SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934, for the fiscal year ended December 31, 1999
Commission File No. _____
2U ONLINE.COM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-2132622
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1288 Alberni Street, Suite 806, Vancouver, British Columbia, Canada V6E 4N5
(Address of registrant's principal executive offices) (Zip Code)
604.664.0484
(Registrant's Telephone Number, Including Area Code)
Check whether the registrant (1) has filed all reports required by Section 13 or
15(d) of the Securities 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 [X ] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X ]
State issuer's revenues for its most recent fiscal year: $0.00
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act). As of December 31,1999, approximately $_________.
The number of shares outstanding of the issuer's only class of Common Stock,
$.0001 par value, was 22,727,500 on December 31, 1999.
Documents incorporated by reference. There are no annual reports to security
holders, proxy information statements, or any prospectus filed pursuant to Rule
424 of the Securities Act of 1933 incorporated herein by reference.
Transitional Small Business Disclosure format (check one):
Yes [ ] No [X ]
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PART I.
Item 1. Description of Business.
Development of the Company. 2U Online.com, Inc., formerly Power Direct, Inc.,
(the "Company") was incorporated in the State of Delaware on September 13, 1993,
and maintains its principal executive offices at 1288 Alberni Street, Suite 806,
Vancouver, BC V6E 4N5. The Company's offices in the United States are located at
4291 Meridian Street, Suite 29, Bellingham, Washington 98226. The Company was
originally incorporated to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware. The
Company was inactive from September 13, 1993, through November, 1998, when we
began the process of identifying potential business interests including, but not
necessarily limited to, interests in oil and natural gas producing properties.
The Company is currently listed on the Over-the-Counter Bulletin Board Quotation
Service ("OTCBB") under the symbol "TWOU". The Company's former symbol was
"PWDR".
For purposes of clarification, anytime that "US$" appears in this Annual Report,
it means the currency of the United States of America, unless otherwise stated.
Anytime that "CDN$" appears, it means the currency of Canada, in Canadian
dollars.
Business of the Company.
The Wyoming Property. On January 15, 1999, we entered into a letter of intent
with Rising Phoenix Development Group Ltd., a Canadian corporation, located in
Vancouver, British Columbia, Canada ("Rising Phoenix"), to acquire all the
assets of Rising Phoenix, including that corporation's interest in the oil and
natural gas rights on 6,360 acres located in the Powder River Basin of eastern
Wyoming (the "Wyoming Property"). That letter of intent specifies that we must,
among other things, pay Rising Phoenix seventy-five thousand dollars (US$75,000)
and, further, issue 3,800,000 shares of its common stock to Rising Phoenix to
complete the acquisition of the assets of Rising Phoenix. We have paid Rising
Phoenix the US$75,000.00 and have issued the 3,800,000 shares. According to the
letter of intent, we are obligated to assume all of Rising Phoenix's financial
obligations pertaining to the Wyoming Property as of January 31, 1999. In
return, Rising Phoenix agreed to deliver the Wyoming Property in good title and
assign to us its rights under the joint venture agreement with Derek Resources
Corporation ("Derek Resources"). Pursuant to that joint venture agreement, Derek
Resources agreed to provide up to a maximum of Three Million Five Hundred
Thousand Dollars (US$3,500,000) of improvements on or before December 31, 2000,
on the Wyoming Property in exchange for a 75% working interest in the Wyoming
Property. Derek Resources is in the process of securing the necessary funding in
order to meet its obligations under the joint venture agreement. We anticipate
that the site construction will commence sometime early in the year 2000. Derek
Resources has begun negotiating with Bateman Engineering, Inc., and its
associate company, Silvertip Project Partners, Inc., to provide development,
financing and construction of a pilot production facility. If Derek Resources
and its partners successfully meet their obligations under the joint venture
agreement, we will own a 25% working interest in the Wyoming Property. If Derek
Resources and its partners fail to meet their obligations under the joint
venture agreement, we will obtain a 100% working interest in the Wyoming
Property, including all of the improvements financed by Derek Resources and its
partners. There are no proven oil or gas reserves on the Wyoming Property. On or
about November 15, 1999, we entered into a definitive asset purchase and sale
agreement with Rising Phoenix that memorializes the terms and conditions
contained in the letter of intent described in the immediately proceeding
paragraph.
Plan of Operation-Wyoming Property. As discussed earlier, Derek Resources is
solely responsible for the capital expenditures on the Wyoming Property. At this
time, we cannot guarantee or predict the timetable for
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completion of the material steps to get the Wyoming Property producing oil, if
any. As discussed earlier, Derek Resources has until December 31, 2000, to meet
its financial obligations. We anticipate that if the Wyoming Property produces
oil, it will be sometime before December 31, 2000. We are not involved in the
exploration of the Wyoming Property. We believe that Derek Resources is
attempting to raise the necessary funds to construct a pilot plant designed to
test a new technology call Steam Assisted Gravity Drainage ("SAGD"). SAGD is
designed to extract oil from the ground. However, Derek Resources has not yet
begun construction on the pilot plant nor do we believe that Derek Resources has
the funds necessary for such a construction. The Wyoming Property does not
contain proved oil and gas reserves at this time.
The Alberta Property. On January 26, 1999, we signed a letter of agreement with
Vertizontal Energy Resources, Inc., formerly I.T.A. Enterprises, Inc.
