatic.com Online Inc. The loss of their services,
or the services of other key employees, could impair our ability to grow our
business.
Our future success also depends on our ability to attract, retain and
motivate highly skilled employees. Competition for employees in our industry is
intense. We may be unable to attract, assimilate or retain other highly
qualified employees in the future. In the past we have experienced from time to
time, difficulty hiring and retaining highly skilled employees with appropriate
qualifications. We expect this difficulty to continue in the future.
OUR INABILITY TO EXPAND OUR SALES AND SUPPORT ORGANIZATIONS MAY RESULT IN A
FAILURE TO INCREASE MARKET AWARENESS OF OUR PRODUCTS AND SERVICES.
We need to substantially expand both our advertising sales and corporate
sales operations as well as our marketing efforts to increase market awareness
and sales of our products and services. We plan to hire additional sales
personnel. Competition for qualified sales personnel is intense, and we may be
unable to hire the kind and number of sales personnel we are targeting. We will
need to increase our staff if our customer base increases. Hiring qualified
customer service and support personnel is very competitive in our industry due
to limited number of people available with the necessary technical skills and
understanding of the Internet. If we are unable to hire additional sales
personnel we may be unable to increase market awareness of our products and
services.
IF WE ARE UNABLE TO DEVELOP OUR BRAND, WE WILL BE UNABLE TO BUILD OUR BUSINESS.
We believe that broader brand recognition and favorable consumer perception
of the "Fetchomatic" brand are essential to our future success. We also believe
that the importance of brand recognition will increase due to the growing number
of Internet sites and the relatively low barriers to entry. Accordingly, we
intend to continue pursuing an aggressive brand-enhancement strategy, that will
include mass marketing and multimedia advertising, promotional programs and
public relations activities. As of November 22, 2000 we have delivered
11,750,000 shares of common stock to Sivla, Inc. and other entities who have
performed media, advertising and public relations services on our behalf. We
are still entitled to $4,812,340 of advertising for shares already issued. We
intend to incur significant expenditures on additional advertising and
promotional programs and activities in the future, however our ability to put in
place an effective media relations plan is impacted by our limited cash flow and
concerns over additional dilution of common stock. Future expenditures, which
may not be sufficient, may not result in a sufficient increase in revenues to
cover our advertising and promotional expenses. In addition, even if brand
recognition increases, the number of new users may not increase. Further, even
if the number of new users increases, the amount of our sales may not increase
sufficiently to justify the expenditures. If our brand enhancement strategy is
unsuccessful, these expenses may never be recovered and we may be unable to
increase future revenues.
WE ARE UNCERTAIN WE CAN OBTAIN THE CAPITAL TO GROW OUR BUSINESS.
To fully realize our business objectives and potential, we may require
significant additional financing. Based on our current operating plan, we
anticipate that we may require additional financing by May 2001. In the past, we
have been largely dependent upon private convertible debt and financing through
the exercise of stock options when we required funds. We also issued common
stock in exchange for services. We may need to raise additional funds in the
future to:
- fund more aggressive brand promotion or more rapid expansion;
<PAGE>
- develop new or enhanced services; and
- respond to competitive pressures or to make acquisitions.
We may be unable to obtain required additional financing on terms favorable
to us. If adequate funds are not available on acceptable terms, and we cannot
exchange shares of common stock for services, we may be unable to:
- fund our expansion;
- successfully promote our brand;
- develop or enhance services;
- respond to competitive pressures; or
- take advantage of acquisition opportunities.
Additional financing may be debt, equity or a combination of debt and
equity. If we raise additional funds through the issuance of equity securities,
our stockholders may experience dilution of their ownership interest and the
newly issued securities may have rights superior to those of the common stock.
If we raise additional funds by issuing debt, we may be subject to limitations
on our operations, including limitations on the payment of dividends.
OUR COMPETITORS OFTEN PROVIDE INTERNET ACCESS OR COMPUTER HARDWARE TO OUR
POTENTIAL CUSTOMERS AND THEY COULD MAKE IT DIFFICULT FOR OUR CUSTOMERS TO ACCESS
OUR SERVICES.
Our potential users must access our services through an Internet service
provider, with which the user establishes a direct billing relationship using a
personal computer or other access device. To the extent that an access provider,
such as America Online, or a computer or computing device manufacturer offers
online services or properties that are competitive with ours, the user may find
it more convenient to use the services or properties of that access provider or
manufacturer. In addition, the access provider or manufacturer may make it
difficult to access our services by not listing them in the access provider's or
manufacturer's own directory. Also, because an access provider gathers
information from the user in connection with the establishment of the billing
relationship, an access provider may be more effective than us in tailoring
services and advertisements to the specific tastes of the user. To the extent
that a user opts to use the services offered by his or her access provider or
those offered by computer or computing device manufacturers rather than the
services provided by us, our business, operating results and financial condition
will be materially adversely affected because we may be unable to increase our
revenues in an amount that is sufficient to sustain our operations.
IF INTERNET USAGE DOES NOT GROW, WE MAY BE UNABLE TO EXECUTE OUR BUSINESS PLAN
TO INCREASE OUR OPERATIONS.
Our business will be unable to succeed if Internet usage does not continue
to grow or grows at significantly lower rates compared to current trends. The
continued growth of the Internet depends on various factors, many of which are
outside our control. These factors include, but are not limited to the following
factors:
- the Internet infrastructure's ability to support the demands placed on it;
- the public's concerns regarding security and authentication concerns with
respect to the transmission over the Internet of confidential information, such
as credit card numbers and
<PAGE>
attempts by unauthorized computer users, so-called hackers, to penetrate online
security systems; and
- the public's concern regarding privacy issues, including those related to
the ability of web sites to gather user information without the user's knowledge
or consent.
OUR INABILITY TO ADAPT TO EVOLVING INTERNET TECHNOLOGIES AND CUSTOMER DEMANDS
MAY IMPEDE OUR FUTURE GROWTH.
To be successful, we must adapt to rapidly changing Internet technologies
and customer demands. To that end, we must continually enhance our products and
services and introduce new services to address our customers' changing needs. If
we need to modify our services or infrastructure to adapt to changes affecting
providers of Internet services, we could incur substantial development or
acquisition costs. If we cannot adapt to these changes, or do not sufficiently
increase the features and functionality of our products and services, our
customers may switch to the product and service offerings of our competitors or
potential competitors.
Furthermore, our competitors or potential competitors may develop novel
Internet applications that are equal or superior to our services. As a result,
customer demand for our services may decrease.
IF OUR SYSTEMS DO NOT PERFORM AS EXPECTED, OUR POTENTIAL REVENUES MAY BE
SIGNIFICANTLY REDUCED.
Any system failure, including network, software or hardware failure, that
causes an interruption in our service or a decrease in our responsiveness could
result in delays in the full launch of our web site or reduced user traffic on
our web site and therefore cause a reduction in potential revenues. Our web site
and data are backed-up on tapes and are stored remotely. Although we believe
that our current back-up methods are adequate, we cannot assure you that the
back-up tapes will not cause an interruption in our service. Computer viruses,
electronic break-ins or other similar disruptions could also affect our web
site. Our users and customers depend on Internet service providers, online
service providers and other web site operators for access to our web site. Each
of these providers has experienced significant outages in the past, and could
experience outages, delays and other difficulties due to system failures
unrelated to our systems in the future. Our systems are vulnerable to damage or
interruption from fire, flood, power loss, telecommunications failure,
break-ins, earthquake and other similar events. Our insurance policies have low
coverage limits and may not adequately compensate us for losses that may occur
due to interruptions in our service.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OR ARE HELD LIABLE
FOR INFRINGING ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WE MAY BE FORCED
TO DEVOTE SIGNIFICANT TIME, ATTENTION AND MONEY TO DEFEND THESE CLAIMS.
Third parties may infringe or misappropriate our trademarks or other
proprietary rights, which could injure our reputation and business. We may be
subject to or may initiate proceedings in the United States Patent and Trademark
Office, which may demand significant financial and management resources. While
we enter into confidentiality agreements with our employees and consultants, and
generally control access to and distribution of our proprietary information, the
steps we have taken to protect our proprietary rights may not prevent
misappropriation. In addition, we do not know whether we will be able to defend
our proprietary rights since the validity, enforceability and scope of
protection of proprietary rights in Internet-related industries is uncertain and
still evolving.
Many parties are actively developing search, indexing, e-commerce and other
Internet related technologies, as well as a variety of online business models
and methods. We believe that these parties will continue to take steps to
protect these technologies, including, but not limited to, seeking patent
protection. As a result, disputes regarding the ownership of these technologies
and rights associated with online business are likely to arise in the future.
<PAGE>
Although we believe our products and information system do not infringe
upon the proprietary rights of others, there can be no assurance that third
parties will not assert infringement claims against us. From time to time in the
ordinary course of business we may be subject to claims of alleged infringement
of the trademarks and other intellectual property rights of third parties. These
claims and any resultant litigation, should this occur, could further subject us
to significant liability for damages. In addition, even if we prevail,
litigation could be time-consuming and expensive to defend, and could result in
the diversion of our time and attention and a reduction in any potential
profits. Any claims from third parties may also result in limitations on our
ability to use the intellectual property subject to these claims unless we are
able to enter into agreements with the third parties making these claims.
IF WE ARE HELD LIABLE FOR PUBLISHING CERTAIN CONTENT ON THE INTERNET, WE MAY BE
FORCED TO DEVOTE SIGNIFICANT RESOURCES TO DEFEND THOSE CLAIMS.
As a publisher of online content, we face potential liability for
defamation, negligence, copyright, patent or trademark infringement, or other
claims based on the nature and content of materials that we publish or
distribute. In the past, plaintiffs have brought these types of claims and
sometimes successfully litigated them against online services. If a plaintiff
were to bring a claim against our company, we would incur legal expenses
associated with defending the litigation. Furthermore, there exists the
possibility that we may not prevail. Litigating any one of these claims would be
time-consuming and expensive to defend and could impair our ability to become
profitable.
IF WE EVER DECIDE TO COLLECT PERSONAL INFORMATION ABOUT OUR USERS, WE MAY FACE
POTENTIAL LIABILITY FOR INVASION OF PRIVACY.
Although we have a policy against using personal information, current
computing and Internet technology allows us to collect personal information
about our users. We may decide in the future to compile and provide such
information to our electronic commerce partners. If we begin collecting such
information, we may face potential liability for invasion of privacy for
compiling and providing to our electronic commerce partners information based on
questions asked by users and visitors on our web site. Because we may not obtain
permission from users to distribute this information, we may potentially face
liability for invasion of privacy.
IF A NEW LAW OR NEW GOVERNMENT REGULATION IS CREATED PERTAINING TO THE INTERNET,
IT COULD DECREASE THE DEMAND FOR OUR SERVICES OR INCREASE THE COST OF DOING
BUSINESS.
Any new law or regulation pertaining to the Internet, or the application or
interpretation of existing laws, could decrease the demand for our services or
increase our cost of doing business. There is, and will likely continue to be,
an increasing number of laws and regulations pertaining to the Internet. These
laws or regulations may relate to liability for information retrieved from or
transmitted over the Internet, online content regulation, user privacy, taxation
and the quality of products and services. Furthermore, the growth and
development of electronic commerce may prompt calls for more stringent consumer
protection laws that may impose additional burdens on electronic commerce
companies as well as companies like ours that provide electronic commerce
services. Moreover, the applicability to the Internet of existing laws governing
intellectual property ownership and infringement, copyright, trademark, trade
secret, obscenity, libel, employment, personal privacy, advertising and other
issues is uncertain and developing.
We file tax returns in such jurisdictions as required by law based on
principles applicable to traditional businesses. However, one or more states
could seek to impose additional income tax obligations or sales tax collection
obligations on out-of-state companies, such as ours, that engage in or
facilitate electronic commerce. A number of proposals have been made at state
and local levels that could impose such taxes on the sale of products and
services through the Internet. Such proposals, if adopted, could substantially
impair the growth of electronic commerce and adversely affect our opportunity to
become profitable.
<PAGE>
The United States Congress has enacted legislation limiting the ability of
the states to impose taxes on Internet-based transactions. This legislation,
known as the Internet Tax Freedom Act was enacted on October 1, 1998 and ends on
October 21, 2001. The legislation imposes only a three-year moratorium on state
and local taxes on (1) electronic commerce where such taxes are discriminatory
and (2) Internet access unless such taxes were generally imposed and actually
enforced prior to October 1, 1998. It is possible that the tax moratorium could
fail to be renewed prior to October 21, 2001. Failure to renew this legislation
would allow various states to impose taxes on Internet-based commerce. The
imposition of such taxes could adversely affect our ability to become
profitable.
Due to the global nature of the Internet, it is possible that the
governments of other states and foreign countries might attempt to regulate its
transmissions or prosecute for violations of their laws. We might
unintentionally violate such laws, such laws may be modified, and new laws may
be enacted in the future. Any such developments could have a material adverse
effect on our business, operating results and financial condition.
SINCE WE PLAN TO ENTER INTO REVENUE-SHARING CONTRACTS WITH THIRD PARTIES, THIS
EXPOSURE MAY SUBJECT US TO LEGAL RISKS AND POSSIBLE LIABILITIES.
As part of our business, we plan to enter into agreements with sponsors,
content providers, service providers and merchants. As a result, we will be
entitled to receive a share of revenues from the purchase of goods and services
by users of our online properties. Such arrangements may expose us to additional
legal risks and uncertainties, including potential liabilities to consumers of
such products and services. Although we carry general liability insurance, our
insurance may not cover potential claims of this type or may not be adequate to
indemnify us against all potential liability.
Some of the risks that may result from these arrangements with businesses
engaged in electronic commerce include, but are not limited to the following:
- potential liabilities for illegal activities that may be conducted by
participating merchants;
- product liability or other tort claims relating to goods or services sold
through third-party commerce web sites;
- consumer fraud and false or deceptive advertising or sales practices;
- breach of contract claims relating to merchant transactions;
- claims that materials included in merchant web sites or sold by merchants
through these web sites infringe third-party patents, copyrights, trademarks or
other intellectual property rights, or are libelous, defamatory or in breach of
third-party confidentiality or privacy rights; and
- claims relating to any failure of merchants to appropriately collect and
remit sales or other taxes arising from electronic commerce transactions.
Even to the extent that such claims do not result in material liability,
investigating and defending such claims could cause a strain on our finances,
damage our reputation and distract the attention of our management.
SINCE OUR CURRENT AND FORMER OFFICERS AND DIRECTORS OWN A LARGE PERCENTAGE OF
OUR OUTSTANDING SHARES, THEY ARE ABLE TO SIGNIFICANTLY INFLUENCE MATTERS
REGARDING STOCKHOLDER APPROVAL.
As of December 12, 2000, our current executive officers, directors and
their affiliates beneficially own (or control via proxy) in the aggregate
8,336,667 shares or approximately 15% of our current issued and outstanding
common stock. These stockholders may be able to exercise control over all
matters requiring approval by our
<PAGE>
stockholders, including the election of directors and the approval of
significant corporate transactions. This concentration of ownership may also
have the effect of delaying or preventing an acquisition or change in control of
our company, which could significantly reduce our stock price.
