<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from ____________ to ________________
Commission file number __________
THINKPATH.COM INC.
(Exact name of Small Business Issuer as Specified in Its Charter)
Ontario 52-209027
------------------------------------ --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 University Avenue
Suite 505
Toronto, Ontario, Canada M5J 2H7
------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(416) 364-8800 (Issuer's telephone number, including area code)
--------------
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
|_|
The number of shares outstanding of the registrant's Common Stock, No
Par Value, on November 17, 2000 was 6,688,595 shares.
Transitional Small Business Disclosure Format (check one):
Yes X No _____
-------
<PAGE>
THINKPATH.COM INC.
SEPTEMBER 30, 2000 QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Page Number
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999....................... 4,5
Consolidated Interim Statements of Income
for three and the the nine months ended September 30, 2000 and 1999........................ 6
Consolidated Interim Statements of Stockholders' Equity
for the nine months ended September 30, 2000 and 1999....................................... 7
Consolidated Interim Statements of Cash Flows
for the nine months ended September 30, 2000 and 1999....................................... 8
Notes to Consolidated Interim Financial Statements.............................................. 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................................... 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................................................ 24
Item 2. Changes in Securities and Use of Proceeds........................................................ 24
Item 3. Defaults Upon Senior Securities.................................................................. 25
Item 4. Submission of Matters to a Vote of Security Holders.............................................. 25
Item 5. Other Information................................................................................ 26
Item 6. Exhibits and Reports on Form 8-K................................................................. 26
</TABLE>
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB contains forward-looking statements
as defined by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions and
other statements, which are other than statements of historical facts. These
statements are subject to uncertainties and risks including, but not limited to,
product and service demand and acceptance, changes in technology, economic
conditions, the impact of competition and pricing, government regulation, and
other risks defined in this document and in statements filed from time to time
with the Securities and Exchange Commission. All such forward-looking statements
are expressly qualified by these cautionary statements and any other cautionary
statements that may accompany the forward-looking statements. In addition,
ThinkPath.com Inc disclaims any obligations to update any forward-looking
statements to reflect events or circumstances after the date hereof.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
THINKPATH.COM INC.
Interim Consolidated Balance Sheet
As of September 30, 2000 and December 31, 1999
(Amounts expressed in US dollars)
(Unaudited)
<TABLE>
<CAPTION>
(Restated)
September 30 December 31
2000 1999
<S> <C> <C>
$ $
ASSETS
CURRENT ASSETS
Cash 784,204 1,904,588
Short-term investments 532,869 383,146
Accounts receivable 8,227,051 5,698,571
Prepaid expenses 458,468 720,754
Inventory 198,938 -
Income taxes receivable 120,542 -
---------- ---------
10,322,072 8,707,059
CAPITAL ASSETS 3,498,857 3,366,885
GOODWILL 11,104,629 6,960,272
DUE FROM RELATED PARTY 154,348 209,420
OTHER ASSETS 2,235,404 1,227,470
LONG-TERM INVESTMENTS 2,519,409 -
DEFERRED INCOME TAXES 284,647 -
---------- ---------
30,119,366 20,471,106
========== ==========
</TABLE>
4
<PAGE>
THINKPATH.COM INC.
Consolidated Interim Balance Sheet
As of September 30, 2000 and December 31, 1999
(Amounts expressed in US dollars)
(Unaudited)
<TABLE>
<CAPTION>
(Restated)
September 30 December 31
2000 1999
$ $
<S> <C> <C>
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness 5,278,306 4,435,199
Accounts payable 2,420,000 3,109,901
Deferred revenue 67,858 10,098
Income taxes payable - 112,023
Dividend payable 91,000 -
Current portion of long-term debt 461,718 373,129
Current portion of note payable 864,032 1,300,000
---------- ---------
9,182,914 9,340,350
DEFERRED INCOME TAXES - 99,472
LONG-TERM DEBT 998,618 1,320,838
NOTE PAYABLE 2,554,654 1,150,000
---------- ---------
12,736,186 11,910,660
---------- ---------
STOCKHOLDERS' EQUITY
CAPITAL STOCK 17,753,759 8,717,572
OTHER COMPREHENSIVE INCOME, NET OF INCOME TAXES
Cumulative translation adjustment (257,355) (49,562)
DEFICIT (113,224) (107,564)
---------- ---------
17,383,180 8,560,446
---------- ---------
30,119,366 20,471,106
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
interim financial statements.
5
<PAGE>
THINKPATH.COM INC.
Consolidated Interim Statements of Income
For the three and nine months ended September 30, 2000 and 1999 (Amounts
expressed in US dollars) (Unaudited)
<TABLE>
<CAPTION>
(Restated) (Restated)
Three Months Three Months Nine Months Nine Months
ended ended ended ended
Sept 30, Sept 30, Sept 30, 2000 Sept 30, 1999
2000 1999 $ $
$ $
<S> <C> <C> <C> <C>
REVENUE 9,935,619 5,131,261 32,629,218 16,066,794
COST OF SERVICES 6,224,758 3,357,525 19,771,530 9,786,801
--------------- ---------------- --------------- ---------------
GROSS PROFIT 3,710,861 1,773,736 12,857,688 6,279,993
Gain on short-term investments 94,728 - 94,728 -
--------------- ---------------- --------------- ---------------
3,805,589 1,773,736 12,952,416 6,279,993
--------------- ---------------- --------------- ---------------
EXPENSES
Administrative 1,541,180 1,449,121 5,116,716 3,690,165
Selling 1,785,978 931,673 5,605,362 2,638,498
--------------- ---------------- --------------- ---------------
3,327,158 2,380,794 10,722,078 6,328,663
--------------- ---------------- --------------- ---------------
INCOME (LOSS) BEFORE INTEREST &
AMORTIZATION 478,431 (607,058) 2,230,338 (48,670)
Interest 137,041 105,964 562,247 331,571
Amortization 337,986 184,803 1,108,242 254,885
--------------- ---------------- --------------- ---------------
INCOME (LOSS) BEFORE THE
UNDERNOTED ITEMS 3,404 (897,825) 559,849 (635,126)
Share of equity (loss) in subsidiary (246,236) - (246,236) -
Non-operational preferred stock discount (200,000) - (200,000) -
--------------- ---------------- --------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES (442,832) (897,825) 113,613 (635,126)
Income taxes (recovery) 51,414 (52,219) (31,406) (65,299)
--------------- ---------------- --------------- ---------------
NET INCOME (LOSS) (494,246) (845,606) 145,019 (569,827)
=============== ================ =============== ===============
BASIC EARNINGS PER STOCK AFTER PREFERRED STOCK
DIVIDENDS (0.11) (0.27) 0.00 (0.23)
=============== ================ =============== ===============
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK OUTSTANDING 5,109,111 3,088,642 4,525,622 2,510,040
=============== ================ =============== ===============
FULLY DILUTED EARNINGS
PER STOCK (0.11) (0.27) 0.00 (0.23)
=============== ================ =============== ===============
</TABLE>
The accompanying notes are an integral part of these
consolidated interim financial statements.
