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SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D. C. 20549
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FORM 10-SB/A-1
General Form for Registration of Securities
Pursuant to Section 12(b) or (g) of
The Securities Exchange Act of 1934
Tsunami Media Corporation
(Exact name of registrant as specific in its charter)
Texas 74-2895648
(State of Incorporation) (I.R.S. Employer Identification
No.)
1902G - 11th Street Southeast
Calgary, Alberta
Canada T2G 3G2
(Address of executive offices, including postal code)
Registrant's telephone number: (403) 537-5715
Copies to: Conrad C. Lysiak, Esq.
601 West First Avenue
Suite 503
Spokane, Washington 99201
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
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(Title of Class)
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK
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(Title of Class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
TSUNAMI MEDIA CORPORATION (the "Company") is a development stage
enterprise formed under the laws of the State of Texas on September 10,
1998. The Company was originally formed for the purpose of selling drive
through coffee services. The Company was unable to initiate its business
operations for the drive through coffee services and in February 2000
changed its principal business purpose to the development and promotion
of interactive full motion video games and movies using an advertising
revenue model for use in the Digital Video Disk ("DVD") market. On
February 19, 2000, the Company acquired 100% of the outstanding shares of
Common Stock of Tsunami Media Corp., a Delaware corporation ("TMC") in
exchange for 13,003,513 restricted shares of Common Stock of the
Company's common stock. TMC was incorporated in Delaware in 1999 for the
purpose of developing and promoting interactive full motion video
advertising running at television quality and speed delivered to highly
targeted consumers via the Internet. TMC provides their consumers with
full motion, television quality interactive video games that while being
played allows TMC the opportunity to download the video advertisements.
The Advertising Model
The purpose of providing interactive game content is to create a
medium that the Company can then use to "SINGLECAST" full motion video
advertisements to network players. Advertisements are targeted based on
the individual demographic profiles provided by the players. Players
provide profiles so that they can earn points while playing the game. At
the conclusion of each game the player is brought to a web page that
shows links to the advertiser's web sites as well as a number of survey
questions. Players that interact with these web sites or answer survey
questions earn additional points. Points can be redeemed for prizes
provided by the advertisers and sponsors or they can accumulate points to
qualify for proposed annual tournament and compete for a proposed first
prize of $1,000,000. Players that do not wish to provide profile
information may still play but will not earn points for playing.
How it works
Games are distributed on DVD (digital video disc). As such each
player has all of the game film required during the game. Players connect
to each other through a common web site. The game server receives the
player's play selection and decides what play clip needs to be shown. The
play clip number along with an instruction to tell the player's DVD drive
to play it is then sent back to each player. The data transmissions
required to accomplish these tasks are extremely small. This allows the
game server to use the balance of the bandwidth to transmit the video
commercials to the players while they are playing the game.
The Games
The Company has completed development of its first interactive web
based game named Quick Strike Football (QSF). QSF is a full motion (not
animation but television quality video) video game.
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Quick Strike (QSF) - "you be the Coach"
QSF was filmed using 120 professional football players. Over 5,000
plays were filmed and edited with crowd shots, cheerleaders, sideline
staff, and voice-over color commentating by professional game announcers.
QSF is the world's first real video, fully interactive, multi-player, web
enabled game. As in an actual football game players make offensive or
defensive play decisions and move the ball up and down the field. Just
like a televised game whenever there is a ball turnover, touchdown, time
out, 2 minute warning, or end of a quarter a single 15-second commercial
is shown and then the game resumes. Commercials are targeted based on
each users demographic profile and are humorous in nature. By making the
commercials humorous they become a part of the total entertainment
experience.
INTERACTIVE MOVIES
Silent Steel
The Company believes that Silent Steel is the world's first
interactive motion picture designed for DVD. The game is approximately
2 hours and 14 minutes long, and is a game of strategy in which the
player directs the "movie" events, by selecting one of three possible
responses, as a command decision.
In Silent Steel the player is the captain of a submarine, which is
engaged in a one-on-one altercation with any enemy submarine. During the
game, events occur that require the captain to make decisions. Three
decisions are available for each event. The decisions made by the
captain lead to different outcomes, which ultimately result in the
sinking of the enemy submarine or the destruction of the captain's
submarine.
The algorithm used to create Silent Steel is proprietary and
generates a script designed for multiple outcomes.
Silent Steel is designed for interactive play, and the Company has
also placed advertising through the use of timely commercials.
Animated Adventure Games
In addition to the foregoing filmed games, the Company owns nine
animated action games.
Manufacturing
The games are placed on DVD disks for insertion in a computer. The
Company intends to contract with third parties for the manufacture of the
DVD disks for the games. As of the date hereof, the Company has not
entered into any contracts with any manufacturers, and there is no
assurance that the Company will enter into any contracts with any
manufacturers in the future. There are, however, a number of
manufacturers who are capable of producing the games. The Company
intends to distribute its games directly through Original Equipment
Manufacturers and on its own web site as well as other "hosting" sites
such as The Football Network.
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Sales and Marketing
The Company distributes its games via bundling and promotional
campaigns through Original Equipment Manufacturers (OEM's), video rental
outlets, various web sites, and sports equipment manufacturers and
sellers. The Company has designed its first sports title so that it is
distributed in several game sets. The first game set is provided free of
charge to the players through the above mentioned promotional
opportunities. Subsequent game sets (additional plays) can be purchased
through the web sites hosting the game or through the Company's web site.
The Company has produced a broadcast quality commercial for QSF and
intends to air this commercial during the launch of the 2000 NFL football
season. The Company will also use trade magazines, sports and related
publications to promote its game to the mass market. The Company has
designed a web site to promote its games. As of the date hereof, the
Company has initiated the marketing of its games and has established
distribution, advertising and hosting agreements.
Hosting of the Games
The Company has secured hosting rights with an established Web
Portal site that is dedicated to serving information and statistics to
football fans on a non-exclusive basis. The Company will seek to secure
additional sports related portals. This element of the Company's business
model conserves capital as the Company does not need to establish and
maintain expensive Internet server farms as its hosting partners have
already done so.
Patents and Copyrights
Currently, the Company is in possession of the following :
Patents:
Router Algorithm, Serial Number: 09/140,485 (under application)
Copyrights:
Return to Ringworld - (PA680809) Audiovisual work
Ringworld: Revenge of the Patriarch - (PA680811) Audiovisual work
Blue Force - (PA680810) Audiovisual Work
Tsunami Wave Design Logo - (VA726516) *note that this is old logo
Trademarks:
a) Registered Marks:
Tsunami and Wave Design - registered (U.S.) (Reg. No. 1,791,731)
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b) Common Law Marks
Singlecasting - under application (Can and U.S.)
QSFL - under application (Can and U.S.)
QUICK STRIKE - under application (Can and U.S.)
Silent Steel - by usage
Wacky Funsters - by usage
Geekwad - by usage
Revenge of the Patriarch - by usage
Return to Ringworld - by usage
Man Enough - by usage
Blue Force - by usage
Flash Traffic: City of Angels - by usage
Free Enterprise - by usage
Protostar - War on the Frontier - by usage
First Wave Collection - by usage
Games of the Galaxy - by usage
Competition
While the Company believes it is the first to deliver a full motion,
interactive, video title it does competes with many other corporations
which manufacture, develop and market animated computer games, most of
which have significantly more financial resources than the Company. There
are twenty-two DVD games in the market place at this time, all of which
are animated products. The Company believes that it has the only DVD full
motion game product in the marketplace at this time.
Obligations to Sports Active Television Network, Inc.
On June 9, 1999, the Company purchased from an unrelated entity, a
note receivable from Sport Active Television Network, Inc. in the amount
of $412,655. The purchase price for the loan and security was $60,729
and 200,000 shares of common stock.
On December 14, 1999, the Company purchased from an unrelated
entity, trade debts of Sport Active Television Network, Inc. in the
amount of approximately $1,405,145. The purchase price for the trade
debt was $33,738 and 200,000 shares of common stock.
During the year ended March 31, 2000, the Company purchased from
various individuals and companies, debentures receivable from Sport
Active Television Network, Inc. in the amount of $1,631,361. The
debentures were purchased by issuing one share of common stock for every
$1.72 of principal value of each respective debenture or 948,800 shares
of common stock.
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Company's Office
The Company's Registered Office is located at 1901 Red Fox, Austin,
Texas 78734.The Company's current business offices are located at 1902G -
11th Street Southeast, Calgary, Alberta, Canada T2G 3G2. The Company's
telephone number is (403) 537-5715. The Company leases the foregoing
offices from THEM Property Management Ltd pursuant to a written sub-lease
for the term of 45 months. The lease began on November 1, 1999 and
terminates on July 31, 2003. The monthly lease payment is for base rent
is $2,214 until July 31, 2000 and increases to $2,530 for the remainder
of the lease.
Subsidiary Corporations
The Company has one subsidiary corporation, Tsunami Media
Corporation, a Delaware corporation ("TMC"). TMC has one subsidiary
corporation, Tsunami Media Corporation, an Alberta corporation ("Tsunami
Alberta").
Employees, Officers and Directors
The Company has a staff of nine including three officers, two of
whom are directors.
