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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-27493.
FREEREALTIME.COM, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0881720
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
3333 Michelson Drive
Suite 430
Irvine, California
----------------------------------------
(Address of principal executive offices)
(949) 833-2959
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ ] No [X*]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at February 11, 2000
- --------------------------------------- --------------------------------
Common Stock, par value $0.01 per share 6,911,265 shares
- ------------------------
* The Company has not been subject to such filing requirements for the past
90 days.
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FREEREALTIME.COM, INC.
FORM 10-Q
FOR THE QUARTER ENDED
DECEMBER 31, 1999
INDEX
Page No.
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Part I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets-
December 31, 1999 and March 31, 1999 1
Unaudited Consolidated Statements of Operations-
For the Three Months Ended December 31, 1999 and 1998 2
Unaudited Consolidated Statements of Operations-
For the Nine Months Ended December 31, 1999 and 1998 3
Unaudited Consolidated Statements of Cash Flows-
For the Nine Months Ended December 31, 1999 and 1998 4
Notes to Unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE 13
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FREEREALTIME.COM, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
As of December 31, 1999 and March 31, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS December 31, March 31,
1999 1999
------------ ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,510 $ 493
Accounts receivable, net of allowance for
doubtful accounts of $81 and $66, respectively 934 358
Prepaid expenses and other current assets 461 8
------- -------
Total current assets 4,905 859
------- -------
Property, plant and equipment, net 569 265
Other assets, net 292 8
------- -------
$ 5,766 $ 1,132
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current installments of note payable to bank $ 32 $ 70
Current installments of loan payable to shareholders -- 3
Current portion of capital lease obligations 22 11
Trade accounts payable 4,266 2,078
Advances payable -- 250
Accrued expenses 84 44
Deferred revenue - short term 348 79
------- -------
Total current liabilities 4,752 2,535
------- -------
Deferred revenue - long term 250 --
Note payable to bank, excluding current portion -- 12
Notes payable to stockholders, excluding current portion 13 38
Capital lease obligations, net of current portion 35 8
Stockholders' equity:
Preferred stock, no par value, 5,000,000 shares authorized;
no shares issued and outstanding -- --
Common stock, no par value 50,000,000 shares authorized;
6,808,265 and 6,537,990 issued and outstanding at 8,075 1,550
December 31 and March 31, 1999, respectively
Accumulated deficit (6,864) (2,807)
Unearned Compensation (495) (204)
------- -------
Total stockholders' equity (deficit) 716 (1,461)
Commitments and contingencies
------- -------
$ 5,766 $ 1,132
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
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FREEREALTIME.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
Three Months ended December 31, 1999 and 1998
(Dollars in thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months ended December 31,
-------------------------------
1999 1998
---------------- ------------
<S> <C> <C>
Revenues $ 1,625 $ 366
Cost of revenues 1,039 654
--------- ---------
Gross profit 586 (288)
General, administrative, selling and development expenses 1,221 312
Non-cash charge - stock option grants 1,241 --
--------- ---------
Total general, administrative, selling and
development expenses 2,462 312
Interest expense (income) (34) 4
--------- ---------
Net loss $ (1,842) $ (604)
========= =========
Basic and diluted loss per common share $ (0.27) $ (0.09)
========= =========
Common shares used in computing basic and diluted
per share amounts 6,747,512 6,537,990
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
2
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FREEREALTIME.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Operations
Nine Months ended December 31, 1999 and 1998
(Dollars in thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months ended December 31,
------------------------------
1999 1998
-------------- -------------
<S> <C> <C>
Revenues $ 4,466 $ 733
Cost of revenues 3,869 1,394
--------- ---------
Gross profit 597 (661)
General, administrative, selling and development expenses 2,895 489
Non-cash charge - stock option grants 1,784 --
--------- ---------
Total general, administrative, selling and
development expenses 4,679 489
Interest expense (income) (25) 12
--------- ---------
Net loss $ (4,057) $ (1,162)
========= =========
Basic and diluted loss per common share $ (0.65) $ (0.22)
========= =========
Common shares used in computing basic and diluted
per share amounts 6,213,483 5,286,363
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
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FREEREALTIME.COM, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
Nine Months ended December 31, 1999 and 1998
(Dollars in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months ended December 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(4,057) $(1,162)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 122 24
Provision for doubtful accounts 81 8
Non-cash charge - stock options 1,784 --
Receivables (657) (226)
Inventories, prepaid expenses and other assets (737) (73)
Trade accounts payable and accrued liabilities 2,228 1,091
Unearned revenue 519 49
------- -------
Net cash used in operating activities (717) (289)
------- -------
Cash flows from investing activities:
Capital expenditures (384) (124)
------- -------
Net cash used in investing activities (384) (124)
------- -------
Cash flows from financing activities:
Advances payable (250) 250
Borrowings (Repayments) of long-term debt (10) 84
Repayments of short-term debt (14) (97)
Proceeds from issuance of common stock 4,914 965
Stock issuance costs (522) (75)
------- -------
Net cash provided by financing activities 4,118 1,127
------- -------
Net increase in cash 3,017 714
Cash at beginning of period 493 55
------- -------
Cash at end of period $ 3,510 $ 769
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 13 $ 7
======= =======
Supplemental disclosure of noncash investing and financing activities:
Borrowings related to the acquisition of assets 57 --
======= =======
Unearned compensation related to stock options 2,075 --
======= =======
Common stock issued to pay for stock issuance fees 84 500
======= =======
</TABLE>
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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENT FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 1999
1. BASIS OF PRESENTATION
The consolidated financial statements as of December 31, 1999 and for
the nine-month periods ended December 31, 1999 and 1998, include, in the opinion
of management, all adjustments (consisting of normal recurring adjustments and
reclassifications) necessary to present fairly the financial position, results
of operations and cash flows at December 31, 1999 and for all periods presented.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the consolidated financial
statements and notes thereto for the year ended March 31, 1999, which can be
found in the Company's registration statement on Form 10-SB, effective as of
December 1, 1999 and incorporated herein by this reference. The results of
operations for the nine-month period ended December 31, 1999 are not necessarily
indicative of the operating results to be expected for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
2. SALE OF UNREGISTERED SECURITIES (AMOUNTS ARE ACTUAL, NOT IN THOUSANDS)
In June and July 1999, the Company offered units consisting of one
share of common stock and one warrant to purchase one additional share of common
stock. The price of each unit was $4.00 and 182,500 units were issued for total
offering proceeds of $730,000 (less issuance costs of $96,000). The Company
relied on the registration exemption in Section 4(2) of the 1933 Act to issue
these units without registering the underlying securities. In September and
October 1999, the Company offered shares of common stock at a price of $5.00 per
share. 836,700 shares were issued for total offering proceeds of $4,183,500
(less issuance costs of $426,000). The Company relied on the registration
exemption in Section 4(2) of the 1933 Act to issue these shares without
registration.
3. REDUCTION IN COMMON SHARES OUTSTANDING
In November 1999, the Company entered into an agreement with certain
shareholders to resolve an outstanding matter. As a result, these shareholders
agreed to return to the Company an aggregate of 773,992 shares of common stock
for cancellation. All common shares and per share amounts have been adjusted
retroactively back to April 1, 1999 to reflect the effects of the cancellation
of these shares.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
The following discussion should be read in conjunction with our
Consolidated Financial Statements and notes thereto.
OVERVIEW
We are a Web-based provider of real-time financial market information
services and analytic tools. Through our Freerealtime.com Web site, we strive to
be a vertical portal for real-time financial information with free, real-time
stock quotes and value-added content, including news, market commentary, company
research, and analytic tools such as charting and portfolio stock tracking. We
completed our third quarter ended December 31, 1999 with over 880,000 registered
users, a portion of whom hit our site ("page views") approximately 182 million
times in the month of December 1999. A registered user is described as a unique
user who completes an online survey and registration form to obtain a login
identification and password for free access to "members-only" parts of our Web
site. For the last month or our third fiscal quarter ending December 31, 1999,
we experienced approximately 76% growth in registered users and page views from
March 1999, the last month of the fiscal year ended March 31, 1999, when we had
approximately 500,000 registered users along with approximately 103 million
page-views. A majority of our page views are real-time quotes, though the
Freerealtime.com site also provides market news, research, commentary, message
boards, and other information. The Freerealtime.com Web site is offered free of
charge to our registered users and the sale of advertising represents our
primary source of revenue from this Web site.
We also own and operate the Web site, BullSession.com, where we
currently offer active investors a subscription service of "streaming" real-time
quotes and dynamically updating stock portfolios. Our subscriber count on this
Web site has also shown significant growth during the nine months ended December
31, 1999. BullSession.com had in excess of 3,500 subscribers as of the end of
March 1999, and by the end of December 1999 the site had approximately 5,000
subscribers, representing 43% growth over the nine month period. Our source of
revenue from the BullSession.com Web site is the sale of subscriptions at
monthly prices ranging from $26 to $50.
Prior to the fiscal year commencing April 1, 1998 and ending March 31,
1999 ("Fiscal 1999"), our operating activities consisted largely of developing
our Freerealtime.com and BullSession.com Web sites, along with the systems and
infrastructure necessary to support these sites, although limited revenue from
subscriptions to the Bullsession.com site was generated in the year ended March
31, 1998. We have incurred substantial costs to date in creating and developing
our Web sites. These costs include significant purchases of computer hardware
and software, the hiring of software developers and information technology
personnel, technical and customer support personnel, executive management, key
strategic consultants, sales and marketing staff, accounting personnel, and
administrative support personnel. We have also incurred substantial costs in
supporting the traffic on our Web sites including market data costs, co-location
and bandwidth costs, and data-feed costs. Our spending has been focused on
providing financial related content and real-time market data. As a result, we
have incurred significant net losses in each fiscal quarter since inception. We
expect these net losses, as well as negative cash flow from operations, to
continue for the foreseeable future as we plan to substantially increase our
operating and capital expenditures in order to continue building site traffic
and brand awareness. Our current sources of revenue with respect to the
Freerealtime.com site include ad sales, sponsorship fees, web-hosting fees and
co-branding revenues. For BullSession.com, our source of revenue is subscription
fees.