6
<PAGE>
THINKPATH.COM INC.
Consolidated Interim Statements of Stockholders' Equity
For the year ended December 31, 1999 and the nine months ended September 30,
2000 (Amounts expressed in US dollars) (Unaudited)
<TABLE>
<CAPTION>
Common Preferred
Stock Stock Cumulative
Number of Number of Paid in Retained Translation
Shares Shares Capital Earnings Adjustment
------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ $ $
Balance as of
December 31, 1998
(restated) 2,567,877 10 1,678,566 (121,883) (139,026)
Issuance of common stock 1,370,767 -- 4,787,788 -- --
Common stock payable -- -- 1,000,000 -- --
Issuance of preferred stock -- 15,000 1,152,142 -- --
Foreign currency translation -- -- -- -- 89,533
Net income for the period -- -- -- 14,319 --
---------- ---------- ---------- ---------- ----------
Balance as of
December 31, 1999 3,938,644 15,010 8,618,496 (107,564) (49,493)
Issuance of common stock 1,969,209 -- 4,950,604 -- --
Common stock payable -- -- 625,000 -- --
Issuance of preferred stock -- 9,000 2,899,980 -- --
Preferred stock converted 678,106 (10,827) -- -- --
Foreign currency translation -- -- -- -- (207,862)
Preferred stock dividend -- -- 59,679 (150,679) --
Net income for the period -- -- -- 145,019 --
---------- ---------- ---------- ---------- ----------
Balance as of
September 30, 2000 6,585,959 13,183 17,753,759 (113,224) (257,355)
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated interim
financial statements.
7
<PAGE>
THINKPATH.COM INC.
Consolidated Interim Statements of Cash Flows
For the nine months ended September 30, 2000 and 1999 (Amounts expressed in US
dollars)
(Unaudited)
<TABLE>
<CAPTION>
(Not Restated)
2000 1999
----------- -----------
<S> <C> <C>
$ $
Cash flows from operating activities:
Net income 145,019 657,331
----------- -----------
Adjustments to reconcile net income
to net cash (used in) provided by operating activities:
Gain on short-term investments (94,728) -
Share of equity loss in subsidiary 246,236 -
Non-operational preferred stock discount 200,000 -
Short-term investment received in lieu of services rendered (14,933) -
Long-term investment received in lieu of services rendered (230,111) -
Amortization 809,500 674,833
Amortization of goodwill 298,742 -
Amortization of deferred contract 90,000 -
Decrease (increase) in accounts receivable (2,715,629) (4,210,088)
Decrease (increase) in prepaid expenses 243,513 (442,821)
Decrease (increase) in income taxes receivable (74,739) -
Decrease (increase) in inventory (200,612) (109,347)
Increase (decrease) in accounts payable and deferred revenue (546,641) 1,965,940
Decrease (increase) in income taxes payable (109,705) 54,426
Decrease (increase) deferred income taxes (384,455) -
----------- -----------
Total adjustments (2,483,562) (2,067,057)
----------- -----------
Net cash (used in) operating activities (2,338,543) (1,409,726)
----------- -----------
Cash flows from investing activities:
Purchase of capital assets (941,472) (2,219,716)
Disposal (purchase) of other assets 223,835 (396,873)
Cash payment for subsidiaries (1,648,557) -
Acquisition of Goodwill - (5,438,039)
Cash payment for long-term investments (2,535,492) -
----------- -----------
Net cash (used in) investing activities (4,901,686) (8,054,628)
----------- -----------
Cash flows from financing activities:
Cash received on due from related party 49,440 -
Cash (paid) received on notes payable 1,048,151 2,500,000
Cash (paid) received on long-term debt (186,288) 53,086
Proceeds from issuance of common stock 2,333,716 4,733,520
Proceeds from issuance of preferred stock 1,999,980 -
Increase in deferred charges - 20,904
Increase in bank indebtedness 843,107 3,495,128
----------- -----------
Net cash provided by financing activities 6,088,106 10,802,638
----------- -----------
Effect of foreign currency exchange rate changes 31,739 -
----------- -----------
Net increase (decrease) in cash and cash equivalents (1,120,384) 1,338,284
Cash and cash equivalents
- Beginning of period 1,904,588 -
----------- -----------
- End of period 784,204 1,338,284
=========== ===========
Interest paid 562,247 355,758
=========== ===========
Income taxes paid 117,190 -
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
interim financial statements.
8
<PAGE>
THINKPATH.COM INC.
Notes to Consolidated Interim Financial Statements
September 30, 2000
(Amounts expressed in US dollars)
(Unaudited)
1. BACKGROUND INFORMATION
a) Principles of Consolidation
For the period January 1, 1997 through September 30, 2000, the company
completed five acquisitions, which were accounted for under the
purchase method, and two combinations, which were accounted for as
pooling of interests. The combination of Object Arts Inc. was completed
prior to March 31, 2000. In connection with this transaction the
company issued 527,260 shares of its common stock for all of the
outstanding common stock of the combined company. The combination of
TidalBeach Inc. was completed prior to September 30, 2000. In
connection with this transaction, the company issued 250,000 shares of
its common stock for all of the outstanding common stock of the
combined company.
Accordingly, the consolidated interim financial statements included
herein for the 1999 periods have been retroactively restated to reflect
the combinations.
b) Change of Name
The Company changed its name to Thinkpath.Com Inc. on February 24,
2000.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
The accompanying consolidated interim financial statements have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in consolidated
interim financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not
misleading.
In the opinion of the Company, all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation have
been included in the consolidated interim financial statements. The
consolidated interim financial statements are based in part on
estimates and have not been audited by independent accountants.
Independent accountants will audit the annual consolidated financial
statements.
b) Business Combinations
Business Combinations that have been accounted for under the purchase
method of accounting include the results of operations of the acquired
business from the date of acquisition. Net assets of the companies
acquired are recorded at their fair value to the Company at the date of
acquisition.
Other business combinations have been accounted for under the
pooling-of-interests method of accounting. In such cases, the assets,
liabilities and stockholders' equity of the acquired entities were
combined with the Company's respective accounts at recorded values.
Prior period financial statements have been restated to give effect to
the merger unless the effect of the business combination is not
material to the financial statements of the Company.
9
<PAGE>
THINKPATH.COM INC.