("I.T.A."), a Canadian company, to acquire and own a 42% working interest in a
natural gas project in west central Alberta (the "Alberta Property"). This
letter of agreement requires us to provide 42% of the cost for the three-phase
project, which are estimated in the letter of agreement to be Two Hundred
Thousand Dollars (CDN$200,000). We have advanced I.T.A. a total of Twenty
Thousand Three Hundred Ninety Three Dollars (US$20,393) toward costs on the
Alberta Property project. The working interest acquired will be subject to a 10%
gross overriding royalty (that is, 4.2% of the 42% working interest shall be
payable directly to Nicholas Baiton, the royalty holder). We have also paid a
deposit of eight thousand four hundred dollars (CDN$8,400) to I.T.A. pursuant to
the terms of the agreement. We agreed with I.T.A. that the $8,400 deposit would
be used for prospect fees and that we would receive a refund of any unused
portion of that deposit. Within ten (10) days of I.T.A. providing us with an
"Authority for Expenditures" and a cash call for Phases I and II of the
development of the Alberta Property, we will be required to advance Seventy Five
Thousand Six Hundred Dollars (CDN$75,600) to I.T.A. There can be no assurance
that we will have sufficient funds available to meet this obligation in the time
frame required by the letter of agreement. Exploration has begun on the Alberta
Property. However, there are no proven oil or gas reserves on the Alberta
Property.
Plan of Operation-Alberta Property. We anticipate that the Alberta Property will
produce mainly methane gas. The development of the Alberta Property project has
proceeded as follows: (1) On September 24, 1999, Liberty Oil & Gas Ltd
("Liberty") received approval from the Alberta Energy and Utilities Board for
the Alberta Property project; (2) On or about October 13, 1999, the testing and
evaluation of the well began; and (3) On or about November 26, 1999, gas flow
test readings from the re-opened well-head showed minimal to no gas flow. We are
not directly involved in the exploration or development of the Alberta Property.
Liberty is the operator of the project. The joint venture partners are currently
considering whether to drill another test well-head. We will have a working
interest in the Alberta Property but Liberty will physically operate the
facility. The Alberta Property does not contain proved oil or gas reserves at
this time.
The material risks include, but are not necessarily limited to, the danger that
an economically recoverable quantity of gas may not exist and there may be a
fire or explosion. Liberty has assured us it has taken all necessary precautions
to prevent the latter from occurring. The project will proceed into the
production stage only if it is determined that there are enough gas reserves to
justify the additional capital expense. If actual gas production occurs, Liberty
will issue joint venture billings and revenue statements on a monthly basis.
Liberty will also market the gas production for all interest owners unless it
gets notification of intent to take in kind. Liberty is solely responsible for
meeting any and all regulatory requirements.
Internet-Related Activities. On or about April 28, 1999, we entered into a
licensing agreement ("Compte Agreement") with Compte De Sierge Accommodative
Corp., a corporation incorporated in Panama City, Panama ("Compte De Sierge").
Compte De Sierge worked in association with a group of programmers doing
business as E-Card. The Compte Agreement specifies, among other things, that we
will have the worldwide right to utilize and commercially exploit certain
software systems and related proprietary technology relating to the operation
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of the Greeting Card Lotto, hereinafter referred to as "CardStakes.com". The
CardStakes.com technology was developed and designed by Mr. Conrado Beckerman, a
director of Compte De Sierge, and a team of programmers hired by CardStakes.com.
CardStakes.com has not produced any historical revenue upon which an estimate of
potential revenue can be determined.
The Compte Agreement also provides for us to pay a total of CDN$300,000 to
Compte De Sierge. The Compte Agreement also provides that we shall issue a total
of 6,000,000 shares of its $.0001 par value common stock. Prior to August, 1999,
we had paid Compte De Sierge CDN$200,000 and issued 3,000,000 shares to Compte
De Sierge. On or about August 16, 1999, with the completion of the second phase
of testing, we requested that Compte De Sierge provide us with duplicate copies
of all Compact Discs and files necessary for the operation of CardStakes.com.
E-Card had custody and control of those items requested by us. On or about
August 23, 1999, Compte De Sierge denied our request stating that a conflict
among its programmers and E-Card prevented delivery of such items. This denial
by Compte De Sierge effectively negated any and all contractual obligations we
had to Compte De Sierge under the Compte Agreement. On or about August 30, 1999,
a meeting between the principals of Compte De Sierge and the Company was held,
whereby Compte De Sierge agreed to discontinue any further association or
involvement with E-Card. Compte De Sierge also agreed to (i) assist
CardStakes.com in retaining new programmers to complete the CardStakes.com
website; (ii) revise and amend the April 28, 1999 agreement to reflect the above
change; (iii) allow us to retain the final CDN$100,000.00 payment under the
Compte Agreement; and (iv) change the title of the agreement to the "Proprietary
Technology Usage - License Agreement". On or about November 9, 1999, we issued
the remaining 3,000,000 shares of the Company's $.0001 par value common stock to
Compte De Sierge. With the final issuance of stock, we have met all of our
financial obligations pursuant to the Compte Agreement.
On or about June 18, 1999, we entered into an Asset Purchase Agreement ("J&S
Agreement") with J&S Overseas Holdings, of Grand Cayman, Cayman Islands ("J&S
Overseas"). Pursuant to the J&S Agreement, we agreed to purchase from J&S
Overseas, and J&S Overseas agreed to sell, an URL registered as
"CardStakes.com". In exchange for the URL, we agreed to pay US$240,000 and grant
to J&S Overseas the rights to purchase 1,000,000 shares of the Company's $.0001
par value common stock. These rights are exercisable at a purchase price of
US$0.30 per share. We have met all of our financial obligations under the J&S
Agreement. Except for the relationships described herein, there are no other
relationships between the Company and J&S Overseas. The URL, Cardstakes.com
(http://www.cardstakes.com), is a website featuring electronic greeting cards
and retail merchandise link. The electronic Greeting Card is sent to the
recipient via e-mail enabling the recipient to play a "Scratch and Win" ticket
for cash coupons and discounts. The retail merchandise links allow the sender to
purchase a gift if the sender so desires.
On or about September 1, 1999, we entered into an Asset Purchase Agreement
("Holm Agreement") with Holm Investment Ltd., a Canadian corporation ("Holm").