Further, as of December 12, 2000, Maurice Simpson, Dana Shaw and William
Murray (former executive officers of our company and/or certain of its
subsidiaries) beneficially own in the aggregate 17,225,000 shares or 31.5% of
our currently issued and outstanding common stock. This concentration of stock
with individuals with which we are currently in dispute may also have the effect
of delaying or preventing approval of transactions and events requiring
stockholder approval.
SINCE THE MARKET FOR STOCKS OF INTERNET COMPANIES HISTORICALLY HAS EXPERIENCED
EXTREME PRICE FLUCTUATIONS, OUR SHARES MAY EXPERIENCE EXTREME PRICE AND VOLUME
FLUCTUATIONS.
The market for the stocks of Internet-related companies has experienced
extreme price and volume fluctuations. The market price of our common stock may
be volatile and may decline. In the past, securities class action litigation has
often been initiated against companies following periods of volatility in the
market price of their securities. If initiated against us, regardless of the
outcome, litigation could result in substantial costs and a diversion of our
management's attention and resources.
IF HOLDERS OF OUR CONVERTIBLE DEBENTURES CONVERT THE DEBENTURES OR EXERCISE
THEIR WARRANTS, OUR COMMON STOCK MAY BE DILUTED AND SALES OF THE SHARES MAY
REDUCE OUR STOCK PRICE.
The existence of warrants and convertible debentures may make it more
difficult for us to raise capital when necessary and may depress the market
price of our common stock in any market that may develop for such securities.
Future sales of a substantial number of shares of our common stock in the public
market could reduce the market price of the stock. It could also impair our
ability to raise additional capital by selling more of our common stock.
THE CONVERSION OF OUR OUTSTANDING CONVERTIBLE DEBENTURES AND THE PAYMENTS FOR
ADVERTISING SERVICES MAY MAKE IT DIFFICULT TO EVALUATE A SHAREHOLDER'S EQUITY
POSITION IN THE COMPANY AND MAY RESULT IN SHAREHOLDER DILUTION.
The number of shares of our common stock issuable upon conversion of our
outstanding convertible debentures will fluctuate based on the average closing
bid price of our common stock as listed on the OTC Electronic Bulletin Board for
the three lowest three days (which need not be consecutive) in the prior twenty
days. The number of shares of our common stock issuable upon exercise from time
to time under the second component of the media and advertising services
agreement with Sivla, Inc. (should we decide to utilize the second component of
the agreement) will fluctuate based on the average market price of our common
stock as listed on the OTC Electronic Bulletin Board for the month prior to the
date the services are rendered. Therefore, the percentage of our common stock
held by a shareholder on any given day may be substantially different from
another day depending on our common stock's closing bid prices, as the number of
shares of our common stock issuable pursuant to our convertible debentures, and
potentially, our media and services agreement with Sivla, Inc. may vary
significantly from day to day. Further, the fluctuation in stock price may
require us to issue a larger than expected number of shares upon conversion of
the debentures or performance of services under the media and advertising
agreement, which could substantially dilute the stockholders' ownership
position. At the present time, the Company does not intend to utilize the
second component of the media and services agreement with Silva, Inc.
THE PREVAILING MARKET PRICE OF OUR COMMON STOCK MAY BE ADVERSELY AFFECTED BY
SALES OF A SUBSTANTIAL NUMBER OF SHARES INTO THE PUBLIC MARKET
<PAGE>
As of December 12, 2000, there were 54,659,217 shares of our common stock
outstanding. Of the outstanding shares, 37,382,500 are subject to the volume
limitations on sale set forth in Rule 144 of the Securities Exchange Act of
1934. Sales of the shares issued in private transactions, as well as the common
stock issuable upon conversion of the convertible debentures and upon exercise
of the warrant, may affect the market price of our common stock.
FUTURE SALES OF COMMON STOCK BY OUR EXISTING STOCKHOLDERS COULD REDUCE THE PRICE
OF OUR COMMON STOCK.
The market price of our common stock could decline as a result of sales by
our existing stockholders of shares of common stock in the market. Likewise, the
perception that these sales could occur may result in the decline of the market
price of our common stock. These sales also might make it more difficult for us
to sell equity securities in the future at a time and at a price that we deem
appropriate.
PROVISIONS IN OUR CHARTER OR AGREEMENTS MAY PREVENT OR DELAY A CHANGE OF
CONTROL.
Provisions of our certificate of incorporation and bylaws as well as
provisions of applicable Nevada law may discourage, delay or prevent a merger or
other change of control that a stockholder may consider favorable. Our board of
directors has the authority to issue up to 200,000,000 shares of common stock
and to determine the price and terms, including preferences and voting rights,
of those shares without stockholder approval. As of December 12, 2000, we have
issued the following (or are required to additional shares of common stock as
the result of our receipt of conversion notices form the holders of the
debentures so that our capitalization is as follows): (1) 364,000 stock options
to purchase common stock; (2) 721,765 warrants to purchase common stock and (3)
$3,500,000 of convertible debentures (with a remaining principal balance of
$2,960,000 convertible into shares of common stock based upon applicable
conversion price of our common stock at the time of conversion). The issuance
of additional shares of common stock or convertible securities could, among
other things, have the following effect:
- delay, defer or prevent an acquisition or a change in control of our
company;
- discourage bids for our common stock at a premium over the market price;
or
- reduce the market price of, and the voting and other rights of the holders
of, our common stock.
Furthermore, we are subject to Nevada laws that could have the effect of
delaying, deterring or preventing a change in control of our company. One of
these laws prohibits us from engaging in a business combination with any
interested stockholder for a period of three years from the date the person
became an interested stockholder, unless certain conditions are met. In
addition, certain provisions of our certificate of incorporation and by-laws,
and the significant amount of common stock held by our executive officers,
directors and affiliates, could together have the effect of discouraging
potential takeover attempts or making it more difficult for stockholders to
change management.
WE DO NOT EXPECT TO PAY DIVIDENDS.
We have not paid dividends on our common stock or preferred stock and do
not expect to do so in the foreseeable future.
ITEM 2. DESCRIPTION OF PROPERTY
We currently lease office space at the following three locations:
<PAGE>
- We lease approximately 900 square feet of office space located at 444
Victoria Street, Suite 370, Prince George, British Columbia under a lease which
expires on January 31, 2001 for annual rent of approximately $10,400, plus our
share of operating expenses;
- We lease approximately 3,500 square feet of office space located at
39-1835 56th Street, Delta, British Columbia, under a lease which expires on
July 3, 2003 for annual rent of approximately $26,000; and
- We lease approximately 7,936 square feet of office space located at 1521
56th Street, Delta, British Columbia under a lease which expires on April 30,
2005 for annual rent of approximately $51,000, plus our share of operating
expenses
We believe that our space is adequate for our immediate needs. These
premises are used for office space and as the facility for our computer
equipment and we believe that they are adequately covered by insurance.
ITEM 3. LEGAL PROCEEDINGS.
On November 24, 2000, Fetchomatic.com Online Inc. (our subsidiary) filed a
writ of summons in the Supreme Court of British Columbia (Vancouver Registry)
against Maurice Simpson, Barbara Ann Jones Simpson, Robert Simpson, Brennan
Simpson, Robert Matthew Simpson, Novacom Marketing Inc., and Dana Shaw. Maurice
Simpson and Dana Shaw are former directors of our company and directors and
officers of Fetchomatic.com Online Inc. Maurice Simpson also served as an
officer of our company. As of the date of this Annual Report, William Murray,
a former officer of Fetchomatic.com Online Inc., has not been named as a party
to this lawsuit. However, we have discontinued his monthly consulting fee
effective October 31, 2000 and are investigating our options for setting aside
the termination provisions of his agreement.
The writ alleges, among other things, various breaches of fiduciary and
contractual duties owed to Fetchomatic.com Online Inc. by Maurice Simpson and
Dana Shaw. The action seeks, among other things, (i) damages for breach of
fiduciary duty and breach of contact; (ii) a declaration that Maurice Simpson
and Dana Shaw committed repudiatory breaches of their respective Consulting
Agreements and the Share Exchange Agreement (dated September 29, 1999), pursuant
to which they received shares of our common stock; and (iii) a declaration that
we and our subsidiary validly terminated the future obligations of performance
under such Consulting Agreements and under the Share Exchange Agreement. In the
event of a determination adverse to our subsidiary, we may incur substantial
monetary liability that could have a material adverse effect on our financial
position and results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the year ended
July 31, 2000.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The shares of our common stock are quoted in the United States on the
National Association of Securities Dealers Inc.'s Over-the-Counter Bulletin
Board (the "OTCBB") under the symbol "FGLB". The following table sets forth the
range of high and low bid quotations for our common stock for each of the
quarters of the fiscal year ended July 31, 1999 and for each of the quarters of
the fiscal year ending July 31, 2000. Our common stock began quotation on the
OTCBB under the symbol "FGII" on July 9, 1999 and under the symbol "FGLB" on
June 9, 2000. Prior to July 9, 1999, there was no public market for our
securities. The quotations represent inter-dealer prices without retail markup,
mark down or commission and may not necessarily represent actual transactions.
<PAGE>
Year Ended July 31, 2000 High Low
---- ---
First Quarter $2.88 $0.78
Second Quarter $2.03 $0.94
Third Quarter $3.53 $1.38
Fourth Quarter $2.44 $1.06
Year Ended July 31, 1999
July 9, 1999 to July 31, 1999 $2.50 $0.63
On December 8, 2000, the closing bid price as quoted by the OTCBB for our
common stock was $0.33. Our common shares are issued in registered form.
Pacific Stock Transfer (5844 South Pecos Road, Suite D, Las Vegas, Nevada 89120
(telephone: (702) 361-3033, facsimile (702) 732-7890) is the registrar and
transfer agent for our common shares. As of December 12, 2000, there were
approximately 133 holders of record of our common stock. This number of
stockholders does not include stockholders who hold our securities in street
name.
We have not issued any cash dividends since our inception, and we do not
anticipate paying any cash dividends on our common stock in the foreseeable
future. Although there is no restrictions on our ability to pay dividends, the
payment of dividends, if any, rests within the discretion of our board of
directors and will depend upon, among other things, our earnings, capital
requirements and financial condition, as well as other relevant factors.
Recent Sales of Unregistered Shares
On November 3, 1999, we closed the share exchange agreement with Maurice
Simpson, Dana Shaw and William Murray (the stockholders of Fetchomatic.com
Online Inc, then known as SSA Coupon Ltd.) to acquire all the issued and
outstanding shares of Fetchomatic.com Online Inc. in exchange for 19,000,000
shares of our common stock. At the conclusion of the agreement, Fetchomatic.com
Online Inc. became our wholly-owned subsidiary. The shares were issued to the
three individuals residing outside of the United States in an "offshore
transaction" relying on Regulation S of the Securities Act of 1933 (see
"Description of Business" for further details of the share exchange).
On May 16, 2000, we issued 8,812,500 shares of our common stock to Venture
Capital Media Group (an affiliate of Sivla, Inc.) pursuant to the Advertising
and Media Services Agreement, dated March 30, 2000. A further 2,937,500 shares
of common stock were issued to Venture Capital Media Group on July 28, 2000 in
connection with the first component of this Agreement. These shares were issued
to these two entities pursuant to sections 4(2), 4(6) and/or Rule 506 of
Regulation D of the Securities Act of 1933, as amended. We completed an SB-2
filing with respect to the 2,937,500 common shares to qualify them for resale by
the holders (see "Description of Business" for further details on the
Advertising and Media Services Agreement).
On May 1, 2000, in a private placement transaction, we issued 7%
convertible debentures in the aggregate principal amount of $3,500,000, due May
1, 2003, to Collinson Road, LLC. The debentures may be converted into shares of
our common stock at the option of the holders of such debentures, in whole or in
part at any time and from time to time. The number of shares of common stock
issuable upon a conversion is based on the conversion price in effect at the
time of conversion. The conversion price is the lesser of (i) $2.295 and (ii)
80% of the average of the lowest three per share market values (determined as
the last closing bid price per share), which need not occur on consecutive days,
during the twenty (20) trading days immediately preceding the applicable
conversion date. In the event of a conversion, the holder of the debenture
exercising its right to convert will receive a number of shares of common stock
equal to the sum of (i) the quotient obtained by dividing (x) the outstanding
principal of the debenture to be converted and (y) the conversion price, and
(ii) the amount of interest accrued on the principal amount of the debentures to
be converted as of the date of conversion divided by the conversion price. Any
convertible debentures outstanding on May 1, 2003 automatically convert into
shares of our common stock at the
<PAGE>
then applicable conversion price. The convertible debentures are redeemable
under certain circumstances as stated therein.
In connection with the private placement of our convertible debentures, we
issued to Collinson Road, LLC a non-forfeitable, fully vested detachable warrant
to purchase up to 521,765 shares of our common stock at a price per share of
$2.295, exercisable on or after May 1, 2000 and expiring on May 1, 2005. The
exercise price and number of shares of common stock issuable upon exercise of
the warrant are subject to adjustment upon the occurrence of certain events,
including, but not limited to our issuance of a stock dividend, stock splits,
reclassification of our common stock or compulsory share exchange pursuant to
which our common stock is converted into other securities, or sales of shares of
our common stock for less than the exercise price.
The sale of the convertible debentures and warrant to Collinson Road LLC
was exempt from registration pursuant to Section 4(2), 4(6) and/or Rule 506 of
Regulation D of the Securities Act of 1933, as amended.
In connection with the convertible debenture financing, we issued 87,500
shares of our common stock each to Ira Terk and Next Millenium Capital Holdings
as a finder's fees relying on section 4(2) of the Securities Act of 1933, as
amended. Also in connection with the convertible debenture financing, we made
cash payments for finder's fees to Next Millennium Capital Holdings in the
amount of $225,000 and to Merchant Bancorp in the amount of $125,000.
On June 9, 2000, we entered into an agreement with OTC Live, Inc. to
acquire investor relations and internet profiling services in exchange for
100,000 shares of our common stock. We issued the shares pursuant to section
4(2), 4(6) and/or Rule 506 of Regulation D of the Securities Act of 1933, as
amended.
On December 17, 1999, we entered into an agreement with Lawrence Adams Ltd.
to obtain marketing and investor relation services for a period of one year. In
connection with the agreement, we issued 100,000 shares of our common stock and
non-forfeitable, fully vested warrants to purchase (1) up to 100,000 shares of
our common stock at a price per share of $1.09, and (2) up to 100,000 shares of
our common stock at a price per share of $3.00. All of the warrants issued under
this agreement are exercisable on or after December 17, 1999 and expire at the
close of business on December 17, 2003. The number of shares of common stock
issuable upon exercise of the warrants are subject to adjustment upon the
occurrence of certain events, including, but not limited to stock splits,
consolidation or reclassification of our common stock or compulsory share
exchange pursuant to which our common stock is converted into other securities.
On November 2, 2000, we issued 200,000 shares of our common stock to Kramer
Group LLC in connection with the marketing services agreement dated September
20, 2000 (see "Description of Business" for more details of the marketing
services agreement). We issued the shares pursuant to section 4(2), 4(6) and/or
Rule 506 of Regulation D of the Securities Act of 1933, as amended.
ITEM 6. MANAGEMENT'S PLAN OF OPERATION.
The following discussion should be read in conjunction with our financial
statements and related notes appearing elsewhere in this Annual Report. The
following discussion contains forward-looking statements that reflect our plans,
estimates, assumptions and beliefs, and that involve risks and uncertainties.