Risk Factors
1. No Operating History and Revenues. The Company is recently
formed and is subject to all the risks inherent in the creation of a new
business. Since the Company is a new venture, it has no record of
operations and there is nothing at this time upon which to base an
assumption that the Company's plans will ultimately prove successful. If
the Company's plans prove to be unsuccessful, the investors may lose all
or a substantial part of their investment.
2. Burden on Investors. The financial risk of the Company's
proposed activities will be borne primarily by the Company's investors.
3. Lack of Market Research. The Company has conducted research on
the need and market for its ability to target consumers with a full
motion 30 frames per second (television quality) commercial while engaged
in the playing of an interactive sports game. The Company has conducted
research in to the various advertising mediums, interactive web based
games, games and products combining an interactive feature of targeted
advertising and the forecast of DVD based products. The Company has not
engaged other entities to conduct market research such that management
has assurance market demand exists for the business contemplated by the
Company.
4. Lack of Key Man Insurance. The Company has not obtained key man
life insurance on the lives of any of the officers or directors of the
Company. The death or unavailability of one or all of the officers or
directors of the Company could have a material adverse impact on the
operation of the Company.
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5. No Insurance Coverage. The Company, like other companies in its
industry, is finding it difficult to obtain adequate insurance coverage
against possible liabilities that may be incurred in conducting its
business activities. At present, the Company has not secured any
liability insurance. The Company has potential liability from its general
business activities, and accordingly, it could be rendered insolvent by
a serious error or omission.
6. Uninsured Risks. The Company may not be insured against all
losses or liabilities, which may arise from operations, either because
such insurance is unavailable or because the Company has elected not to
purchase such insurance due to high premium costs or other reasons.
7. Need for Subsequent Funding. The Company believes it will need
to raise additional funds in order to maintain its operations. The
Company's continued operations therefore will depend upon the
availability of cash flow, if any, from its operations or its ability
to raise additional funds through bank borrowings or equity or debt
financing. There is no assurance that the Company will be able to
obtain additional funding when needed, or that such funding, if
available, can be obtained on terms acceptable to the Company. If the
Company cannot obtain needed funds, it may be forced to curtail or
cease its activities.
8. Need for Additional Key Personnel. At the present, the Company
has five full-time employees and four consultants. The success of the
Company's proposed business will depend, in part, upon the ability to
attract and retain qualified employees. The Company believes that it will
be able to attract competent employees, but no assurance can be given
that the Company will be successful in this regard. If the Company is
unable to engage and retain the necessary personnel, its business would
be materially and adversely affected.
9. Reliance Upon Directors and Officers. The Company is wholly
dependent, at the present, upon the personal efforts and abilities of its
Officers who will exercise control over the day to day affairs of the
Company, and upon its Directors, some of whom are engaged in other
activities, and will devote full time to the Company's activities. The
President will devote 100% of his time to the operation of the day to day
affairs of the Company, the Chief Operations Officer will devote 100% of
his time to the operation of the day to day affairs to the Company and
the Chief Financial Officer and Secretary/Treasurer will devote 100% of
his time to the operation of the day to day affairs to the Company.
Accordingly, while the Company may solicit business through its Officers,
there can be no assurance as to the volume of business, if any, which the
Company may succeed in obtaining, nor that its proposed operations will
prove to be profitable. As of the date hereof, the Company does have
commitments regarding its proposed operations, however there can be no
assurance that any commitments will be forthcoming in generating
revenues.
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10. Issuance of Additional Units. Approximately 81,972,687 shares
of Common Stock or 82% of the 100,000,000 authorized Shares of Common
Stock of the Company will remain unissued even if all Units offered
hereby are sold. The Board of Directors has the power to issue such
shares of Common Stock, subject to shareholder approval, in some
instances. The Company may also issue additional shares of Common Stock
pursuant to a plan and agreement of merger with a private corporation.
Although the Company presently has no commitments, contracts or
intentions to issue any additional shares of Common Stock to other
persons, the Company may in the future attempt to issue shares of Common
Stock to acquire products, equipment or properties, or for other
corporate purposes.
11. Non-Arm's Length Transaction. The number of shares of Common
Stock issued to present shareholders of the Company for property and
services was arbitrarily determined and may not be considered the product
of arm's length transactions.
12. Indemnification of Officers and Directors for Securities
Liabilities. The Articles of Incorporation of the Company provide that
the Company may indemnify any Director, Officer, agent and/or employee as
to those liabilities and on those terms and conditions as are specified
in the Texas Business Corporation Act. Further, the Company may purchase
and maintain insurance on behalf of any such persons whether or not the
corporation would have the power to indemnify such person against the
liability insured against. The foregoing could result in substantial
expenditures by the Company and prevent any recovery from such Officers,
Directors, agents and employees for losses incurred by the Company as a
result of their actions. Further, the Company has been advised that in
the opinion of the Securities and Exchange Commission, indemnification is
against public policy as expressed in the Securities Act of 1933, as
amended, and is, therefore, unenforceable.
13. Competition. The Company believes that it will have competitors
and potential competitors, many of whom may have considerably greater
financial and other resources than the Company.
14. No Public Market for Securities. At present, no public market
exists for the Company's securities and there is no assurance that a
trading market will develop. Furthermore, it is unlikely that a lending
institution will accept the Company's securities as pledged collateral
for loans unless a regular trading market develops.
15. Cumulative Voting, Preemptive Rights and Control. There are no
preemptive rights in connection with the Company's Common Stock. The
shareholders may be further diluted in their percentage ownership of the
Company in the event the Company issues additional shares of Common Stock
in the future. Cumulative voting in the election of Directors is not
provided for. Accordingly, the holders of a majority of the shares of
Common Stock, present in person or by proxy, will be able to elect all of
the Company's Board of Directors.
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16. No Dividends Anticipated. At the present time the Company does
not anticipate paying dividends, cash or otherwise, on its Common Stock
in the foreseeable future. Future dividends will depend on earnings, if
any, of the Company, its financial requirements and other factors.
Investors who anticipate the need of an immediate income from their
investment in the Company's Common Stock should refrain from the purchase
of the securities being offered hereby.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Plan of Operation
The following Plan of Operation contains forward-looking statements,
which involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth
elsewhere in this document.
Our plan and focus during the next twelve months include the
following,
1. Complete agreements for the hosting of the games.
2. Initiate the DVD reproduction of the games
3. Begin to market and sell the advertising space within the
games.
The Company is considered to be in the development stage, as defined
in the Statement of Financial Accounting Standards No. 7. The Company
has been in the development stage since its inception. The Company has
not had any recurring source of revenue, it has incurred operating losses
since inception and at March 31, 2000 had an accumulated deficit of
approximately $2,989,569.
The development and marketing of new interactive video games is
capital intensive. The Company has funded operations to date either from
the sale of its common stock or through advances made by officers,
directors or promoters. The Company has utilized funds obtained to date
for organizational purposes and to complete certain research and
development. The Company intends to conduct additional product research
or development in the next twelve months, in order to prepare new
additional games for manufacture and marketing. At the present time the
Company has not engaged anyone to market its products. The Company has
marketed the game and advertising concept directly. The Company has
located manufacturers for the DVD reproduction of its games. As of June
13, 2000, the Company requires additional funding to continue its efforts
and has therefore prepared this private placement in anticipation of
raising additional capital.
The Company does not intend to purchase a plant or to expend
significant amounts for equipment in the next twelve months. The Company
has executed employment and consulting agreements with its officers and
directors.
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The Company has inadequate cash to maintain operations during the
next twelve months. In order to meet its long-term cash requirements the
Company will have to raise additional capital through revenues, the sale
of securities or loans. As of the date hereof, the Company has not made
sales of additional securities and there is no assurance that it will be
able to raise additional capital through the sale of securities in the
future. Further, the Company has not initiated any negotiations for loans
to the Company and there is no assurance that the Company will be able to
raise additional capital in the future through loans. In the event that
the Company is unable to raise additional capital, it may have to suspend
or cease operations.
Operating Expenses:
Operating expenses include those costs incurred for research,
development and selling, general and administrative expenses and for the
private placement of our Units. In addition the Company incurred certain
expenses necessary to complete the necessary research and development
associated with its games. Operating expenses totaling $2,990,639 have
been incurred since inception. For the twelve-months ended March 31,
2000 the Company's operating expenses totaled $2,973,619 as compared to
$17,020 for the period from inception September 10, 1998 through March
31, 1999. This increase of approximately $2,956,599 or 100% was primarily
the result of researching the product and its marketability as well as
establishing contacts and negotiating with potential technical support
and contractors. Finally, approximately $283,484 of additional expense
was incurred in 2000, and was primarily the result of the increase in the
Company's general administrative activities.
Net Loss:
Primarily as a result of the foregoing factors, the Company's net
loss was $ 2,972,549 for the twelve months ending March 31, 2000 as
compared with a net loss of $17,020 for the period from inception through
March 31, 1999 This increase of approximately $2,955,529 or $0.54 per
share resulted in a $0.55 loss per share for the twelve month period
ended March 31, 2000.