Our management efforts and strategies are oriented to enhancing our
existing revenues, as well as developing new revenue opportunities. These
efforts include (i) regularly updating and expanding our Freerealtime.com Web
site in order to exhibit more robust functionality, additional content and
greater ease-of-use, (ii) building our in-house direct ad sales force to
increase revenues, (iii) pursuing higher prices, referred to as
cost-per-thousand, for our ad impressions through greater use of user
"targeting" ad serving technology and the addition of non-quote content pages,
(iv) focusing on revenue alternatives to banner advertising sales, including
email marketing revenues, sponsorship fees, revenue sharing from new co-branding
ventures, and opportunities in on-line transaction services, and (v) developing
and acquiring new content to be offered on the Freerealtime.com
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site. We also have strategies to drive growth in our subscriber base, and
thereby increase our subscription fees, by enhancing our BullSession.com service
and adding new subscription-based tools and content services. Apart from our
efforts to grow our revenues, we believe that our costs per page view should
continue to decline over time due to declining costs in programming, data-feed
and other services from our suppliers as well as from the effect of spreading
certain fixed costs over greater page view traffic. Though we expect to continue
incurring net losses for the foreseeable future, we plan to continue to execute
on these and other measures that are designed with an objective of achieving
profitable operations, although we cannot give any assurances that we will
achieve such objective.
THREE AND NINE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THE THREE AND NINE
MONTHS ENDED DECEMBER 31, 1998
REVENUES
Revenues increased by 344% from $366,000 in the three months ended
December 31, 1998 to $1,625,000 for the three months ended December 31, 1999,
and increased by 509% from $733,000 in the nine months ended December 31, 1998
to $4,466,000 for the nine months ended December 31, 1999. The increase in
revenue, which is comprised primarily of ad sales and subscription fees, was a
direct result of the substantial increase from period to period in the number of
users, page views, and ad impressions on the Freerealtime.com Web site and in
the number of subscribers on the BullSession.com Web site.
Revenue from advertising on Freerealtime.com increased by 400% from
$211,000 in the three months ended December 31, 1998 to $ 1,054,000 in the three
months ended December 31, 1999, and increased by 554% from $413,000 in the nine
months ended December 31, 1998 to $2,700,000 for the nine months ended December
31, 1999. Revenue from subscriptions to the BullSession.com Web site increased
by 231% from $129,000 in the three months ended December 31, 1998 to $427,000 in
the three months ended December 31, 1999, and increased by 382% from $272,000 in
the nine months ended December 31, 1998 to $1,310,000 for the nine months ended
December 31, 1999. Revenue from web-hosting and co-branding ventures increased
by 454% from $26,000 in the three months ended December 31, 1998 to $144,000 in
the three months ended December 31, 1999, and increased by 850% from $48,000 in
the nine months ended December 31, 1998 to $456,000 for the nine months ended
December 31, 1999.
COST OF REVENUES
Cost of revenues increased by 59% from $654,000 in the three months
ended December 31, 1998 to $1,039,000 in the three months ended December 31,
1999, and increased by 178% from $1,394,000 in the nine months ended December
31, 1998 to $3,869,000 for the nine months ended December 31, 1999. The period
to period increase was the result of the substantial increase in the site
traffic on our Web sites as most of the components of cost of revenues are based
on certain measures of site traffic volume, including the number of real-time
quotes, the number of periodic users, and the amount of communications bandwidth
utilized. Cost of revenues as a percent of revenues decreased from 179% in the
three months ended December 31, 1998 to 64% in the three months ended December
31, 1999, and decreased from 190% in the nine months ended December 31, 1998 to
87% for the nine months ended December 31, 1999. This change was primarily the
result of reduced rates paid for real-time quotes from the Exchanges and reduced
datafeed costs, as well as from economies of scale associated with higher
volumes of Web-site traffic and revenues.
OPERATING EXPENSES
Sales And Marketing. Sales and Marketing expense increased by 190% from
$115,000 in the three months ended December 31, 1998 to $334,000 in the three
months ended December 31, 1999, and increased by 415% from $168,000 in the nine
months ended December 31, 1998 to $865,000 for the nine months ended December
31, 1999. Sales and Marketing expense as a percent of revenues decreased from
31% in the three months ended December 31, 1998 to 21% in the three months ended
December 31, 1999, and decreased from 23% in the nine months ended December 31,
1998 to 19% in the nine months ended December 31, 1999. The period to period
increase on an absolute dollar basis was primarily the result of increased
advertising sales commissions paid to third party ad sales firms, as well as
increased costs of additional employees and consultants
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retained to manage our advertising sales function and to direct the overall
marketing efforts of the Company, including the development of an in-house ad
sales force and new marketing programs during Fiscal 2000. The period to period
decrease as a percent of revenues was primarily due to economies of scale
associated with higher volumes of Web-site traffic and revenues.
General and Administrative. General and administrative expense
increased by 378% from $168,000 in the three months ended December 31, 1998 to
$803,000 in the three months ended December 31, 1999, and increased by 610% from
$264,000 in the nine months ended December 31, 1998 to $1,875,000 for the nine
months ended December 31, 1999. General and administrative expense as a percent
of revenues increased from 46% in the three months ended December 31, 1998 to
49% in the three months ended December 31, 1999, and increased from 36% from the
nine months ended December 31, 1998 to 42% for the nine months ended December
31, 1999. The period to period increase on an absolute dollar and percentage
basis was primarily the result of increased costs of additional personnel,
including administrative and technical personnel, fees for independent
consultants providing management advisory and investor relations services, as
well as greater occupancy costs, legal and accounting fees, telecommunications
costs, and other overhead costs associated with managing our rapid growth in
traffic on our Web sites.
Product Development. Product development expense increased by 190% from
$29,000 in the three months ended December 31, 1998 to $84,000 in the three
months ended December 31, 1999, and increased by 172% from $57,000 in the nine
months ended December 31, 1998 to $155,000 for the nine months ended December
31, 1999. Product development expense as a percent of revenues decreased from 8%
in the three months ended December 31, 1998 to 5% in the three months ended
December 31, 1999, and decreased from 8% in the nine months ended December 31,
1998 to 3% in the nine months ended December 31, 1999. The period-to-period
increase on an absolute dollar basis was primarily the result of costs of
additional personnel, including costs for software developers, as well as fees
paid to third party developers and systems consultants. The period to period
decrease as a percent of revenues was primarily due to economies of scale
associated with higher volumes of Web-site traffic and revenues.
Non-Cash Charges-Stock Option Grants. For the three months ended
December 31, 1999, we recorded an additional amount of aggregate unearned
compensation of $1,661,000, as compared to $-0- for the three months ended
December 31, 1998, and $2,075,000 for the nine months ended December 31, 1999 as
compared to $-0- for the nine months ended December 31, 1998, reflecting the
grant of stock options to employees and non-employees. These options were
granted at exercise prices less than the fair market value of the underlying
common stock on the grant date. We expect to record additional unearned
compensation in future periods to reflect additional option grants at exercise
prices less than the fair market value of common stock on the grant date. For
the three months ended December 31, 1999, $1,241,000 was amortized to expense as
a non-cash charge from unearned compensation recorded as the result of vested
stock options granted during this as well as previous periods, as compared to
$-0- for the three months ended December 31, 1998. For the nine months ended
December 31, 1999, $1,784,000 was amortized to expense as a non-cash charge from
unearned compensation recorded as the result of vested stock options granted
during this as well as previous periods, as compared to $-0- for the nine months
ended December 31, 1998. As the unearned compensation expense is amortized based
on the vesting period of the granted stock options, we expect there will be
material variations in the amount of this expense from quarter to quarter and
that quarterly comparisons of such expense are not meaningful.
INTEREST INCOME (EXPENSE), NET
Net interest expense was $4,000 in the three months ended December 31,
1998, compared to net interest income of $34,000 generated in the three months
ended December 31, 1999. Net interest expense was $12,000 in the nine months
ended December 31, 1998, compared to net interest income of $25,000 generated in
the nine months ended December 31, 1999. Net interest income during the three
and nine months ended December 31, 1999 was earned on money market investments
from proceeds raised from the sale of the Company's common stock.
INCOME TAXES
We have incurred losses since inception and again during the three
months and nine months ended
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December 31, 1999, and anticipate losses for the foreseeable future. We have
therefore recorded no provision for income taxes during these periods. Deferred
tax assets for the three months and nine months ended December 31, 1999 which
would otherwise reflect the tax net operating loss carryforwards existing at the
balance sheet date, as well as the taxable temporary differences in the
treatment of certain items, are fully offset by valuation allowances. We will
reassess the need to record such valuation allowances, or a current or deferred
tax liability as appropriate, over future periods.
LIQUIDITY AND CAPITAL RESOURCES
To date, our operations have been financed primarily from the sale of
equity securities, and to a lesser extent, from a non-revolving loan from Royal
Bank in Calgary, loans from stockholders, directors, and other outside parties,
and from capital lease arrangements. As of December 31, 1999, approximately $3.5
million in cash and cash equivalents was on hand. All but $34,000, which was
restricted as collateral by Royal Bank, was available to the Company.