Notes to Consolidated Interim Financial Statements
September 30, 2000
(Amounts expressed in US dollars)
(Unaudited)
c) Accounting Changes
In June 1998 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities". This statement
requires that an entity recognizes all derivatives as either assets or
liabilities and measure those instruments at fair value. If certain
conditions are met, a derivative may be specifically designated as a
hedge. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting
designation. The adoption of this standard will not have a material
impact on the consolidated interim financial statements of the company.
d) Acquisition Costs for Investee Corporations
The acquisition costs include the purchase consideration, fees to third
parties for services rendered, and all expenses related to the
acquisitions.
3. ACQUISITONS AND COMBINATIONS
a) The combination of Object Arts Inc. was effected through the
issuance of common stock with a value of $1,977,000 on the
date of closing.
b) MicroTech Professionals Inc. was acquired effective April 1,
2000 for $4,500,000. This amount will be paid in two
installments, based on certain requirements to be met by
MicroTech Professionals Inc.
First Installment: 133,333 common stock issued on closing,
$1,250,000 cash paid on closing, $750,000 3 year promissory
note bearing interest at1/2% above prime paid semi-annually
issued on closing.
Second Installment: $625,000 in common stock, $875,000 cash,
$500,000 3-year promissory note bearing interest at 1/2% above
prime paid semi-annually. The second installment is contingent
on the December 31, 2000 audited financial statements of
MicroTech Professionals Inc.
c) The combination of TidalBeach Inc. was effected through the
issuance of common stock with a value of $540,000 on the date
of closing.
4. CAPITAL STOCK
a) Authorized:
15,000,000 Common Stock, no par value
1,000,000 Preferred Stock, issuable in series, rights to be
determined by the Board of Directors
b) Issued:
<TABLE>
<CAPTION>
September 30 December 31
2000 1999
$ $
<S> <C> <C>
Issued 6,585,959 Common Stock 13,222,076 6,236,196
(3,938,644 as of December 31, 1999)
Issued 13,183 Preferred Stock 2,906,683 1,481,245
(15,010 as of December 31, 1999)
Common Stock Payable 1,625,000 1,000,000
--------- ---------
17,753,759 8,717,441
========== =========
</TABLE>
10
<PAGE>
THINKPATH.COM INC.
Notes to Consolidated Interim Financial Statements
September 30, 2000
(Amounts expressed in US dollars)
(Unaudited)
On August 22, 2000, 1,063,851 shares of common stock were
issued in a private placement for net proceeds of $2,681,600.
In connection with the acquisition of TidalBeach Inc., the
company issued 250,000 shares of common stock.
Over the course of the 3 months ended September 30, 2000,
678,106 common stock were issued on the conversion of 7,527
Preferred Stock
The common stock payable represents the final payments for Cad
Cam Inc. ($1,000,000) and MicroTech Professionals Inc.
($625,000). Common Stock of Thinkpath.Com Inc. will be issued
for Cad Cam inc. at the prevailing market rate at the time of
issuance. Common Stock of Thinkpath.Com Inc. will be issued for
MicroTech Professionals at the lower of $3.75 and the average
of the last sale price as quoted on NASDAQ for the 10 days
prior to issuance. If the commons stock payable were to be
converted at June 30, 2000 the number of common stock to be
issued would be 483,631.
The earnings per share calculation (basic and fully diluted)
does not include any common stock for common stock payable as
the conversion ratio is unknown.
c) Preferred Stock
On December 30, 1999, 15,000 shares of Series A, 8% cumulative,
convertible, preferred stock, no par value were issued in a
private placement for gross proceeds of $1,500,000. The
proceeds have been reduced by any issue expenses.
On April 16, 2000, 2500 shares of Series A, 8% cumulative,
convertible, preferred stock, no par value were issued in a
private placement for gross proceeds of $250,000. The proceeds
have been reduced by any issue expenses.
On April 16, 2000, 1,500 shares of Series B, 8% cumulative,
convertible, preferred stock, no par value were issued in a
private placement for gross proceeds of $1,500,000. The
proceeds have been reduced by any issue expenses.
On July 7, 2000, 5,000 shares of series A, 8% cumulative,
convertible, preferred stock, no par value were issued in a
private placement for gross proceeds of $500,000. The proceeds
have been reduced by any issue expenses.
The preferred stock are convertible into common stock at the
option of the holders under certain conditions, at any time
after the effective date of the registration statement. As of
September 30, 2000, 10,827 preferred stock had been converted
into common stock.
d) Warrants
On December 30, 1999, 475,000 warrants were issued in
conjunction with the private placement of the Series A,
preferred stock. They are exercisable at any time and in any
amount until December 30, 2004 at a purchase price of $3.24 per
share.
In connection with the Initial Public Offering, the
underwriters received 100,000 warrants. They are exercisable at
a purchase price of $5.00 per share.
11
<PAGE>
THINKPATH.COM INC.
Notes to Consolidated Interim Financial Statements
September 30, 2000
(Amounts expressed in US dollars)
(Unaudited)
In connection with the private placement of Series B preferred
stock 100,000 warrants were issued.
They are exercisable at a purchase price of $3.58. Also in
connection with the private placement of the Series B preferred
stock 150,000 warrants were issued. They are exercisable at a
purchase price of $3.30.
In connection with the purchase of the investment in E-Wink
500,000 warrants were issued. They are exercisable at a
purchase price of $3.24.
In connection with the private placement of Series A preferred
stock 225,000 warrants were issued. They are exercisable at a
purchase price of $3.58.
In connection with the private placement of common stock,
532,534 warrants were issued. They are exercisable at any time
and in any amount until August 22, 2005 at a purchase price
ranging from $1.9692 to $2.8125. In addition, warrants were
issued to the placement agent, certain financial advisors and
the placement agent's counsel, to purchase up to 280,093 shares
of common stock . Such warrants are exercisable at any time and
in any amount until August 22, 2005 at an exercise price of
$2.4614 per share.
e) Stock Options
The company has outstanding stock options issued in conjunction
with its long-term financing agreements for 22,125 common stock
and additional options issued to a previous employee of the
company for 200,000 shares exercisable at $2.10.
An additional 250,000 options to purchase common stock of the
company were issued to related parties. The options are
exercisable at $5.00.
In connection with the acquisition of Cad Cam Inc. 100,000
options to purchase shares of the Company will be delivered in
quarterly installments, starting January 1, 2000. Each option
entitles the holder thereof to purchase one common stock of the
Company. The first 25,000 options have an exercise price of
$3.25 per common stock, and can be exercised at any time during
the period up until December 31, 2000. The second 25,000
options have an exercise price of $2.62. The third 25,000
options have an exercise price of $2.87. The final 25,000
options shall have an exercise price equal to the lowest
trading price of the Company's shares during the period between
July 1, 2000 and September 30, 2000.