Liquidity and Capital Resources
Financial Condition:
During the twelve month period ended March 31, 2000, the Company
used cash in operating activities of $1,120,823 as compared to $437 for
the period ending March 31, 1999. This increase in the cash used in
operating activities was primarily due to research and development
activities and general and administrative expenses. As of March 31,
2000, the Company had a cash balance of $20,933 in cash and cash
equivalents. For the period ending March 31, 2000, the Company had
proceeds from financing activities of $1,359,343 and used cash for
operating activities ($1,120,823), investing in furniture and equipment
($124,521) and acquiring long term receivables ($94,467).
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At March 31, 2000, the Company had a deferred tax asset of
approximately $ 920,400. The Company does not believe that its present
condition or past results makes it more likely than not that it will be
able to realize the benefit of this deferred tax asset. As such a
valuation allowance has been established equal to the net deferred tax
asset.
As of March 31, 2000, the Company had no recurring source of
revenue, had incurred losses since inception and had a working capital
deficiency. Primarily as a result of these factors, the Company's
independent certified public accountants included an explanatory
paragraph in their report on its financial statements for the period
ended March 31, 2000, which expressed substantial doubt about the
Company's ability to continue as a going concern. The Company believes
that its ability to continue as a going concern and achieve profitability
is highly dependent on a number of factors including, but not limited to
its ability to market and distribute its products, obtain sufficient
financing, and to secure an agreement with a manufacturer to produce in
sufficient quantity and at a cost efficient price, its three games.
Impact of Year 2000
The Year 2000 issue was the result of computer programs written
using two digits rather than four to define the applicable year. As a
result, date sensitive software could have recognized a date using "00"
as the year 1900 rather than the year 2000. This could result in system
failures or miscalculations causing disruptions of operations, including
among others, temporary inability to process transactions, send invoices,
or engage in similar normal business activities.
Though the Company did not acquire any additional hardware or
software technology in support of its services, any future acquisitions
will most likely involve hardware or software which is relatively new.
There is no risk associated with the equipment and or the software that
may be purchased for the operations of the Company as all and any
equipment and software is compliant with Year 2000.
The Company believes that it has taken the steps necessary regarding
Year 2000 compliance issues with respect to matters within its control,
and to date, the Company has not experienced any Year 2000 issues.
However, no assurance can be given that Year 2000 compliant issues will
not have a material adverse effect on the Company's business, financial
condition and results of operations in the future.
Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting
for Derivative Instruments and Hedging Activities. SFAS No. 133 requires
companies to recognize all derivative contracts as either assets or
liabilities in 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 asset or liability that are
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attributable to the hedged risk or (ii) the earnings effect of the hedged
forecasted transaction. For a derivative not designated as a hedging
instrument, the gain or loss is recognized as income in the period of
change. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. Based on our current and planned future
activities relative to derivative instruments, we believe that the
adoption of SFAS No. 133 will not have a significant effect on our
financial statements.
In June 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 130, "Reporting Comprehensive Income," which establishes
standards for reporting and displaying comprehensive income and its
components in a full set of general purpose financial statements. This
statement is effective for the Company in fiscal 1999. Comprehensive
income generally represents all changes in stockholders' equity except
those resulting from transactions by stockholders. There was no impact
to the Company as a result of the adoption of SFAS No. 130, as there were
no differences between net loss and comprehensive loss available to
common stockholders.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131
requires publicly held companies to report financial and other
information about key revenue-producing segments of the entity for which
such information is available and is utilized by the chief operating
decision maker. Specific information to be reported for individual
segments includes profit or loss, certain revenue and expense items and
total assets. A reconciliation of segment financial information to
amounts reported in the consolidated financial statements is also to be
provided. SFAS No. 131 is effective for the Company in fiscal year 1999.
The Company has adopted this statement and identifies its operations
based on business activities and management responsibility. For the
reported periods, the Company did not have reportable business segments
under SFAS 131.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company does not own any real property.
The Company's Registered Office is located at 1901 Red Fox, Austin,
Texas 78734.The Company's current business offices are located at 1902G -
11th Street Southeast, Calgary, Alberta, Canada T2G 3G2. The Company's
telephone number is (403) 537-5715. The Company leases the foregoing
offices from THEM Property Management Ltd pursuant to a written sub-lease
for the term of 45 months. The lease began on November 1, 1999 and
terminates on July 31, 2003. The monthly lease payment is for base rent
is $2,214 until July 31, 2000 and increases to $2,530 for the remainder
of the lease.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth the Common Stock ownership of each
person known by the Company to be the beneficial owner of five percent or
more of the Company's Common Stock, each director individually and all
officers and directors of the Company as a group. Each person has sole
voting and investment power with respect to the shares of Common Stock
shown, unless otherwise noted, and all ownership is of record and
beneficial.
Percentage
Name and address Number of Of Share
of owner Share Position Owned
Peter Leeuwerke 1,900,000 President, CEO and a 12.16%
852 Edgemont Rd. NW member of the Board
Calgary, Alberta of Directors
Canada T3A 2J2
William Buterman 1,900,000 Chief Operations Officer 12.16%
87 Millrise Way SW and a member of the
Calgary, Alberta Board of Director
Canada T2Y 2M7
Jamil Kanany 244,000 Secretary/Treasurer and 1.56%
19 Edgebrooke Chief Financial Officer
Circle NW
Calgary, Alberta
Canada T3A 5A2
All Officers and
Directors as a Group
(Three Person) 4,044,000 25.88%
Don Robertson 1,589,674 10.17%
150 Eagle Ridge Dr. SW
Calgary, Alberta
Canada T2V 2V4
John Jackman 875,033 5.60%
Suite 10
110 - 10A Street NW
Calgary, Alberta
Canada T2N 4T2 875,033
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The Executive Officers and Directors of the Company, and further
information about them are as follows:
Name Age Position
Peter Leeuwerke 44 President and Director
William Buterman 45 Chief Operation Officer and Director
Jamil Kanany 46 Secretary/Treasurer and Chief
Financial Offficer
The following are the current officers and directors of the Company
and will hold their offices until the next annual meeting of shareholders
or until such time as they resign, which ever shall occur first. The
Company's officers are elected by the Board of Directors at the annual
meeting after each annual meeting of the Company's shareholders and hold
office until their death, or until they resign or have been removed from
office.
There are no family relationships among the officers and directors
of the Company, nor are there any arrangements or understandings between
any officers and directors and any other person pursuant to which the
officers and directors have been or will be elected to their respective
positions.
Peter Leeuwerke - President, Chief Executive Officer and a Member of the
Board of Directors.
Since March 2000, Mr. Leeuwerke has been President and Chief
Executive Officer and a member of the board of Directors of the Company.
Since May 1999, Mr. Leeuwerke has been President and Chief Executive
Officer of TMC and Tsunami Alberta. From December 1995 to May 1999, Mr.
Leeuwerke was General Manager of Virtual Universe Ltd., a Internet
communications company with its principal place of business in Calgary,
Alberta. From 1991 to 1995, Mr. Leeuwerke was President/CEO of Automated
Retail Solutions, Inc. (ARS) with its principal place of business in
Edmonton, Alberta. ARS designed and sold accounting, inventory
management, and communications software to the automotive industry within
Canada. From 1988 to 1991, Mr. Leeuwerke held a position as a sales
person with MAI Canada with its principal business in Edmonton, Alberta.
Mr. Leeuwerke sold municipal accounting systems. From 1984 to 1989, Mr.
Leeuwerke was a business consultant working with independent business
people with respect to marketing their products and services within the
real-estate business.
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William J. Buterman - Chief Operations Officer and a member of the Board
of Directors.
Since, March 2000, Mr. Buterman has been Chief Operations Officer
and a member of the Board of Directors of the Company. Since May 1999,
Mr. Buterman has been Chief Operations Officer and a member of the Board
of Directors of TMC and Tsunami Alberta. From April 1998 to April 1999,
Mr. Buterman was an independent consultant specializing in Finance and
Venture Capital Funding. From October 1996 to April 1998, Mr. Buterman
was Director of Finance (Consulting Position) of Applied Gaming Solutions
of Canada, Inc., a Gamming corporation with its principal place of
business located in Calgary, Canada. Applied Gaming Solutions is engaged
in the business of providing hardware and software lottery solutions to
various countries such as Vietnam. From 1982 to 1996, Mr. Buterman was a
partner in Inter Group Financial Consultants located in Edmonton,
Alberta, which provided real estate related financial solutions to
Residential and Commercial projects domestically and internationally.
Jamil Kanany - Secretary/Treasurer and Chief Financial Officer
Since March 2000, Mr. Kanany has been Secretary/Treasurer, and Chief
Financial Officer of the Company. Since July 1999, Mr. Kanany has been
Chief Financial Officer of TMC and Tsunami Alberta. From September 1996
to June 1999, Mr. Kanany was Chief Financial Officer of Applied Gaming
Solutions of Canada, Inc., a publicly-traded corporation with its
principal place of business located in Alberta. Applied Gaming Solutions
was engaged in the business of providing hardware and software solutions
to the gaming industry. From February 1998 to January 1999, Mr. Kanany
was Secretary/Treasurer of Quantum Data Supplies Ltd, a private
corporation with its principal place of business located in Alberta.
Quantum Data Supplies was engaged in the business of hardware
distribution and technology services provider. From January 1995 to
August 1996, Mr. Kanany was Manager of Accounting and Administration of
Sunalta Energy, Inc., a publicly-traded corporation with its principal
place of business located in Alberta. Sunalta Energy was engaged in the
business of oil and gas exploration, development and marketing
Significant Employees and Associates
Daniel Horner - Director and Legal Counsel of TMC and Tsunami Alberta.