Pursuant to the Holm Agreement, we agreed to purchase from Holm, and Holm agreed
to sell to us, three (3) Universal Resource Locators ("URL's") registered as
"GREETINGCARDLOTTO.NET", "E-CARDLOTTO.NET" and "CARDLOTTO.NET". In exchange for
the 3 URL's, we agreed to issue Holm 1,000,000 warrants to purchase the
Company's $.0001 par value common stock at a purchase price of US$0.25 per
share. The warrants are exercisable for a period of two (2) years from the date
of issuance. The 1,000,000 warrants have been issued and Holm has transferred
the three URL's to us. Holm also provided promotional services to us for which
we have issued to Holm 600,000 shares of the Company's $.0001 par value common
stock. We also lease office space from Holm.
On or about November 19, 1999, we entered into an Asset Purchase Agreement with
May Joan Liu ("MJLiu Agreement"). Pursuant to the MJLiu Agreement, we agreed to
purchase from Ms. Liu, and Ms. Liu agreed to sell to us, three (3) Universal
Resource Locators ("URL's") registered as "Thankyou2u.com", "Homeaccents2u.com"
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and "Necessities2u.com". In exchange for the 3 URL's, we agreed to issue Ms. Liu
six hundred fifty thousand (650,000) shares of the Company's $.0001 par value
common stock. The shares have been issued and Ms. Liu has transferred the three
URL's to us.
On or about November 24, 1999, we entered into an Asset Purchase Agreement with
CardTek International Holdings Ltd. ("Ctek"), a Gibraltor corporation, ("CTek
Agreement"). Pursuant to the CTek Agreement, we agreed to purchase from CTek,
and CTek agreed to sell to us, four (4) Universal Resource Locators ("URL's")
registered as "Gaming2u.com", "Weddings2u.com", "Essentials2u.com" and
"Theorient2u.com". In exchange for the 4 URL's, we agreed to issue to CTek eight
hundred thousand (800,000) shares of the Company's $.0001 par value common
stock. The shares have been issued and CTek has transferred the four URL's to
us.
On or about November 25, 1999, we entered into an Asset Purchase Agreement with
Richard Angelo Holmes ("RAHolmes") ("RAH Agreement"). Pursuant to the RAH
Agreement, we agreed to purchase from RAHolmes, and RAHolmes agreed to sell to
us, two (2) Universal Resource Locators ("URL's") registered as "Things2u.com"
and "Arrangements2u.com". In exchange for the 2 URL's, we agreed to issue
RAHolmes two hundred fifty thousand (250,000) shares of the Company's $.0001 par
value common stock. The shares have been issued and RAHolmes has transferred the
two URL's to us.
On or about November 25, 1999, the Company and Cybermall Consulting Services
Ltd., a Bahamian corporation ("Cybermall"), entered into an Asset Purchase
Agreement ("Cybermall Agreement"). Pursuant to the Cybermall Agreement, we
agreed to purchase from Cybermall, and Cybermall agreed to sell to us, two (2)
Universal Resource Locators ("URL's") registered as "Website2u.com" and
"Gourmet2u.com". In exchange for the 2 URL's, we agreed to issue to Cybermall
five hundred thousand (500,000) shares of the Company's $.0001 par value common
stock. The shares have been issued and Cybermall has transferred the four URL's
to us.
Employees. We currently have 2 part-time employees and 2 full-time employees. We
anticipate using consultants for business, accounting, and legal services on an
as-needed basis.
Competition. Competition in the oil and natural gas production industry is
intense. If the interests owned by us produce any oil or gas, we will encounter
intense competition from other companies and entities in virtually all phases of
the oil and gas industry. Many of these competitors have greater financial and
other resources, and more experience in the oil and gas industry, than us. We
will compete directly with other companies and businesses that have developed,
and are in the process of developing, exploration and drilling technologies
which may provide those competitors with an advantage over us. We believe we
will encounter competition from other oil and natural gas companies in all areas
of its operations, including the acquisition of exploratory prospects and proven
properties.
Should the Wyoming Property or the Alberta Property produce oil or gas, our
competitors will include major integrated oil and natural gas companies and
numerous independent oil and natural gas companies, individuals, and drilling
and income programs. Many of our competitors will be large, well-established
companies with substantially larger operating staffs and greater capital
resources than those we currently possess and which, in many instances, have
been engaged in the oil and natural gas business for a much longer time than us.
Such companies may be able to pay more for exploratory prospects and productive
oil and natural gas properties and may be able to identify, evaluate, bid for
and purchase a greater number of properties and prospects than our financial or
human resources permit.
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Business of Company's Subsidiary. On February 19, 1999, we caused PDTech.com, a
Nevada corporation, to be formed as a subsidiary of the Company. On or about
June 8, 1999, PDTech.com changed its name to CardStakes.com.
The Compte Agreement provides that we may grant sublicenses to third parties on
terms agreeable to Compte De Sierge with respect to the proprietary technology.
On or about June 15, 1999, CardStakes.com became such a third party licensee. On
or about that date, we entered into a licensing agreement with CardStakes.com
whereby CardStakes.com acquired 51% of the Company's rights, title and interest
under the Compte Agreement. The result is that CardStakes.com has the right to
utilize and commercially exploit certain software and related proprietary
technology allowing for the marketing and sale of greeting cards over the
Internet. The technology licensed from Compte De Sierge also allows
CardStakes.com to conduct a scratch and win whereby the winners are awarded cash
coupons and discounts.
The Greeting Card Industry. Based on research conducted by us, including, but
not limited to, searching the Internet for similar operations, we believe that
Cardstakes.com is the first Internet site to combine a greeting card and a
scratch and win entry. CardStakes.com's cards feature special effects,
animation, music, and custom design abilities. The cards at www.cardstakes.com
can be sent free with or without a purchase while visiting any of the
www.2uonline.com websites set up by us. Our websites offer products such as
jewels, flowers, chocolates and original art. We anticipate that revenue will be
generated from the sale of goods at the www.2uonline.com websites.