OPERATING ACTIVITIES
We used net cash in our operating activities in the amount of $717,000
during the nine months ended December 31,1999 as compared to $289,000 during the
nine months ended December 31, 1998, which was primarily the result of our net
losses for these periods and an increase in accounts receivable and prepaid
expense, partially offset by an increase in accounts payable and accrued
liabilities and unearned revenues, as follows:
NINE MONTHS ENDED DECEMBER 31, 1999 NINE MONTHS ENDED DECEMBER 31, 1998
----------------------------------- -----------------------------------
o Net loss of approximately o Net Loss of approximately
$4,057,000; $1,162,000;
o An increase in accounts o An increase in accounts
receivable of approximately receivable of approximately
$657,000; $226,000;
o An increase in prepaid expenses o An increase in prepaid expenses
and other assets of and other assets of approximately
approximately $737,000; $73,000
o An increase in accounts payable o An increase in accounts
and accrued expenses of payable and accrued expenses
approximately $2,228,000; of approximately $1,091,000;
o Depreciation of approximately o Depreciation of approximately
$122,000; $24,000;
o Non-cash charges-stock option o An increase in Unearned Revenue
grants of approximately of approximately $49,000.
$1,784,000; and
o An increase in Unearned
Revenue of approximately
$519,000.
Accounts payable increased as a result of an overall increase in our cost of
sales and operating expenses over the nine months ended December 31, 1999, as
our business has grown during this same period. This increase in accounts
payable from Fiscal 1999 forward primarily reflects amounts due in arrears as of
December 31, 1999 to our major suppliers of market data. Subsequent to the end
of Fiscal 1999, we have received sufficient net proceeds from the sale of equity
securities to fund the payment of these accrued accounts payable. The amount of
our accounts receivable at each period-end varies, primarily due to the timing
of revenue recognition associated with the running of our advertising and
sponsorship campaigns, and the growth in our Web-host related revenue and
subscription revenue. To date, we have not experienced material collection
difficulties, but have recorded certain write-offs of bad debts as well as an
allowance for uncollectible accounts.
INVESTING ACTIVITIES
Cash used in investing activities was approximately $384,000 during the
nine months ended December 31, 1999, compared to $124,000 during the nine months
ended December 31,1998, and consisted of property and equipment expenditures in
both periods.
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FINANCING ACTIVITIES
Net cash provided by financing activities was approximately $4,118,000
during the nine months ended December 31, 1999 compared to approximately
$1,127,000 during the nine months ended December 31,1998. Cash used in financing
activities during the nine months ended December 31, 1999, was approximately
$796,000, as compared to $172,000 during the nine months ended December 31,
1998, and consisted of payments of debt obligations and stock issuance costs.
Cash provided by financing activities during these same periods was
approximately $4,914,000 and $1,299,000, respectively, which consisted primarily
of gross proceeds from the sale of common stock, as well as shareholder advances
and loans to the company during the nine months ended December 31, 1998.
We have no material financial commitments other than obligations under
our bank loan agreements and under our leases. Subject to cash availability, we
anticipate significant increases in our operating and capital expenditures over
the foreseeable future, including:
o web-site development and enhancement for Freerealtime.com and
BullSession.com, including functionality, content, and
back-end systems;
o computer servers and other computer equipment to support
growth in site traffic;
o software developers, computer programmers, and other technical
staff;
o bandwidth and networking equipment and infrastructure;
o information systems and furniture and fixtures for new
employees and facilities expansion;
o additional personnel in the areas of sales, marketing,
business development, customer support, accounting, and
administration;
o increased promotional activities and branding efforts and
o content development and acquisition.
In addition to purchasing computer hardware, software, and office
equipment, we also lease certain equipment under short term and long term leases
with terms ranging from one to three years. We may exercise purchase options at
the end of the lease terms if determined to be favorable to replacing such items
at that time through lease renewal or capital acquisition. During Fiscal 2000 we
plan to spend up to $1,000,000 for computer hardware, software, office
equipment, and tenant improvements. We lease our Irvine, California facility
under a noncancelable operating lease that expires on May 31, 2000. We plan to
relocate our Irvine operations to a larger facility sometime in Fiscal 2000 or
2001. We will incur additional costs related to the relocation of the Irvine
operations and may have to pay rent on two leases for a period of time. We
recently moved our Calgary office into a larger facility in January 2000, under
a cancelable operating lease which expires on January 1, 2005. The timing of
these additional capital and operating expenditures, as well as the timing of
hiring additional personnel to support our growth plans, and our ability to
continue sustaining net losses and negative cash flows from operations will
depend largely on our ability to continue to obtain additional capital through
financing transactions. The failure to raise such capital when needed could have
a material adverse effect on our business, operating results, and our financial
condition. If additional funds are raised through the sale of equity, or
convertible debt securities, the percentage ownership of our stockholders will
be reduced, our stockholders may experience significant dilution and these
securities may have rights, preferences, or privileges senior to those of our
common stockholders. There can be no assurance that additional financing will be
available to us or on terms favorable to us. If adequate capital funds are not
available or are not available on acceptable terms, our ability to fund our
current growth plans and to take advantage of unanticipated opportunities, to
develop or enhance our Web sites, or otherwise to respond to competitive
pressures, could be significantly limited. Based on net proceeds received from
the sale of equity securities subsequent to the end of Fiscal 1999, and
management contingency plans to curtail our growth plans and reduce our current
scope of operations in the event that additional capital funds are not available
to us, management believes we can continue our operations through Fiscal 2000.
10
<PAGE> 13
During the nine months ended December 31, 1999 we completed two private
equity financings in which we sold an aggregate of 1,019,200 shares of Common
Stock, and stock purchase warrants to purchase 182,500 shares of Common Stock,
for total gross proceeds of $4,913,500.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Investors are cautioned that certain statements contained in this Form
10-Q as well as some of our statements in periodic press releases and some oral
statements of our officials during presentations about the company are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include statements
that are predictive in nature, which depend upon or refer to future events or
conditions, which include words such as "believes," "anticipates," "estimates,"
"expects" or similar expressions. In addition, any statements concerning future
financial performance, ongoing business strategies or prospects, and possible
future actions, which may be provided by our management, are also
forward-looking statements. Forward-looking statements are based on current
expectations and projections about future events and are subject to risks,
uncertainties, and assumptions about our company, economic and market factors
and the industry in which we do business, among other things. These statements
are not guaranties of future performance and we have no specific intention to
update these statements.
Actual events and results may differ materially from those expressed or
forecasted in forward-looking statements due to a number of factors. The
principal important risk factors that could cause our actual performance and
future events and actions to differ materially from such forward-looking
statements, include, but are not limited to, those set forth below:
o our limited operating history,
o intense competition for Web-based business and financial
content,
o need to establish and maintain strategic relationships with
other Web-sites,
o our dependence on the various Exchanges for real-time stock
quotes,
o inability to attract advertisers to our site,
o our reliance on a third party advertising sales force,
o changes in government regulation and legal uncertainties
pertaining to the Web, and
o disruptions and interruptions in service due to Web-site
failure.
Certain of these factors are discussed in more detail elsewhere in this
Form 10-Q and the Company's other filings with the Securities and Exchange
Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rate Sensitivity. The primary objective of our investment
activities is to preserve principal while at the same time maximizing the income
we receive from our investments without significantly increasing risk. Some of
the securities that we have invested in may be subject to market risk. This
means that a change in prevailing interest rates may cause the principal amount
of the investment to fluctuate. For example, if we hold a security that was
issued with a fixed interest rate at the then-prevailing market rate and the
prevailing interest rate later rises, the principal amount of our investment
will probably decline. To minimize this risk, we maintain our portfolio of cash
equivalents in money market funds. In general, money market funds are not
subject to market risk because the interest paid on such funds fluctuates with
the prevailing interest rate. As of December 31, 1999, all of our investments
mature in less than one year.
Exchange Rate Sensitivity. We are exposed to changes in the currency
exchange rate between U.S. Dollars and Canadian Dollars, to the extent that the
our wholly-owned Canadian subsidiary (First International Financial Corporation,
Calgary) has an inter-Company obligation to Freerealtime.com, Inc., as it had in
the amount of approximately $135,000 as of December 31, 1999. Any future
repayment of that obligation to Freerealtime.com, Inc. will result in a currency
exchange loss if re-paid at a time when the Canadian Dollar weakens against the
U.S. Dollar. Under our current policies, we do not use currency hedges (forward
contracts, options, etc.) to manage exposure to currency risk.
11
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 22, 1999 the Company held its Annual Meeting of
Stockholders for the following purposes:
o to elect three nominees to the Company's Board of Directors;
o to reincorporate in Delaware through the merger of the Company
and Freerealtime.com Delaware, Inc., a Delaware subsidiary
formed in August 1999; and
o to approve and adopt the Company's 1999 Equity Incentive Plan.
The number of shares entitled to vote at the meeting was 6,799,932 shares of the
Company's Common Stock. The total number of shares represented in person or by
proxy to vote was 4,260,722. The votes cast on each matter are set forth below:
1. Election of Directors: To elect the three nominees to the Company's
Board of Directors, the votes were as follows:
Name For Against
---- --- -------
Brad G. Gunn 4,260,722 0
Stuart Robson 4,260,722 0
John C. Gunn 4,260,722 0
2. Reincorporation: To reincorporate in Delaware the votes were as
follows:
For Against
--- -------
4,260,722 0
3. 1999 Equity Incentive Plan: To approve the adoption of the Company's
1999 Equity Incentive Plan, the votes were as follows:
For Against
--- -------
4,260,722 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
6.1 Amendment #1 to Representation Agreement by and between
Adsmart Corporation (successor in interest to 2CAN
Media,Inc.) and Freerealtime.com, Inc., dated
December 1, 1999.
6.2 Order Form/Addendum to Master Services Agreement by and
between Exodus Communications, Inc. and Freerealtime.com,
Inc., dated December 21, 1999.
6.3 Lease between Certus Developments, Inc. and
Freerealtime.com, Inc., dated October 25, 1999.
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K during the quarter ended
December 31, 1999.
12
<PAGE> 15
SIGNATURES
Pursuant to the requirements 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.
FREEREALTIME.COM, INC.