Since May 1999, Mr. Horner has been Legal Counsel to and a member of
the Board of Directors of TMC and Tsunami Alberta. Since August 1993,
Mr. Horner has been an attorney licensed to practice law in the Province
of Alberta. From August 1993 to 1996, Mr. Horner was an associate
member of Code Hunter, Barristers and Solicitors and since September
1996, Mr. Horner has been associated with Scott Hall, Barristers and
Solicitors. In January 2000, Mr. Horner became a partner of Scott Hall.
<PAGE> 16
Jennifer Peers - Project Director.
Since June 1999, Ms. Peers has been Project Director and a pivotal
member of TMC and Tsunami Alberta. From May 1996 to February 1999, Ms.
Peers was the Manager of Systems Projects with Quantum Data, a
corporation with its principal place of business located in Calgary,
Alberta. Quantum Data was engaged in the business of sales and supplies
of computer products. From July 1993 to May 1996 Mrs. Peers was a Senior
Account Executive in the Major Accounts Division for The Xerox Company,
a corporation with a local branch of its multi-national corporation in
Calgary, Alberta. Xerox was engaged in the business of marketing digital
and analog photocopiers and printers. From 1986 to 1992 Mrs. Peers was
a Major Account Representative, Project Manager and Systems Analyst at
Wang Canada Ltd., a corporation with a local branch of its multi-national
corporation in Calgary, Alberta. Wang was engaged in the business of
marketing business computer solutions.
Some of the officers and directors are engaged in other business. As
such, they will not be devoting time exclusively to the operation of the
Company. The President expects to devote approximately 100% of his time
to the operation of the Company and the Vice President and the Chief
Financial Officer and Secretary/Treasurer each expect to devote
approximately 100% of their time to the operation of the Company.
Promoters
Ryan Corley and Louis J. Aloisio, former officers and directors of
the Company are deemed promoters of the Company. Messrs. Corley and
Aloisio resigned as officers and directors of the Company on March 5,
2000.
ITEM 6. EXECUTIVE COMPENSATION.
The following table sets forth the compensation paid by the Company
from inception on September 10, 1999 through March 31, 2000, for each
officer and director of the Company. This information includes the
dollar value of base salaries, bonus awards and number of stock options
granted, and certain other compensation, if any.
<PAGE> 17
Summary Compensation Table
Long-Term Compensation
Annual Compensation Awards Payouts
Names of Other Restricted All
Executive Annual Securities Other
Officers and Compen- Stock Underlying LTIP Compen-
Principal Year Salary Bonus sation Award(s) Options/ Payouts sation
Position Ended (US$) (US$) (US$) (US$) SARs (#) (US$) (US$)
Peter Leeuweke 2000 127,000 -0- -0- -0- -0- -0- -0-
President 1999 -0- -0- -0- -0- -0- -0- -0-
and CEO 1998 -0- -0- -0- -0- -0- -0- -0-
William
Buterman 2000 43,000 -0- -0- -0- -0- -0- -0-
COO 1999 -0- -0- -0- -0- -0- -0- -0-
1998 -0- -0- -0- -0- -0- -0- -0-
Jamil Kanany 2000 112,000 -0- -0- -0- -0- -0- -0-
Secretary/ 1999 -0- -0- -0- -0- -0- -0- -0-
Treasurer 1998 -0- -0- -0- -0- -0- -0- -0-
and CEO
Ryan Corely 2000 -0- -0- -0- -0- -0- -0- -0-
CEO & CFO 1999 -0- -0- -0- -0- -0- -0- -0-
(Resigned) 1998 -0- -0- -0- -0- -0- -0- -0-
Louis Aloisio 2000 -0- -0- -0- -0- -0- -0- -0-
President 1999 -0- -0- -0- -0- -0- -0- -0-
(Resigned) 1998 -0- -0- -0- -0- -0- -0- -0-
The Company anticipates paying the following salaries in 2001,
subject to the Company beginning profitable operations and generating
sufficient revenues to pay the same:
Peter Leeuwerke President 2001 $ 150,000
William Buterman Chief Operating Officer 2001 $ 150,000
Jamil Kanany Secretary/Treasurer and
Chief Financial Officer 2001 $ -0-
The Company has adopted a non-qualified incentive stock option plan,
however, no options have granted as of the date hereof. There are no
other stock option plans, retirement, pension, or profit sharing plans
for the benefit of the Company's officers and directors other than as
described herein.
Option/SAR Grants.
The following grants of stock options, whether or not in tandem with
stock appreciation rights ("SARs") and freestanding SARs have been made
to officers and/or directors:
<PAGE> 18
Number of
Securities
Number of Underlying
Securities Options/SARs
Underlying Granted Exercise Number
Options During of Base of
SARs Last 12 Price Options Expiration
Name Granted Months [1] ($/Sh) Exercised Date
Peter Leeuwerke 200,000 200,000 $ 1.00 -0- 05/04/2002
William Buterman 200,000 200,000 $ 1.00 -0- 05/04/2002
Jamil Kanany 50,000 50,000 $ 1.00 -0- 06/27/2001
Long-Term Incentive Plan Awards.
The Company does not have any long-term incentive plans that provide
compensation intended to serve as incentive for performance.
Employment/Consultant Agreements.
On May 5, 1999 TMC entered into an Executive Employment Agreement
with Peter Leeuwerke, wherein Peter Leeuwerke was retained as the
President of TMC for an indefinite period. The agreement provides for the
payment of $11,000 per month for the first year ending March 31, 2000 and
$12,500 for the next fiscal year, bonuses and the issuance of an option
to acquire up to 200,000 restricted shares of the Company's common stock
at an exercise price of $1.00 per share. The option expires on May 4,
2002.
On May 5, 1999, TMC entered into an Executive Employment Agreement
with William Buterman, in the capacity of Chief Operations Officer. The
agreement provides for the payment of $10,000 per month for the first
year ending March 31, 2000 and $12,500 per month for the next fiscal
year, bonuses and the issuance of an option to acquire up to 200,000
restricted shares of the Company's common stock at an exercise price of
$1.00 per share. The option expires on May 4, 2002.
Compensation of Directors.
Directors do not receive any compensation for serving as members of
the Board of Directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On October 31, 1998, the Company issued 1,647,000 shares of Common
Stock to 45 persons in consideration of $823.50. The shares were issued
pursuant to Reg. 504 of the Securities Act of 1933. The foregoing shares
were issued without restriction and are not deemed "restricted
securities." Of the foregoing, shares were issued to officers and
directors of the Company, as well.
<PAGE> 19
On February 14, 2000, the Company acquired 13,003,513 shares of
Common Stock of Tsunami Media Corporation, a Delaware corporation ("TMC")
in exchange for 13,003,513 restricted shares of the Company's common
stock. The aforementioned 13,003,513 shares of Common Stock constituted
100% of the total outstanding shares of TMC.
On May 5, 1999, TMC entered into an Executive Employment Agreement
with Peter Leeuwerke, wherein Peter Leeuwerke was retained as the
President of TMC for an indefinite period. The agreement provides for the
payment of $11,000 per month for the first year ending March 31, 2000 and
$12,500 for the next fiscal year, bonuses and the issuance of an option
to acquire up to 200,000 restricted shares of the Company's common stock
at an exercise price of $1.00 per share. The option expires on May 4,
2002.
On May 5, 1999, TMC entered into an Executive Employment Agreement
with William Buterman, in the capacity of Chief Operations Officer. The
agreement provides for the payment of $10,000 per month for the first
year ending March 31, 2000 and $12,500 per month for the next fiscal
year, bonuses and the issuance of an option to acquire up to 200,000
restricted shares of the Company's common stock at an exercise price of
$1.00 per share. The option expires on May 4, 2002.
On May 31, 1999, the Company's wholly owned subsidiary corporation,
Tsunami Media Corporation, a Delaware corporation, agreed to pay Sports
Active Television Network, Inc. ("SAT") a royalty of $0.10 for each copy
of certain software sold by the Company. Any royalties earned by SAT will
be offset against a debt owed by SAT to the Company. As of March 31,
2000, the Company has not sold any software and accordingly the
receivable due the Company from SAT has not been reduced.
On June 9, 1999, the Company purchased from an unrelated entity, a
note receivable from Sport Active Television Network, Inc. in the amount
of $412,655. The purchase price for the loan and security was $60,729 and
200,000 shares of common stock.
On December 14, 1999, the Company purchased from an unrelated
entity, trade debts of Sport Active Television Network, Inc. in the
amount of approximately $1,405,145. The purchase price for the trade
debt was $33,738 and 200,000 shares of common stock.
During the year ended March 31, 2000, the Company purchased from
various individuals and companies, debentures receivable from Sport
Active Television Network, Inc. in the amount of $1,631,361. The
debentures were purchased by issuing one share of common stock for every
$1.72 of principal value of each respective debenture or 948,800 shares
of common stock.
The law firm of Scott Hall provides legal services to the Company.
Mr. Daniel Horner, Legal Counsel for the Company, TMC and Tsunami Alberta
is a member of the law firm of Scott Hall. As at March 31, 2000, the
Company was indebted to the law firm of Scott Hall in the amount of
$23,377. Through March 31, 2000, the Company has paid Scott Hall $15,490.