Our actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and elsewhere
in this Annual Report, particularly in the section titled "Risk Factors" in Item
1 of this Annual Report.
We were formed under the laws of the State of Nevada on August 27, 1998
under the name "Forest Glade International Inc." Our name change to
"Fetchomatic Global Internet Inc." was approved by the State of Nevada on June
2, 2000. Until the acquisition of 100% of the issued and outstanding shares of
SSA Coupon Ltd. on November 3, 1999, we were principally engaged in the
ownership and operation of a mobile home park in British Columbia, Canada. Our
wholly-owned subsidiary, SSA Coupon Ltd. (now Fetchomatic.com Online Inc.),
incorporated in British Columbia, Canada on September 24, 1998 is developing
www.fetchomatic.com, a web site with an
<PAGE>
integrated search engine and portal that utilizes a geographical searching
capability. With divestiture of the mobile home park in June 2000, our primary
business focus is the development and launch of www.fetchomatic.com.
The Company has recently gone through a major reorganization. During that
reorganization, which commenced October 26, 2000 and is expected to end on or
before December 31, 2000, the Company has designed a new Web portal.
Additionally, it expects to have fully-developed its new search engine by the
end of the 2000 calendar year. In any case, the Company has sufficient capital
to complete the reorganization as discussed.
Our objective is to be the first graphical portal on the Web with a
geographical-based one-click product, services and business locater
incorporating our Targeted Advertising Banner System ("TABS"). In certain
cases, we will provide this technology to other companies as licensees.
We have developed a plan of operations for the twelve months commencing
January 1, 2001 and ending December 31, 2001.
Our primary objectives over the next twelve months will be to complete the
following:
- continue development and redesign of the web portal;
- upgrade the site to include additional forms of content and services;
- commence sales and marketing initiatives, including implementation of
in-house and external sales team and a public relations campaign which will
provide us with exposure to the consumer and investment communities;
- implement targeted advertising campaigns to support the sales and branding
requirements;
- development of partnerships and strategic alliances; and
- enhance and further develop our current technology to increase performance
and usability.
CASH REQUIREMENTS
We will require a minimum of $1.9 million over the period ending December
31, 2001 in order to accomplish our goals. The cash requirements of $1.9
million are based on our estimates of operational costs for the period ending
December 31, 2001. We estimate that $289,000 is required to hire marketing and
sales persons and to implement our planned sales and marketing program. We
estimate that $100,000 will be required to support a shareholder communications
program, $125,000 will be required for the continued development and enhancement
of www.fetchomatic.com, $100,000 will be required for equipment purchases and
the balance of $1,286,000 will be required to support general corporate expenses
and operating expenses.
We intend to obtain the balance of the cash requirements through the sale
of our equity securities, proceeds received from the exercise of outstanding
warrants and stock options or by obtaining further debt financing.
Additionally, we will explore the possibility of raising funds by way of
government grants made available to high-technology companies operating in
Canada.
ADVERTISING AND MARKETING
We plan on expending $289,000 of cash in the twelve months ended December
31, 2001 in marketing, advertising and promotional expenses in connection with
the launch of our web portal and to develop brand awareness of our products and
services. As well, we will utilize the balance of advertising due to us pursuant
to the first component of our agreement with Sivla, Inc. We will issue further
shares of our common stock as necessary to cover a significant amount of
expenses in relation to advertising and marketing. See Item 1 - Description of
Business for more details.
<PAGE>
RESEARCH AND DEVELOPMENT
We expect to spend $125,000 in the twelve months ending December 31, 2001
in further developing its search engine during 2001. These monies will be spent
on expanding the scope and sophistication of our search engine.
From inception to July 31, 2000, we have spent approximately $649,000
(including $610,000 during the year ended July 31, 2000) on construction of our
web site and on development of our search engine (excluding the costs of
computer hardware and equipment). To July 31, 2000, we have deferred on our
consolidated balance sheet approximately $495,000 of these development costs
(incurred in fiscal 2000) with the remaining development costs of $154,000
charged to our consolidated statement of operations, including $116,000 in
fiscal 2000.
PERSONNEL
As of July 31, 2000, our staff consisted of 20 full-time employees, 15
full-time consultants and 2 part-time consultants. In the next twelve months,
we plan to hire sales and marketing personnel for the implementation of a
in-house sales and marketing team.
PURCHASE OR SALE OF EQUIPMENT
We expect to purchase approximately $100,000 in equipment associated with
the further development of its search engine. We will also continue to purchase
other computer hardware and software required for our ongoing operations.
GENERAL AND ADMINISTRATIVE EXPENSES
We expect that we will spend approximately $107,000 per month on general
corporate and operating expenses, which includes salaries, rent, legal,
accounting and other general corporate expenses.
OTHER MATTERS DISCUSSED BY MANAGEMENT
Proceeds on the exercise of 3,250,000 stock options totalling $3,542,500
were received by Northern Business Consultants Ltd. on our behalf from various
optionees. Certain amounts received by Northern Business Consultants Ltd. were
forwarded to us or used to pay for expenses incurred on our behalf. At July 31,
2000, proceeds yet to be forwarded to us or used for expenses totaled
$1,874,250. Due to concerns over the likelihood of recovery of the balance
outstanding, we have fully provided for the amount outstanding as a write-down
of amounts receivable in the year ended July 31, 2000. We are also reviewing
all expenses paid by Northern Business Consultants Ltd. on our behalf and intend
to vigorously pursue collection of all amounts owing to us on exercise of stock
options.
ITEM 7. FINANCIAL STATEMENTS
Our consolidated financial statements are stated in United States dollars
and are prepared in accordance with accounting principles generally accepted in
the United States.
The consolidated financial statements are attached hereto and are found
immediately following the text of this Annual Report. The Independent Auditors'
Report of BDO Dunwoody LLP, Chartered Accountants, on the consolidated audited
financial statements for the fiscal years ended July 31, 2000 and 1999 is
included herein immediately preceding the audited financial statements.
The Company's Consolidated Audited Financial Statements include:
<PAGE>
Independent Auditors' Report, dated October 26, 2000.
Consolidated Balance Sheet at July 31, 2000.
Consolidated Statements of Operations for the Year Ended July 31, 2000, for
the period from September 24, 1998 (inception) to July 31, 1999 and for the
cumulative period from September 24, 1998 (inception) to July 31, 2000.
Consolidated Statement of Changes in Stockholders' Equity (Deficit) for the
cumulative period from September 24, 1998 (inception) to July 31, 2000.
Consolidated Statements of Cash Flows for the Year Ended July 31, 2000, for
the period from September 24, 1998 (inception) to July 31, 1999 and for the
cumulative period from September 24, 1998 (inception) to July 31, 2000.
Summary of Significant Accounting Policies.
Notes to the Consolidated Financial Statements.
At July 31, 2000, we were considered a development stage company. As a
result of our acquisition of Fetchomatic.com Online Inc. (formerly SSA Coupon
Ltd.) via reverse acquisition on November 3, 1999, our financial statements are
presented as a continuation of Fetchomatic.com Online Inc. Accordingly,
financial information pertaining to periods prior to the acquisition is that of
Fetchomatic.com Online Inc.
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED JULY 31, 2000
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED JULY 31, 2000
CONTENTS
INDEPENDENT AUDITORS' REPORT
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet
Statements of Operations
Statement of Changes in Stockholders' Equity (Deficit)
Statements of Cash Flows
Summary of Significant Accounting Policies
Notes to the Financial Statements
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Directors and Stockholders of
fetchOmatic Global Internet Inc.
(formerly Forest Glade International Inc.)
We have audited the Consolidated Balance Sheet of fetchOmatic Global Internet
Inc. (a development stage company) and subsidiaries as at July 31, 2000 and the
related Consolidated Statements of Operations, Changes in Stockholders' Equity
(Deficit) and Cash Flows for the year ended July 31, 2000, for the period from
September 24, 1998 (inception) to July 31, 1999 and for the cumulative period
from September 24, 1998 (inception) to July 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of fetchOmatic Global Internet Inc. (a
development stage company) as at July 31, 2000 and the related Consolidated
Statements of Operations, Changes in Stockholders' Equity (Deficit) and Cash
Flows for the year ended July 31, 2000, for the period from September 24, 1998
(incorporation) to July 31, 1999 and for the cumulative period from September
24, 1998 (inception) to July 31, 2000 in accordance with accounting principles
generally accepted in the United States.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the consolidated
financial statements, the Company has suffered significant losses from
operations and has no established source of revenue. This raises substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are described in Note 1. These consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ BDO Dunwoody LLP
Chartered Accountants
Vancouver, Canada
October 26, 2000
<PAGE>
<TABLE>
<CAPTION>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Consolidated Balance Sheet
JULY 31 2000
------------------------------------------------------------------------- -------------
<S> <C>
ASSETS
CURRENT
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 1,982,923
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,808
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,812
-------------
2,108,543
PROPERTY AND EQUIPMENT (Note 4) . . . . . . . . . . . . . . . . . . . . . 801,219
SOFTWARE DEVELOPMENT COSTS. . . . . . . . . . . . . . . . . . . . . . . . 494,522
DEFERRED FINANCING COSTS (Note 6) . . . . . . . . . . . . . . . . . . . . 581,976
-------------
$ 3,986,260
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 250,447
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,050
Demand loans payable (Note 5) . . . . . . . . . . . . . . . . . . . . . 42,626
-------------
381,123
CONVERTIBLE DEBENTURES (Note 6) . . . . . . . . . . . . . . . . . . . . . 2,589,861
-------------
2,970,984
-------------
STOCKHOLDERS' EQUITY
Capital stock (Note 7)
Authorized
200,000,000 common shares, par value $0.001
Issued
53,561,000 common shares. . . . . . . . . . . . . . . . . . . . 53,561
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 35,400,279
Deficit accumulated in the development stage . . . . . . . . . . . . . (17,015,713)
Accumulated other comprehensive income - foreign currency translation. 30,752
-------------
18,468,879
Deferred advertising costs and stock subscriptions receivable (Note 7) (17,453,603)
-------------
1,015,276
-------------
$ 3,986,260
=============
</TABLE>
See the accompanying summary of significant accounting policies and notes to the
consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Consolidated Statements of Operations
Cumulative
Period from Period from
September 24 September 24
Year 1998 1998
Ended (Inception) (Inception)
July 31 to July 31 to July 31
2000 1999 (a) 2000
-------------- -------------- -----------
<S> <C> <C> <C>
EXPENSES
Administration (including stock option compensation
of $3,800,000 in 2000, (Note 9)) . . . . . . . . . $ 4,198,042 $ 80,640 $ 4,278,682
Advertising and promotion. . . . . . . . . . . . . . 6,567,500 - 6,567,500
Corporate finance and Communications . . .. . . . . . 878,491 - 878,491
Depreciation . . . . . . . . . . . . . . . . . . . . 153,362 - 153,362
Professional fees. . . . . . . . . . . . . . . . . . 155,113 - 155,113
Research and development . . . . . . . . . . . . . . 115,781 39,900 155,681
Write-down of amounts receivable (Note 11) . . . . . 2,544,356 114,814 2,659,170
------------- -------------- ------------
14,612,645 235,354 14,847,999
INTEREST AND FINANCING COSTS (Note 6). . . . . . . . . 1,600,212 - 1,600,212
-------------- -------------- -----------
LOSS FROM CONTINUED OPERATIONS . . . . . . . . . . . . 16,212,857 235,354 16,448,211
LOSS FROM DISCONTINUED OPERATIONS,
net of tax (Note 3). . . . . . . . . . . . . . . . . 567,502 - 567,502
-------------- -------------- -----------
NET LOSS FOR THE PERIOD. . . . . . . . . . . . . . . . $ 16,780,359 $ 235,354 $17,015,713
------------------------------------------------------ ============== ============== ===========
LOSS PER SHARE - BASIC AND DILUTED
From continued operations. . . . . . . . . . . . . . $ (0.44) $ (0.01)
Discontinued operations (Note 3) . . . . . . . . . . (0.02) -
-------------- --------------
After discontinued operations. . . . . . . . . . . . $ (0.46) $ (0.01)
------------------------------------------------------ ============== ==============
WEIGHTED AVERAGE SHARES OUTSTANDING. . . . . . . . . . 36,145,419 19,000,000
------------------------------------------------------ ============== ==============
<FN>
(a) Represents the results of operations of fetchOmatic.com Online Inc. (formerly SSA Coupon Ltd.)