Date: February 14, 2000 /s/ Michael Neufeld
-------------------------------------------
Michael Neufeld
Executive Vice President, Chief Financial
Officer and Secretary (Duly Authorized
Officer, Principal Financial and
Accounting Officer)
13
<PAGE> 16
EXHIBIT INDEX
Exhibit No. Description Note No.
- ----------- ----------- --------
6.1 Amendment #1 to Representation Agreement by and between Adsmart
Corporation (successor in interest to 2CAN Media, Inc.) and
Freerealtime.com, Inc., dated December 1, 1999.
6.2 Order Form/Addendum to Master Services Agreement by and between
Exodus Communications, Inc. and Freerealtime.com, Inc.,
dated December 21, 1999.
6.3 Lease between Certus Developments, Inc. and Freerealtime.com, Inc.,
dated October 25, 1999.
27.1 Financial Data Schedule
14
<PAGE> 1
EXHIBIT 6.1
[ADSMART NETWORK LOGO]
AMENDMENT #1
ADVERTISING ALLIANCE AGREEMENT
This amendment agreement ("Amendment") is entered into on this 1st day of
December, 1999 (the "Effective Date"), by and between Adsmart Corporation, as
successor in interest to 2CAN Media, Inc. ("Adsmart"), with offices at 100
Brickstone Square, Andover, MA 01810 and FreeRealTime.com, Inc. ("FRT"), with
offices at 3333 Michelson Drive, Suite 430, Irvine, California 92612.
RECITALS
A. Adsmart and FRT entered into an Advertising Alliance Agreement ("the
Agreement"), dated March 10, 1999, in which FRT appointed Adsmart as its
exclusive third-party sales representative.
B. The parties desire to amend the agreement as indicated below.
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. Exclusivity. ADSMART is appointed a non-exclusive third-party sales
representative for FRT for the Initial Term and all Renewal Terms of this
Agreement.
2. Ad-Serving Fees - Specific Requests. If FRT requests that specific paid or
non-paid Campaigns, including, without limitation, house banners, which are
not sold by ADSMART, be served by ADSMART, FRT shall pay ADSMART $0.40 per
thousand impressions for all costs associated with serving, auditing and
reporting with respect to such Campaigns ("Serving Fee"). ADSMART shall
deduct such fees from payments owed to FRT for advertising revenue.
3. All other provisions and covenants of the Agreement remain in full force
and effect.
IN WITNESS OF THE FOREGOING, the parties have caused this agreement to be
signed as of the Effective Date set forth above.
Adsmart Corporation FreeRealTime.com, Inc.
By: /s/ JOHN FEDERMAN By: /s/ BRAD G. GUNN
--------------------------------- --------------------------------
Name: John Federman Name: Brad G. Gunn
------------------------------- ------------------------------
Title: CEO Title: President & CEO
------------------------------ -----------------------------
Date: 12/8/99 Date: 12/02/1999
------------------------------- ------------------------------
Page 1 of 1
<PAGE> 1
EXHIBIT 6.2
[EXODUS LOGO]
ORDER FORM
CUSTOMER BILL TO
Freerealtime.com Freerealtime.com
FIF001 217 10th Ave. South West
Calgary Alberta T2ROAG
Quote Date: January 06, 2000 IDC: LA/Irvine Payment Terms: Net 30
Form #: 1-30GV1 Revision: 1 Sales Person: Corbin Matousek
Valid From: Through: Order Status: Final Order Type: Upgrade
Requested Service Date: 12/21/1999 Initial Term: 6 Months [SIG]
<TABLE>
<CAPTION>
Monthly Extended Extended
Recurring Non-Recurring Monthly Non-Recurring
Line Services Description* IDC Qty Cost Cost Fees Fees
- ---- -------- ------------ --- --- ---------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 EXOD-FAST-LSU100 100 Mbps base LA/Irvine 1 $69,769.70 $0.00 $69,769.70 $0.00
Fast Ethernet
2 EXOD-FAST-U90 90 Mbps base LA/Irvine -1 -$62,799.75 $0.00 -$62,799.75 $0.00
Fast Ethernet
with 100 Mbps
burstability
========== =====
Total $ 6,969.95 $0.00
Variable Usage above Base
EXO-FAST-UV Variable Usage LA/Irvine 0 $ 800.00
Cost above
base
</TABLE>
- --------
*More detailed descriptions of the Services are contained in the specification
sheets and/or Scope of Work for each service, which are incorporated herein and
made a part hereof by this reference.
Customer's initials [SIG]
--------
Order Form: 1-30GV1 Rev: 1
[EXODUS LOGO]
Exodus Communications, Inc. Proprietary and Confidential rev. 8/99
Page 1 of 2
<PAGE> 1
EXHIBIT 6.3
THIS LEASE MADE THIS 25TH DAY OF OCTOBER, 1999.
BETWEEN:
CERTUS DEVELOPMENTS, INC., a body corporate having an office in the City of
Calgary in the Province of Alberta (hereinafter referred to as the
"Lessor")
OF THE FIRST PART
-and-
FREEREALTIME.COM, INC., a body corporate having an office in the City of
Calgary, in the Province of Alberta (hereinafter referred to as the
"Lessee")
OF THE SECOND PART
WHEREAS the Lessor is the registered owner of the certain lands the "Lands"
legally described as Lots 12 and 13 and the East Half of Lot 14, Block 6, Plan
Calgary 4453L (hereinafter referred to as "the said lands"). Upon the Lessor
Lands is a two-story office and retail building, hereinafter described as the
"Building". The municipal address for the second floor office premises located
within the Building is 2219 - 4th Street SW Calgary, Alberta, T2S 1X1.
1. DEMISED PREMISES
NOW THEREFORE THIS AGREEMENT WITNESSETH that, in consideration of the
rents, covenants and agreements hereinafter reserved and contained on the part
of the Lessee to be paid, observed and performed, the Lessor does demise and
lease unto the Lessee the second floor office premises located at the address
set out above and hereinafter referred to as the "Premises" together with all
rights and appurtenances whatsoever to the said Premises belonging or
appertaining thereto. The Premises shall include all of the second floor and its
contiguous main floor entry hallway, stairwells, and storage area. A plan of the
second floor office area is attached hereto as Schedule "A", (hereinafter called
"the Demised Premises").
The gross leasable area of the Premises is four thousand two hundred and
forty (4,240) square.
2. TERM AND RENT
The Term of this Lease shall be for Five (5) Years, commencing on the 1st
day of January, 2000 (the "Commencement Date") and to end and to be fully
completed on the 31st day of December, 2004 the "Expiration Date". Rent in
respect of the Premises shall be a gross annual rent payable in equal
consecutive monthly installments together with GST on the first day of the month
in the amount of Eighty-Five Thousand ($85,000.00) Dollars per annum, plus
G.S.T., divided into monthly installments of Seven Thousand Eighty-three Dollars
and Thirty-three ($7,083.33), plus G.S.T. The Lessor acknowledges receiving the
sum of $30,316.65 representing payment of the last four (4) months rent plus GST
payable in the Term of this Lease.
For further clarification all rental payments shall be made in lawful money of
Canada and shall be paid by the Lessee to the Lessor at such place as the Lessor
may from time to time designate.
<PAGE> 2
The Operating Costs, Realty Taxes, and Management fees for the Building,
as defined in Schedule "B" hereto are included in the Gross Rent. Any increase,
adjustment, or changes in the Operating Costs and Taxes will have no effect on
the Gross Rent payable during the Term by the Lessee to the Lessor.
Notwithstanding which the Lessee shall be responsible for its business taxes,
telephone, satellite, cable or internet costs and the costs of all separately
metered utilities serving the Premises.
THE LESSEE COVENANTS AND AGREES WITH THE LESSOR AS FOLLOWS:
3. PAYMENT OF RENT
The Lessee will during the Term promptly pay or cause to be paid to the
Lessor the rents reserved at the time and in the manner hereinbefore mentioned
without any deductions whatsoever, and shall observe and perform and permit no
violation of each and every of the terms, conditions, covenants, agreements and
provisos herein contained on the part or on behalf of the Lessee to be observed
and performed.
4. USE OF PREMISES
The Premises shall be used and occupied by the Lessee solely for the
purposes of general offices and for no other purpose. Nothing contained herein
to the contrary shall allow the Lessee, or any assignee, or sub-lessee to use
the Premises for the purposes of retailing espresso based coffee beverages for
on or off premises consumption, or the providing of financial services typically
offered by a chartered bank in Canada. Lessor acknowledges that it has a
complete understanding of Lessee's existing and contemplated business at the
time of the execution of this Lease and further acknowledges Lessee's
compliance with this paragraph.
5. NUISANCE OR ANNOYANCE
The Lessee will not carry on any business or occupation or do anything or
permit anything to be done in or about the Premises that shall be deemed a
nuisance or which shall be in contravention of any law or which shall cause
annoyance to the Lessor or to any other occupants of the Building, nor suffer
nor permit the Premises to be used for any purpose other than the use
hereinbefore specifically mentioned.
6. PROTECTION OF PREMISES
a) The Lessee will not keep or store or suffer or permit to be kept,
stored or used in or upon the Premises any inflammable oils,
substances or materials unless such inflammable oils, substances or
materials are kept in proper storage facilities within the Premises as
required by the City By-laws, the City Fire Regulations and approved
by the fire and liability insurance company who have or may at any
time hereafter place fire and liability coverage in respect of the
Building and/or the Premises.
b) The Lessee shall not carry on any operation or work whereby any
insurance in respect of:
i) the Premises;
ii) all or any part of the Building of which they form a part; and/or
iii) the contents of any space in the Building
which may become void or voidable, or which would increase the rate
for insurance (including contents) in comparison to normal insurance
costs in comparable buildings.