<PAGE> 20
ITEM 8. LEGAL PROCEEDINGS.
The Company is not a party to any pending or threatened litigation
and to its knowledge, no action, suit or proceedings has been threatened
against its officers and its directors.
ITEM 9. MARKET PRICE FOR COMMON EQUITY AND OTHER SHAREHOLDER MATTERS.
No market exists for the Company's securities and there is no
assurance that a regular trading market will develop, or if developed,
that it will be sustainable. A shareholder in all likelihood, there
fore, will be unable to resell the securities referred to herein should
he or she desire to do so. Furthermore, it is unlikely that a lending
institution will accept the Company's securities as pledged collateral
for loans unless a regular trading market develops.
There are no plans, proposals, arrangements or understandings with
any person with regard to the development of a trading market in any of
the Company's securities. On January 4, 1999, the NASD amended its rules
regarding listing of securities for trading on the Bulletin Board which
it operates. Effective January 4, 1999, securities of corporations will
not be listed for trading on the Bulletin Board unless the corporation
files reports pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. Accordingly, the Company's common stock will not be listed
for trading on the Bulletin Board until such time as this registration is
declared effective by operation of law and the Company has satisfied all
outstanding comments issued by the Securities and Exchange Commission.
As of June 15, 2000, the Company has 95 shareholders of record.
The Company has not paid any dividends since its inception and does
not anticipate paying any dividends on its Common Stock in the
foreseeable future.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
On October 31, 1998, the Company issued 1,647,000 shares of Common
Stock to 45 persons in consideration of $823.50 . The shares were issued
pursuant to Reg. 504 of the Act.
On February 14, 2000, the Company acquired 13,003,513 shares of
Common Stock of Tsunami Media Corporation, a Delaware corporation ("TMC")
in exchange for 13,003,513 restricted shares of the Company's common
stock. The foregoing shares were issued pursuant to Section 4(2) of the
Act.
On May 5, 1999 TMC entered into an Executive Employment Agreement
with Peter Leeuwerke, wherein Peter Leeuwerke was retained as the
President of TMC for an indefinite period. The agreement provides for the
payment of $11,000 per month for the first year ending March 31, 2000 and
$12,500 for the next fiscal year, bonuses and the issuance of an option
to acquire up to 200,000 restricted shares of the Company's common stock
at an exercise price of $1.00 per share. The option expires on May 4,
2002.
<PAGE> 21
On May 5, 1999, TMC entered into an Executive Employment Agreement
with William Buterman, in the capacity of Chief Operations Officer. The
agreement provides for the payment of $10,000 per month for the first
year ending March 31, 2000 and $12,500 per month for the next fiscal
year, bonuses and the issuance of an option to acquire up to 200,000
restricted shares of the Company's common stock at an exercise price of
$1.00 per share. The option expires on May 4, 2002.
On June 9, 1999, the Company purchased from an unrelated entity, a
note receivable from Sport Active Television Network, Inc. in the amount
of $412,655. The purchase price for the loan and security was $60,729 and
200,000 shares of common stock. The shares were issued pursuant to
Section 4(2) of the Act.
On December 14, 1999, the Company purchased from an unrelated
entity, trade debts of Sport Active Television Network, Inc. in the
amount of approximately $1,405,145. The purchase price for the trade
debt was $33,738 and 200,000 shares of common stock. The shares were
issued pursuant to Section 4(2) of the Act.
During the year ended March 31, 2000, the Company purchased from
various individuals and companies, debentures receivable from Sport
Active Television Network, Inc. in the amount of $1,631,361. The
debentures were purchased by issuing one share of common stock for every
$1.72 of principal value of each respective debenture or 948,800 shares
of common stock. The shares were issued pursuant to Section 4(2) of the
Act.
ITEM 11. DESCRIPTION OF SECURITIES.
The authorized capital stock of the Company currently consists of
100,000,000 shares of Common Stock, $0.0005 par value per share. As of
May 25, 2000, 15,627,313 shares of Common Stock were issued and
outstanding. Of the 15,627,313 shares presently outstanding, 13,952,313
are restricted securities and may only be resold in compliance with Reg.
144 of the Securities Act of 1933 (the "Act").
In general, under Reg. 144, a person who has held his shares for a
period of one (1) year, may sell in ordinary market transactions through
a broker or with a market maker, within any three (3) month period a
number of shares which does not exceed the greater of one percent (1%) of
the number of outstanding shares of Common Stock or the average of the
weekly trading volume of the Common Stock during the four calendar weeks
prior to such sale. Sales under Reg. 144 require the filing of Form 144
with the Securities and Exchange Commission. If the shares of Common
Stock have been held for more than two (2) years by a person who is not
an affiliate, there is no limitation on the manner of sale or the volume
of shares that may be sold and no Form 144 is required. Sales under Reg.
144 may have a depressive effect on the market price of the Company's
Common Stock.
All shares have equal voting rights and are not assessable. Voting
rights are not cumulative and, therefore, the holders of more than 50% of
the Common Stock could, if they chose to do so, elect all of the
directors of the Company.
<PAGE> 22
Upon liquidation, dissolution or winding up of the Company, the
assets of the Company, after the payment of liabilities, will be
distributed pro rata to the holders of the Common Stock. The holders of
the Common Stock do not have preemptive rights to subscribe for any
securities of the Company and have no right to require the Company to
redeem or purchase their shares. The shares of Common Stock presently
outstanding are fully paid and non-assessable.
Dividends
Holders of the Common Stock are entitled to share equally in
dividends when, as and if declared by the Board of Directors of the
Company, out of funds legally available therefore. No dividend has been
paid on the Common Stock since inception, and none is contemplated in the
foreseeable future.
Transfer Agent
The Company's transfer agent is Pacific Stock Transfer Company, 5844
Pecos Road, Suite D, Las Vegas, Nevada 89120 and its telephone number is
(702) 361-3033.
Rights of Shareholders
Shareholders of the Company have no preemptive rights to acquire
additional shares of Common Stock or other securities. The Common Stock
is not subject to redemption and carries no subscription or conversion
rights. In the event of liquidation of the Company, the shares of Common
Stock are entitled to share equally in corporate assets after
satisfaction of all liabilities. The Shares of Common Stock, when issued,
will be fully paid and non-assessable.
There are no outstanding options, warrants or rights to purchase
shares of the Company's Common Stock, other than as disclosed below.
Redeemable Warrants
The Company is currently offering for sale up to 1,200,000 Units.
The offering is being made pursuant to Reg. 506 of the Securities Act of
1933. Each Unit consists of one share of common stock and one
Redeemable Unit at an offering price of $4.00 per Unit.
Each Redeemable Warrant entitles the holder to purchase one share of
common stock for $6.00. The number and kind of securities for which the
Redeemable Warrants are exercisable is subject to adjustment in certain
events, such as mergers, stock splits, stock dividends, recapitalizations
and the like. Rights to purchase shares of Common Stock pursuant to a
Redeemable Warrant will be forfeited unless exercised prior to March 31,
2002 or prior to the redemption. Holders of Redeemable Warrants will not
have any of the rights or privileges of shareholders of the Company prior
to the exercise of the Redeemable Warrants.
<PAGE> 23
Unexercised Warrants may be redeemed by the Company at any time upon
thirty (30) days written notice for a price of $3.00 per Redeemable
Warrant. If the Redeemable Warrant is not exercised during said period,
the payment aforesaid will be made to the Redeemable Warrant holder and
the Redeemable Warrant will terminate.
The Redeemable Warrants may be exercised by surrendering the
Redeemable Warrant certificate, together with appropriate instructions,
duly executed by the holder or its authorized attorney, at the office of
the Transfer Agent, accompanied by payment of full purchase price for the
Redeemable Warrants being exercised. Payment of the purchase price must
be in U.S. funds (by check, cash or bank draft) payable to the order of
the Company. Common stock certificates will be issued as soon as
practicable after the exercise and payment of the purchase price.
The exercise of the Redeemable Warrant is subject to the
availability of an exemption from registration in the jurisdiction where
the holder resides. If no exemption from registration is available, the
Redeemable Warrant may not be exercised and will expire. No allowance
will be made to the holder of the Redeemable Warrant if such should
occur.
The Redeemable Warrants will be issued subject to the terms and
conditions of a Warrant Agreement between the Company and the Warrant
Agent, Pacific Stock Transfer Company.
Options
There are currently issued and outstanding options to acquire up to
1,144,000 Shares of Common Stock. The options are exercisable at prices
ranging from $0.50 to $8.00 for periods ranging up to two years. If all
of the options are exercised, the Company will receive $1,883,900. As of
the date hereof, no options have been exercised and there is no assurance
that any options will ever be exercised. The foregoing number includes
options held by the Company's officers and directors. See "Executive
Compensation."
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Texas Revised Statutes and certain provisions of the Company's
Bylaws under certain circumstances provide for indemnification of the
Company's Officers, Directors and controlling persons against liabilities
which they may incur in such capacities. A summary of the circumstances
in which such indemnification is provided for is contained herein, but
this description is qualified in its entirety by reference to the
Company's Bylaws and to the statutory provisions.