</TABLE>
See the accompanying summary of significant accounting policies and notes to the
consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
JULY 31, 2000 AND 1999
------------------------------------------------------------------
Deficit
Accumulated
Additional in the
Common Shares Paid-in Development
Number Amount Capital Stage
------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Initial capital contributions to SSA Coupon Ltd. on September 24,
1998 at C$0.01 per share. . . . . . . . . . . . . . . . . . . . . 100 $ 66 $ - $ -
Capital contributions by Forest Glade during the period. . . . . . - - 175,000 -
Net loss for the period. . . . . . . . . . . . . . . . . . . . . . - - - (235,354)
------------- ------------ ------------- ---------------
BALANCE, July 31, 1999 . . . . . . . . . . . . . . . . . . . . . . 100 66 175,000 (235,354)
Adjustment for the issuance of common stock on reverse
acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,999,900 18,934 (18,934) -
------------- ------------ ------------- ---------------
19,000,000 19,000 156,066 (235,354)
Issuance of common stock by SSA Coupon Ltd. prior to
acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 14 -
Capital contributions by Forest Glade prior to acquisition . . . . - - 355,000 -
Adjustment for the stockholders' equity of the Company
at the acquisition date . . . . . . . . . . . . . . . . . . . . . 17,800,000 17,800 (547,800) -
Stock option compensation (Note 9) . . . . . . . . . . . . . . . . - - 3,800,000 -
Issuance of common stock on exercise of stock options at
$1.09 per share (Notes 7 and 9) . . . . . . . . . . . . . . . . . 4,636,000 4,636 5,048,604 -
Issuance of common stock for services:
- in January 2000 at $1.25 per share (Note 7). . . . . . . . . . . 100,000 100 124,900 -
- in June 2000 at $1.78 per share (Note 7) . . . . . . . . . . . . 100,000 100 177,900 -
- in June 2000 for finders fees at $1.06 per share (Note 6). . . . 175,000 175 185,325 -
Issuance of warrants for services (Note 7) . . . . . . . . . . . . - - 192,800 -
Issuance of common stock for advertising:
- in May and July 2000 at $2 per share (Note 7). . . . . . . . . . 11,750,000 11,750 23,488,250 -
Beneficial conversion feature and value of warrants on
convertible debentures (Note 6) . . . . . . . . . . . . . . . . . - - 2,419,220 -
------------- ------------ ------------- ---------------
53,561,000 53,561 35,400,279 (235,354)
------------- ------------ ------------- ---------------
Net loss for the year. . . . . . . . . . . . . . . . . . . . . . . - - - (16,780,359)
Foreign currency translation adjustments . . . . . . . . . . . . . - - - -
------------- ------------ ------------- ---------------
Total comprehensive loss . . . . . . . . . . . . . . . . . . . - - - (16,780,359)
------------- ------------ ------------- ---------------
BALANCE, July 31, 2000 . . . . . . . . . . . . . . . . . . . . . . 53,561,000 $ 53,561 $ 35,400,279 $ (17,015,713)
------------------------------------------------------------------ ============= ============ ============= ===============
JULY 31, 2000 AND 1999
------------------------------------------------------------------
Deferred
Accumulated Advertising
Other Costs and Total
Comprehensive Subscriptions Stockholders
Income Receivable Equity (Deficit)
-------------- --------------- -----------------
<S> <C> <C> <C>
Initial capital contributions to SSA Coupon Ltd. on September 24,
1998 at C$0.01 per share. . . . . . . . . . . . . . . . . . . . . $ - $ - $ 66
Capital contributions by Forest Glade during the period. . . . . . - - 175,000
Net loss for the period. . . . . . . . . . . . . . . . . . . . . . - - (235,354)
-------------- --------------- -----------------
BALANCE, July 31, 1999 . . . . . . . . . . . . . . . . . . . . . . - - (60,288)
Adjustment for the issuance of common stock on reverse
acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . - - -
-------------- --------------- -----------------
- - (60,288)
Issuance of common stock by SSA Coupon Ltd. prior to
acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 14
Capital contributions by Forest Glade prior to acquisition . . . . - 355,000
Adjustment for the stockholders' equity of the Company
at the acquisition date . . . . . . . . . . . . . . . . . . . . . - - (530,000)
Stock option compensation (Note 9) . . . . . . . . . . . . . . . . - - 3,800,000
Issuance of common stock on exercise of stock options at
$1.09 per share (Notes 7 and 9) . . . . . . . . . . . . . . . . . - (190,359) 4,862,881
Issuance of common stock for services:
- in January 2000 at $1.25 per share (Note 7). . . . . . . . . . . - - 125,000
- in June 2000 at $1.78 per share (Note 7) . . . . . . . . . . . . - - 178,000
- in June 2000 for finders fees at $1.06 per share (Note 6). . . . - - 185,500
Issuance of warrants for services (Note 7) . . . . . . . . . . . . - - 192,800
Issuance of common stock for advertising:
- in May and July 2000 at $2 per share (Note 7). . . . . . . . . . - (17,263,244) 6,236,756
Beneficial conversion feature and value of warrants on
convertible debentures (Note 6) . . . . . . . . . . . . . . . . . - - 2,419,220
-------------- --------------- -----------------
- (17,453,603) 17,764,883
-------------- --------------- -----------------
Net loss for the year. . . . . . . . . . . . . . . . . . . . . . . - - (16,780,359)
Foreign currency translation adjustments . . . . . . . . . . . . . 30,752 - 30,752
-------------- --------------- -----------------
Total comprehensive loss . . . . . . . . . . . . . . . . . . . 30,752 - (16,749,607)
-------------- --------------- -----------------
BALANCE, July 31, 2000 . . . . . . . . . . . . . . . . . . . . . . $ 30,752 $ (17,453,603) $ 1,015,276
------------------------------------------------------------------ ============== =============== =================
</TABLE>
See the accompanying summary of significant accounting policies and notes to the
consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Consolidated Statements of Cash Flows
Cumulative
Period from Period from
September 24 September 24
YEAR Year 1998 1998
ENDED Ended (Inception) (Inception)
JULY 31 July 31 to July 31 to July 31
2000 1999 (a) 2000
-------- ----------- ------------
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net loss for the period. . . . . . . . . . . . . . . . $ (16,780,359) $ (235,354) $(17,015,713)
Adjustments to reconcile net loss to net cash used
in operating activities
Write-down of amounts receivable. . . . . . . . . 2,544,356 114,814 2,659,170
Amortization and depreciation of property and
equipment and goodwill. . . . . . . . . . . . . 223,259 - 223,259
Amortization of deferred financing costs. . . . . 52,907 - 52,907
Loss on sale of trailer park. . . . . . . . . . . 478,560 - 478,560
Expenses settled with common stock and warrants . 6,732,556 - 6,732,556
Stock option compensation . . . . . . . . . . . . 3,800,000 - 3,800,000
Beneficial conversion feature on convertible
debentures and amortization of discount . . . . 1,509,361 - 1,509,361
(Increase) decrease in assets
Receivables. . . . . . . . . . . . . . . . . . . . (87,808) - (87,808)
Prepaid expenses . . . . . . . . . . . . . . . . . (30,001) (4,174) (34,175)
Increase (decrease) in liabilities
Accounts payable . . . . . . . . . . . . . . . . . 49,649 117,635 167,284
Accrued expenses . . . . . . . . . . . . . . . . . 88,050 - 88,050
-------------- -------------- -------------
(1,419,470) (7,079) (1,426,549)
-------------- -------------- -------------
INVESTING ACTIVITIES
Proceeds on sale of discontinued operations. . . . . . 135,000 - 135,000
Software development costs . . . . . . . . . . . . . . (494,522) - (494,522)
Cash acquired on reverse acquisition of Forest Glade . 145,757 - 145,757
Purchase of property and equipment . . . . . . . . . . (948,994) (3,448) (952,442)
-------------- -------------- -------------
(1,162,759) (3,448) (1,166,207)
-------------- -------------- -------------
FINANCING ACTIVITIES
Proceeds on issuance of common stock, net
of subscriptions receivable and non cash proceeds. . 1,626,772 60,252 1,687,024
Repayment of advances from directors (8,019) - (8,019)
Repayment of note payable on acquisition of
discontinued operations. . . . . . . . . . . . . . . (138,000) - (138,000)
Repayment of long-term debt from discontinued
operations . . . . . . . . . . . . . . . . . . . . . (11,260) - (11,260)
Proceeds on issuance of convertible debentures
and warrants, net of issuance costs. . . . . . . . . 3,050,617 - 3,050,617
-------------- -------------- -------------
4,520,110 60,252 4,580,362
-------------- -------------- -------------
INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . 1,938,381 49,725 1,988,106
EFFECT OF FOREIGN EXCHANGE ON CASH . . . . . . . . . . . (5,183) - (5,183)
CASH AND CASH EQUIVALENTS, beginning of period . . . . . 49,725 - -
-------------- -------------- -------------
CASH AND CASH EQUIVALENTS, end of period . . . . . . . . $ 1,982,923 $ 49,725 $ 1,982,923
============= ============= =============
<FN>
SUPPLEMENTAL INFORMATION (Note 8)
a) Represents the cash flows of fetchOmatic.com Online Inc. (formerly SSA Coupon Ltd.).
</TABLE>
See accompanying summary of significant accounting policies and notes to the
consolidated financial statements.
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Summary of Significant Accounting Policies
JULY 31, 2000
---------------
BASIS OF PRESENTATION
These consolidated financial statements are expressed in US dollars and
have been prepared in conformity with accounting principles generally accepted
in the United States. Included in the financial statements are the accounts of
the Company and its wholly-owned subsidiaries, fetchOmatic.com Online Inc.
(formerly SSA Coupon Ltd.) and Forest Glade Properties Inc.
In accordance with provisions governing the accounting for reverse
acquisitions, the figures presented for the period from September 24, 1998
(inception) to July 31, 1999 are those of fetchOmatic.com Online Inc.
All significant intercompany transactions have been eliminated on
consolidation. All per share information for fiscal 1999 has been
restated to reflect the recapitalization.
FOREIGN CURRENCY TRANSLATION
The Company's functional currency is the Canadian dollar as substantially
all of the Company's operations are in Canada. The Company uses the United
States dollar as its reporting currency for consistency with other registrants
of the Securities and Exchange Commission ("SEC").
Assets and liabilities of the subsidiary denominated in a foreign
currency are translated at the exchange rate at the period end. Income statement
accounts are translated at the average rates of exchange prevailing during the
periods. Translation adjustments arising from the use of differing exchange
rates from period to period are included in the Accumulated Foreign Currency
Translation account in Stockholders' Equity.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company's management to make
estimates and assumptions that affect the amounts reported in the financial
statements and related notes to the financial statements. Actual results may
differ from management's best estimates as additional information becomes
available in the future.
FINANCIAL INSTRUMENTS
The following assumptions were used to estimate the fair value of each
class of financial instruments:
For cash and cash equivalents, receivables, accounts payable, accrued
expenses and demand loans payable, the carrying amounts approximate fair value
due to the immediate or short-term maturity of these financial instruments.
The carrying amount for convertible debentures approximates fair value because,
in general, terms are comparable to those on convertible debentures received by
other development stage companies not having revolving credit facilities.
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Summary of Significant Accounting Policies - Continued
JULY 31, 2000
---------------
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is provided over
the estimated useful lives of the property and equipment on the straight-line
basis at rates set out below:
Computer equipment - 33%
Furniture and fixtures - 20%
Leasehold improvements are amortized on a straight-line basis over the
terms of the underlying leases, not to exceed their useful lives.
INCOME TAXES
The Company follows the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes", which requires the
Company to recognize deferred tax liabilities and assets for the expected future
tax consequences of events that have been recognized in the Company's financial
statements or tax returns using the liability method. Under this method,
deferred tax liabilities and assets are determined based on the temporary
differences between the financial statement carrying amounts and tax bases of
assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse.
LOSS PER SHARE
Loss per share is computed in accordance with SFAS No. 128, "Earnings Per
Share". Basic loss per share is calculated by dividing the net loss available
to common stockholders by the weighted average number of shares outstanding
during the period. Diluted earnings per share reflects the potential dilution
of securities that could share in earnings of an entity. In a loss period,
dilutive common equivalent shares are excluded from the loss per share
calculation as the effect would be anti-dilutive.
For the year ended July 31, 2000, options (364,000), warrants (721,765) and
shares issuable on conversion of debentures (3,771,552, Note 6) totaling
4,857,317 were excluded from loss per share because their effect would be
anti-dilutive. For the period from September 24, 1998 (inception) to July 31,
1999, there were no common share equivalents.
COMPREHENSIVE INCOME
The Company has adopted SFAS No. 130. "Reporting Comprehensive Income",
which establishes standards for reporting and display of comprehensive income,
its components and accumulated balances. The Company is disclosing this
information on its Statement of Changes in Stockholders' Equity (Deficit).
Comprehensive income is comprised of net income (loss) and all changes to
stockholders' equity except those resulting from investments by owners and
distributions to owners.
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Summary of Significant Accounting Policies - Continued
JULY 31, 2000
---------------
ADVERTISING COSTS
Costs of production of media advertising are expensed as incurred. Costs
incurred for media advertising space or airtime are charged to expense when the
advertising is first made public. Costs related to executory contracts for
sponsorship of race vehicles are amortized over the race seasons.
STOCK BASED COMPENSATION
The Company applies Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations in
accounting for stock option plans. Under APB 25, compensation cost is
recognized for stock options granted to employees at prices below the market
price of the underlying common stock on the date of grant.
SFAS No. 123, "Accounting for Stock-Based Compensation", requires the
Company to provide pro-forma information regarding net income as if compensation
cost for the Company's stock option plan had been determined in accordance with
the fair value based method prescribed in SFAS No. 123. The value of stock
options granted to consultants is recognized in these financial statements as
compensation expense using the Black-Scholes option pricing model.
All options granted in 2000 were granted to consultants.
DEFERRED FINANCING COSTS
Costs directly associated with the convertible debentures issued during
the year are capitalized and amortized on a straight-line basis over the
term of the debentures.
SOFTWARE DEVELOPMENT COSTS
The Company has adopted Statement of Position ("SOP") 98-1, "Accounting for
the Costs of Computer Software Development or Obtained for Internal Use".
Accordingly, direct internal and external costs associated with the development
of the features, content and functionality of the Company's internet software,
incurred during the application development stage, are being capitalized and
will be amortized over the estimated useful life of three years once development
is complete.
During the period prior to July 31, 1999, SSA Coupon Ltd. carried out
procedures in the preliminary project stage including the research and
evaluation of ideas and determination of an implementation plan as well as
certain activities relating to the application software development. The
Company commenced the capitalization of costs associated with software
development on August 1, 1999.
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Summary of Significant Accounting Policies - Continued
JULY 31, 2000
---------------
VALUATION OF LONG-LIVED ASSETS
The Company periodically evaluates the carrying value of its long-lived
assets. The carrying value of long-lived assets is considered impaired when
the undiscounted net cash flow from such asset is estimated to be less than its
carrying value. Management does not believe that there were any long-lived
assets used in continuing operations which were impaired at July 31, 2000.
DETACHABLE STOCK PURCHASE WARRANTS
Proceeds from debt issued with detachable stock purchase warrants are
allocated between the debt and the warrants based on their relative fair values.
The value ascribed to the warrants is recorded as a debt discount and is
amortized to interest expense over the term of the related debt.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Cash and cash
equivalents principally consist of cash deposited in checking accounts and
amounts invested in short-term Canadian guaranteed investment certificates.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, The Financial Account Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
requires companies to recognize all derivatives contracts as either assets or
liabilities on the balance sheet and to measure them at fair value. If certain
conditions are met, a derivative may be specifically designated as a hedge, the
objective of which is to match the timing of gain or loss recognition on the
hedging derivative with the recognition of (I) the changes in the fair value of
the hedged assets or liability that are attributable to the hedged risk or (ii)
the earning effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income in
the period of change. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000.
Historically, the Company has not entered into derivatives contracts either
to hedge existing risks or for speculative purposes. Accordingly, the Company
does not expect adoption of the new standards on August 1, 2000 to affect its
financial statements.
In 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 dealing with revenue recognition which is effective in the
fourth quarter of the Company's 2001 fiscal year. The Company does not expect
its adoption to have a material effect on the Company's financial statements.
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Summary of Significant Accounting Policies - Continued
JULY 31, 2000
---------------
NEW ACCOUNTING PRONOUNCEMENTS - Continued
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation", an interpretation of APB Opinion No. 25. The Company is required
to adopt the Interpretation on July 1, 2000. Among other things, the
Interpretation requires that stock options that have been modified to reduce the
exercise price be accounted for as variable. Adoption of this standard is not
expected to have a material effect on the financial statements.
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to the Consolidated Financial Statements
JULY 31, 2000
---------------
1. NATURE OF BUSINESS AND GOING CONCERN
The Company was incorporated under the laws of the State of Nevada on
August 27, 1998 as Forest Glade International Inc. and was inactive until
November 17, 1998 when it acquired all the issued and outstanding shares
of Forest Glade Properties Inc. ("FGP"), an inactive Canadian company
incorporated on January 29, 1998. Upon completion of the acquisition and the
subsequent acquisition of the Mountain View Park (the "Park") a mobile home
park in Sparwood, British Columbia on December 1, 1998, the Company engaged in
the business of operations of this park in Canada. In November 1999, to create
a separate and distinct division of the Company, the Company entered into an
agreement to acquire via reverse acquisition the remaining 80% interest it did
not own in SSA Coupon Ltd. ("SSA") (Note 2), a company engaged in the
development of a geographically enabled internet search engine
(www.fetchOmatic.com) and smart source database and internet portal and
personalized internet communications tool.
In May 2000, the Company entered an agreement to sell all the assets
constituting its mobile home park business. (Note 3) The sale closed in June
2000 and as a result, the Company is solely involved in the development and
marketing of www.fetchOmatic.com. In connection with its business focus, the
Company changed its legal name to fetchOmatic Global Internet Inc. on June 2,
2000.
These accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities and commitments in the normal course of business. As at July 31,
2000, the Company has recognized no revenues and has accumulated operating
losses from the Internet business of approximately $16.4 million since its
inception, including the write-down of amounts receivable (primarily on the
exercise of stock options) of $2,544,356 (1999 - $114,814). The continuation of
the Company is dependent upon the successful completion of development of
www.fetchOmatic.com, the continuing financial support of creditors and
stockholders, obtaining long-term financing, the favorable settlement of
contingent liabilities (Note 10(a)) as well as achieving a profitable level of
operations. In May 2000, the Company issued $3.5 million of convertible
debentures (Note 6) and plans to raise additional equity capital as necessary to
finance the operating and capital requirements of the Company. Amounts raised
will be used to continue development of the Company's website, to provide
financing for the marketing and promotion of its website, to secure products and
for other working capital purposes. While the Company is expending its best
efforts to achieve the above plans, there is no assurance that any such activity
will generate sufficient funds for operations.
These conditions raise substantial doubt about the Company's ability
to continue as a going concern. These financial statements do not include any
adjustments that might arise from this uncertainty.
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to the Consolidated Financial Statements
JULY 31, 2000
---------------
2. ACQUISITION OF SSA COUPON LTD.
On November 3, 1999, the Company closed a share exchange agreement with the
stockholders of SSA Coupon Ltd. ("SSA", renamed fetchOmatic.com Online Inc.), a
company that was incorporated in British Columbia, Canada on September 24, 1998
for the purpose of developing, exploiting and marketing a geographically enabled
internet web search engine and smart source data base and internet portal and
personalized internet communications tool. The Company acquired 100% of the
issued and outstanding shares of SSA in exchange for 19 million restricted
shares of the Company's common stock. Restrictions on these shares will be
removed at the rate of 10% each year after their issuance. Additionally, the
Company has agreed to pay, or cause SSA to pay to the three founding
shareholders of SSA, in perpetuity, royalties aggregating to 7% of the gross
revenues of SSA and/or the Company relating to the technology created by SSA.
Such royalties will be paid on a quarterly basis.
Effective as of the closing date, the transaction was accounted for using the
purchase method of accounting as applicable for reverse acquisitions. Following
reverse acquisition accounting, financial statements subsequent to the closing
of this acquisition are presented as a continuation of SSA. The operations of
the Company are consolidated with those of SSA from the date of acquisition.
The fair value of the net assets of the Company at November 3, 1999 was as
follows:
Current assets $ 9,440
Property and equipment and other long-term assets,
including $530,000 previously advanced to SSA 1,652,326
---------
1,661,766
Current liabilities (274,421)
Deferred income taxes (156,843)
Long-term liabilities, including $1,084,124 advanced for
common stock, subsequently issued (1,607,870)
-----------
Goodwill $ (377,368)
================
Goodwill was being amortized on a straight-line basis over five years. The
value assigned to the common stock issued on the transaction was $Nil based on
the estimated fair value of the net assets of the Company at the acquisition
date. The net book value of goodwill of $339,632 was written off as part of the
Company's loss from discontinued operations. (Note 3)
3. DISPOSAL OF MOBILE HOME PARK OPERATIONS
On December 1, 1998, as amended on August 31, 1999, the Company acquired 100% of
the common shares of 514592 BC Ltd. (a company 50% owned by a director of the
Company) the beneficial owner of the assets and liabilities comprising the
Mountain View Park ("the Park") in British Columbia, Canada.
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to the Consolidated Financial Statements
JULY 31, 2000
---------------
3. DISPOSAL OF MOBILE HOME PARK OPERATIONS - CONTINUED
On May 1, 2000, the Company made the decision to dispose of all of the assets
constituting its mobile home park business, the sale of which was completed in
June 2000. Total proceeds on the sale were approximately $675,000, with
$135,000 received on closing, $98,000 due bearing 6% interest on July 15, 2000
(which has not yet been received) and the balance due in installments of $4,500
per month including interest at Prime plus 1% per annum with the balance due on
May 15, 2002. The balance due to 514592 BC Ltd. is collateralized by equipment
and an unconditional guarantee by the purchaser. Immediately following the
sale, the Company transferred the shares of 514592 BC Ltd. to its four directors
for nominal consideration. Prior to the sale of the shares of 514592 BC Ltd.,
514592 BC Ltd. transferred all of its remaining assets and liabilities to the
Company except for the mortgage obligation on the Park of approximately $435,000
and an amount due to the Company of $104,871 and the installments receivable
equal to the liabilities existing in 514592 BC Ltd. Under the current
agreement, the Company will not receive payment on the amount of $104,871 owing
until the third-party mortgage is discharged. Because of concerns regarding
collectability of the balance due to the Company by 514592 BC Ltd. as a result
of the purchaser's overdue payment, the Company has fully provided against a
possible bad debt. Management of the Company and 514592 BC Ltd. continue to
pursue collection of the full amount outstanding. Any recovery will be recorded
in the period of collection.
The financial results of the Park have been segregated and presented as a
discontinued operation on the Statements of Operations and Cash Flows. The
Statement of Operations for the year ended July 31, 2000 includes a loss on sale
of net assets associated with the Park and a write-off of goodwill recorded on
the reverse acquisition (Note 2). The results of discontinued operations were
as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31 2000
--------------------------------------------------------- ----------
<S> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,267
----------
Loss from operations. . . . . . . . . . . . . . . . . . . (88,942)
----------
Loss on sale of net assets. . . . . . . . . . . . . . . . (297,033)
Write-off of goodwill . . . . . . . . . . . . . . . . . . (339,632)
Deferred tax recovery . . . . . . . . . . . . . . . . . . 158,105
----------
Loss on disposal of discontinued operations . . . . . . . (478,560)
----------
Loss from discontinued operations . . . . . . . . . . . . $(567,502)
==========
Loss per share from discontinued operations is summarized
as follows:
- from operations . . . . . . . . . . . . . . . . . . . $ -
- on sale of net assets . . . . . . . . . . . . . . . . (0.02)
----------
$ (0.02)
==========
</TABLE>
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to the Consolidated Financial Statements
JULY 31, 2000
---------------
<TABLE>
<CAPTION>
4. PROPERTY AND EQUIPMENT
2000
-------------
<S> <C> <C>
Accumulated
Cost Depreciation
------- -------------
Computer equipment . . $ 886,770 $144,682
Furniture and fixtures 17,411 1,715
Leasehold improvements 48,261 4,826
------------- --------
952,442 151,223
------------- --------
Net book value . . . . $ 801,219
=============
</TABLE>
5. DEMAND LOANS PAYABLE
Amounts loaned to the Company by two directors and two other parties are
unsecured, non-interest bearing and are due on demand.
6. CONVERTIBLE DEBENTURES
On May 9, 2000, the Company issued $3.5 million of unsecured convertible
debentures due May 1, 2003 and bearing interest at 7% per annum due annually.
The debentures are immediately convertible at the option of the holder into
shares of common stock of the Company at the lesser of (1) $2.295 and (2) 80% of
the average of the lowest three per share market values (not necessarily
consecutive) during the twenty trading days immediately preceding the conversion
date. As a result, a beneficial conversion feature of $1,426,621 was recorded
as interest expense in the fourth quarter of the Company's 2000 fiscal year.
The Company has the option to pay annual interest in cash or shares of its
common stock.
Subsequent to July 31, 2000, the debenture holder has converted, or filed
conversion notices for, $455,000 of the principal balance of the debentures
into 898,217 shares of common stock.
The convertible debentures also contain 521,765 detachable warrants exercisable
to purchase shares of the Company's common stock at any time until May 1, 2005
at a price of $2.295 per share. The value of the warrants based on a
Black-Scholes option pricing model was $992,599 using the following assumptions:
- no dividends
- risk-free interest of 6.3%
- volatility of expected market price of the Company's common stock of 273%
- expected life of the warrants of 36 months
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to the Consolidated Financial Statements
JULY 31, 2000
---------------
6. CONVERTIBLE DEBENTURES - CONTINUED
All warrants remained outstanding at July 31, 2000.
The discount was recorded as additional paid-in capital during the year and
is being amortized as interest expense on a straight-line basis over the term of
the convertible debentures. $82,740 was amortized during 2000.
The debenture agreement contains provisions to adjust conversion privileges in
connection with certain changes to the Company's capital structure and provides
an option available to the debenture-holder to acquire an additional $6,500,000
of convertible debentures.
The Company incurred direct costs in connection with the convertible debentures
of $634,883 which is being amortized to the Statement of Operations over the
term of the debentures. To July 31, 2000, $52,907 has been amortized leaving a
net book value of the deferred asset of $581,976. The direct financing costs
included finders fees totalling $535,500 to three parties, including $185,500
attributed to 175,000 shares of common stock using the market price of the stock
on the issuance date.
Subsequent to July 31, 2000, the market value of the Company's common stock has
declined significantly resulting in an increase in the number of shares issuable
on conversion. As of October 26, 2000, 11,534,091 common shares would be
issuable on conversion of debentures outstanding on that date, excluding 898,217
shares already issued on conversion.
7. CAPITAL STOCK
Transactions not disclosed elsewhere in these consolidated financial statements
are as follows:
a) On March 30, 2000, the Company entered into an agreement to acquire
public relations and advertising services from Sivla Inc. in exchange for
$100,000 cash (paid in May 2000) plus up to approximately $43.5 million of the
Company's common stock. 11,750,000 shares of fully vested, non-forfeitable
common stock were issued in 2000 in respect of $23,500,000 of available
advertising, valued using the trading value of the Company's common stock on the
agreement date. To July 31, 2000, the Company has committed for $18,652,018 in
various forms of media advertising and public relation services including print,
radio, television, billboards, internet and racing sponsorship, of which
$6,236,756 has been used in the year and charged to the Statement of Operations
at July 31, 2000. The Company is entitled to $4,847,982 of further advertising
for common stock already issued pursuant to the contract. This entitlement has
been recorded as a reduction of stockholders' equity along with $12,415,262 of
committed advertising, which ran, or will be aired, subsequent to July 31, 2000.
Advertising in excess of $23.5 million is payable in common stock based upon a
35% discount to the average of the previous month's closing trading price.
Future issuances of common stock for advertising will be measured using the
trading value of the Company's common stock on the respective dates of issuance.
b) On May 25, 2000, the Company entered into an agreement to obtain an
Internet profile of the
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to the Consolidated Financial Statements
JULY 31, 2000
---------------
7. CAPITAL STOCK - Continued
Company for a period of ninety days in exchange for the issuance of 100,000
fully vested, non-forfeitable shares of common stock. The value attributed to
the common stock was $178,000 based on the trading value of the Company's common
stock on the date of issuance.
c) Notes receivable from three individuals outstanding in respect to the
exercise of stock options during the year total $660,359 at July 31, 2000,
including an amount of $545,000 owing from a director. Amounts owing are
secured by the underlying common stock and are non-interest bearing and
repayable out of the proceeds on sale of the underlying common stock. Market
value of the common stock at July 31, 2000 approximated carrying value.
Subsequently, the value of the common stock has declined substantially. In
absence of additional security, a write-down of $470,000 has been recognized to
reduce the subscription receivable to the value of the underlying common stock
at October 26, 2000.
d) In December 1999, the Company entered into an agreement with a company to
provide promotional services in exchange for 175,000 non-forfeitable, fully
vested shares of common stock plus 200,000 non-forfeitable, fully vested
warrants to purchase common stock. 100,000 shares of common stock were issued
by the Company while 75,000 shares were supplied by a stockholder for which the
Company reimbursed with cash. 100,000 of the warrants are exercisable at a
price of $1.09 with the balance exercisable at $3 for a four-year period. The
value assigned to the common stock based on the trading price of the stock on
the agreement date was $218,750. Using a Black-Scholes option-pricing model, a
value of $192,800 was assigned to the warrants using the following assumptions:
- risk-free interest rate of 5.6%
- no dividends
- volatility of expected market price of the Company's common stock of 380%
- weighted average expected life of the warrants of 24 months.
-
The aggregate value of warrants and common stock of $411,550 was charged to the
Statement of Operations as investor relations expense during the year.
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to the Consolidated Financial Statements
JULY 31, 2000
---------------
8. SUPPLEMENTAL CASH FLOW INFORMATION
Required disclosures of supplemental information on the Statements of Cash Flows
include:
a) Supplemental disclosure of non-cash investing and financing activities:
Period from
September 24
1998
YEAR ENDED (inception) to
JULY 31, 2000 July 31, 1999
------------- -------------
i) issuance of common stock for
subscription proceeds received prior
to reverse acquisition,
not advanced to SSA $ 554,124 $ -
-
ii) portion of proceeds on disposal of
the trailer park operations satisfied
by notes receivable, net of mortgage
assigned to the purchaser (Note 3) $ 104,871 $ -
-
iii) Common stock issued for deferred
financing costs on convertible
debentures $ 185,500 $ -
-
iv) Common stock and warrants issued
for current Expenses $ 6,732,556 $ -
b) Interest paid for the periods ended July 31, 2000 and 1999 included in
the loss from discontinued operations was $22,160 and $Nil.
9. STOCK OPTIONS
On November 5, 1999, the Company adopted its 1999 Stock Option Plan to offer an
inducement to obtain services of key employees, directors and consultants of the
Company. The maximum number of shares issuable under the Plan shall not exceed
5 million. Under the Plan, the Company's Board of Directors determines the
exercise price and terms of the options not, however, to exceed five years from
the date of grant.
The Company's Board of Directors approved the grant of five million options to
consultants on November 5, 1999 vesting immediately at an exercise price of
$1.09 per share. During the period, 4,636,000 options were exercised as
follows:
Options
Exercised
---------
December 1999 995,000
January 2000 215,000
February 2000 806,000
March 2000 780,000
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to the Consolidated Financial Statements
JULY 31, 2000
---------------
9. STOCK OPTIONS - Continued
April 2000 1,060,000
June 2000 555,000
July 2000 225,000
-------
4,636,000
---------
9. STOCK OPTIONS - CONTINUED
364,000 stock options remain outstanding at July 31, 2000.
The Company follows Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-based Compensation", in accounting for stock options
granted to non-employees. Under SFAS No. 123, compensation cost is recognized
based upon the fair value based method prescribed using the Black-Scholes option
pricing model. The fair value of these options of $0.76 was estimated at the
date of grant using the following assumptions:
- No dividends.
- Risk-free interest rate of 5.5%.
- Volatility of the expected market price of the Company's common stock of
303%.
- Weighted average expected life of the options of 6 months.
Compensation expense of $3.8 million has been recognized in the Statement of
Operations in the year ended July 31, 2000 as Administration expense.
Proceeds on the exercise of 3,250,000 stock options totalling $3,542,500 were
received by a consultant to the Company from various optionees. Certain amounts
received by the consultant were forwarded to the Company or used to pay for
expenses incurred on the Company's behalf. At July 31, 2000, proceeds yet to
be forwarded to the Company or used for expenses totalled $1,874,250. Due to
concerns over the likelihood of recovery of the balance outstanding, the Company
has fully provided for the amount outstanding as a write-down of amounts
receivable in the year ended July 31, 2000. The Company is also reviewing
expenses paid by the consultant on the Company's behalf and intends to
vigorously pursue collection of all amounts owing to the Company on exercise of
stock options.