2
<PAGE> 3
PROVIDED HOWEVER, in the event that any insurance rates as aforesaid shall
be increased above those paid as of the date hereby by the Lessor and/or in the
event that at any time hereafter the insurance cost to any other lessee in
respect of the Building is increased by virtue of the Lessee's use or occupation
of the Premises, the Lessee shall pay to the Lessor the amount by which the
insurance premium shall be so increased or the Lessee shall (at the election of
the Lessor) provide additional insurance coverage as may be required at its own
expense in order that the original amount and type of insurance coverage shall
be maintained. If notice of cancellation shall be given respecting any insurance
policy or if any insurance policy be refused to be renewed by an insurer by
reason of the use or occupation of the Premises or any part thereof by the
Lessee or by anyone permitted by the Lessee to be upon the Premises, the Lessee
shall forthwith remedy or rectify such occupation or use upon being requested to
do so in writing by the Lessor. If the Lessor shall fail to do so forthwith or
shall (at the election of the lessor) fail to procure equivalent insurance to
that cancelled or refused, the Lessor may at its option terminate this Lease and
the Lessee shall immediately deliver up vacant possession of the Premises to the
Lessor.
7. ASSIGNMENT AND SUBLETTING
The Lessee shall not assign or sublet without the prior written consent of
the Lessor (which consent shall not be unreasonably withheld) provided that no
assignment or subletting shall discharge or release the Lessee from the full
observation and performance of all the terms, conditions, covenants, agreements
and provisos herein contained on the part of the Lessee to be observed and
performed (subject to the release of Lessee as to the terms of this provision as
described in the following paragraph). The Lessee shall, in respect of any
assignment or sublease, cause the assignee or sublessee from time to time of the
Lessee's interest in respect of this lease, and concurrent with or prior to the
assignment or subletting, to enter into an agreement in writing with the Lessor
covenanting and agreeing to observe, perform and be bound by all of the terms,
conditions, covenants, agreements and provisos herein contained on the part of
the Lessee to be observed and performed. The Lessee shall be liable and
responsible for all reasonable third party legal costs incurred by the Lessor in
either preparing, revising, considering or approving any written agreement
submitted to the Lessor pursuant to the immediately preceding sentence, such
costs to be payable by the Lessee on request for payment by the Lessor.
PROVIDED FURTHER, HOWEVER, that within seven (7) days of receipt of notice from
the Lessee of its intention to assign, pledge or sublease the Premises, the
Lessor may serve notice upon the Lessee of its intention to accept a surrender
of the Lease of the Premises and the Lessee shall surrender the Lease of the
Premises. PROVIDED FURTHER, HOWEVER, that in the event of such assignment or
subletting, all monies paid by the Assignee or Sublessee shall be paid directly
to the Lessor who shall credit the sum as and when received to payments required
and reserved hereunder. The Lessor and the Lessee shall share any excess of such
monies over and above monies payable and reserved hereunder (the "Excess") for
their own use, respectively, absolutely and forever, specifically, the Lessor
shall receive 60% of the Excess and the Lessee shall receive 40% of the Excess.
The Lessor shall remit to the Lessee the Lessee's 40% portion of the Excess
within seven (7) days of the Lessor's receipt of such Excess. In the case of
such sublease of the premises, the Lessor has the right to fully release the
Lessee from any and all further obligations under this Lease forever. If the
Lessor elects to release the Lessee under these conditions, then the Lessor will
notify the Lessee in writing of such release. The Lessor will also specify in
such written notification that it is granting a full release to the Lessee of
any obligations and covenants under this Lease forever and will specify the
effective date of such release. Upon such release, the Lessor will then be
entitled to retain 100% of the Excess received on payments received pursuant to
the sublease after such effective date of the release. Additionally, Lessor
shall refund all prepaid rent to Lessee within seven (7) days after such
effective date of release.
3
<PAGE> 4
8. CLEANLINESS OF PREMISES
The Lessee shall not place, leave or permit or suffer to be placed, left in
or upon the roads, parking lots, sidewalks and delivery areas forming part of
the said lands any debris or refuse and will at all times during the Term, at
its sole cost and expense, keep the Premises in a clean, wholesome and sanitary
condition, free and clear of all waste paper and other substances which would be
a nuisance or liable to occasion fire and will cause all dirt, rubbish, garbage
and other refuse matter on or about the Premises to be carefully collected and
promptly disposed of in a manner satisfactory to the Lessor, and will at all
times exercise and take reasonable precautions to protect the Premises against
fire and vandalism.
9. COVENANT TO REPAIR
The Lessee shall at all times during the Term of this Lease at its sole
cost and expense, well, properly and sufficiently repair, decorate, maintain,
mend and keep the Premises with the appurtenances (including but without
restricting the generality of the foregoing, signs and the inside and outside
plate glass windows and doors if damage caused by Lessee or any agents of the
Lessee) in good and substantial repair, and repair and maintain all fixtures and
things which at any time during the Term of this Lease are located or erected in
or upon the Premises, such repair and maintenance to be made by the Lessee when,
where and so often as needed, save and except repairs necessitated by damage
from hazards against which the Lessor is required to insure hereunder, and
subject to the following:
Lessor represents that all of the following are in good working condition
and comply with all related laws and codes, and further that Lessor is
responsible for maintaining in good working condition, and repairing as needed:
all structural areas, electrical systems, HVAC systems, plumbing, roofing,
concrete, flooring, common areas, and any and all other structural and/or
permanent fixtures that would reasonably be construed as items comprising or
attached to the property.
10. NOTICE OF DEFECTS
The Lessee shall give the Lessor immediate notice in writing of any
accident occurring within the Premises or upon the Lands or any defect in or
damage thereto which comes to the notice of the Lessee.
11. INSPECTION BY LESSOR
The Lessor, by its servants or agents, may at all reasonable times during
the Term hereof enter upon the Premises and view the state of repair thereof,
provided the Lessor gives Twenty-four (24) hours notice to the Lessee of such
intent to view the Premises, and further that all want of reparation that upon
such view shall be found, the Lessee shall within ten (10) days next after such
notification of such need to repair shall well and sufficiently repair and make
good the same insofar as the Lessee is bound to do.
12. GLASS, DOORS AND WINDOW DAMAGE
The Lessee shall be responsible for the repair and costs thereof of all
damage to plate glass, doors and windows in the Premises, should such damage be
caused by the Lessee, its employees or invitees.
4
<PAGE> 5
13. INSURANCE
The Lessee shall insure the Lessor and the Lessee, including but without
restricting the generality of the foregoing, their respective servants,
employees, invitees and agents and keep them insured against legal liability for
damages to persons or property caused by the use and occupancy of the Premises
by the Lessee with any insurance company or companies licensed to do business in
the Province of Alberta, in such amounts as the Lessor may from time to time
reasonably require, which at the commencement of this Lease shall not be less
than One Million ($1,000,000.00) Dollars for any one occurrence, and the Lessee
shall keep in force a policy of insurance which will provide that if any damage
is occasioned to the Premises by a person or persons during the course of
burglary, attempted burglary, or vandalism the entire cost of repairing such
damage will be paid by the insurer at the request of the Lessor.
The Lessee shall take out and maintain in respect of its property on the
Premises, fire insurance with extended coverage and water damage insurance, the
Lessee's property to include, without limitation, its improvements, furniture,
equipment, fittings, fixtures and stock-in-trade, in an amount adequate to cover
fully any loss that the Lessee may sustain.
The cost of the premiums for each and every such policy shall be paid by
the Lessee and the Lessee shall provide the Lessor with a certified copy of the
insurance policy to be taken out by the Lessee in accordance with the preceding
provisions hereof and shall provide the Lessor with evidence of due payment of
all premiums for such insurance. The Lessee shall obtain from the insurers under
such policies undertakings to notify the Lessor in writing at least ten (10)
days prior to any material change or cancellation thereof. The Lessee agrees
that if the Lessee fails to take out or maintain such insurance, the Lessor
shall have the right to do so and pay the premiums therefor and in such event,
the Lessee shall repay to the Lessor on demand the amount so paid plus and
administrative fee or 15% and should the Lessee fail to pay such amounts, the
same shall be deemed to be rent in arrears and collectable as such.
The Lessor shall insure the Lessor and the Lessee, including but without
restricting the generality of the foregoing, their respective servants,
employees, invitees and agents and keep them insured against legal liability for
damages to persons or property not caused by the use and occupancy of the
Premises by the Lessee with any insurance company or companies licensed to do
business in the Province of Alberta, which at the commencement of the lease
shall not be less than One Million ($1,000,000.00) Dollars for any one
occurrence, and the Lessor shall keep in force a policy of insurance which will
provide that if any damage is occasioned to the Premises by a person or persons
during the course of burglary, attempted burglary, or vandalism the entire cost
of repairing such damage will be paid by the insurer at the request of the
Lessor.
The Lessor shall take out and maintain in respect of its property on the
Premises, fire insurance with extended coverage and water damage insurance, the
Lessor's property to include, without limitation, its improvements, furniture,
equipment, fittings, fixtures and stock-in-trade, in an amount adequate to cover
fully any loss that the Lessor may sustain.
14. COMPLIANCE WITH LAWS
The Lessee and the Lessor will abide by all laws, by-laws, legislative and
regulatory requirements of any Governmental or other competent authority
relating to the business conducted on the Premises and will save each other
harmless from all costs or charges incidental thereto, or damages or penalties
by reason of breach thereof. Lessor warrants that the property complies with all
laws and codes, and that the property is fit for general office use.
15. JANITORIAL SERVICE
The Lessee shall cause whenever reasonably necessary the floors, light
fixtures,
5
<PAGE> 6
walls, bathrooms, stairwells, hallways and windows of the Premises to be cleaned
and maintained in a first class manner and shall undertake to do so throughout
the Term of the Lease. Janitorial service to be provided by the Lessee shall
include the replacement of all interior electrical light bulbs, rubes and
ballasts on the Premises whenever necessary.