In July 1998, the directors of the Company adopted and the
stockholders approved the adoption of the Company's 1998 Stock
option plan.
In May 2000, the directors of the Company adopted and the
stockholders approved the adoption of the Company's 2000 Stock
option plan. The plan provides for 435,000 options at an
exercise price of $3.25 per share. The options vest over a
three-year period and expire May 9, 2005.
12
<PAGE>
THINKPATH.COM INC.
Notes to Consolidated Interim Financial Statements
September 30, 2000
(Amounts expressed in US dollars)
(Unaudited)
Options
Options outstanding at January 1, 1999 222,125
Options granted to key employees and directors 250,000
---------
Options outstanding at December 31, 1999 472,125
Options granted to employees and Officers 920,000
---------
Options outstanding at June 30, 2000 1,392,125
Options granted to employees and Officers -
---------
Options outstanding at September 30, 2000 1,392,125
=========
5. SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
(i) Thinkpath.com Inc. acquired all of the common stock of Object
Arts Inc. U.S for $346,310. The acquisition was funded as
follows:
$
Fair Value of Assets acquired 365,848
Liabilities Assumed (349,928)
Goodwill 330,390
Cash paid for Common Stock (346,310)
---------
-
---------
(ii) Thinkpath.com Inc. combined with Object Arts Inc. Canada through
the issuance of 527,260 shares of common stock, having a dollar
value of $1,977,225.
(iii) Thinkpath.com Inc. acquired all the common stock of MicroTech
Professionals Inc. for $4,500,000. The acquisition was funded as
follows:
$
Fair Value of Assets acquired 1,255,515
Liabilities Assumed (214,714)
Goodwill 3,459,199
Cash Paid For Common Stock (1,250,000)
Common Stock Issued (500,000)
Notes Payable (1,250,000)
Accounts Payable (875,000)
Common Stock Payable (625,000)
----------
-
==========
(iv) Thinkpath.com Inc. combined with TidalBeach Inc. through the
issuance of 250,000 shares of common stock, having a dollar
value of $540,000.
13
<PAGE>
THINKPATH.COM INC.
Notes to Consolidated Interim Financial Statements
September 30, 2000
(Amounts expressed in US dollars)
(Unaudited)
6. TRANSACTIONS WITH RELATED COMPANIES
a) In the first quarter of fiscal 2000, the Company received fees
from MicroTech professionals (prior to their acquisition) in the
amount of $500,000 and the company paid certain expenses on
behalf of MicroTech Professionals Inc. in the total amount of
$260,000.
b) During the second quarter of 2000, Thinkpath.Com transferred
$762,000 in GTS capitalized costs to the associated company
E-Wink Inc. The costs represent the value given to the key
source code of GTS which will be used by E-Wink. Thinkpath
currently owns 80% of E-Wink Inc. which it is holding as a
short-term investment.
7. BASIC EARNINGS PER COMMON STOCK
Basic earnings per common stock is computed by dividing net income by
the weighted average number of common stock outstanding.
The fully diluted number of common stock outstanding for the
three-month period ending September 30, 2000 was 6,462,834 and for the
nine-month period ending September 30, 2000 was 5,879,344.
8. SEGMENTED INFORMATION
a) Sales by Geographic Area
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Sept 30, Ended Sept 30, Ended Sept 30, Ended Sept 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
$ $ $ $
Canada 3,474,351 3,804,251 11,676,309 12,790,726
United States of America 6,461,268 1,327,010 21,252,909 3,276,068
--------- --------- ---------- ---------
9,935,619 5,131,261 32,629,218 16,066,794
========= ========= ========== ==========
</TABLE>
b) Net Income by Geographic Area
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Sept 30, Ended Sept 30, Ended Sept 30, Ended Sept 30,
2000 1999 2000 1999
$ $ $ $
<S> <C> <C> <C> <C>
Canada (1,052,212) (718,979) (1,288,821) (633,557)
United States of America 557,966 (126,627) 1,433,840 63,730
----------- --------- ----------- ---------
(494,246) (845,606) 145,019 (569,827)
=========== ========= =========== ---------
</TABLE>
14
<PAGE>
THINKPATH.COM INC.
Notes to Consolidated Interim Financial Statements
September 30, 2000
(Amounts expressed in US dollars)
(Unaudited)
c) Identifiable Assets by Geographic Area
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
$ $
<S> <C> <C>
Canada 10,386,407 8,036,329
United States of America 19,732,959 12,434,777
---------- ----------
30,119,366 20,471,106
========== ==========
</TABLE>
d) Revenue and Gross Profit by Operating Segment
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Sept 30, Ended Sept 30, Ended Sept 30, Ended Sept 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
$ $ $ $
Revenue
Project Management 5,779,767 - 17,475,896 -
IT & Engineering Placement 2,887,282 3,391,325 9,382,411 11,248,277
Technical Training 1,268,570 1,739,936 5,770,911 4,818,517
--------- --------- ---------- ----------
9,935,619 5,131,261 32,629,218 16,066,794
========= ========= ========== ==========
Gross Profit
Project Management 2,003,776 - 6,107,071 -
IT & Engineering Placement 1,100,807 1,706,806 3,831,357 3,902,961
Technical Training 606,278 66,930 2,919,260 2,377,032
--------- --------- ---------- ----------
3,710,861 1,773,736 12,857,688 6,279,993
========= ========= ========== =========
</TABLE>
e) Revenue from Major Customers
No single customer consisted of more than 10% of the revenues.
f) Purchases from Major Suppliers
There were no significant purchases from major suppliers in
either 2000 or 1999.
15
<PAGE>
THINKPATH.COM INC.
Notes to Consolidated Interim Financial Statements
September 30, 2000
(Amounts expressed in US dollars)
(Unaudited)
9. COMPREHENSIVE INCOME
The Company has adopted the Statement of Financial Accounting Standards
No. 130 "Reporting Comprehensive Income" as of June 1, 1998 which
requires new standards for reporting and display of comprehensive
income and its components in the financial statements. However, it does
not affect net income or total stockholder's equity. The components of
comprehensive income are as follows:
<TABLE>
<CAPTION>
Nine Months
Ended
September 30, December 31,
2000 1999
$ $
<S> <C> <C>
Net income (loss) 145,019 14,319
Other comprehensive income (loss):
Foreign Currency Translation Adjustments (207,862) 89,533
--------- ------
Comprehensive Income (62,843) 103,852
========= =======
</TABLE>
The components of accumulated other comprehensive income (loss) are as
follows:
<TABLE>
<S> <C>
Accumulated other comprehensive loss, December 31, 1998 $ (139,026)
Foreign currency translation adjustments for the year ended
December 31, 1999 89,533
----------
Accumulated other comprehensive loss, December 31, 1999 (49,493)
Foreign currency translation adjustments for the nine-month period ended (207,862)
----------
September 30, 2000
Accumulated other comprehensive loss, September 30, 2000 (257,355)
==========
</TABLE>
The foreign currency translation adjustments are not currently adjusted
for income taxes since the company is situated in Canada and the
adjustments relate to the translation of the financial statements from
Canadian dollars into United States dollars which is done only for the
convenience of the reader.