10. COMMITMENTS AND CONTINGENCIES
a) During 1999, SSA Coupon Ltd. entered into contracts with its three former
stockholders for consulting services each at approximately $4,000 per month for
a period of five years expiring in September 2003, renewable for successive
two-year terms. Additional termination fees aggregating to approximately $2
million would be due to the three former stockholders in the event of their
termination. The monthly fee of $4,000 remains until the first period that the
Company has quarterly earnings in excess of approximately $167,000. Once
quarterly earnings exceed $167,000, monthly payments to the former stockholders
increase in accordance with specific earnings benchmarks up to a maximum of
approximately $29,000 per month for quarterly earnings in excess of
approximately $4 million.
On October 26, 2000, the Company discontinued payments for services of the
three former stockholders and intends to challenge the enforceability of the
consulting agreements, including the specific severance provisions contained
therein. At this time, the Company is uncertain of the outcome of such a
challenge. A settlement, if any, will be accrued in the period payment becomes
probable and a reasonable estimate can be made.
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to the Consolidated Financial Statements
JULY 31, 2000
---------------
10. COMMITMENTS AND CONTINGENCIES - CONTINUED
b) The Company has entered into a lease agreement for office premises in
Delta, British Columbia, expiring on April 30, 2005, with lease payments of
approximately $4,500 per month. Other premises used are leased on a
month-to-month basis.
Rent expense for the year ended July 31, 2000 was $45,241 (1999 - $Nil).
c) On October 29, 1999 the Company signed an agreement with a vendor to
acquire use of the vendor's proprietary data for a one-year term renewable for
additional one-year terms. The Company is obligated to pay a license fee to the
vendor in the amount of $75,000 per annum, payable quarterly.
d) SSA, along with its three founding stockholders, was the defendant in an
action filed in the Supreme Court of British Columbia in October 1999 by a
former consultant to SSA. The action claimed breach of contract and sought
unspecified damages. On November 17, 1999, SSA commenced an action against the
consultant seeking compensation for $235,000 allegedly misappropriated by the
consultant as well as general damages.
Amounts advanced by the Company to the consultant subsequent to July 31, 1999
and not received by SSA totalling $95,235 (1999 - $114,814) were written off
during the year ended July 31, 2000. On February 28, 2000, SSA reached a
settlement with the former consultant to release both parties from damages
claimed in the action and from future claims associated with the action without
additional payment.
11. WRITE-DOWN OF AMOUNTS RECEIVABLE
The write-down of amounts receivable is summarized as follows:
2000 1999
---- ----
a) Write-down of amounts receivable on exercise of
stock options (Note 9) $ 1,874,250 $ -
b) Write-down of subscriptions receivable (Note 7) 470,000 -
c) Write-down of amount receivable on sale of the
mobile home park (Note 3) 104,871 -
d) Other 95,235 114,814
------------ -------
$ 2,544,356 $ 114,814
============ =========
<PAGE>
<TABLE>
<CAPTION>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to the Consolidated Financial Statements
JULY 31, 2000
---------------
12. INCOME TAXES
The tax effects of the temporary differences that give rise to the
Company's deferred tax assets and liabilities are as follows:
2000
--------------------
<S> <C> <C>
Net operating losses . . . . . . . . . . . . . . . . . . . . $ 3,900,000
Property and equipment and software development costs. . . . (122,000)
Valuation allowance. . . . . . . . . . . . . . . . . . . . . (3,778,000)
--------------------
Deferred tax asset (liability) . . . . . . . . . . . . . . . $ -
====================
Period from
September 24
Year 1998
Ended (incorporation)
July 31 to July 31
2000 1999
--------------- ---------------
Provision (benefit) on continuing operations at the
federal US statutory rate of 34% . . . . . . . . . .$ (5,500,000) $(80,000)
Foreign income taxes at other than the federal US
statutory rate . . . . . . . . . . . . . . . . . . . (1,780,000) (26,000)
Non-deductible expenses. . . . . . . . . . . . . . . 3,716,000 -
Increase in valuation allowance. . . . . . . . . . . 3,564,000 106,000
-------------------- ---------
$ - $ -
==================== =========
</TABLE>
The Company evaluates its valuation allowance requirements based on projected
future operations. When circumstances change and this causes a change in
management's judgement about the recoverability of deferred tax assets, the
impact of the change on the valuation allowance is reflected in current income.
At July 31, 2000, the Company had losses available for income tax purposes of
approximately $8.7 million which will expire in various amounts in 2005 through
2007. Approximately $240,000 of losses were acquired upon reverse acquisition
in November 1999, for which a valuation allowance was fully provided.
<PAGE>
FETCHOMATIC GLOBAL INTERNET INC.
(FORMERLY FOREST GLADE INTERNATIONAL INC.)
(A DEVELOPMENT STAGE COMPANY)
Notes to the Consolidated Financial Statements
JULY 31, 2000
---------------
13. SUBSEQUENT EVENTS
Subsequent events not disclosed elsewhere in these financial statements include:
a) On July 20, 2000, the Company entered into an agreement with a company
for a two-month term, extendable to six months, to obtain public relation
services. Under the terms of the agreement, the Company was required to pay a
non-refundable fee of $10,000 (which has been paid) and fees payable by issuance
of 25,000 shares of common stock and options to purchase an additional 25,000
common shares per month. Expenses incurred under the contract will be measured
using the trading price of the Company's common stock on the respective dates of
issuance for shares to be issued and using the Black-Scholes option pricing
model for stock options. Options have yet to be granted.
b) On September 20, 2000, the Company entered into an agreement with a
consulting firm, whereby the consulting firm will market and solicit banner ads
for the Company's website for an initial term of twelve months, subject to
performance review on March 30, 2001. Compensation for these services include
200,000 non-forfeitable shares of common stock (approximately $188,000 based on
the trading price of the common stock on the commitment date), a monthly
consulting fee of $6,000 subject to a partial set-off against commissions
earned, 50% of banner advertising fees collected and certain other performance
incentives.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
As reported on our Form 8-K filed on October 21, 1999, Effective October
18, 1999, Chan Foucher Lefebvre, Chartered Accountants, our independent
accountants of our wholly owned subsidiary, Forest Glade Properties, Inc., for
the period from January 25, 1998 (incorporation) to July 31, 1998, were
dismissed. The dismissal of Chan Foucher Lefebvre was approved by our Board of
Directors on October 18, 1999. We engaged BDO Dunwoody, LLP as our new auditors
on the same date. No consultation regarding accounting policy or procedures
with new auditors occurred prior to their engagement.
Chan Foucher Lefebvre's report for the period from January 25, 1998
(incorporation) to July 31, 1998 did not contain an adverse opinion or a
disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope, or accounting principles. Nor has there been any disagreement with
Chan Foucher Lefebvre on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure or reportable
events during the Registrant's most recent fiscal year through October 18, 1999
which if not resolved to the satisfaction of Chan Foucher Lefebvre would have
caused them to make reference thereto in their report on the financial
statements for such period.
We provided Chan Foucher Lefebvre with a copy of the disclosure contained
herein and have requested that Chan Foucher Lefebvre provide the Registrant with
a letter addressed to the U.S. Securities and Exchange Commission stating
whether they agree with the disclosure. Chan Foucher Lefebvre have provided
such a letter and it was attached to our Form 8-K filed on October 21, 1999.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The following table and text sets forth the names and ages of all
directors, executive officers and significant employees of the Company as of
December 12, 2000. All of the directors serve until the next Annual General
Meeting of shareholders and until their successors are elected and qualified, or
until the earlier of death, retirement, resignation or removal. Subject to any
applicable employment agreement, executive officers serve at the discretion of
the Board of Directors, and are appointed to serve until the first Board of
Directors meeting following the annual meeting of shareholders. Also provided
is a brief description of the business experience of each director, executive
officer and significant employee during the past five years and an indication of
directorships held by each director in other companies subject to the reporting
requirements under the federal securities laws.
<TABLE>
<CAPTION>
DATE FIRST
NAME POSITION HELD WITH THE COMPANY AGE ELECTED OR APPOINTED
--------------------------------------- -------------------------------------- --- -----------------------
<S> <C> <C> <C>
Wayne F. Loftus . . . . . . . . . . . . Chairman of the Board of Directors 51 Chairman since October
9, 2000 and Director
since September 4, 1998
--------------------------------------- -------------------------------------- --- -----------------------
Jeffrey Dale Welsh. . . . . . . . . . . Chief Executive Officer and President 49 CEO and President since
October 26, 2000
--------------------------------------- -------------------------------------- --- -----------------------
Lindsay Lent. . . . . . . . . . . . . . Vice President (Marketing), Secretary 46 Officer since October
and Director 26 and Director since
April 20, 2000
--------------------------------------- -------------------------------------- --- -----------------------
Kevin Kosick. . . . . . . . . . . . . . Vice President (Business Development) 39 October 26, 2000
--------------------------------------- -------------------------------------- --- -----------------------
Colin Fraser. . . . . . . . . . . . . . Vice President (Technology) 28 October 26, 2000
--------------------------------------- -------------------------------------- --- -----------------------
Alex Klenman. . . . . . . . . . . . . . Vice President (Communications) 37 October 26, 2000
--------------------------------------- -------------------------------------- --- -----------------------
Chris Harrington. . . . . . . . . . . . Treasurer 45 October 26, 2000
--------------------------------------- -------------------------------------- --- -----------------------
Ted Kozub . . . . . . . . . . . . . . . Director 63 February 4, 2000
--------------------------------------- -------------------------------------- --- -----------------------
Frank A. Denis. . . . . . . . . . . . . Director 63 September 4, 1998
--------------------------------------- -------------------------------------- --- -----------------------
Gil Rahier. . . . . . . . . . . . . . . Director 59 September 4, 1998
--------------------------------------- -------------------------------------- --- -----------------------
Michael Jenks . . . . . . . . . . . . . Director 47 September 4, 1998
======================================= ====================================== === =======================
</TABLE>
The following is a brief account of the business experience during at least
the past five years of each director, executive officer and key employee,
indicating the principal occupation during that period, and the name and
principal business of the organization in which such occupation and employment
were carried out.
Wayne F. Loftus has served as Chairman of the Board of Directors since
October 9, 2000. From 1983 to present, Mr. Loftus has been the owner/manager of
Pacific Rim Mortgage & Loan Corp. located in Prince George,
<PAGE>
British Columbia, Canada. Pacific Rim is a private corporation involved in
brokering loans and private financing in all facets of residential, commercial
and institutional lending. Mr. Loftus holds a degree in Business Management &
Economics from Douglas Community College, Burnaby, British Columbia, Canada.
Jeffrey Dale Welsh has served as Chief Executive Officer and President
since October 26, 2000. Mr. Welsh is a graduate of the United States Naval
Academy. After serving in the United States Navy for five (5) years, he
graduated from the University of Pittsburgh School of Law and, thereafter,
practiced law in New York for approximately thirteen (13) years. He then founded
Southern Financial Services, Inc. in January 1995, which specializes in the
raising of equity capital for emerging growth companies.
Lindsay Lent has been a Director since April 20, 2000 and Vice-President
(Marketing) since October 26, 2000. Mr. Lent has over 25 years of business
experience including 15 years of technology-related marketing and management.
His past marketing experience includes: international product launches,
development of new markets and distribution channels, and corporate sales to
various Fortune 500 companies, including IBM, U.S. West, First Union Corp. and
Computer Sciences Corp. His management skills include business plan development,
financial management, business systems analysis, and strategic planning and
implementation. Mr. Lent graduated from Capilano College and holds a degree in
Computer Systems Management.
Kevin Kosick has served as Vice President, Business Development since
October 26, 2000. Mr. Kosick has over 20 years experience in a wide variety of
areas, and has held senior level positions in the internet, investment, sales,
media, business development, broadcast and retail sectors. Mr. Kosick attended
the British Columbia Institute of Technology, where he studied Broadcast
Communications.
Colin Fraser has served as Vice President, Technology since October 26,
2000. Recently, Mr. Fraser was a Senior Network Analyst at Thinq Learning
Solutions, where he was responsible for e-commerce and LAN infrastructure,
having planned, designed and implemented an entire e-com architecture for
www.thinq.com. Mr. Fraser has extensive infrastructure experience and has
successfully managed large dollar information technology budgets. He is also a
graduate of the British Columbia Institute of Technology.
Alex Klenman has served as Vice President, Communications since October 26,
2000. He attended Los Angeles Valley College and Diablo Valley College in
California. Mr. Klenman has over 20 years experience in the media and Internet
communities. As a writer, producer and director, he has produced numerous
projects for broadcasting on prime time television. He has served on the Boards
of Directors of numerous major broadcast companies, including Western Approaches
Ltd. and Canwest Pacific Television (CKVU-TV Vancouver). A former member of the
director's Guild of Canada, he is the author of four motion picture screenplays
and over three hundred (300) newspaper and magazine articles. For the last five
(5) years, Mr. Klenman has focused on web development and has built and launched
several successful web sites.
Chris Harrington has served as a consultant providing financial and
administrative services to the Company since October 1999, and has served as its
Treasurer since October 26, 2000. Mr. Harrington has over 25 years experience
in the financial services industry, including banking and investment, mortgage
portfolio management and retirement planning. He has also worked extensively in
the real estate conveyance field. Mr. Harrington attended the Northern Alberta
Institute of Technology.
Ted Kozub has been a Director since February 4, 2000 and served as our
Chief Financial Officer until October 4, 2000. Mr. Kozub is a former tax
partner of KPMG LLP, an international accounting firm, and since 1998, has
served as a consultant to that firm. From 1971 to 1979, Mr. Kozub served as a
Corporate Account Manager for Canada Customs and Revenue Agency. Prior to his
tenure with Canada Customs and Revenue Agency, he was a Senior Accountant and
Tax Manager with Hudson's Bay Oil & Gas Ltd. Mr. Kozub received his Certified
Management Accountant designation in 1963.
Frank A. Denis has been a Director since September 4, 1998. Mr. Denis has
been President and owner of Kenda Enterprises Ltd., located in Prince George,
British Columbia, since 1986. Kenda Enterprises is engaged in
<PAGE>
buying and selling land and timber. Mr. Denis graduated from Prince George
Senior Secondary High School in Prince George, British Columbia.
Gil Rahier has been a Director since September 4, 1998 and served as our
Secretary and Treasurer from inception until October 26, 2000. From 1976 to
present, Mr. Rahier has been associated with the Barton Group of Companies
located in Prince George, British Columbia, and is presently a Senior Vice
President with a portfolio of forest industry and commercial insurance accounts.
Since April 1996, Mr. Rahier has also served as president and a director of
514592 B.C., Ltd. Mr. Rahier graduated from Prince George Senior Secondary
School in Prince George, British Columbia, Canada.
Michael Jenks has been a Director since September 4, 1998. Since 1968, Mr.
Jenks has been an owner of Jemi Holdings Ltd., located on Gabriola Island,
British Columbia, Canada. Jemi Holdings Ltd. owns and develops commercial,
industrial and residential real estate properties throughout British Columbia.
Mr. Jenks graduated from Duchess Park Senior Secondary School, located in Prince
George, British Columbia, Canada.