16. HEATING AND AIR-CONDITIONING
The Lessee will at all times maintain the heating and cooling thermostat
within the Premises at not less than sixty (60 degrees) degrees Fahrenheit, and
not greater than eighty (80 degrees) Fahrenheit. The Lessee shall not install
any equipment within the Premises which may require additional cooling capacity
beyond that which is intended for normal occupancy of the Premises for general
office purposes. The Lessee shall construct or cause anything to interfere with
the normal operation of the heating and air-conditioning system or the ducts
through which it operates.
AND THE LESSOR COVENANTS WITH THE LESSEE:
17. QUIET ENJOYMENT
The Lessor hereby covenants with the Lessee that the Lessee, upon paying
the rent hereinbefore reserved at the times and in the manner aforesaid, and
upon observing and performing each and every term, condition, covenant,
agreement and provision herein contained, shall and may from time to time and at
all times during the Term peaceably and quietly enjoy the Premises without
molestation or hindrance by the Lessor, or any person, firm or corporation
claiming by, through and under it.
18. USE OF COMMON AREAS
As part of the consideration for this Lease, the Lessor hereby grants to
the Lessee, its servants, agents, employees, invitees and licensees, throughout
the Term, the privilege of using in common with other persons entitled thereto
all those portions of the common areas of the said lands, save and except the
Lessee its employees and customers shall not during normal business hours be
permitted to use the parking lot located at the rear Building.
PROVIDED HOWEVER that the Lessor reserves the right at any time during the Term,
with reasonable notice to the Lessee, to take possession of all or any part of
the common areas for any purpose whatsoever. PROVIDED FURTHER, HOWEVER, for the
good and welfare of all persons entitled to use the common areas, the Lessor
expressly reserves the right to reasonably promulgate rules and regulations
relating to the use thereof, and such rules and regulations shall be binding
upon the Lessee upon the Lessor giving notice thereof to the Lessee or by
posting the same in a conspicuous place within the confines of the common areas.
IT IS MUTUALLY AGREED BY AND BETWEEN THE LESSOR AND THE LESSEE AS FOLLOWS:
19. LESSEE'S IMPROVEMENTS
The Lessee may at any time, and from time to time, with the consent of the
Lessor in writing, make such changes, alterations or improvements to and may
paint and decorate the interior of the Premises, in such manner as shall in the
judgment of the Lessee better adapt the same for the purpose of its business,
provided that:
6
<PAGE> 7
(a) No changes, alterations, additions or improvements shall be made
without the prior written consent of the Lessor;
(b) All changes, alternations, additions and improvements shall comply
with all statutes, regulations, by-laws, specifications or
requirements of any municipal, provincial federal or other authority;
(c) The Lessee shall observe all the provisions of the within Lease
relating to fire regulations and insurance policies.
20. EMINENT DOMAIN
If the whole of the Building shall be taken by any public authority under
the power of eminent domain, this Lease shall terminate from the day possession
shall be taken for such public purpose and the Lessee shall be liable for
rental only up to the date of such taking.
If a part only of the Premises and the Building shall be taken by any
public authority under the power of eminent domain, the Term shall cease from
the day possession shall be taken for such public purpose insofar as the
premises so taken comprise part of the Premises, and the Lessee shall be liable
only for rent in respect of the part of the Premises so taken up to the date of
the taking and, if the remainder of the Premises shall be suitable for the
purposes of the Lessee, the Lessee shall remain in possession of the remainder
of the Premises and the rent payable hereunder shall be reduced in the
proportion that the area of the Premises so taken bears to the entire area of
the Premises. If the remainder of the Premises shall be unsuitable for the
purposes of the Lessee, the Lessee shall be entitled to terminate this Lease as
at the date of such taking and the Lease and Rent shall cease and terminate at
such date.
All compensation or damages awarded in respect of such taking of the
Premises and any diminution in value of the remainder thereof shall be the
property of the Lessor, but the Lessee shall be entitled to receive such
compensation or damages as it may be able to establish against such public
authority in respect of loss of occupancy and its leasehold improvements.
Upon a termination pursuant to this section, Lessor shall return any prepaid
rent to Lessee within seven (7) days of such termination.
21. REMOVAL OF FURNITURE AND EQUIPMENT
The Lessee may throughout the Term or within three (3) days after the
termination of the Term, take, remove and carry away from the Premises all
furniture, and equipment placed in or upon the Premises which is the property
of the Lessee, but the Lessee shall in such removal do no damage to the Premises
or shall make good any damage which it may occasion thereto. PROVIDED that the
Lessee shall not remove any furniture, equipment, goods or chattels of any kind
from the Premises should the Lessee be in default of any rent or other monies
due hereunder until said monies have been fully paid to the Lessor.
22. DAMAGE BY FIRE OR FLOOD
If during the Term hereby demised or any renewal thereof the Building or
the Premises or any part thereof shall be damaged by fire, explosion, lightning
or tempest or flood, earthquake, tornado, or other natural disaster, then the
following provisions shall have effect:
(a) In the event that the Premises shall be so badly injured as to be
unfit for occupancy and be incapable of being repaired with
reasonable diligence within Sixty (60) days of the happening of such
injury, then the Term hereby granted shall cease and be at an end to
all intents and purposes from the date of such damage or destruction
and the Lessee shall immediately surrender the same and
7
<PAGE> 8
yield up possession of the Premises to the Lessor, and no rent shall
be payable from the happening of the injury, and all rents prepaid at
such time shall be repaid by the Lessor to the Lessee.
(b) In the event that the Premises shall be capable, with reasonable
diligence, of being repaired and rendered fit for occupancy, within
Sixty (60) days from the happening of such injury as aforesaid and
should the damage be such as to render the Premises wholly unfit for
occupancy during the process of such repairs, then the rent hereby
reserved shall not accrue after such injury, or while the process of
repair is going on, and the Lessor shall repair the same with all
reasonable diligence and the rental shall recommence immediately
after such repairs shall be completed.
(c) In the event that the Premises can be repaired within Sixty (60) days
as aforesaid, and if the damage is such that the said Premises are
capable of being partially used, then until such damage shall have
been repaired, the rent shall abate in the proportion that the part of
the Premises rendered unfit for occupancy bears to the whole of the
Premises.
In the event that the Lessor and the Lessee cannot agree as to whether
or not the Building can in fact be repaired with Sixty (60) days, the
arbitration provisions of this Lease shall apply.
23. ALTERATIONS BY LESSOR
The Lessor shall be at liberty at any time during the Term hereby granted
to make such changes, alterations, additions or improvements in or to the
Building and the fixtures and equipment thereof, as may be necessary or
desirable, PROVIDED that the Lessor shall not use any of the Common Areas in
such a way as to restrict access to the Lessee's Premises. The Lessor shall also
be entitled to add to the Building or construct additional Buildings on the
Lands as may be approved by the appropriate governing body.
24. LIENS
The Lessee shall not suffer or permit during the Term any builders' or
other liens for work, labor, services or materials ordered by it or for the cost
of which it may in any way be obligated, to with respect to the Lands, or the
Premises or any portion thereof, or to any improvements erected upon the same,
and that whenever and so often, if ever, as any such lien or liens shall be
filed or shall attach to the title for the Lands the Lessee shall, within a
period of Fourteen (14) days thereafter, either pay the same or procure the
discharge thereof by giving security or in such manner as is or may be required
or permitted by law.
25. PERFORMANCE BY LESSOR OF LESSEE'S COVENANTS
Upon the failure of the Lessee to perform any of the terms, conditions,
covenants, agreements and provisions herein contained which may be performed by
the employment of labor or by the payments of money, the same may be paid for or
performed by the Lessor, and the cost of such work the Lessor shall be entitled
to recover plus an administration fee of 15% from the Lessee in the same manner
as if the amount was Rent as set out herein.
26. NOT APPLICABLE
27. SUBORDINATION OF LEASE
This lease is subject and subordinate to any mortgage or deed of trust
which may now or at any time hereafter affect the Building situated upon the
Lands, or upon any other
8
<PAGE> 9
buildings hereinafter placed upon the Lands, and this Lease shall also be
subject and subordinate to all renewals, modifications, consolidations,
replacements and extensions of any such mortgage or deed of trust, PROVIDED
HOWEVER; if the Lessee is requested by the Lessor to execute any such instrument
to carry out the intent of this Article, and fails to do so within five (5) days
of notice so to do, then the Lessor is hereby authorized and appointed the
attorney of the Lessee to execute any such postponement agreement on its behalf.
Any instrument so executed by the Lessor shall be sufficient and the mortgagee
or the holder of the deed of trust need not inquire whether a request or demand
had been made of the Lessee for its execution, PROVIDED ALWAYS that any such
subordination shall reserve in writing to the Lessee the right of continued
possession of the Premises so long as the Lessee shall not be in default under
this Lease.
28. OVERHOLDING LESSEE
If the Lessee shall remain in possession of the Premises after the
Expiration Date or termination of this Lease without an agreement in writing to
extend the Term of the Lease executed by both the Lessor and the Lessee, the
same shall be a tenancy from month to month at a monthly rental calculated on
the basis of twice the amount of the monthly rent being paid hereunder at the
date of termination. Such month-to-month tenancy shall be held upon and subject
in all other respects to the terms, conditions, covenants, agreements and
provisos of this Lease insofar as the same are applicable to a tenancy from
month-to-month.
29. MUTUAL INDEMNIFICATION
The Lessee will save, defend, hold harmless and indemnify the Lessor, its
servants and agents, of, from and against any and all suits, claims, actions or
demands of any nature or kind to which the Lessor shall or may become liable
for or suffer by reason of any breach, violation or non-performance by the
Lessee of any term, condition, covenant, agreement or provisos hereof or by
reason of any injury occasioned to or suffered by any person or persons or any
property resulting from any wrongful act, neglect or default on the part of the
Lessee or any of its agents, servants, employees, invitees or licensees, or
arising out of the use and occupation by the Lessee of the Premises and/or the
business conducted thereon by it.