According to information gathered by us from the website maintained by the
Greeting Card Association ("GCA"), an organization representing card publishers
and allied members of the greeting card industry, in 1998, the purchase of over
7 billion greeting cards by American consumers generated a total of $7.5 billion
in United States retail sales. Also, according to the GCA, of the total greeting
cards purchased annually, roughly half are seasonal and the remaining half are
everyday cards.
On or about May 20, 1999, we commissioned the firm of Hall, Dickler, Kent,
Freidman & Wood of New York, New York, to provide a legal opinion regarding the
operation of the Internet greeting card scratch and win by our subsidiary,
CardStakes.com. The opinion provided by Hall, Dickler, Kent, Freidman & Wood
provided that the scratch and win activities proposed by CardStakes.com fall
under the sweepstakes and promotions laws of the United States allowing
residents of the United States to freely participate in sending and receiving
CardStakes.com's electronic greeting card, while also enabling the recipient to
play a scratch and win ticket for cash coupons and discounts. Hall, Dickler,
Kent, Freidman & Wood concluded that the promotion conducted by CardStakes.com
could be permissibly conducted in all United States jurisdictions.
CardStakes.com's Card. Customers of CardStakes.com can send animated, singing,
speaking, personally customized, virtual cards over the Internet for free with
our without a purchase from one of our cybermall websites. The card contains a
scratch and win ticket that offers cash discounts and coupons. Should the
recipient want to review the cards in the future, the card will remain in the
recipient's mailbox until deleted.
CardStakes.com's cards allow the sender a high level of interaction in the
designing and viewing process. The user has the opportunity to send stock cards
(from art deco, vogue, classic, Victorian, and cartoons to 3D animation) after
choosing their own clip art and/or pictures to customize the greeting card.
There is also the option of speak as you type audio capabilities allowing the
sender to include his or her own voice with the card. For example, the card will
say "Hi! John, thank you for a wonderful time, love, Susan White."
Competition in the Greeting Card Industry. Competition in the Internet greeting
card industry is significant. Certain of CardStakes.com's competitors have more
experience, seasoned management, name recognition,
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marketing capabilities and financial resources than CardStakes.com.
CardStakes.com may also encounter increasing competition from new as well as the
existing Internet greeting card operations. CardStakes.com may also encounter
indirect competition from companies selling greeting cards in the traditional
storefront form. It is possible that increased competition could have a material
adverse effect on CardStakes.com. Many of these competitors have greater
financial and other resources, and more experience in the greeting card industry
than Cardstakes.com. There can be no assurance that competitors have not or will
not succeed in developing technologies that are more effective than any which
that have been or are being developed by CardStakes.com or which would render
the greeting card operations of CardStakes.com obsolete and non-competitive.
Compliance with Environmental Laws. We have interests in are subject to numerous
federal, state and local laws and regulations governing the discharge of
materials into the environment or otherwise relating to environmental
protection. These laws and regulations may require the acquisition of a permit
before drilling commences, restrict the types, quantities and concentration of
various substances that can be released into the environment in connection with
drilling and production activities, limit or prohibit drilling activities on
certain lands within wilderness, wetlands and other protected areas, require
remedial measures to mitigate pollution from former operations, such as pit
closure and plugging abandoned wells, and impose substantial liabilities for
pollution resulting from production and drilling operations. Public interest in
the protection of the environment has increased dramatically in recent years.
The trend of more expansive and stricter environmental legislation and
regulations applied to the oil and natural gas industry could continue,
resulting in increased costs of doing business and consequently affecting
profitability. To the extent laws are enacted or other governmental action is
taken that restricts drilling or imposes more stringent and costly waste
handling, disposal and cleanup requirements, our business and prospects could be
adversely affected.
We anticipate that our interests will generate waste that may be subject to the
federal Resource Conservation and Recovery Act ("RCRA") and comparable state
statutes. The U.S. Environmental Protection Agency ("EPA") and various state
agencies have limited the approved methods of disposal for certain hazardous and
non-hazardous wastes. Furthermore, certain wastes generated by the Company's oil
and natural gas interests that are currently exempt from treatment as "hazardous
wastes" may in the future be designated as "hazardous wastes," and therefore be
subject to more rigorous and costly operating and disposal requirements.
The Oil Pollution Act of 1990, ("OPA") contains numerous requirements relating
to the prevention of and response to oil spills into waters of the United
States. The OPA subjects owners of facilities to strict joint and several
liability for all containment and cleanup costs and certain other damages
arising from a spill, including, but not limited to, the costs of responding to
a release of oil to surface waters. The OPA also requires owners and operators
of offshore facilities that could be the source of an oil spill into federal or
state waters, including wetlands, to post a bond, letter of credit or other form
of financial assurance in amounts ranging from $10 million in specified state
waters to $35 million in federal outer continental shelf waters to cover costs
that could be incurred by governmental authorities in responding to an oil
spill. Such financial assurances may be increased by as much as $150 million if
a formal risk assessment indicates that the increase is warranted. Noncompliance
with OPA may result in varying civil and criminal penalties and liabilities.
Our future operations may also be subject to the federal Clean Water Act ("CWA")
and analogous state laws. Pursuant to the requirements of the CWA, the EPA has
adopted regulations concerning discharges of storm water runoff. This program
requires covered facilities to obtain individual permits, participate in a group
permit or seek coverage under an EPA general permit. If we own properties that
require permits for discharges of storm water runoff, we believe that we will be
able to obtain, or be included under, such permits, where necessary. Like OPA,
the CWA and analogous state laws relating to the control of water pollution
provide varying civil and criminal penalties and liabilities for releases of
petroleum or its derivatives into surface waters or into the ground.