<PAGE> 24
In general, any Officer, Director, employee or agent may be
indemnified against expenses, fines, settlements or judgments arising in
connection with a legal proceeding to which such person is a party, if
that person's actions were in good faith, were believed to be in the
Company's best interest, and were not unlawful. Unless such person is
successful upon the merits in such an action, indemnification may be
awarded only after a determination by independent decision of the Board
of Directors, by legal counsel, or by a vote of the shareholders, that
the applicable standard of conduct was met by the person to be
indemnified.
The circumstances under which indemnification is granted in
connection with an action brought on behalf of the Company is generally
the same as those set forth above; however, with respect to such actions,
indemnification is granted only with respect to expenses actually
incurred in connection with the defense or settlement of the action. In
such actions, the person to be indemnified must have acted in good faith
and in a manner believed to have been in the Company's best interest, and
have not been adjudged liable for negligence or misconduct.
Indemnification may also be granted pursuant to the terms of
agreements which may be entered in the future or pursuant to a vote of
shareholders or Directors. The statutory provision cited above also
grants the power to the Company to purchase and maintain insurance which
protects its Officers and Directors against any liabilities incurred in
connection with their service in such a position, and such a policy may
be obtained by the Company.
ITEM 13. FINANCIAL STATEMENTS.
Financial Statements begin on following page.
TSUNAMI MEDIA CORPORATION
AND SUBSIDIARIES
(A Development Stage Company)
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
Page
INDEPENDENT AUDITOR'S REPORT . . . . . . . F-1
FINANCIAL HIGHLIGHTS
Consolidated Balance Sheets . . . . . . . F-2
Consolidated Statements of Loss . . . . . . F-3
Consolidated Statements of Changes in Stockholders' Equity . F-4
Consolidated Statements of Cash Flow . . . . . F-5
Notes to the Consolidated Financial Statements . . . F-7
<PAGE> 25
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Tsunami Media Corporation
Austin, Texas
We have audited the accompanying consolidated balance sheets of Tsunami
Media Corporation and Subsidiaries (a development stage company)
(Company) as of March 31, 2000 and 1999, and the related consolidated
statements of loss, changes in stockholders' equity and cash flow for the
year ended March 31, 2000, and the period from inception (September 10,
1998) to March 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Tsunami Media Corporation and Subsidiaries as of March 31, 2000 and 1999,
and the results of its operations and its cash flow for the year ended
March 31, 2000, and the period from inception (September 10, 1998) to
March 31, 1999, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As shown in
the financial statements, the Company incurred net losses of $2,972,549
for the year ended March 31, 2000, and $17,020 for the period from
inception (September 10, 1998) to March 31, 1999, respectively, and had
negative working capital at March 31, 2000. These factors, among others,
as discussed in Note 1 to the financial statements, raise substantial
doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note
1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Brown, Graham & Company
Georgetown, Texas
April 15, 2000
F-1
<PAGE> 26
TSUNAMI MEDIA CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND 1999
ASSETS
2000 1999
------------ ---------
Current assets:
Cash and cash equivalents $ 20,933 $ 1,401
Accounts receivable 34,211 -
Prepaid expenses 14,301 -
------------ ---------
Total current assets 69,445 1,401
Property and equipment, net of
accumulated depreciation of $14,877
and $0, respectively (Note 2) 109,644 -
Long-term receivables (Note 3) 768,867 -
------------ ---------
Total assets $ 947,956 $ 1,401
============ =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 883,331 $ 16,583
Accrued expenses 1,613 -
Deposits for purchase of common stock 35,690 -
------------ ---------
Total current liabilities 920,634 16,583
------------ ---------
Stockholders' equity (Note 7 and 8):
Common stock; par value $.0005 per share;
100,000,000 shares authorized; 15,627,313
and 1,675,000 shares issued and outstanding,
respectively 7,814 838
Subscription receivable for common stock (18,515) -
Additional paid in capital 3,027,592 1,000
Deficit accumulated during the
development stage (2,989,569) (17,020)
------------ ---------
Total stockholders' equity 27,322 (15,182)
------------ ---------
Total liabilities and stockholders' equity $ 947,956 $ 1,401
============ =========
The accompanying notes are an integral part of these financial
statements.
F-2
<PAGE> 27
TSUNAMI MEDIA CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF LOSS
YEAR ENDED MARCH 31, 2000 AND FOR THE PERIOD FROM
INCEPTION (SEPTEMBER 10, 1998) TO MARCH 31, 1999
Cumulative
During the
Development
2000 1999 Stage
Revenue $ 1,070 $ - $ 1,070
------------ --------- ------------
Expenses:
Selling, general and
administrative expense 283,484 17,020 300,504
Research and development
expense 2,690,135 - 2,690,135
------------ --------- ------------
Total selling, general and
administrative expense 2,973,619 17,020 2,990,639
------------ --------- ------------
Loss before income tax (2,972,549) (17,020) (2,989,569)
Income tax - - -
------------ --------- ------------
Net loss $ (2,972,549) $ (17,020) $ (2,989,569)
============ ========= ============
Basic and diluted loss
per common share $ (0.55) $ (0.01) $ (0.55)
============ ========= ============
Weighted average common
shares outstanding, basic
and diluted 5,419,140 1,647,000 5,419,140
============ ========= ============
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE> 28
TSUNAMI MEDIA CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEAR ENDED MARCH 31, 2000 AND FOR THE PERIOD FROM
INCEPTION (SEPTEMBER 10, 1998) TO MARCH 31, 1999
Deficit
Accumulated Total
Common Stock Additional During the Stock-
Par Paid-In Development holders'
Shares Value Capital Stage Equity
Common stock issued:
Founders stock 1,675,000 $ 838 $ 1,000 $ - $ 1,838
Net loss - - - (17,020) (17,020)
--------- ------- ---------- ------------ ------------
Balance at
March 31, 1999 1,675,000 838 1,000 (17,020) (15,182)
Stock options
issued for
services - - 12,000 - 12,000
Common stock issued:
Cash 5,603,513 2,802 1,339,366 - 1,342,168
Founders stock 5,000,000 2,500 2,500 - 5,000
Purchase of
assets 3,348,800 1,674 1,672,726 - 1,674,400
Stock
subscriptions
receivable - - (18,515) - (18,515)
Net loss - - - (2,972,549) (2,972,549)
--------- ------- ---------- ----------- -----------
Balance at
March 31, 2000 15,627,313 $ 7,814 $ 3,009,077 $(2,989,569) $ 27,322
========== ======= =========== =========== ===========
The accompanying notes are an integral part of these financial
statements
F-4
<PAGE> 29
TSUNAMI MEDIA CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOW
YEAR ENDED MARCH 31, 2000 AND FOR THE PERIOD FROM
INCEPTION (SEPTEMBER 10, 1998) TO MARCH 31, 1999
Cumulative
During the
Development
2000 1999 Stage
Cash flow from operating
activities:
Net loss $ (2,972,549) $ (17,020) $ (2,989,569)
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Common stock issued
for research and
development 1,000,000 - 1,000,000
Common stock issued
for services 5,000 - 5,000
Stock options issued
for services 12,000 - 12,000
Depreciation and
amortization 14,877 - 14,877
(Increase) decrease in:
Prepaid expenses (14,301) - (14,301)
Accounts receivable (34,211) - (34,211)
Increase (decrease) in:
Accounts payable 866,748 16,583 883,331
Accrued liabilities 1,613 - 1,613
------------ --------- ------------
Total adjustments 1,851,726 16,583 1,868,309
------------ --------- ------------
Net cash used by
operating activities (1,120,823) (437) (1,121,260)
------------ --------- ------------
Cash flow from investing
activities:
Purchase of property and
equipment (124,521) - (124,521)
Cash advances for long-
term receivables (94,467) - (94,467)
------------ --------- ------------
Net cash used for
investing activities (218,988) - (218,988)
------------ --------- ------------
The accompanying notes are an integral part of these financial
statements.
F-5
<PAGE> 30
TSUNAMI MEDIA CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOW - CONTINUED
YEAR ENDED MARCH 31, 2000 AND FOR THE PERIOD FROM
INCEPTION (SEPTEMBER 10, 1998) TO MARCH 31, 1999
Cumulative
During the
Development
2000 1999 Stage
Cash flow from financing
activities:
Proceeds from issuance
of common stock 1,359,343 1,838 1,361,181
----------- ------- -----------
Net increase in cash and
cash equivalents 19,532 1,401 20,933
Cash and equivalents,
beginning of period 1,401 - -
----------- ------- -----------
Cash and equivalents,
end of period $ 20,933 $ 1,401 $ 20,933
=========== ======= ===========
Supplemental disclosures of
non-cash transactions:
Stock options issued for services $ 12,000 $ - $ 12,000
Common stock issued for assets
or services $ 1,679,400 $ - $ 1,679,400
The accompanying notes are an integral part of these financial
statements.
F-6
<PAGE> 31
TSUNAMI MEDIA CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2000 AND FOR THE PERIOD
FROM INCEPTION (SEPTEMBER 10, 1998) TO MARCH 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company:
Tsunami Media Corporation and Subsidiaries (the Company) delivers full
motion video advertising via the Internet to demographically targeted
consumers. The Company intends to use its interactive web enabled
entertainment and sports titles to deliver streaming video commercials
using DVD technology to targeted viewers based on their demographic
profile. The Company adds value by being able to provide immediate
feedback and interaction from the viewers for the advertiser's marketing
applications. This is accomplished through the use of technology
developed by the Company called the PATT TM server (Profile Advertising
Tracking Tool). This is the concept of "Single Casting" direct one on
one marketing.