16
<PAGE>
THINKPATH.COM INC.
Notes to Consolidated Interim Financial Statements
September 30, 2000
(Amounts expressed in US dollars)
(Unaudited)
10. THREE MONTHS ENDED SEPTEMBER 30, 1999
The three-month period ended September 30, 1999 does not include the
third quarter results of TidalBeach Inc. as the information was
unavailable to the Company at the time of filing. It is estimated that
these results do not have a material impact on these financial
statements.
11. LONG-TERM INVESTMENTS
Included in long-term investments are:
(i) A 99% ownership in Njoyn Software Inc. incorporated July 4,
2000. The company assessed its control over the operations of
Njoyn to be temporary and therefore the assets and liabilities
of Njoyn have not been consolidated. The investment has been
accounted for under the equity method.
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
$ $
<S> <C> <C>
Cost of Investment 922,376 -
Share of Net Loss (246,236) -
---------------- ---------------
Net Investment 676,140 -
================ ===============
</TABLE>
(ii) A 80% ownership in E-wink Inc. The company assessed its control
over the operations of E-wink Inc. to be temporary and therefore
the assets and liabilities of E-wink Inc. have not been
consolidated. The investment has been accounted for under the
equity method. As of September 30, 2000 there was no income or
loss in E-wink.
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
$ $
<S> <C> <C>
Cost of Investment 1,613,158 -
Share of Income (loss) - -
---------------- ---------------
Net Investment 1,613,158 -
================ ===============
</TABLE>
(iii) Due to the Pooling of Interests method used for the combination
of TidalBeach Inc., two long-term investments have been included
in the September 30, 2000 consolidated financial statements,
which are being carried at cost.
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
$ $
<S> <C> <C>
Investment in Personal Stress Inc. 146,004 -
Investment in Envision Inc. 84,107 -
---------------- ---------------
Net Investment 230,111 -
================ ===============
</TABLE>
The company is restricted from selling the shares in Envision Inc.
until such time as an IPO is completed.
17
<PAGE>
THINKPATH.COM INC.
Notes to Consolidated Interim Financial Statements
September 30, 2000
(Amounts expressed in US dollars)
(Unaudited)
12. SUBSEQUENT EVENTS
a) The Company has signed a number of letters of intent and
expressions of interest with corporations operating in various
cities in North America. At this time, due to confidentiality
agreements, the Company is not at liberty to disclose the
identity or terms and conditions of these acquisitions.
b) On September 13, 2000, the Company entered into an agreement
with Burlington Capital Markets Inc. conditional on the
successful integration and financing of the Aquila Holdings
Limited acquisition. The Company will sell Burlington an
aggregate of 250,000 shares of its common stock at a cash
purchase price of $0.01 per share. These shares were issued
October 6, 2000. The value of services rendered in exchange for
the right to acquire these shares has been estimated to be
$600,000 and has been reflected in deferred acquisition costs
included in other assets and paid in capital. The Company will
also issue to Burlington warrants to purchase an aggregate of
400,000 shares of common stock in accordance with the following
schedule: (i) 100,000 shares at an exercise price of $5.00 per
share, exercisable at any time after October 31, 2000, (ii)
100,000 shares at an exercise price of $7.00 per share,
exercisable at any time after November 13, 2000, (iii) 100,000
shares at an exercise price of $9.00 per share, exercisable at
any time after December 13, 2000, and (iv) 100,000 shares at an
exercise price of $11.00 per share, exercisable at any time
after February 13, 2001. Such warrants are exercisable in whole
or in part until 5 years from the date they can first be
exercised, and will contain a cashless exercise provision and
registration rights. Compensation will be paid to Burlington at
a monthly fee of $10,000 for a minimum of six months.
c) On October 4, 2000, the Company entered into a non-binding
letter of intent with Aquila Holdings Limited, a European
recruitment company. Pursuant to the letter of intent, the
Company will acquire all of the issued and outstanding common
stock of Aquila Holdings Limited, and its wholly-owned
subsidiary DPP International Limited in consideration for up to
an aggregate of (pound)2,500,000 in cash and (pound)961,000
worth of common stock. The consummation of the transaction
contemplated by the letter of intent is subject to due diligence
investigation.
d) On October 26, 2000, the Company entered into an agreement with
Rodman & Renshaw, Inc., whereby the Company has engaged Rodman
on a best efforts basis to raise up to $10.0 million for Njoyn
Software Inc. through the private placement of securities. Upon
successful completion, Rodman will be entitled to a combination
of cash and warrants based on the funding received by the
Company.
e) On November 2, 2000, the Company's subsidiary, Njoyn Software
Inc. entered into an agreement with Trinity Capital Securities
Limited, whereby Njoyn engages Trinity Capital to facilitate a
merger with an identified CDNX company and raise up to
$3,300,000 for the combined entity. Upon successful completion,
Trinity Capital will be entitled to a combination of cash and
warrants based on the funding received by the Njoyn.
f) On November 15, 2000, the Company signed a letter of intent with
a corporation based in the United States in a complementary
industry segment. The Company has signed a Confidentiality
Agreement which prevents it from disclosing the name of the
corporation at this time. The corporation has annual sales of
$16,000,000, an EBITDA of $3,000,000, 8 offices in North
America, 1 office in Europe, and 300 employees. The purchase
price consists of $8,000,000 cash and $4,000,000 of the
Company's common stock. The consummation of the transaction
contemplated by the letter of intent is subject to a final
purchase and sale agreement.
18
<PAGE>
THINKPATH.COM INC.
Notes to Consolidated Interim Financial Statements
September 30, 2000
(Amounts expressed in US dollars)
(Unaudited)
13. CONTINGENCIES
The company is party to various lawsuits arising from the normal course
of business. In management's opinion, the litigation will not
materially affect the company's financial position, results of
operations or cashflows. No provision has been recorded in the accounts
for possible losses and gains. Should any expenditures be incurred by
the company for the resolution of these lawsuits, they will be charged
to the operations of the year in which such expenditures are incurred.