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CERCLA, also known as the "Superfund" law, and similar state laws impose
liability, without regard to fault or the legality of the original conduct, on
certain classes of persons that are considered to have contributed to the
release of a "hazardous substance" into the environment. These persons include
the owner or operator of the disposal site or sites where the release occurred
and companies that disposed or arranged for the disposal of the hazardous
substances found at the site. Persons who are or were responsible for releases
of hazardous substances under CERCLA may be subject to joint and several
liability for the costs of cleaning up the hazardous substances that have been
released into the environment, for damages to natural resources and for the
costs of certain health studies, and it is not uncommon for neighboring
landowners and other third parties to file claims for personal injury and
property damage allegedly caused by the hazardous substances released into the
environment.
We also anticipate that our interests may be subject to a variety of federal,
state and local permitting and registration requirements relating to protection
of the environment. We believe that our interests will be able to maintain
substantial compliance with current applicable environmental laws and
regulations and that continued compliance with existing requirements will not
have a material adverse effect on us.
Comparison of Results of Operations at December 31, 1999 and December 1, 1998.
Our available cash and equivalents increased from $2,246.00 at December 31, 1998
to $170,457.00 at December 31, 1999 primarily as a result of the sale of the
Company's $.0001 common stock. Our accounts payable increased from $13,042.99 in
1998 to $17,137.00 in 1999 and the Company became indebted to a related party in
the amount of $5,408.00. The Company's net property and equipment increased from
$0 to $59,075.00 due primarily to the purchase of additional computer equipment.
Depreciation expense for the years ended December 31, 1999 and 1998 were
$2,037.00 and $2,037.00, respectively.
General and administration costs increased from $10,797.00 for the year ended
December 31, 1998 to $1,365,901.00 for the year ended December 31, 1999.
Commission expenses increased from $0 to $99,500.00 during that same period. Our
cash flows used in operating activities were $10,797.00 for the year ended
December 31, 1998 and $1,432,230.00 for the year ended December 31, 1999. The
increase in funds expended was primarily the result of the Company meeting its
financial commitments under various agreements and general administration costs.
Cash provided by financing activities increased from $0 for the year ended
December 31, 1998 to $1,359,500.00 for the year ended December 31, 1999.
Item 2. Description of Property.
Property held by the Company. The consolidated financial statements filed as
exhibits to this Annual Report on Form 10KSB include the accounts of the Company
and its wholly-owned subsidiary, CardStakes.com, Inc., a Nevada corporation
(previously defined in this Annual Report as "CardStakes.com"). All significant
intercompany transactions have been eliminated. As of the dates specified in the
following table, we held the following property:
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<TABLE>
<CAPTION>
====================================================================================================
Property Dec. 31, 1999 Dec. 31,1998
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<S> <C> <C>
Cash and equivalents $117,999.00 $2,246.00
- -------------------------------------------------------------------------------- -------------------
Universal Resource Locator (net of amortization) $817,181.00 $0.00
- --------------------------------------------------- --------------- --------------
Property and Equipment (net of depreciation) $59,075.00 $0.00
- -----------------------------------------------------------------------------------------------------
</TABLE>
The Company defines cash equivalents as all highly liquid investments with a
maturity of 3 months or less when purchased.
Item 3. Legal Proceedings
There are no legal actions pending against the Company nor are any such legal
actions contemplated.
Item 4. Submission of Matters to a Vote of Security Holders.
On or about January 31, 2000, we received written approval from at least 51% of
the Company's shares entitled to vote to change the name of the Company from
Power Direct, Inc., to 2U Online.com, Inc.
PART II.
Item 5. Market for Common Equity and Related Stockholder Matters
Reports to Security Holders. The Company is a reporting company with the
Securities and Exchange Commission ("SEC"). The public may read and copy any
materials filed with the SEC at the SEC's Public Reference Room at 450 Fifth
Street N.W., Washington, D.C. 20549. The public may also obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC. The address of that site is http://www.sec.gov.
The Company participates in the OTC Bulletin Board, an electronic quotation
medium for securities traded outside the Nasdaq Stock Market. The Company's
common stock trades on the OTC Bulletin Board under the trading symbol "TWOU".
This market is extremely limited and the prices for the Company's common stock
quoted by brokers is not necessarily a reliable indication of the value of the
Company's common stock.
The Company is authorized to issue 100,000,000 shares of common stock, $.0001
par value, each share of common stock having equal rights and preferences,
including voting privileges. The shares of $.0001 par value common stock of the
Company constitute equity interests in the Company entitling each shareholder to
a pro rata share of cash distributions made to shareholders, including dividend
payments. The holders of the Company's common stock are entitled to one vote for
each share of record on all matters to be voted on by shareholders. There is no
cumulative voting with respect to the election of directors of the Company or
any other matter, with the result that the holders of more than 50% of the
shares voted for the election of those directors can elect all of the Directors.
The holders of the Company's common stock are entitled to receive dividends
when, as and if
9
<PAGE>
declared by the Company's Board of Directors from funds legally available
therefor; provided, however, that cash dividends are at the sole discretion of
the Company's Board of Directors. In the event of liquidation, dissolution or
winding up of the Company, the holders of common stock are entitled to share
ratably in all assets remaining available for distribution to them after payment
of liabilities of the Company and after provision has been made for each class
of stock, if any, having preference in relation to the Company's common stock.
Holders of the shares of Company's common stock have no conversion, preemptive
or other subscription rights, and there are no redemption provisions applicable
to the Company's common stock. All of the outstanding shares of Company's common
stock are duly authorized, validly issued, fully paid and non-assessable.
Dividend Policy. We have never declared or paid a cash dividend on its capital
stock and we do not expect to pay cash dividends on our common stock in the
foreseeable future. We currently intend to retain earnings, if any, for use in
our business. Any dividends declared in the future will be at the discretion of
the Board of Directors and subject to any restrictions that may be imposed by
our lenders.