The Lessor will save, defend, hold harmless and indemnify the Lessee, its
servants and agents, of, from and against any and all suits, claims, actions or
demands of any nature or kind to which the Lessee shall or may become liable for
or suffer by reason of any breach, violation or non-performance by the Lessor of
any term, condition, covenant, agreement or provisos hereof or by reason of any
injury occasioned to or suffered by any person or persons or any property
resulting from any wrongful act, neglect or default on the part of the Lessor or
any of its agents, servants, employees, invitees or licensees.
30. CONSEQUENTIAL LOSS
The Lessor shall not be liable or responsible for any loss, injury or
damage of any nature whatsoever that may be sustained by any person or for any
loss of or damage to any property at any time in or upon the Premises, the
Building or the Lands or for any loss to the business of the Lessee caused
directly or indirectly by any latent or other defect in the Premises or the
Building and the fixtures thereto belonging by reason of the interruption of any
public utility or service, nor from or by steam, electricity, gas, water, rain
or snow which may leak into, issue from or flow from any part of the Building or
from the pipes, wires or plumbing works of the same or from any other place or
quarter or from or by any other reason, matter or cause whatsoever unless such
loss, injury or damage is based on the negligence of the Lessor, its servants,
agents or employees.
9
<PAGE> 10
31. DEFAULT BY LESSEE
Provided always and it is hereby expressly understood and agreed that if
and whenever the rent reserved, or any part thereof, whether lawfully demanded
or not, shall be unpaid after ten (10) days' notice of default thereof has been
duly given to the Lessee, or in case of the breach or non-performance of any of
the terms, conditions, covenants, agreements or provisos in this Lease
mentioned after ten (10) days' notice of the same having been given to the
Lessee, it shall and will be lawful for the Lessor at any time, and from time
to time hereafter, notwithstanding any former breach or non-performance or any
waiver of the Lessor's rights arising therefrom (and in addition to any other
right or remedy it may have or be entitled to), to enter upon the Premises or
any part thereof in the name of the whole and to have again, repossess and
enjoy the Premises as of their former state anything herein contained to the
contrary notwithstanding. This proviso shall extend and apply to all terms,
conditions, covenants, agreements and provisos herein contained, whether
positive or negative on the part of the Lessee to be observed or performed.
PROVIDED FURTHER, HOWEVER; no act of the Lessor of any nature or kind shall at
any time during the Term be deemed to be a waiver of any of the rights of the
Lessor unless it is effected by instrument executed in the same fashion as this
Lease.
32. PREMISES BECOME VACANT
In the event that the Premises during the Term shall be left or become
vacant and the Lessee shall fail to make payment of rent, the Lessor, its
servants or agents, may re-enter upon the same and relet the Premises and
receive the rent thereof, but the Lessee shall nevertheless remain liable for
any deficiency in such rent and for this purpose and for the purpose of any
re-entry under this or the next itself or by its servants or agents, and with
such assistants as it or they may require, at any time during the day to enter
in and upon the Premises and for that purpose to break and force open any
doors, locks, bars, bolts, fastenings and hinges.
33. LESSOR'S REMEDIES ON DEFAULT
PROVIDED FURTHER that, if and when the rent hereby reserved or any part
thereof be not paid when due after ten (10) days' notice thereof, or if any
other sums payable by the Lessee hereunder are not paid when they are payable
to the Lessor, or if the Lessee shall not observe, perform and keep all and
every of the terms, conditions, covenants, agreements and provisos herein
contained to be observed, performed and kept by the Lessee, after ten (10)
days' notice thereof, or if the Lessee shall make a bulk sale of its goods or
attempt to move its goods, chattels and equipment out of the Premises (other
than in the ordinary course of its business), or if the Term hereby granted or
the goods and chattels of the Lessee on the Premises liable to distress shall
during the said Term be seized or taken in execution or in attachment, or if
the Lessee shall become insolvent or make an assignment for the benefit of
creditors, or commit an act of bankruptcy, or in case the Premises or any part
thereof shall be used for any other purpose than is herein provided for without
the written consent of the Lessor and where such use is not terminated within
ten (10) days after written notice to terminate such use has been delivered to
the Lessee, the Lessor may at its option in any of such cases (and without
prejudice to any other right or remedy it may then have or be entitled to)
cancel this Lease, whereupon this Lease shall terminate and the Term hereby
created expire and be at an end and the Rent payable throughout the remainder
of the term shall accrue and be immediately due and payable and the said Term
shall at the option of the Lessor be forfeited, and the Lessor may immediately
distrain for such Rent together with any arrears then unpaid and the Lessor's
legal costs to obtain payment, and the Lessor may without notice or any form of
legal process forthwith re-enter upon and take possession of the Premises or
any part thereof in the name of the whole and remove and sell the Lessee's
goods, chattels and equipment therefrom, subject to applicable laws, and in
addition to any remedy otherwise provided, the Lessor may seize and sell the
goods, chattels and equipment of the Lessee at any place to which the Lessee or
any other person may have removed them in the same manner as if they had
remained and been distrained upon the Premises.
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<PAGE> 11
34. LESSOR'S RIGHTS ON RE-ENTRY OR TERMINATION
If the Lessor shall re-enter or if this Lease shall be terminated by reason
of default by the Lessee:
a) Rent shall, at the selection of the Lessor (such election to be
exercised by notice in writing to the Lessee and within a period of
thirty (30) days from the date of termination or re-entry),
immediately become due and be paid up to the time of such re-entry or
termination together with the reasonable expenses of the Lessor as
hereinafter defined;
b) The Lessor may relet the Premises or any part thereof either in name
of the Lessor or otherwise, as agent of the Lessee and the Lessee does
hereby expressly unconditionally and irrevocably constitute and
appoint the Lessor as its agent for such purpose, for a term or terms
which may if the Lessor chooses be lesser or greater than the balance
of the Term of this Lease and may grant reasonable concessions in
connection therewith;
c) The Lessor may, at its election and in addition to any other remedy it
may have, require that the lessee pay to the Lessor as liquidated
damages for the failure of the Lessee to observe and perform the
covenants of this lease, monthly on the first day of each month
following such re-entry or termination and until the expiration of the
period that would otherwise have constituted the balance of the Term
of the Lease, any deficiency between:
(i) the sum of the monthly rent payable hereunder, and
(ii) the amount of any rents collected on account of the Lease of the
Premises for each month of the period which would otherwise have
constituted the balance of the Term;
d) The Lessee shall pay to the Lessor on demand such reasonable expenses
as the Lessor may incur in reletting the Premises, including
reasonable legal costs, solicitors' and brokerage fees and the
expenses of keeping the Premises in good order or preparing the
premises for reletting, and
e) The making of any alterations or improvements in the Premises, which
the Lessor considers advisable or necessary for the purpose of
reletting them, shall not operate or be construed to release the
Lessee from liability hereunder.
The terms and conditions set forth in this paragraph may be availed of by
the Lessor without limitation of any other rights or remedies the Lessor may
have or be entitled to hereunder or otherwise.
35. NON-EXCLUSIVENESS OF REMEDIES AND WAIVER
The specific remedies to which the Lessor may resort under the terms of
this lease are cumulative and are not intended to be exclusive of any other
remedies or means of redress to which the Lessor may lawfully be entitled in
case of any breach or threatened breach by the Lessee of any term, condition,
covenant, agreement or proviso of this Lease.
The waiver by the Lessor of any breach by the Lessee of any term,
condition, covenant, agreement or proviso herein contained shall not be
construed as or constitute a waiver of any further or other breach of the same
or any other term, condition, covenant, agreement or proviso and the consent or
approval of the Lessor to or of any act by the Lessee requiring the
11
<PAGE> 12
Lessor's consent or approval shall not be deemed to waive or render unnecessary
the Lessor's consent or approval to any subsequent similar act by the Lessee.
The Lessee undertakes and agrees that the acceptance by the Lessor of
any rent from any person other than the Lessee shall not be construed as a
recognition of any rights not herein expressly granted or as a waiver of any of
the Lessor's rights, or as an admission that such person is or as the consent
that such person shall be deemed to be, an assignee or sub-tenant of this Lease
irrespective of whether the Lessee or the said person claims that such person is
an assignee or sub-tenant of this Lease. The Lessor may accept rent from any
person occupying the Premises at any time without in any way waiving any rights
under this Lease.
36. INTEREST
All rent in arrears and all sums paid or expenses incurred hereunder by
the Lessor, which ought to have been paid or incurred by the Lessee, or for
which the Lessor is entitled hereunder to reimbursement from the Lessee, shall
bear interest at the greater of either Royal Bank of Canada prime rate plus 5%
or eighteen (15%) percent per annum from the date same becomes due, or was spent
or incurred, as the case may be, until the date of payment or repayment PROVIDED
that in each case the Lessor shall give written notice to the Lessee of such
sums due and payable and the Lessee shall have seven (7) days after receipt of
such written notice from the Lessor to pay any such arrears, and if such amounts
are paid during such period, interest shall not be payable by the Lessee. All
monies payable by the Lessee to the Lessor in respect of interest shall be
deemed to be Rent and shall be recoverable as such by the Lessor.
37. SOLICITORS' FEES
If the Lessor at any time incurs reasonable legal fees and costs in
instituting or prosecuting any action or proceedings based upon any default of
the Lessee under this Lease, all such fees and costs (on a solicitor/client
basis) shall be payable by the Lessee to the Lessor and be recoverable by the
latter as Rent. All such fees and costs shall be payable by the Lessee to the
Lessor upon demand for payment being made.