19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto and the other historical financial
information of Thinkpath.com Inc. contained elsewhere in this Form 10-QSB. The
statements contained in this Form 10-QSB that are not historical are forward
looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Exchange Act of 1934, including
statements regarding ThinkPath.com Inc.'s expectations, intentions, beliefs or
strategies regarding the future. Forward-looking statements include
ThinkPath.com Inc.'s statements regarding liquidity, anticipated cash needs and
availability and anticipated expense levels. All forward-looking statements
included in this Form 10-QSB are based on information available to ThinkPath.com
Inc. on the date hereof, and ThinkPath.com Inc. assumes no obligation to update
any such forward-looking statement. It is important to note that ThinkPath.com
Inc.'s actual results could differ materially from those in such forward-looking
statements. All dollar amounts stated throughout this Form-10QSB are in United
States dollars unless otherwise indicated.
Overview
ThinkPath.com Inc. (the "Company"), a corporation formed under the laws
of the Province of Ontario, Canada, is a global provider of project outsourcing,
information technology and engineering recruiting, technical training and
consulting and ASP-based skills management technology. The Company's customers
include high profile software development, financial services, banking,
telecommunications, government and information technology companies, including
but not limited to, Bank of Montreal, Bell Canada, Goldman Sachs, Chapters,
Lucent Technologies, Cummins Engine, General Motors, Merrill Lynch, Xerox
Corporation, General Electric, American Express and Universal Industrial Corp.
(ESI).
A substantial part of the Company's growth has been achieved through
combinations and acquisitions. For the period commencing on January 1, 2000 and
ending on September 30, 2000, the Company completed the combinations of Object
Arts Inc., and Tidal Beach Inc. which were accounted for using the
pooling-of-interests method of accounting, and the acquisition of MicroTech
Professionals, Inc. which was accounted for using the purchase method of
accounting. In connection with the combinations and acquisitions, the Company
issued an aggregate 910,593 shares of its common stock in exchange for: (i) all
of the issued and outstanding common stock of Object Arts Inc; (ii) all of the
issued and outstanding shares of common stock of MicroTech Professionals, Inc
and; (iii) all of the issued and outstanding common stock of TidalBeach Inc.
In March 2000, the Company issued 300,000 shares of its common stock in
exchange for 80% of the issued and outstanding common stock of E-Wink, Inc. The
acquisition of E-Wink, Inc. has been reflected as a long-term investment.
E-Wink, Inc. is currently developing platform technology that will match
corporation's seeking venture capital with venture capital firms. E-Wink, Inc.
is in the process of raising equity and, as a result, the Company's equity
interest in E-Wink, Inc. may be reduced.
Results of Operations For Each of the Three and Nine Months Ended September,
2000 and 1999
Revenue
Revenue for the three months ended September 30, 2000 increased by
$4,810,000 or 94% to $9,940,000, as compared to $5,130,000 ended for the three
months ended September 30, 1999. The increase is primarily due to added revenues
of Cad Cam, Inc., Object Arts Inc. and MicroTech Professionals, Inc. Cad Cam
Inc. was acquired in October 1999 and had sales of $4,280,000 for the
20
<PAGE>
three months ended September 30, 2000. Object Arts Inc. was combined and had
sales of $1,060,000 for the three months ended September 30, 2000. MicroTech
Professionals, Inc. was acquired effective April 1, 2000 and had sales of
$1,490,000 for the three months ended September 30, 2000. As a result of these
acquisitions, the Company's revenues from the United States for the three months
ended September 30, 2000 increased by $5,130,000, or 386%, to $6,460,000, as
compared to $1,330,000 for the three months ended September 30, 1999.
Revenue for the nine months ended September 30, 2000 increased by
$16,560,000 or 103%, to $32,630,000, as compared to $16,070,000 for the nine
months ended September 30, 1999. The increase is primarily attributable to the
added revenues of Cad Cam, Inc., Object Arts Inc. and MicroTech Professionals,
Inc. Cad Cam Inc. was acquired October 1999 and had sales of $14,440,000 for the
nine months ended September 30, 2000. Object Arts Inc. was combined and had
sales of $5,110,000 for the nine months ended September 30, 2000. MicroTech
Professionals, Inc. was acquired effective April 1, 2000 and had sales of
$3,230,000 for the six months ended September 30, 2000. As a result of these
combinations and acquisitions, the Company's revenues from the United States for
the nine months ended September 30, 2000 increased by $17,970,000, or 548%, to
$21,250,000, as compared to $3,280,000 for the nine months ended September 30,
1999.
Cost of Services Sold
The costs of services sold for the three months ended September 30,
2000 increased by $2,870,000 or 85%, to $6,230,000, as compared to $3,360,000
for the three months ended September 30, 1999. This increase was due to the
increased volume of contract services, largely a result of the acquisitions of
Cad Cam, Inc. and Micro Tech Professionals, Inc. As a percentage of revenue, the
cost of services sold decreased from 65% for the three months ended September
30, 1999 to 63% for the three months ended September 30, 2000.
The costs of services sold for the nine months ended September 30, 2000
increased by $9,980,000, or 102%, to $19,770,000, as compared to $9,790,000 for
the nine months ended September 30, 1999. This increase was due to the increased
volume of contract services, largely a result of the acquisitions of Cad Cam,
Inc. and MicroTech Professionals, Inc. As a percentage of revenue, the cost of
services sold was the same at 61% for the nine months ended September 30, 2000
and the nine months ended September 30, 1999.
Gross Profit
Gross profit for the three months ended September 30, 2000 increased by
$1,940,000 or 110%, to $3,710,000, as compared to $1,770,000 for the three
months ended September 30, 1999. This increase was attributable to the
aforementioned increase in revenue during the three months ended September 30,
2000. As a percentage of revenue, gross profit increased from 35% for the three
months ended September 30, 1999 to 37% for the three months ended September 30,
2000.
Gross profit for the nine months ended September 30, 2000 increased by
$6,580,000, or 105%, to $12,860,000, as compared to $6,280,000 for the nine
months ended September 30, 1999. This increase was attributable to the
aforementioned increase in revenue during the nine months ended September 30,
2000. As a percentage of revenue, gross profit was the same at 39% for the nine
months ended September 30, 2000 and the nine months ended September 30, 1999.
Operating Expenses
Operating expenses include expenses for administrative, sales and
management salaries and benefits, advertising and promotion, office and general,
professional fees and occupancy costs. Operating expenses for the three months
ended September 30, 2000 increased by $950,000, or 40%, to
21
<PAGE>
$3,330,000, as compared to $2,380,000 for the three months ended September 30,
1999. This increase was primarily attributable to the increase in administrative
expenses at the corporate level required to support the increasing number of
locations and volume of transactions. As a percentage of revenue, operating
expenses decreased from 46% for the three months ended September 30, 1999 to 34%
for the three months ended September 30, 2000.