Tsunami Media Corporation ("TMDel") was incorporated on May 27, 1999, in
the State of Delaware. TMDel was formed to conduct business in the
Internet advertising industry. During 1999, TMDel purchased 821506
Alberta, Ltd. which was registered on March 8, 1999, in the providence of
Alberta, Canada, and changed its name on May 1, 1999 to Tsunami Media
Corporation.
Through a stock exchange agreement dated February 22, 2000, between the
common stock shareholders of TMDel and the shareholders of Gatsby's
Coffee Company which was incorporated in the state of Texas on September
10, 1998, the shareholders of TMDel exchanged their shares of common
stock of TMDel for common shares of Gatsby's Coffee Company. This
resulted in Gatsby's Coffee Company owning 100% of the outstanding stock
of TMDel. The business objectives of TMDel became the business
objectives of Gatsby's Coffee Company and was renamed Tsunami Media
Corporation ("Tsunami"). The transaction was accounted for as a
recapitalization.
Basis of presentation:
The accompanying consolidated financial statements include the financial
statements of Tsunami Media Corporation (Texas) and subsidiaries, Tsunami
Media Corporation (Delaware) and Tsunami Media Corporation (Alberta).
All intercompany transactions between Tsunami and its subsidiaries have
been eliminated upon consolidation.
F-7
<PAGE> 32
TSUNAMI MEDIA CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2000 AND FOR THE PERIOD
FROM INCEPTION (SEPTEMBER 10, 1998) TO MARCH 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Basis of accounting:
The Company's financial statements have been presented on the basis that
the Company is a going concern which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business. The Company is in the development stage and has not generated
a profit as of March 31, 2000. Realization of a major portion of the
assets is dependant upon the Company's ability to meet its future
financing requirements, and the success of future operations.
Management believes that a proposed private placement of $4,000,000 will
provide funds to complete the production and distribution of existing
software products and working capital to continue in existence.
Income taxes:
Income taxes are provided based on the liability method of accounting
pursuant to SFAS No. 109, "Accounting for Income Taxes." Under this
approach, deferred income taxes are recorded to reflect the tax
consequences on future years of differences between the tax basis of
assets and liabilities and their financial reporting amounts at each year
end. A valuation allowance is recorded against deferred tax assets as
management does not believe the Company has met the "more likely than
not" realization standard imposed by SFAS No. 109 to allow recognition of
such an asset.
Use of estimates:
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates and
assumptions.
Fair value of financial instruments:
The Company's financial instruments, including cash and cash equivalents,
accounts receivable, and accounts payable, are carried at cost which
approximates their fair value. The carrying value of the Company's
operating lease is estimated to approximate prevailing market rates, and
in the opinion of management does not require adjustment.
Cash and cash equivalents:
The Company considers all highly liquid investments with original
maturities of three months or less to be classified as cash equivalents.
Cash equivalents are carried at cost, which approximates market value.
The Company places its cash investments in high credit quality
instruments.
F-8
<PAGE> 33 TSUNAMI MEDIA CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2000 AND FOR THE PERIOD
FROM INCEPTION (SEPTEMBER 10, 1998) TO MARCH 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Property and equipment:
Property and equipment are stated at cost. The Company has a policy of
capitalizing asset acquisition costs. Costs incurred in the enhancement
and development of such assets are also capitalized for purposes of
aggregating total costs of the assets. When the assets are placed in
service, these assets are depreciated or amortized over their estimated
useful lives, generally ranging from three to five years.
Advertising costs:
Advertising costs, except for costs associated with direct-response
advertising, are charged to operations when incurred. The costs of
direct response advertising are capitalized and amortized over the period
during which future benefits are expected to be received.
Foreign currency translation:
The Company reports in US currency. Certain transactions are undertaken
in Canadian currency which does not exchange at par with the US currency.
As a result, assets and liabilities and revenues and expenses are
translated at exchange rates, on average, prevailing at the transaction
date. Gains or losses resulting from the translations are included in
the statement of operations.
Revenue recognition:
Revenue from sales is recognized when persuasive evidence of an
arrangement exists, delivery has occurred or services have been rendered,
the price to the buyer is fixed and determinable and collectibility is
reasonably assured. The Company warrants products against defects, has
a policy concerning the return of products and will accrue the cost of
warranting these products as the items are shipped.
Research and development:
Research and development expenses relate primarily to the purchase of
software and the technological development and enhancement of the
Company's software products. Research and development costs are charged
to expense as incurred.
Recent accounting pronouncements:
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income," which establishes
standards for reporting and displaying comprehensive income and its
components in a full set of general purpose financial statements. This
statement is effective for the Company in fiscal 1999. Comprehensive
income generally represents all changes in stockholders' equity except
those resulting from transactions by stockholders. There was no impact
to the Company as a result of the adoption of SFAS No. 130, as there were
no differences between net loss and comprehensive loss available to
common stockholders for the year ended March 31, 2000.
<PAGE> 34
TSUNAMI MEDIA CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2000 AND FOR THE PERIOD
FROM INCEPTION (SEPTEMBER 10, 1998) TO MARCH 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
In June, 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 131 requires
publicly held companies to report financial and other information about
key revenue-producing segments of the entity for which such information
is available and is utilized by the chief operating decision maker.
Specific information to be reported for individual segments includes
profit or loss, certain revenue and expense items and total assets. A
reconciliation of segment financial information to amounts reported in
the consolidated financial statements is also to be provided. SFAS No.
131 is effective for the Company in fiscal year 1999. The Company has
adopted this statement and identifies its operations based on business
activities and management responsibility. For the reported periods, the
Company did not have reportable business segments under SFAS 131.
In December 1999, the Staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101"). This SAB summarizes certain of the
Staff's views in applying generally accepted accounting principles, to
revenue recognition in financial statements. The Company's revenue
recognition policy is in compliance with SAB 101.
In June 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of
Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-up
Activities." SOP 98-5 requires all start-up and organizational costs to
be expensed as incurred. It also requires all remaining historically
capitalized amounts of these costs existing at the date of adoption to be
expensed and reported as the cumulative effect of a change in accounting
principle. SOP 98-5 is effective for all fiscal years beginning after
December 31, 1998. The Company believes that the adoption of SOP 98-5 on
April 1, 1999, had no significant effect on its financial statements.
Patents and trademarks:
The Company has applied for patents and trademark registrations for its
products and significant product creations, such as the PATT server, the
Tsunami logo and name. Costs will be amortized over five years, once the
applications have been successful.
F-10
<PAGE> 35
TSUNAMI MEDIA CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2000 AND FOR THE PERIOD
FROM INCEPTION (SEPTEMBER 10, 1998) TO MARCH 31, 1999
NOTE 2 - PROPERTY AND EQUIPMENT
2000
Computers $ 45,755
Leasehold improvements 57,520
Office furniture and equipment 21,246
---------
Total property and equipment, at cost 124,521
Accumulated depreciation 14,877
---------
Net property and equipment $ 109,644
=========
NOTE 3 - LONG-TERM RECEIVABLES
Long-term receivables consist of the following:
10% debentures from Sport Active $ 1,631,361
Television Network, Inc., convertible
into common stock at $0.50 per share,
due October 31, 2002
Note receivable from Sport Active Television 421,655
network, Inc., dated October 22, 1996, with
interest at Royal Bank of Canada prime rate
plus 1.25% per annum
Trade debt receivable from Sport Active 1,405,145
Television Network, Inc., dated April 23, 1998
with interest at 6.5% per annum
-----------
Total long-term receivables 3,449,161
Discount to fair value of consideration
given for purchase (2,680,294)
-----------
Long-term receivables $ 768,867
===========
The above debentures and notes receivables have accrued interest of
approximately $1,123,500 from the date of the notes and will be reduced
by royalties earned by Sport Active Television Network, Inc. as earned.
(See below)
F-11
<PAGE> 36
TSUNAMI MEDIA CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2000 AND FOR THE PERIOD
FROM INCEPTION (SEPTEMBER 10, 1998) TO MARCH 31, 1999
NOTE 3 - LONG-TERM RECEIVABLES - CONTINUED
During the year ended March 31, 2000, the Company purchased from various
individuals and companies, debentures receivable from Sport Active
Television Network, Inc. in the amount of $1,631,361. The debentures
were purchased by issuing one share of common stock for every $1.72 of
principal value of each respective debenture or 948,800 shares of common
stock.
On June 9, 1999, the Company purchased from an unrelated entity, a note
receivable from Sport Active Television Network, Inc. in the amount of
$412,655. The purchase price for the loan and security was $60,729 and
200,000 shares of common stock.
On December 14, 1999, the Company purchased from an unrelated entity,
trade debts of Sport Active Television Network, Inc. in the amount of
approximately $1,405,145. The purchase price for the trade debt was
$33,738 and 200,000 shares of common stock.
The above issues of common stock for long-term receivables have been
valued at $.50 per share of common stock issued, which is the price paid
for a share of common stock in cash sales to third parties at
approximately the same date of the purchase agreement.