38. FORCE MAJEURE
Whenever and to the extent that the Lessor or the Lessee shall be unable to
fulfill or shall be delayed or restricted in fulfilling any obligations
hereunder in respect of supply or provision of any heating, service or utility
or the doing of any work or the making of any repairs by any cause beyond its
reasonable control, such party shall be relieved from the fulfillment of such
obligation during the period during which it shall be so unable to fulfill or
shall be so delayed or restricted in fulfilling such obligation, PROVIDED
HOWEVER that nothing contained in this clause shall relieve any party having a
duty to make any repair from taking such interim and conservatory measures
during the period while it is prevented from effecting such repair, as may be
necessary or advisable for the preservation and safety of the Building. Rent
shall be abated accordingly for any and all periods due to such inability or
delay of the Lessor to fulfill its obligations hereunder.
39. REPRESENTATIONS
The Lessee hereby acknowledges that the Premises are taken without
representation of any kind on the part of the Lessor or its agent other than
as set forth herein. It is understood and agreed that no representative or
agent of the Lessor or Lessee is or shall be authorized or permitted to make
any representation with reference hereto, or to vary or modify this Agreement
in any way, and that this Lease contains all of the terms, conditions,
covenants, agreements and provisions made between the parties hereto and that
any addition to or alteration of or changes in this Lease, or other agreements
hereafter made or condition created to be binding.
12
<PAGE> 13
must be made in writing and signed by both parties.
40. RESERVATION TO LESSOR
All outside walls of the Premises and any space in the Premises used
for stairways and passageways to other adjoining premises, shafts, stacks,
pipes, conduits, ducts or other building facilities, the heating, electrical,
plumbing air-conditioning and other systems and the use thereof, as well as
access thereto through the Premises for the purpose of use, operation,
maintenance and repair are hereby expressly reserved to the Lessor, on the
understanding that the Lessor or the Lessee shall have the right to access the
Premises to conduct repairs for which each party is responsible as set out
herein.
41. SPECIAL CLAUSES
1. ARBITRATION
Whenever in this Lease it is provided that any matter in dispute
between the Lessor and the Lessee, if not settled or agreed between
them, is to be determined by arbitration, the same shall be decided by
a single arbitrator mutually agreeable to both Lessor and Lessee, to
the provisions of "The Arbitration Act" of the Province of Alberta and
amendments thereto. The prevailing party in such arbitration shall be
entitled to reasonable reimbursement of attorney's fees and costs
related to the dispute, as well as reasonable attorneys fees and costs
incurred in collecting the same.
2. GOODS AND SERVICES TAX
All amounts due by the Lessee to the Lessor under the terms of the
Lease that are subject to the Goods and Services Tax shall be paid by
the Lessee to the Lessor including the amount of the Tax, upon
notification by the Lessor of such amounts due. Payments by the Lessee
to the Lessor are due and payable within the times specified under the
terms outlined in the applicable sections of the Lease.
3. FURNITURE AND APPLIANCES
The Lessor shall, during the terms of this Lease, provide the Lessee
with the stairwell credenza, boardroom table and chairs, and
refrigerator, all of which are presently located in the Premises.
4. TERMINATION PENALTY
This Lessee, upon providing one hundred twenty (120) days written
notice to the Lessor, may terminate this Lease upon the payment of
penalty of Fifty-Five Thousand One Hundred Twenty ($55,120.00)
Dollars.
42. AMENDMENTS TO LEASE
If the holder of any mortgage or mortgages or any charge resulting
from any other method of financing or re-financing, declaration of trust,
debenture issue or any other such method of financing or re-financing now or
hereafter in force against the Building situate within the Lands shall at any
time require any change not of a substantial nature in any of the terms,
covenants and provisions of this Lease, the Lessee agrees to the modification of
this Lease to comply with the requirements of such party, provided always that
there is no increase in the Rent or other monies to be paid hereunder, any
increase in the length of the Term hereby created and that such requirements do
not impose undue burdens upon the Lessee and do not involve
13
<PAGE> 14
alterations of substance in the covenants and agreements herein contained.
43. HEADINGS
The parties hereto agree that the headings used throughout this Lease form
no part of this Lease and shall be deemed to have been inserted for convenience
of reference only.
44. DEFINITION
The word "Lessor" as used throughout this Lease shall mean: The Party of
the First Part hereto, PROVIDED HOWEVER that if the Lessor shall convey title to
the said lands and shall notify the Lessee in writing of such conveyance and the
name and address of the new owner, the word "Lessor" shall, from and after the
date upon which such notice is given, mean only such new owner.
45. NOTICES
Any notice herein provided or permitted to be given by the Lessee shall be
sufficiently given if mailed, in the absence of a postal strike, postage
prepaid, addressed to the Lessor as follows:
Certus Developments Inc.
200, 815 - 10th Avenue, S.W.
Calgary, Alberta
T2R 0B4
Any notice herein provided or permitted to be given by the Lessor to the
Lessee shall be sufficiently given if mailed, in the absence of a postal strike,
postage prepaid, addressed to the Lessee as follows:
2219 - 4th Street S.W.
Calgary, Alberta
T2S 1X1
And a copy to:
Freerealtime.com, Inc.
3333 Michelson, Suite 430
Irvine, CA 92612
NOTICE given as aforesaid shall be conclusively deemed to have been given on the
third business day following the day on which such notice is mailed. The Lessor
may at any time give notice in writing to the Lessee of any change of address
giving such notice and from and after the giving of such notice addressed
therein specified shall be deemed to be the address of such for the giving of
notices hereunder. The word "notice" in this clause shall be deemed to include
any request, statement or other writing in this Lease provided or permitted to
be given by the Lessor to the Lessee or by the Lessee to the Lessor.
46. RIGHT OF RENEWAL.
Provided the Lessee is not in default of this Lease the Lessee shall be
entitled to
14
<PAGE> 15
renew the Term of the Lease upon the Expiration Date as set out herein for a
further term of Five (5) years as the then fair market gross rent for premises
located within buildings in the immediate trade area having regard to general
quality of premises, building, and interior improvements.
Further provided the Lessee shall notify the Lessor in writing of its decision
to renew the Lease not more than Nine (9) months nor less than Six (6) months
prior to the expiration of the Lease Term failing which the Lessee shall have
no right of renewal as set out herein. In the event the Lessee provides such
notice and the parties are unable to agree upon the fair market gross rent for
the Premises the Rent shall be determined by arbitration pursuant to the
Arbitration Act of Alberta. Notwithstanding which should the fair market gross
rent be determined to be less than the Rent as set out herein the Lessor may at
their option choose to terminate the Lease and the Lessee shall thereupon
vacate the Premises at the expiration of the Lease Term.
47. INTERPRETATION
The terms "Lessor" and "Lessee" and the pronouns relating thereto,
where used herein shall, where the context makes it possible, include the
heirs, executors, administrators, successors and assigns of the parties hereto,
and shall include the feminine and plural and a body corporate where the
context or the party or parties hereto so required and, where there is more
than one Lessee, all covenants shall be deemed joint and several. The word
"term" where it appears herein shall mean the Term hereby created together with
every renewal thereof, if any.
48. TIME OF ESSENCE
Time is of the essence of these presents.
49. PARKING
It is understood that the Lessor has access to 5 parking stalls
situated on the lands located directly to the west of the Lands and that such
parking stalls are provided to the Lessor at no charge by the adjacent land
owner in exchange for a reciprocal evening shared parking arrangement on the
Lands, and that at any time either the Lessor or the adjacent land owner may
terminate said parking agreement in which event the Lessor shall have no
further right to the use of said parking stalls, and the adjacent land owner
shall have no further right to the use of parking stall located upon the Lands.
It is understood that the Lessee may have the use and enjoyment of said 5
parking stalls at no additional cost throughout the Term of the Lease provided
said mutual parking agreement remains in place and is not terminated as set out
herein. However, in the event said parking agreement is terminated the Lessee
shall make alternate parking arrangements, and in no event shall the Lessee be
entitled to park on the Lands during normal business hours. Furthermore the
Lessor shall not be responsible to compensate the Lessee in any manner
whatsoever for the loss of said parking.
50. ENUREMENT
This Lease and the terms, conditions, covenants, agreements and
provisos herein contained shall enure to the benefit of and shall be binding
upon the parties hereto, their respective heirs, executors, administrators,
successors and assigns.
IT WITNESS WHEREOF the parties have hereunto affixed their hands and
seals the day, month and year first above written.
CERTUS DEVELOPMENTS INC.
(LESSOR) c/s
Per /s/ [Signature Illegible]
---------------------------------
Per /s/ [Signature Illegible]
---------------------------------
(SEAL)
15
<PAGE> 16
FREEREALTIME.COM, INC.
(LESSEE)e's
Per: /s/ Brad G. Gunn
--------------------------
Per:
--------------------------
16
<PAGE> 17
SCHEDULE 'A'
[MAP]
<PAGE> 18
SCHEDULE 'B'
Operating Costs
- - exterior property maintenance
- - landscaping
- - exterior building repairs
- - snow removal
- - building insurance
- - parking lot supervision
- - exterior lighting
- - building administration
- - property management
- - the cost of salaries and benefits relating to all management and
maintenance personnel
- - repair and maintenance of building operating systems
- - real estate taxes
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,510,000
<SECURITIES> 0
<RECEIVABLES> 1,015,000
<ALLOWANCES> 81,000
<INVENTORY> 0
<CURRENT-ASSETS> 4,905,000
<PP&E> 718,000
<DEPRECIATION> 149,000
<TOTAL-ASSETS> 5,766,000
<CURRENT-LIABILITIES> 4,752,000
<BONDS> 0
0
0
<COMMON> 8,075,000
<OTHER-SE> (495,000)
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<SALES> 1,625,000
<TOTAL-REVENUES> 1,625,000
<CGS> 1,039,000
<TOTAL-COSTS> 1,039,000
<OTHER-EXPENSES> 2,462,000
<LOSS-PROVISION> 27,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,842,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,842,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,842,000)
<EPS-BASIC> (0.26)
<EPS-DILUTED> 0
</TABLE>