Operating expenses for the nine months ended September 30, 2000
increased by $4,390,000, or 69%, to $10,720,000, as compared to $6,330,000 for
the nine months ended September 30, 1999. This increase was primarily
attributable to the increase in administrative expenses at the corporate level
required to support the increasing number of locations and volume of
transactions. As a percentage of revenue, operating expenses decreased from 39%
for the nine months ended September 30, 1999 to 33% for the nine months ended
September 30, 2000.
Net Income
Net losses for the three months ended September 30, 2000 decreased by
$360,000 or 42%, to a net loss of $490,000, as compared to a net loss of
$850,000 for the three months ended September 30, 1999. The net loss in the
three months ending September 30, 2000 is primarily attributable to the
Company's investment in its technology subsidiary, Njoyn Software Inc and the
financing cost of non-operational preferred share discounts. The Company raised
capital throughout the course of the year by way of the issuance of convertible
preferred stock. These shares of convertible preferred stock have a discount to
the market price at the time of conversion, which was $200,000 during the third
quarter. Amortization expense increased $160,000 or 89% from $180,000 for the
three months ended September 30, 1999 to $340,000 for the three months ended
September 30, 2000. This increase is primarily attributable to the increase in
capital assets, the increase in the acquisition of other assets, and the
increase of goodwill. Interest expense increased $30,000 or 27% to $140,000 for
the three months ended September 30, 2000 from $110,000 for the three months
ended September 30, 1999. This increase is a result of the Company's increase in
short-term and long-term debt.
Net income for the nine months ended September 30, 2000 increased by
$720,000 to $150,000, as compared to a net loss of $570,000 for the nine months
ended September 30, 1999. Amortization expense increased $860,000 or 344% from
$250,000 for the nine months ended September 30, 1999 to $1,110,000 for the nine
months ended September 30, 2000. This increase is primarily attributable to the
increase in capital assets, the increase in the acquisition of other assets, and
the increase of goodwill. Interest expense increased $230,000 or 70% to $560,000
for the nine months ended September 30, 2000 from $330,000 for the nine months
ended September 30, 1999. This increase is a result of the Company's increase in
short-term and long-term debt.
Liquidity and Capital Resources
The Company's primary sources of cash and cash flow from operations are
its credit line with Bank One and proceeds from a private placement offering. At
September 30, 2000, the Company had cash and cash equivalents of $780,000 and
working capital of $1,140,000. During the nine months ended September 30, 2000,
the Company had a cash flow deficiency from operations of $2,340,000, due
primarily to an increase in accounts receivable and a decrease in accounts
payable.
The Company's financing activities include borrowings and repayments
under its bank financing agreements, issuance of and payments against
installment notes used to finance acquisitions. For the nine months ended
September 30, 2000, the Company had cash flow from financing activities of
$6,090,000, attributable to an increase in bank indebtedness of $840,000 and
proceeds of $2,330,000 from the issuance of common stock and $2,000,000 from the
issuance of preferred stock. For the nine
22
<PAGE>
months ended September 30, 1999, the Company had cash flow from financing
activities attributable to proceeds of $4,730,000 from the issuance of common
stock.
The Company's arrangement with Bank One allows for an operating line,
payable on demand and secured by the Company's assets, of up to $7,000,000. At
September 30, 2000, there was $5,000,000 outstanding on this line. At September
30, 2000, the Company had a total of $590,000 due to the Business Development
Bank of Canada pursuant to eight separate loans.
During the nine months ended September 30, 2000 the Company had a cash
flow deficit from investing activities of $4,900,000, attributable to the
acquisition of capital assets and cash payments for subsidiaries and long-term
investments.
The Company's working capital requirements consist primarily of the
financing of accounts receivable and Njoyn Software Inc., formerly known as the
GTS (the Company's proprietary Internet-based recruiting and information
management tool). While there can be no assurances in this regard, the Company
expects that internally generated cash plus the bank revolving lines of credit
will be sufficient to support its working capital needs, its fixed payments and
other short-term obligations. The Company will continue to identify and
participate in financing activities on a debt or equity basis to fund its
internal growth, marketing and development of Njoyn Software Inc. and strategic
acquisitions.
Recent Events
On October 4, 2000, the Company entered into a non-binding letter of
intent with Aquila Holdings Limited, a European recruitment company. Pursuant to
the letter of intent, the Company will acquire all of the issued and outstanding
common stock of Aquila Holdings Limited, and its wholly-owned subsidiary DPP
International Limited in consideration for up to an aggregate of
(pound)2,500,000 in cash and (pound)961,000 worth of common stock. The
consummation of the transaction contemplated by the letter of intent is subject
to due diligence investigation.
On October 26, 2000, the Company entered into an agreement with Rodman
& Renshaw, Inc., whereby the Company engaged Rodman on a best efforts basis to
raise up to $10.0 million for Njoyn Software Inc. through the private placement
of securities. Upon successful completion, Rodman will be entitled to a
combination of cash and warrants based on the funding received by the Company.
On November 2, 2000, the Company's subsidiary, Njoyn Software Inc.
entered into an agreement with Trinity Capital Securities Limited, whereby the
Company engages Trinity Capital to facilitate a merger with an identified CDNX
company and raise up to $3,300,000 for the combined entity. Upon successful
completion, Trinity Capital will be entitled to a combination of cash and
warrants based on the funding received by the Company.
On November 15, 2000, the Company signed a letter of intent with a
corporation based in the United States in a complimentary industry segment. The
Company has signed a Confidentiality Agreement which prevents it from disclosing
the name of the corporation at this time. The corporation has annual sales of
$16,000,000, an EBITDA of $3,000,000, 8 offices in North America, 1 office in
Europe, and 300 employees. The purchase price consists of $8,000,000 cash and
$4,000,000 of the Company's common stock. The consummation of the transaction
contemplated by the letter of intent is subject to a final purchase and sale
agreement.
23
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On July 7, 2000, the Company issued an aggregate of: (a) 5,000 shares
of Series A 8% Cumulative Convertible Preferred Stock; and (b) warrants to
purchase up to an aggregate of 225,000 shares of common stock, in consideration
for $500,000 pursuant to the exercise of an option granted to the Company in its
December 1999 private placement offering. The 225,000 warrants issued upon the
Company's exercise of the option are exercisable at any time and in any amount
until December 30, 2004 at a purchase price of $3.575 per share.