In a letter agreement dated May 31, 1999, with Sport Active Television
Network, Inc. (SAT), the Company has agreed to pay SAT a royalty of $.10
for each copy of game software sold by the Company to customers. Any
royalties earned by SAT will be offset against the above receivables plus
accrued interest until paid in full. As of March 31, 2000, the Company
has not sold any software and has not reduced the receivables since no
royalties have been earned.
NOTE 4 - RELATED PARTY TRANSACTIONS
During the reporting period, the Company obtained services from a firm of
which one of its directors is a partner. This firm provided legal
services amounting to approximately $40,000.
The Company has entered into consulting agreements with officers of the
Company. Certain of the agreements with the officers have an initial
term of one year, automatically renewable for a further one year period.
The agreements provide for severance in the event of termination without
cause. The agreements also provide options to purchase common shares of
the Company at an exercise price of $1.00 per share. As of the reporting
date, no options have been exercised. (See Note 8)
F-12<PAGE> 37
TSUNAMI MEDIA CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2000 AND FOR THE PERIOD
FROM INCEPTION (SEPTEMBER 10, 1998) TO MARCH 31, 1999
NOTE 5 - LEASE COMMITMENTS
The Company has entered into a operating lease to rent office space for
a period expiring July 31, 2003. Under this operating lease, the Company
is required to pay minimum rents as follows:
Year ended March 31:
2001 $ 23,357
2002 20,583
2003 20,583
2004 6,861
---------
$ 71,384
=========
NOTE 6 - INCOME TAX
Income tax is as follows:
2000 1999
Income tax asset $ (914,600) $ (5,800)
Valuation allowance 914,600 5,800
---------- --------
Net income tax asset $ - $ -
========== ========
At March 31, 2000, the Company has a net operating loss (tax loss) carry
forward of $920,400 that expires beginning in 2014. The net operating
loss carryforward will be available to offset future taxable income, if
any. Due to the uncertainty of the utilization of the net operating loss
carryforward, a valuation allowance has been recorded as indicated above.
NOTE 7 - COMMON STOCK
During the year ended March 31, 2000, and period ended March 31, 1999,
the Company issued 6,675,000 shares of common stock to officers and
consultants as founders stock for cash. Based on the financial condition
of the Company and the limited operations at the time the stock was
issued, management estimates that the fair value of the Company's common
stock approximates its par value at the date of issue.
On December 6, 1999, the Company entered into an agreement to purchase
certain assets, primarily software and source codes and licensing rights,
for $750,000 and 2,000,000 shares of common stock. The common stock was
valued at $.50 per share, which is the price paid for a share of common
stock at the approximate date of the asset purchase agreement. The cost
of the assets in the amount of $1,750,000 has been charged to research
and development expense in the accompanying consolidated statements of
income.
<PAGE> 38
TSUNAMI MEDIA CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2000 AND FOR THE PERIOD
FROM INCEPTION (SEPTEMBER 10, 1998) TO MARCH 31, 1999
NOTE 7 - COMMON STOCK - CONTINUED
Also during the year ended March 31, 2000, the Company purchased
debentures, a note receivable and trade debts (receivables) of Sport
Active Television Network, Inc. for $94,467 and 1,348,800 shares of
common stock (see Note 3). The common stock was valued at $.50 per
share, which was the price paid for a share of common stock in cash sales
to third parties at the approximate date of the purchase of the
receivables. The cost of the receivables in the amount of $768,867 have
been recorded as long-term receivables on the accompanying consolidated
balance sheet.
NOTE 8 - STOCK OPTIONS
During the year ended March 31, 2000, the Company granted non-qualified
options to consultants as follows:
Shares
Under
Option
Options outstanding at beginning of year -
Options granted 983,900
Options exercised -
Options canceled -
-------
Options outstanding at end of year 983,900
=======
The following table summarizes the information about the stock options as
of March 31, 2000:
Weighted Weighted
Weighted Average Average
Average Exercise Number Exercise
Range of Number Remaining Price Number Price
Exercise Outstanding Contractual (Total Exercisable (Exercisable
Price at March 31 Life years shares) at March 31 Shares)
$ 1.00 75,000 2.00 $ 1.00 75,000 $ 1.00
0.50 200,000 2.00 0.50 200,000 0.50
2.00 100,000 0.25 2.00 - -
4.00 100,000 0.25 4.00 - -
6.00 50,000 0.25 6.00 50,000 6.00
8.00 50,000 0.25 8.00 50,000 8.00
1.00 408,900 2.00 1.00 408,900 1.00
------ ------- ---- ------ ------- ------
$ 0.50 to
$ 8.00 983,900 1.47 $ 1.91 783,900 $ 1.64
====== ======= ==== ====== ======= ======
<PAGE> 39
TSUNAMI MEDIA CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2000 AND FOR THE PERIOD
FROM INCEPTION (SEPTEMBER 10, 1998) TO MARCH 31, 1999
NOTE 8 - STOCK OPTIONS - CONTINUED
The Company estimated the fair value of each stock option at the grant
date by using the Black-Sholes option pricing model. Consulting fees in
the amount of $12,000 has been recorded in the accompanying financial
statements for options granted to consultants.
NOTE 9 - LOSS PER SHARE
SFAS No. 128 requires dual presentation of basic and diluted earnings per
share (EPS) on the face of all income statements for all entities with
complex capital structures. Basic EPS is computed as net income (loss)
divided by the weighted average number of common shares outstanding for
the period. Diluted EPS reflects the potential dilution that could occur
from common shares issuable through stock options, warrants and other
convertible securities. The Company had no dilutive potential common
stock at March 31, 2000 or 1999, and therefore, basic and diluted EPS are
the same for both periods.
The following data details the amounts used in computing loss per share
(EPS) and the effect on income and the weighted average number of shares
of dilutive potential common stock.
Cumulative
During
Development
2000 1999 Stage
Loss available to common
Stockholders used in
basic EPS $ (2,972,549) $ (17,020) $ (2,989,569)
============ =========== ============
Weighted average number
of common shares in
basic EPS 5,419,140 1,647,000 5,419,140
Effect of dilutive securities:
Options - - -
------------ ----------- ------------
Weighted number of common
shares and dilutive
potential common stock
used in diluted EPS 5,419,140 1,647,000 5,419,140
============ =========== ============
F-15
<PAGE> 40
TSUNAMI MEDIA CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2000 AND FOR THE PERIOD
FROM INCEPTION (SEPTEMBER 10, 1998) TO MARCH 31, 1999
NOTE 9 - LOSS PER SHARE - CONTINUED
Options on 983,900 shares of common stock as of March 31, 2000, are not
included in computing diluted EPS, since there is an incremental per
share effect of zero under the treasury stock method required by FASB 128
"Earnings Per Share."
NOTE 10 - COMMITMENTS
During the year ended March 31, 2000, the Company acquired from Sport
Active Television Network, Inc. (SAT) and Tsunami Media, Inc., licenses
to compile, use, copy and modify certain software and to create and
manufacture products and services. Additionally, the license agreement
provides that the Company may sub-license any products and services that
it creates using the technology under the licensing agreements. The
license was acquired by the issuance of common stock, and a royalty fee
(see Notes 3 and 7).
The Company has entered into several agreements with various companies
for these companies to market and distribute gaming software produced by
the Company. The agreements provide for royalties to be paid for the
sale of various games.
The Company has entered into agreements to obtain consulting services.
The agreements provide for monthly payments and are usually for a term of
one year.
NOTE 11 - SUBSEQUENT EVENTS
The Company has commenced activities to register for sale $4,000,000 of
equity units in the Company to finance the next step of its business
plan. These units, priced at $4.00 each, consist of 2 common shares plus
a warrant exercisable at $6.00 per share. The net proceeds are expected
to be used for game development, payment for assets acquired, marketing
and promotion, and working capital. This offering is targeted to have an
initial closing on May 15, 2000.
F-16
<PAGE> 41
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial
disclosures through the date of this Registration Statement.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) List of Financial Statements
Independent Auditors' Report
Balance Sheet
Statement of Income
Statement of Cash Flows
Statement of Shareholders' Equity
Notes to Financial Statements
b) List of Exhibits.
Exhibit No. Description
3.1 * Articles of Incorporation.
3.2 * Amended Articles of Incorporation
3.3 * Bylaws.
4.1 * Specimen Stock Certificate.
4.2 * Specimen Warrant Certificate
10.1 * Asset Purchase Agreement
10.2 * Digital River Vendor Agreement
10.3 * Registration Rights Agreement
27.1 * Financial Data Schedule
99.1 * Contract with Peter Leeuwerke
99.2 * Contract with William Buterman
* Previously filed.
<PAGE> 42
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
Tsunami Media Corporation
BY: /s/ Peter Leeuwerke
Peter Leeuwerke, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10-SB/A-1 Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:
Signatures Title Date
/s/ Peter Leeuwerke
Peter Leeuwerke President, Chief Executive Officer 07/24/00
and a member of the Board of Director
/s/ William Buterman
William Buterman Chief Operations Officer and a 07/24/00
member of the Board of Directors
/s/ Jamil Kanany
Jamil Kanany Secretary/Treasurer and Chief 07/24/00
Financial Officer