As described in Item I, the composition of our management and Board of
Directors has changed since the end of our fiscal year. Maurice Simpson and Dana
Shaw no longer serve as members of our Board of Directors and neither of them,
nor William Murray, is currently an officer or director of the Company or any
of its subsidiaries. We believe both individuals were relieved of their duties
for just cause rendering termination amounts due to them under their contract
as invalid. A writ of summons has been filed in the Supreme Court of British
Columbia to set aside these terms of consulting agreements with each of Mr.
Simpson and Mr. Shaw. (See Item 3 - "Legal Proceedings").
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
During the last five years, none of our directors, executive officers or
control persons have been:
- a party to a bankruptcy proceeding by or against any business of which
such person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time;
- convicted in a criminal proceeding or is subject to a pending criminal
proceeding;
- subject to any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking activities; or
- found by a court of competent jurisdiction (in a court action), the SEC or
the Commodity Futures Trading Commission to have violated a federal or state
securities or commodities law.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES ACT.
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's executive officers and directors, and persons who own
more than 10% of the Company's Common Shares to file with the Securities and
Exchange Commission initial statements of beneficial ownership, reports of
changes in ownership and annual reports concerning their ownership of Common
Shares and other equity securities of the Company, on Form 3, 4 and 5
respectively. Executive officers, directors and greater than 10% shareholders
are required by Commission regulations to furnish the Company with copies of all
Section 16(a) reports they file.
To the best of our knowledge, all executive officers, directors and greater
than 10% shareholders filed the required reports in a timely manner, with the
exception of the following:
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF TRANSACTIONS NOT FAILURE TO FILE
NAME LATE REPORTS REPORTED ON A TIMELY BASIS REQUESTED FORMS
--------------- ------------- --------------------------- ----------------
<S> <C> <C> <C>
Maurice Simpson 1(1) 1 1(1)
------------- --------------------------- ----------------
Michael Jenks 1(1) 1 1(1)
------------- --------------------------- ----------------
Gil Rahier 1(1) 1 1(1)
------------- --------------------------- ----------------
Frank Denis 1(1) 1 1(1)
------------- --------------------------- ----------------
Wayne Loftus 1(1) 1 1(1)
------------- --------------------------- ----------------
Ted Kozub 2(2) 2 2(2)
------------- --------------------------- ----------------
Dana Shaw N/A(3) N/A(3) 1(3)
------------- --------------------------- ----------------
William Murray N/A(3) N/A(3) 1(3)
------------- --------------------------- ----------------
Stan Polson N/A(3) N/A(3) 1(3)
--------------- ------------- --------------------------- ----------------
<FN>
(1) The named officer, director or greater than 10% shareholder, as
applicable, did not file a Form 3 - Initial Statement of Beneficial Ownership.
However, the named officer / director / greater than 10% shareholder
subsequently late filed a Form 5 - Annual Statement of Changes in Beneficial
Ownership on November 30, 1999.
(2) Mr. Kozub did not file a form 4 - Statement of Changes in Beneficial
Ownership with respect to the 500,000 stock options granted to him on June 9,
2000.
(3) These persons were previously officers and/or directors and also 10%
shareholders and did not file a Form 3 - Initial Statement of Beneficial
Ownership. The Company has not received any other reports from any of these
persons and cannot therefore determine if such individuals have failed or late
filed any applicable
</TABLE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended July 31, 2000, the Board of Directors held
three (3) meetings. All of the directors serving on the Board of Directors at
the time of each of those meetings attended the meetings. Most of the Board
of Directors' actions are conducted by written consent resolution after the
directors have discussed the proposed action to be taken by the Board.
For the year ended July 31, 2000, the Board of Directors had one standing
committee, the Audit Committee. During the year ended July 31, 2000, the Audit
Committee was composed of Ted Kozub, Wayne Loftus and Maurice Simpson. The
function of the Audit Committee is to review and approve the scope of audit
procedures employed by the Company's independent auditors, to review the results
of the auditor's examination, the scope of audits, the auditor's opinions on the
adequacy of internal controls and quality of financial reporting, and the
Company's accounting and reporting principles, policies and practices, as well
as the Company's accounting, financial and operating controls. The Audit
Committee also reports to the Board of Directors with respect to such matters
and recommends the selection of independent auditors. The Audit Committee did
not meet during the financial year ended July 31, 2000.
ITEM 10. EXECUTIVE COMPENSATION
The Company has omitted the Summary Compensation Table because, for the
fiscal year ended July 31, 2000, our then President and Chief Executive Officer,
Wayne Loftus, did not receive any compensation as time spent on company matters
was not significant. No other executive officer was awarded compensation in
excess of $100,000.
OPTION GRANTS IN FISCAL 2000.
<PAGE>
We established the 1999 Stock Option Plan to serve as a vehicle to attract
and retain the services of key employees and consultants and to help them
realize a direct proprietary interest in us. The 1999 Plan is administered by
the Board of Directors. The 1999 Plan provides for the grant of up to 5,000,000
stock options. The per share option price for stock subject to each option
shall not be less than the fair market value per share on the effective date of
the grant or such other price as the Board may determine. The period for the
exercise of each option shall be determined by the Board not to exceed five
years. The Board may at any time terminate the Plan and may at any time and
from time to time and in any respect amend or modify the Plan. On November 5,
1999, our Board of Directors approved the grant of 5 million options under the
1999 Plan with an exercise price of $1.09 (the market price on the grant date)
for a one year period. At July 31, 2000, 4,636,000 options have been exercised.
There were no grants of stock options or stock appreciation rights made
during the fiscal year ended July 31, 2000 to our executive officers and
directors except as set out below:
OPTIONS GRANTED IN THE CURRENT YEAR
(through July 31, 2000)
<TABLE>
<CAPTION>
NUMBER OF SHARES % OF TOTAL MARKET
OF COMMON STOCK OPTIONS GRANTED EXERCISE PRICE
UNDERLYING OPTIONS TO EMPLOYEES OR BASE PRICE ON DATE EXPIRATION
NAME GRANTED IN 2000 IN 2000(1) ($/SHARE) OF GRANT DATE
---------- ------------------- ---------------- --------------- --------- ------------
<S> <C> <C> <C> <C> <C>
Ted Kozub. 500,000 10% $ 1.09 $ 1.06 Nov. 5, 2000
---------- ------------------- ---------------- --------------- --------- ------------
<FN>
(1) The total number of options to purchase common shares granted to employees,
directors and consultants to July 31, 2000 was 5,000,000.
</TABLE>
Mr. Kozub exercised all of the options granted on June 9, 2000 in exchange
for a non-interest bearing promissory note to our company in the principal
amount of $545,000, the balance of which was outstanding as of July 31, 2000.
The note is repayable out of the proceeds of the ultimate sale of the stock
acquired via exercise of stock options.
AGGREGATED OPTION EXERCISES IN FISCAL 2000 AND YEAR END OPTION VALUES.
Set forth below is information with respect to the stock options held by
our executive officers at July 31, 2000.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SAR'S AT FY- OPTIONS/SAR'S AT FY-
ACQUIRED ON END (#) EXERCISABLE/ END ($) EXERCISABLE/
NAME EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---------------- --------------------- ---------------------- -------------------- -------------
<S> <C> <C> <C> <C>
Ted Kozub. . . . 500,000 $ 545,000 Nil Nil
--------------------- ---------------------- -------------------- -------------
Chris Harrington 100,000 $ 109,000 Nil Nil
---------------- --------------------- ---------------------- -------------------- -------------
</TABLE>
DIRECTOR COMPENSATION.
We reimburse our directors for expenses incurred in connection with
attending board meetings but did not pay director's fees or other cash
compensation for services rendered as a director in the year ended July 31,
2000.
<PAGE>
We have no formal plan for compensating our directors for their service in
their capacity as directors although such directors are expected to receive in
the future options to purchase shares of common stock as awarded by our board of
directors or (as to future options) a compensation committee which may be
established in the future. Directors are entitled to reimbursement for
reasonable travel and other out-of-pocket expenses incurred in connection with
attendance at meetings of our board of directors. The board of directors may
award special remuneration to any director undertaking any special services on
our behalf other than services ordinarily required of a director. Other than
indicated below, no director received and/or accrued any compensation for his or
her services as a director, including committee participation and/or special
assignments.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE IN CONTROL
ARRANGEMENTS
On October 6, 2000, we entered into a verbal contract with Jeffrey Dale
Welsh where he will act as our CEO and President for a four month period. In
exchange for these services he will receive $12,500 per month plus a $15,000
bonus at the end of the four months.
On October 1, 1999, we entered into an agreement with Chris Harrington to
obtain financial management and administration services for a term expiring on
September 30, 2001. Mr. Harrington is to receive CDN$120,000 (approximately
$78,000) over the duration of the contract plus 100,000 stock options
exercisable until November 5, 2000 at an exercise price of $1.09 per share. All
said stock options have been exercised at July 31, 2000. The balance of
contract is due in the event Mr. Harrington is terminated.
On May 1, 2000, we entered into a management contract with Ted Kozub
Enterprises Ltd. (a company beneficially controlled by Ted Kozub) to obtain
management services in exchange for CDN$5,000 ($3,250) per month. In connection
with the resignation of Mr. Kozub on October 4, 2000, the management contract
was terminated. Under terms of the resignation, Mr. Kozub is to receive a
settlement of CDN$55,000 (approximately $36,000) payable CDN$27,500
(approximately $18,000) on October 10, 2000 (which has been paid) and CDN$27,500
(approximately $18,000) on January 1, 2001.
On September 24, 1999, our subsidiary Fetchomatic.com Online Inc. allegedly
entered into consulting agreements with former executive officers, Maurice
Simpson, Dana Shaw and William Murray for terms expiring on September 24, 2003,
unless extended for additional two year terms. The agreements provided for an
initial salary for each executive officer in the amount of CDN$6,000 per month
until specific earnings targets were met at which time monthly salary increases
would result. The agreements also provided for the payment of termination fees
of CDN$2 million, CDN$500,000 and CDN$500,000 (approximately $1,340,000,
$335,000 and $335,000) to Messrs. Simpson, Shaw and Murray, respectively, if the
contracts were terminated prior to the end of the initial five year term or
during the additional two year terms.
On October 26, 2000, we terminated the services of Messrs. Simpson, Shaw
and Murray and on November 24, 2000, we filed a writ of summons with the Supreme
Court of British Columbia to, among other things, set aside the termination
provisions in the agreements with Messrs. Simpson and Shaw since the services
were believed to be terminated for just cause as a result of the repudiatory
breaches by Messrs. Simpson and Shaw. (See Item 3 - "Legal Proceedings").
There are no arrangements or plans in which we provide pension, retirement
or similar benefits for directors or executive officers, except that our
directors and executive officers may receive stock options at the discretion of
the Board of Directors. Other than agreements discussed above, we do not have
any material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to our directors or executive officers, except
that stock options and bonuses may be granted at the discretion of our Board of
Directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
<PAGE>
Principal Stockholders
As used in this section, the term "beneficial ownership" with respect to a
security is defined by Regulation 228.403 under the Securities Exchange Act of
1934, as amended, as consisting of: (1) any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise has
or shares voting power (which includes the power to vote, or to direct the
voting of such security) or investment power (which includes the power to
dispose, or to direct the disposition of, such security); and (2) any person
who, directly or indirectly, creates or uses a trust, proxy, power of attorney,
pooling arrangement or any other contract, arrangement or device with the
purpose or effect of divesting such person of beneficial ownership of a security
or preventing the vesting of such beneficial ownership. Each person has sole
voting and investment power with respect to the common shares, except as
otherwise indicated. Beneficial ownership consists of a direct interest in the
common shares, except as otherwise indicated.
The following table sets forth, as of December 12, 2000, certain
information with respect to the beneficial ownership of our common stock by each
stockholder known by us to be the beneficial owner of more than 5% of our common
stock and by each of our current directors and executive officers:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENTAGE OF CLASS(1)
------------------------------------- -------------------- ----------------------
<S> <C> <C>
Frank Denis
c/o 444 Victoria Street, Suite 370
Prince George, BC . . . . . . . . . . 2,866,668 5.24%
-------------------- ----------------------
Chris Harrington
Box 29, RR08
Pollard Site
Quesnel, BC . . . . . . . . . . . . . 70,000 0.13%
-------------------- ----------------------
Jeff Welsh
3000 NE 30th Place, Suite #107
Ft. Lauderdale, FL 33306. . . . . . . Nil 0%
-------------------- ----------------------
Michael Jenks
c/o 444 Victoria Street, Suite 370
Prince George, BC . . . . . . . . . . 9,147,750(5) 16.73%
-------------------- ----------------------
Ted Kozub
c/o 498 Ellis Street, 2nd Floor
Penticton, BC . . . . . . . . . . . . 500,000 0.91%
-------------------- ----------------------
Lindsay Lent
15298 20th Avenue
White Rock, BC. . . . . . . . . . . . 50,000 0.09%
-------------------- ----------------------
Kevin Kosick
3676 Somerset Cres., South
Surrey, BC. . . . . . . . . . . . . . Nil 0%
-------------------- ----------------------
Colin Fraser
4278 Garden Grove Drive
Burnaby, BC . . . . . . . . . . . . . Nil 0%
-------------------- ----------------------
Alex Klenman
6011 Takla Place
Richmond, BC. . . . . . . . . . . . . Nil 0%
-------------------- ----------------------
<PAGE>
Wayne Loftus
c/o 444 Victoria Street, Suite 370
Prince George, BC . . . . . . . . . . 1,583,333 2.90%
-------------------- ----------------------
William Murray
3343 Highland Blvd.,
North Vancouver, BC . . . . . . . . . 4,000,000 7.32%
-------------------- ----------------------
Gil Rahier
c/o 444 Victoria Street, Suite 370
Prince George, BC . . . . . . . . . . 1,683,333 3.08%
-------------------- ----------------------
Dana Shaw(3)
5260 Sixth Avenue
Delta, BC . . . . . . . . . . . . . . 4,000,000 7.32%
-------------------- ----------------------
Maurice Simpson (4)
c/o 4920 - 800 West Pender Street
Vancouver, BC . . . . . . . . . . . . 9,225,000 16.88%
-------------------- ----------------------
DIRECTORS AND OFFICERS AS A GROUP . . 15,901,084 29.09%
===================================== ==================== ======================
<FN>
(1) Based on 54,659,217 shares of common stock issued and outstanding as of
December 12, 2000. Except as otherwise indicated, we believe that the beneficial
owners of the common stock listed above, based on information furnished by such
owners, have sole investment and voting power with respect to such shares, subject
to community property laws where applicable. Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options or
warrants currently exercisable, or exercisable within 60 days, are deemed
outstanding for purposes of computing the percentage ownership of the person
holding such option or warrants, but are not deemed outstanding for purposes of
computing the percentage ownership of any other person. With respect to 5%
shareholders, the information for the above table was derived from a registered
shareholders list as provided by the transfer agent on December 12, 2000. We did
not receive any Schedule 13Ds or 13Gs during the fiscal year.
(2) As holders of our convertible debentures, Collinson Road LLC, may become a
beneficial owner of more than 5% of our common stock depending on the current
conversion price upon which the convertible debentures could be converted into
shares of our common stock.
(3) Dana Shaw resigned as a director of the Company effective December 12,
2000.