Stock Options. On or about April 23, 1999, we issued options to purchase shares
of the Company's $.0001 par value common stock for $0.25 per share in the
following amounts: (i) May Joan Liu in the amount of 600,000 (we valued the
consulting services provided by Ms. Liu at US$37,500.00); (ii) Richard Angelo
Holmes in the amount of 300,000 (we valued the consulting services provided by
Mr. Holmes at US$18,750.00); (iii) Jack Sha in the amount of 300,000 (we valued
the services provided by Mr. Sha at US$18,750.00); and (iv) Ferdinand Marehard
in the amount of 50,000 (we valued the services provided by Mr. Marehard at
US$3,125.00). All of such options were issued in reliance upon the exemption
from the registration and prospectus delivery requirements of the Act as set
forth in Regulation S promulgated by the Securities and Exchange Commission.
Specifically, the issuance was made to a "non-U.S. person outside the United
States of America" as that term is defined under applicable federal and state
securities laws. All of such options are exercisable on a 1:1 basis for the
$.0001 par value common stock of the Company. The options are exercisable at a
price of $0.25 per share and expire by their own terms 18-months from the grant
date.
Warrants. As of December 31, 1999, there were two million five hundred twenty
thousand (2,520,000) warrants outstanding. YENN Asset Management was the holder
of 1,000,000 of the aforementioned warrants. J & S Overseas Holdings Ltd.
("J&S") was the holder of 610,000 of such warrants. Holm Investments Ltd. was
the holder of 910,000 of such warrants. The 1,000,000 YENN warrants represent
the right to purchase from the Company one share of its $.0001 par value common
stock at a price of $.30 per share and all of which expire by their own terms on
October 31, 2000. The 610,000 outstanding warrants held by J&S represent the
right to purchase from the Company one share of its $.0001 par value common
stock at a price of $0.25 per share and all of which expire by their own terms
on January 15, 2001. The 910,000 warrants held by Holm Investment Ltd. represent
the right to purchase from the Company one share of its $.0001 par value common
stock at a price of $0.25 per share.
According to quotes provided by Smallcapcenter.com, the Company's common stock
has closed at:
Quarter High Low
1998 Fourth Quarter $ .60 $ .41
- --------------------------- ----------------------- -------------------------
1999 First Quarter $ .75 $ .23
- --------------------------- ----------------------- -------------------------
1999 Second Quarter $1.09 $ .27
- --------------------------- ----------------------- -------------------------
1999 Third Quarter $ .54 $ .37
- --------------------------- ----------------------- -------------------------
1999 Fourth Quarter $ .39 $ .23
- --------------------------- ----------------------- -------------------------
December 31, 1999
to February 11, 2000 $ .92 $ .30
- --------------------------- ----------------------- -------------------------
10
<PAGE>
Such quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not represent actual transactions.
Item 6. Plan of Operation
THIS ANNUAL REPORT SPECIFIES FORWARD-LOOKING STATEMENTS OF MANAGEMENT OF THE
COMPANY ("FORWARD-LOOKING STATEMENTS") INCLUDING, WITHOUT LIMITATION,
FORWARD-LOOKING STATEMENTS REGARDING OUR EXPECTATIONS, BELIEFS, INTENTIONS AND
FUTURE STRATEGIES. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT ESTIMATE THE
HAPPENING OF FUTURE EVENTS AND ARE NOT BASED ON HISTORICAL FACTS.
FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY, SUCH AS "COULD", "MAY", "WILL", "EXPECT", "SHALL", "ESTIMATE",
"ANTICIPATE", "PROBABLE", "POSSIBLE", "SHOULD", "CONTINUE", "INTEND" OR SIMILAR
TERMS, VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE
FORWARD-LOOKING STATEMENTS SPECIFIED IN THIS PROSPECTUS HAVE BEEN COMPILED BY
MANAGEMENT OF THE COMPANY ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND
CONSIDERED BY MANAGEMENT TO BE REASONABLE. FUTURE OPERATING RESULTS OF THE
COMPANY, HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, OR
WARRANTY IS TO BE INFERRED FROM THOSE FORWARD-LOOKING STATEMENTS.
THE ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD-LOOKING STATEMENTS REPRESENT
ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT TO UNCERTAINTY AS TO POSSIBLE CHANGES
IN ECONOMIC, LEGISLATIVE, INDUSTRY, AND OTHER CIRCUMSTANCES. AS A RESULT, THE
IDENTIFICATION AND INTERPRETATION OF DATA AND OTHER INFORMATION AND THEIR USE IN
DEVELOPING AND SELECTING ASSUMPTIONS FROM AND AMONG REASONABLE ALTERNATIVES
REQUIRE THE EXERCISE OF JUDGMENT. TO THE EXTENT THAT THE ASSUMED EVENTS DO NOT
OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY FROM ANTICIPATED OR PROJECTED RESULTS,
AND, ACCORDINGLY, NO OPINION IS EXPRESSED ON THE ACHIEVABILITY OF THOSE
FORWARD-LOOKING STATEMENTS. NO ASSURANCE CAN BE GIVEN THAT ANY OF THE
ASSUMPTIONS RELATING TO THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THIS REPORT
ARE ACCURATE, AND WE ASSUME NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING
STATEMENTS.
General. We have not yet realized any significant revenue from operations, nor
do we it expect to in the foreseeable future. Loss from operations increased
from $10,797.00 in 1998 to $1,432,230.00 in 1999 due to our renewed activities
in locating and evaluating suitable gas and oil leases, our pursuit of
Internet-related assets, and the general, selling, and administrative costs.
From inception to December 31, 1999, we experienced a net loss of
US$1,444,027.00 which resulted primarily as a result of selling, general and
administrative expenses and commissions.