The shares of Series A 8% Percent Cumulative Convertible Preferred
Stock are convertible into shares of the Company's common stock at the option of
the holders the Series A 8% Percent Cumulative Convertible Preferred Stock, at
any time after issuance until either: (i) such shares of Series A 8% Percent
Cumulative Convertible Preferred Stock are converted at the Company's option; or
(ii) such shares of Series A 8% Percent Cumulative Convertible Preferred Stock
are redeemed by the Company, under certain conditions, at any time after April
27, 2000.
The holders of the shares of Series A 8% Percent Cumulative Convertible
Preferred Stock are entitled to receive preferential dividends in cash, out of
any of the Company's funds legally available at the time of declaration of
dividends before any other dividend distribution will be paid or declared and
set apart for payment on any shares of the Company's common stock, or other
class of stock presently authorized, at the rate of 8% simple interest per annum
on the stated value per share. Such are payable on a quarterly basis commencing
on the quarter ending March 31, 2000 when as and if declared, provided however,
that the dividends will be made in additional shares of Series A 8% Percent
Cumulative Convertible Preferred Stock at a rate of one share of Series A 8%
Percent Cumulative Convertible Preferred Stock for each $100 of such dividend
not paid in cash. Dividends may be paid at the Company's option with shares of
Series A 8% Percent Cumulative Convertible Preferred Stock only if the Company's
common stock deliverable upon the conversion of the Series A 8% Percent
Cumulative Convertible Preferred Stock will have been included for public resale
in an effective registration statement filed with the Securities and Exchange
Commission on the dates such dividends are payable and paid to the holders. The
dividends shall be cumulative whether or not earned and shall be cumulative from
and after December 30, 1999.
The number of shares of the Company's common stock into which the
Series A 8% Percent Cumulative Convertible Preferred Stock shall be convertible
shall be equal to (i) the sum of (A) the stated value per share and (B) at the
holder's election, accrued and unpaid dividends on such share, divided by (ii)
the "Conversion Price". The Conversion Price shall be the lesser of (x) 90% of
the average "Closing Bid Prices" for the three trading days immediately
preceding December 30, 1999, or (y) 80% of the average of the three lowest
"Closing Bid Prices" for the ten trading days immediately preceding the
conversion of the respective shares of Series A 8% Percent Cumulative
Convertible Preferred Stock. The "Closing Bid Price" is defined as the closing
bid price as reported on the Nasdaq SmallCap Market or the principal market or
exchange where the Company's common stock is then traded. The holders of the
shares of Series A 8% Percent Cumulative Convertible Preferred Stock may
exercise their right to conversion only if the aggregate stated value of the
shares of Series A 8% Percent Cumulative Convertible Preferred Stock to be
converted is equal to at least $5,000, unless if at the time of such conversion,
the aggregate stated value of all of the shares of Series A 8% Percent
Cumulative Convertible Preferred Stock is less than $5,000, then the whole
amount of the remaining shares of Series A 8% Percent Cumulative Convertible
Preferred Stock may be converted.
At any time after April 27, 2000, the Company has the option to redeem
any or all of the shares
24
<PAGE>
of Series A 8% Percent Cumulative Convertible Preferred Stock by paying to the
holders a sum of money equal to 135% of the stated value of the aggregate of the
shares of Series A 8% Percent Cumulative Convertible Preferred Stock being
redeemed plus the dollar amount of the accrued dividends, if the Conversion
Price of the shares of Series A 8% Percent Cumulative Convertible Preferred
Stock on the trading day prior to the date of redemption is less than $2.
On August 22, 2000, the Company completed a private placement offering
of units pursuant to Regulation D. Each unit consists of 1 share of common stock
and a callable warrant to purchase 1/2 of 1 share of common stock. A total of
1,063,851 shares of common stock were issued together with 532,534 warrants to
purchase shares of common stock exercisable for a period of five years from
August 22, 2000, in consideration for $2,681,600. The purchase price per unit
ranged from $1.9692 to $2.8125. In addition, the Company issued to the placement
agent, certain financial advisors and the placement agent's counsel, warrants to
purchase up to 280,093 shares of common stock in connection with the private
placement offering. Such warrants are exercisable for a period of five years
from August 22, 2000 at an exercise price of $2.4614 per share.
On September 13, 2000, the Company entered into an agreement with
Burlington Capital Markets Inc. conditional on the successful integration and
financing of the Aquila Holdings Limited acquisition. Pursuant to the agreement,
the Company has sold Burlington an aggregate of 250,000 shares of its common
stock at a cash purchase price of $0.01 per share. The Company will also issue
to Burlington warrants to purchase an aggregate of 400,000 shares of common
stock in accordance with the following schedule: (i) 100,000 shares at an
exercise price of $5.00 per share, exercisable at any time after October 31,
2000, (ii) 100,000 shares at an exercise price of $7.00 per share, exercisable
at any time after November 13, 2000, (iii) 100,000 shares at an exercise price
of $9.00 per share, exercisable at any time after December 13, 2000, and (iv)
100,000 shares at an exercise price of $11.00 per share, exercisable at any time
after February 13, 2001. Such warrants are exercisable in whole or in part until
5 years from the date they can first be exercised, and will contain a cashless
exercise provision and registration rights. Compensation will be paid to
Burlington at a monthly fee of $10,000 for a minimum of six months.
ITEM 3. DEFAULTS IN SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 3, 2000, the Company held a duly called special meeting of
its shareholders pursuant to which the shareholders approved the ratification of
the issuance of more than 735,011 shares of the Company's common stock upon the
completion of the August private placement offering of up to $5,000,000.00 worth
of units (each unit consisting of one share of common stock and a warrant to
purchase one-half of one share of common stock) or approximately 1,666,667
shares of common stock which represented an issuance of more than 20% of the
issued and outstanding shares of the Company's common stock as of the record
date set for the meeting, and therefore required the approval of the Company's
shareholders under Rule 4460 of the National Association of Securities Dealers,
Inc.
The following is a breakdown of the votes cast at the August 2, 2000
special meeting of the Company's shareholders:
25
<PAGE>
For: 2,048,594 shares
Against: 12,865 shares
Withheld: 300 shares
Abstain: 1,613,292 shares
ITEM 5. OTHER INFORMATION
On July 27, 2000, the Company consolidated its Canadian and United
States banking and signed an agreement with Bank One for banking facilities and
an operating line, payable on demand, of $7,000,000. The Company has cancelled
its banking facilities and operating lines with Provident Bank and Toronto
Dominion Bank.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the nine-month
period ended September 30, 2000.
(c) Exhibits.
27 Financial Data Schedule
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.
THINKPATH.COM INC.
Dated: November 20, 2000 By: /s/ Declan French By: /s/ Kelly Hankinson
------------------ -------------------
Declan French Kelly L. Hankinson
Chief Executive Officer Chief Financial Officer
and President
26