(4) Maurice Simpson resigned as a director of the Company effective October 26,
2000.
(5) Includes 7,564,417 shares of common stock that Mr. Jenks holds proxies to
vote. Mr. Jenks holds a proxy for Venture Capital Media Ltd. with respect to
2,879,265 shares of our common stock. Mr. Jenks holds a proxy for Global Ventures
Ltd. with respect to 2,012,599 shares of our common stock. Mr. Jenks holds a proxy
for Newsmakers Inc. with respect to 911,250 shares of our common stock. Mr. Jenks
holds a proxy for Sox Ltd. with respect to 1,761,303 shares of our common stock.
</TABLE>
Except for common stock issuable upon conversion of convertible debentures
and the second block of shares issuable should we pursue further advertising
with Sivla, Inc., we are unaware of any contract or other arrangement the
operation of which may, at a date subsequent to this Annual Report, result in a
change of control of the Company. Shares issuable upon conversion of debentures
and additional advertising are determined in relation to then current trading
prices of our common stock.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as otherwise indicated below, and in compensation agreements
discussed above under "Item 10 - Executive Compensation", we have not been a
party to any transaction, proposed transaction, or series of transactions during
the year ended July 31, 2000 in which the amount involved exceeds $60,000, and
in which, to its knowledge, any of our directors, officers, 5% beneficial
security holder, or any member of the immediate family of such persons has had
or will have a direct or indirect material interest.
<PAGE>
As part of the share exchange agreement with the former stockholders of SSA
Coupon Ltd (now Fetchomatic.com Online Inc.), we are required to pay Maurice
Simpson, Dana Shaw and William Murray (the former stockholders of SSA Coupon
Ltd.), in perpetuity, royalties in the aggregate amount of 7% of the gross
revenues derived from the technology developed by Fetchomatic.com Online Inc.,
payable on a quarterly basis. To July 31, 2000, no amounts have been paid or
are owing under this agreement.
During the year ended July 31, 2000, we repaid a non-interest bearing loan made
by Michael Jenks (one of our directors) in 1998 in the amount of $67,000.
On December 1, 1998, our subsidiary, FGP, acquired beneficial control of certain
assets and liabilities comprising the Mountain View Park from 514592 BC Ltd., a
company 50% beneficially controlled by Mr. Gil Rahier, one of our directors, in
exchange for the issuance of 200,000 shares of common stock. On August 31,
1999, the terms of the acquisition were amended such that we acquired the shares
of 514592 BC Ltd. as opposed to the assets. As part of the acquisition
agreement, we repurchased and cancelled 100,000 shares of common stock
previously issued to two stockholders controlling 50% of the common stock of
514592 BC Ltd. in exchange for approximately $287,000. As a result of the share
purchase, FGP became the sole shareholder of 514592 BC Ltd.
On November 5, 1999, an option to purchase 100,000 shares of our common stock,
at an exercise price of $1.09 and expiring on November 5, 2000, was granted to
Chris Harrington, our Treasurer, prior to his appointment as executive officer.
In connection therewith, Mr. Harrington exercised said options for consideration
which included a non-interest bearing promissory note due in the amount of
$103,550 with $16,350 of the note having been repaid, leaving a balance of
$87,200 owing with no specified terms of repayment, but secured by the
remaining underlying common shares.
On November 5, 1999, an option to purchase 30,000 shares of our common stock, at
an exercise price of $1.09 and expiring on November 5, 2000, was granted to Barb
Little, one of our employees. In connection with the exercise of the option,
Mrs. Little exercised the options for consideration which included a
non-interest bearing promissory note due in the amount of $32,700 with no
specified terms of repayment, but secured by the remaining underlying common
shares.
On November 5, 1999, an option to purchase 500,000 shares of our common stock,
at an exercise price of $1.09 and expiring on November 5, 2000, was granted to
Ted Kozub, a current member of our Board of Directors and our former Chief
Financial Officer, prior to his appointment as an officer or director. In
connection therewith, Mr. Kozub exercised said options for consideration which
included a non-interest bearing promissory note due in the amount of $545,000.
None of the principal due under the note has been repaid, and there are no
specified terms of repayment, but the note is secured by the underlying common
shares.
On November 5, 1999, we granted stock options to Adeline Gratton, a sister of
Frank Denis, one of our directors, to purchase up to 450,000 common shares
at $1.09 per common share. Ms. Gratton received the options as compensation
for certain consulting services she provided to us.
On May 1, 2000, we made the decision to dispose of all of the assets
constituting its mobile home park business, the sale of which was completed in
June, 2000. Total proceeds on the sale were approximately $675,000, with
$135,000 received on closing, $98,000 due bearing 6% interest on July 15, 2000
(which has not yet been received) and the balance due in instalments of $4,500
per month including interest at prime plus 1% per annum with the balance due on
May 15, 2002. The balance due to 514592 BC Ltd. is collateralized by equipment
and an unconditional guarantee by the purchaser. Immediately following the
sale, we transferred the shares of 514592 BC Ltd. to its four directors for
nominal consideration. The four directors were Wayne Loftus, Frank Denis, Gil
Rahier and Michael Jenks. Prior to the sale of the shares of 514592 BC Ltd.,
514952 BC Ltd. transferred all of its remaining assets and liabilities to us
except for the mortgage obligation on the Park of approximately $435,000 and an
amount due to us of $104,871 and the instalments receivable equal to the
liabilities existing in 514952 BC Ltd. Under the current agreement, we will not
receive payment on the amount of $104,871 owing until the third-party mortgage
is discharged. Because of concerns regarding collectability of the balance due
to the Company by 514592 BC Ltd. as a result of the purchaser's overdue payment,
we have fully provided against a possible bad debt. Our
<PAGE>
management and management of 514592 B.C. Ltd. and 514592 BC Ltd. continue to
pursue collection of the full amount outstanding.
In July 2000, we entered into a consulting agreement with Strategic
Investors Group ("SIG"). Under the terms of the agreement, SIG will provide our
company with financial public relations services, including drafting and
publishing of press releases about the Company, and distributing investor
updates to members of the SIG database. The agreement also required us to pay
SIG a one-time cash fee of $10,000 (which has been paid) and 25,000 shares of
our common stock for each of the first two months of the agreement. At the end
of the second month of the agreement, we had the opportunity to terminate the
agreement, but did not. Accordingly, pursuant to the contract, SIG earned a one
year option to purchase 50,000 shares at a price currently under negotiation.
SIG will receive 25,000 shares of our common stock per month. Upon completion
of the agreement, SIG will have earned a one-year option to purchase 100,000
shares of common stock at a price currently under negotiation. Jeffrey Dale
Welsh became our Chief Executive Officer and President on October 26, 2000. At
the time that we entered into the agreement with SIG, Mr. Welsh was the
President of SIG and maintained a controlling interest of a corporation (The
Southern Companies, Inc.) that owned 50% of SIG. On October 15, 2000 Mr. Welsh
resigned as President of SIG and The Southern Companies Inc. sold its interest
in SIG to a third party. Mr. Welsh no longer has any interest, directly or
indirectly, in SIG.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
Financial Statements:
Independent Auditor's Report, dated October 26, 2000.
Consolidated Balance Sheet at July 31, 2000.
Consolidated Statements of Operations for the Year Ended July 31, 2000, for
the period from September 24, 1998 (inception) to July 31, 1999 and for the
cumulative period from September 24, 1998 (inception) to July 31, 2000.
Consolidated Statement of Changes in Stockholders' Equity (Deficit) for the
cumulative period from September 24, 1998 (inception) to July 31, 2000.
Consolidated Statements of Cash Flows for the Year Ended July 31, 2000, for
the period from September 24, 1998 (inception) to July 31, 1999 and for the
cumulative period from September 24, 1998 (inception) to July 31, 2000.
Summary of Significant Accounting Policies.
Notes to the Consolidated Financial Statements.
Financial Statement Schedule: Not Applicable.
Exhibits: Incorporated by reference to the Exhibit Index at the end of
this report.
(b) Reports on Form 8-K
On May 23, 2000, we filed a report on Form 8-K announcing the closing of
the private placement sale of $3,500,000 of our convertible debentures and the
sale of certain assets owned by our former subsidiary.
<PAGE>
On June 16, 2000, we filed a report on Form 8-K in connection with the sale
of all the shares of 514592 B.C. Ltd. (a former subsidiary) to four of our
directors. The Form 8-K contained unaudited Pro Forma Consolidated Financial
Information giving effect to the sale of the subsidiary's assets and the
subsequent liquidation of the remaining assets and liabilities of the
subsidiary.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on December 13, 2000.
FETCHOMATIC GLOBAL INTERNET INC.
By: /s/ Jeffrey Dale Welsh
-------------------------
Jeffrey Dale Welsh
Chief Executive Officer
and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Jeffrey Dale Welsh December 13, 2000
-------------------------
Jeffrey Dale Welsh
Chief Executive Officer
and President
/s/ Wayne Loftus December 13, 2000
------------------
Wayne Loftus
Chairman of the Board
of Directors
/s/ Michael Jenks December 13, 2000
-------------------
Michael Jenks
Director
/s/ Frank Denis December 13, 2000
-----------------
Frank Denis
Director
/s/ Ted Kozub December 13, 2000
---------------
Ted Kozub
Director
/s/ Lindsay Lent December 13, 2000
------------------
Lindsay Lent
Vice-President (Marketing),
Secretary and Director
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
----- ------------------------
Exhibits Required by Item 601 of Regulation S-B
(3) Articles of Incorporation and By-laws
3.1 Articles of Incorporation of the Company (incorporated by reference
from the Company's Form 10-SB Registration Statement, filed December 9, 1998)
3.2 Bylaws of the Company (incorporated by reference from the Company's
Form 10-SB Registration Statement, filed December 9, 1998)
3.3 Amended Articles of Incorporation of the Company (incorporated by
reference from the Company's Form SB-2/A, filed July 27, 2000)
(10) Material Contracts
10.1 Agreement between the Company (Forest Glade Properties Inc.), Gil
Rahier Holdings Ltd., Annette Schattenkirk, Orval John Schattenkirk, Gilbert
Rahier and Marjorie Rahier, dated August 25, 1999 (incorporated by reference
from the Company's Form SB-2/A, filed July 27, 2000)
10.2 Agreement on Principal Terms, between SSA Coupon Ltd., Maurice
Simpson, William Murray and Dana Shaw, dated August 30, 1999 (incorporated by
reference from the Company's Form 8-K, filed September 13, 1999)
10.3 Share Exchange Agreement between the Company (Forest Glade
International Inc.), Maurice Simpson, Dana Shaw, William Murray and Dennis
Brovarone, dated September 29, 1999 (incorporated by reference from the
Company's Form SB-2/A, filed July 27, 2000)
10.4 Letter (change in accountant) from Chan Foucher Lefebvre to the
Company, dated October 20, 1999 (incorporated by reference from the Company's
Form 8-K, filed October 21, 1999)
10.5 Data Licence Agreement between SSA Coupon Ltd. and Acxiom
Corporation, dated October 29, 1999 (incorporated by reference from the
Company's Form SB-2/A, filed July 27, 2000)
10.6 Consulting Agreement between the Company (Forest Glade
International Inc.) and Ted Kozub, dated November 5, 1999 (incorporated by
reference from the Company's Form SB-2/A, filed July 27, 2000)
10.7 Agreement between the Company (Forest Glade International Inc.),
Lawrence Adams Ltd. and Northern Business Consultants Ltd., dated December 17,
1999 (incorporated by reference from the Company's Form SB-2/A, filed July 27,
2000)
10.8 1999 Stock Option Plan - Forest Glade International Inc.
(incorporated by reference from the Company's Form S-8, filed December 22, 1999)
10.9 Agreement between SSA Coupon Ltd. and Brian Nadjiwon, dated
February 14, 2000, with attached amendment dated May 16, 2000
<PAGE>
10.10 Amending Agreement between SSA Coupon Ltd. and William Murray,
dated February 23, 2000 (incorporated by reference from the Company's Form
SB-2/A, filed July 27, 2000)
10.11 Agreement between the Company (Forest Glade International Inc.)
and Sivla Inc., dated March 30, 2000 (incorporated by reference from the
Company's Form 10-QSB, filed June 19, 2000)
10.12 Agreement between the Company and T. Kozub Enterprises Ltd.,
dated May 1, 2000 (incorporated by reference from the Company's Form SB-2/A,
filed July 27, 2000)
10.13 Convertible Debenture Purchase Agreement between the Company
(Forest Glade International Inc.) and The Investors Signatory Thereto, dated May
1, 2000 (incorporated by reference from the Company's Form 8-K, filed May 23,
2000)
10.14 7% Convertible Debenture - Forest Glade International Inc., dated
May 1, 2000 (incorporated by reference from the Company's Form 8-K, filed May
23, 2000)
10.15 Registration Rights Agreement between the Company (Forest Glade
International Inc.) and The Investors Signatory Thereto (incorporated by
reference from the Company's Form 8-K, filed May 23, 2000)
10.16 Warrant (Forest Glade International Inc.), in the name of
Collinson Road LLC, dated May 1, 2000 (incorporated by reference from the
Company's Form 8-K, filed May 23, 2000)
10.17 Letter Agreement between the Company (Forest Glade International
Inc.) and Collinson Road LLC, dated May 1, 2000 (incorporated by reference from
the Company's Form 8-K, filed May 23, 2000)
10.18 Contract of Purchase and Sale between 514592 BC Ltd. and R.P.M.J.
Corporate Communications Limited, dated May 2, 2000 (incorporated by reference
from the Company's Form 8-K, filed June 16, 2000)
10.19 Land Title Act Form C (with respect to Exhibit 10.10), between
514592 BC Ltd. and R.P.M.J. Corporate Communications Limited, dated May 2, 2000
(incorporated by reference from the Company's Form 8-K, filed June 16, 2000)
10.20 Letter of Confirmation of Assignment between 514592 BC Ltd. and
the Company (Forest Glade Properties Inc.), dated May 5, 2000 (incorporated by
reference from the Company's Form 8-K, filed June 16, 2000)
10.21 Consulting Agreement between the Company (Forest Glade
International Inc.) and OTC Live, Inc., dated May 25, 2000 (incorporated by
reference from the Company's Form SB-2/A, filed July 27, 2000)
10.22 Purchase and Sale Agreement, between 514592 BC Ltd. and R.P.M.J.
Corporate Communications Limited, dated May, 2000 (incorporated by reference
from the Company's Form 8-K, filed June 16, 2000)
10.23 Share Transfer Agreement between the Company (Forest Glade
Properties Inc.) and Wayne Loftus, Gil Rahier Holdings Ltd., Frank Denis and
Michael Jenks, dated June 1, 2000 (incorporated by reference from the Company's
Form 8-K, filed June 16, 2000)
10.24 Financial Public Relations Agreement between the Company and
Strategic Investors Group, dated July 24, 2000
10.25 Consulting Agreement between the Company and Kramer Group LLC,
dated September 20, 2000
<PAGE>
10.26 Acknowledgment of Indebtedness in favor of the Company by Ted
Kozub, dated December 11, 2000
10.27 Consulting Agreement between the Company and Chris Harrington,
dated November 5, 1999
(21) Subsidiaries of the Company: Fetchomatic.com Online Inc. and Forest
Glade Properties Inc.
(27) Financial Data Schedule