In order to address the going concern problem discussed in our financial
statements, we will require additional cash. We will also require additional
cash to implement our business strategies, including cash for (i) payment of
increased operating expenses and (ii) further implementation of those business
strategies. No assurance can be given, however, that we will have access to the
capital markets in the future, or that financing will be available on acceptable
terms to satisfy our cash requirements to implement its business strategies. Our
inability to access
11
<PAGE>
the capital markets or obtain acceptable financing could have a material adverse
effect on our results of operations and financial condition and could severely
threaten our ability to operate as a going concern.
We anticipate that we will need to raise additional capital within the next 12
months in order to continue as a going concern. Such additional capital may be
raised through additional public or private financings, as well as borrowings
and other resources. To the extent that additional capital is raised through the
sale of equity or equity- related securities, the issuance of such securities
could result in dilution of our stockholders. There can be no assurance that
additional funding will be available on favorable terms, if at all. If adequate
funds are not available within the next 12 months, we may be required to curtail
our operations significantly or to obtain funds through entering into
arrangements with collaborative partners or others that may require us to
relinquish rights to certain of its assets that we would not otherwise
relinquish.
We do not anticipate any material expenditures within the next 12 months that
will affect its liquidity. We do not anticipate any significant research and
development within the next 12 months, nor do we anticipate that we will lease
or purchase any significant equipment within the next 12 months. We do not
anticipate a significant change in the number of its employees within the next
12 months. We are not aware of any material commitment or condition that may
affect our liquidity within the next 12 months.
We anticipate that we will begin to realize a positive revenue stream beginning
in or about the third quarter of 2000, as a result of the activities of our
subsidiary, CardStakes.com, Inc. Specifically, as a holder of 59% of
CardStakes.com's issued and outstanding stock, we believe that CardStakes.com,
Inc.'s greeting card/scratch and win business, having recently completed its
beta testing, will generate a positive revenue stream for the Company.
Liquidity and Capital Resources. During the year ended December 31, 1999, we
received approximately $1,358,500.00 from the sale of the Company's common
stock. At December 31, 1999, we had cash resources of $117,999.00. The cash and
equivalents constitute our present internal sources of liquidity. Because we are
not generating any revenues from the sale or licensing of our products, our only
external source of liquidity is the sale of our capital stock.
Company's Plan of Operation For Next 12 Months. We have decided that it is in
the best interests of the Company and its shareholders to shift the Company's
focus from pursuing oil and gas interests to pursuing Internet-related projects.
Specifically, within the next 12 months we plan to continue to enhance and
improve our Internet-related activities as well as those of our subsidiary,
CardStakes.com, Inc. We have not yet determined how we will maximize our oil and
gas interests.
Changes in Number of Employees. During the next 12 months, depending on the
success of our marketing plan, we may be required to hire additional employees;
however, we are not able to provide a reasonable estimate of the number of such
additional employees which may be required at this time.
Item 7. Financial Statements
Copies of the financial statements specified in Regulation 228.310 (Item 310)
are filed with this Annual Report on Form 10-KSB.
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
There have been no changes in or disagreements with the Company's accountants
since the formation of the Company required to be disclosed pursuant to Item 304
of Regulation S-B.
12
<PAGE>
PART III.
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
The directors and principal executive officers of the Company are as specified
on the following table:
<TABLE>
<CAPTION>
=========================== ================== ========================================
Name Age Position
- --------------------------- ------------------ ----------------------------------------
<S> <C> <C>
Jack Sha 49 President and Director
- --------------------------- ------------------ ----------------------------------------
Ferdinand Marehard 71 Secretary, Treasurer and a Director
=========================== ================== ========================================
</TABLE>
Jack Sha is the President and a Director of the Company. Mr. Sha was the
president of Tokyo Trading Ltd. from 1990 through 1994, during which time he was
involved in the decision making process for various investment opportunities
ranging from golf course developments to mining properties. In 1991, Mr. Sha
acquired, on behalf of the Tokyo Trading Ltd., the rights to develop and market
a unique essence for skin care products. In 1994, Mr. Sha underwent major
surgery and was inactive until 1998.
Ferdinand Marehard is the Secretary, Treasurer and a Director of the Company.
Mr. Marehard was the president of West-Mar Resources Ltd. ("West-Mar") from 1984
through 1994, during which time he managed West-Mar's participation in various
foreign and domestic gas and oil leases. In 1985, Mr. Marehard managed
West-Mar's participation in the development of six gas wells in Indiana, and
also participated in negotiations for the acquisition of a 1,200,000 acre oil
concession in Liberia, West Africa. In 1986 he acquired, on behalf of West-Mar,
a 5% working interest on 40,000 acres in Adams County, Indiana. From 1990
through 1994 he participated in drilling and developing a horizontal well and in
waterflood oil production in Texas. He also acquired, on behalf of West-Mar,
17,000 acres of gas and oil leases in the state of Washington. From 1975 through
1981 Mr. Marehard was the president of Hesca Resources Corp., Ltd.; from 1982
through 1984 he was the president of Demus Petro Corporation; and from 1979
through 1984 he was the president of Mar-Gold Resources, Ltd. These entities
participated in the oil and gas industry and the mining industry. During this
period, Mr. Marehard had a broad range of management duties for these companies,
including oversight of drilling and production of oil wells in Kentucky, Texas
and Utah. He also negotiated the acquisition of several properties in the
Greenwood-Grandforks gold camp and negotiated financing for the various company
operations. Mr. Marehard has experience in prospecting, including examination of
property in the field. He has supervised placer gold leases in the Yukon and has
identified and negotiated for silver, lead, zinc and copper bearing property on
Vancouver Island, British Columbia. He has experience in mining and exploration
for precious and base metals in British Columbia, the Yukon, the Northwest
Territories and the United States.
There is no family relationship between any of the officers or directors of the
Company. There are no orders, judgments, or decrees of any governmental agency
or administrator, or of any court of competent jurisdiction, revoking or
suspending for cause any license, permit or other authority to engage in the
securities business or in the sale of a particular security or temporarily or
permanently restraining any officer or director of the Company from engaging in
or continuing any conduct, practice or employment in connection with the
purchase or sale of securities, or convicting such person of any felony or
misdemeanor involving a security, or any aspect of the securities business or of
theft or of any felony, nor are any of the officers or directors of any
corporation or entity affiliated with the Company so enjoined.
13
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance. The Company does not
presently have knowledge as to whether all of its officers, directors, and
principal shareholders have filed all reports required to be filed by those
persons on, respectively, Form 3 ( Initial Statement of Beneficial Ownership of
Securities), Form 4 (Statement of Changes of Beneficial Ownership of
Securities), or Form 5 (Annual Statement of Beneficial Ownership of Securities).
Item 10. Executive Compensation.
Any compensation received by officers, directors, and management personnel of
the Company will be determined from time to time by the Board of Directors of
the Company. Officers, directors, and management personnel of the Company will
be reimbursed for any out-of-pocket expenses incurred on behalf of the Company.
Compensation to the Company's officers is specified on the following chart:
As of December 31, 1999, the Company has paid Jack Sha compensation in the
following amounts.
======================= =========================
Month Compensation
----------------------- -------------------------
May $700.00
----------------------- -------------------------
June $1,400.00
----------------------- -------------------------
July $1,400.00
----------------------- -------------------------
August $1,700.00
----------------------- -------------------------
September $1,000.00
----------------------- -------------------------
October $1,000.00
----------------------- -------------------------
November $1,000.00
----------------------- -------------------------
December $1,200.00
======================= =========================
The Company anticipates compensating Jack Sha for accrued salary when and if the
funds are available.
Shares Issued as Compensation for Services. In 1999, the Company issued
3,970,000 shares of its $.0001 par value common stock as compensation for
consulting and other services, as follows:
(i) Consultants were issued 2,750,000 shares of the Company's $.0001 par
value common stock as compensation for their services to the Company. Those
shares were valued at what the Company believes was the fair market value at the
time of issuance, which was $0.20 per share.
(ii) The Company's transfer agent was issued 20,000 shares of the Company's
$.0001 par value common stock as additional compensation for their services to
the Company. Those shares were valued at what the Company believes was the fair
market value at the time of issuance, which was $0.25 per share.
(iii) The Company issued an additional 800,000 shares of the Company's
$.0001 par value common stock as additional compensation for their services to
the Company. Those shares were valued at what the Company believes was the fair
market value at the time of issuance.
(iv) The Company issued an additional 400,000 shares to E-Vista Commerce
Ltd. for services rendered. Those shares were valued at what the Company
believes was the fair market value at the time of issuance.
(v) Jack Sha, an officer, director and shareholder of the Company, was
issued 300,000 options to purchase the Company's $.0001 par value common stock.
The Company valued the services provided by Mr. Sha at
14
<PAGE>
US$18,750.00. All of such options are exercisable on a 1:1 basis for the $.0001
par value common stock of the Company. The options are exercisable at a price of
$0.25 per share and expire by their own terms 18-months from the grant date.
(vi) Ferdinand Marehard, an officer, director and shareholder of the
Company, was issued 50,000 options to purchase the Company's $.0001 par value
common stock. The Company valued the services provided by Mr. Marehard at
US$3,125.00. All of such options are exercisable on a 1:1 basis for the $.0001
par value common stock of the Company. The options are exercisable at a price of
$0.25 per share and expire by their own terms 18-months from the grant date.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of December 31, 1999, by (i) each
person or entity known by the Company to be the beneficial owner of more than 5%
of the outstanding shares of common stock, (ii) each of the Company's directors
and named executive officers, and (iii) all directors and executive officers of
the Company as a group. The number of shares outstanding of the issuer's only
class of Common Stock, $.0001 par value, was 22,727,500 on December 31, 1999.
(a) Security Ownership of Certain Beneficial Owners. Other than officers and
directors, the following chart represents those persons who are beneficial
owners of 5% or more of the Company's issued and outstanding common stock:
<TABLE>
<CAPTION>
Title of Class Name of Beneficial Owner Amount and Nature of Percent of Class
- -------------- ----------------------- Beneficial Owner ----------------
--------------------
<S> <C> <C> <C>
Common Stock YENN Asset Management(1) 1,100,000(2) 5.4%
Warrants to Purchase Buckingham Square, The
Common Stock Penthouse
Seven Mile Beach, West Bay Road
Grand Cayman, Cayman Islands
Common Stock J&S Overseas Holding Ltd.(3) 8.9%
Warrants to Purchase Buckingham Square, The 1,800,000(4)
Common Stock Penthouse
Seven Mile Beach, West Bay Road
Grand Cayman, Cayman Islands
Common Stock Holm Investment Ltd. (6) 1,900,000(5) 9.4%
Warrants to Purchase 534 Beachview Drive
Common Stock Vancouver, British Columbia
Canada V7G 1P9
Common Stock Mae Joan Liu 1,500,000(7) 7.4%
Options to Purchase 1066 Groveland Road
Common Stock West Vancouver, British Columbia
V7S 1Z4
</TABLE>
15
<PAGE>
<TABLE>
<S> <C> <C> <C>
Common Stock Rising Phoenix Development 3,800,000(8) 18.8%
Group, Ltd.
Common Stock Compte De Sierge 29.7%
</TABLE>
(1) The beneficial owner of YENN Asset Management is Regina Strakova, Krezdub
317, 696 64, Czech Republic.
(2) Includes 100,000 shares of the Company's $.0001 par value common stock and
1,000,000 unexercised warrants to purchase the Company's $.0001 par value
common stock at $.30 per share.
(3) The beneficial owner of J&S Overseas Holding Ltd. is Fred Tham, 1301 Pik
Hoi House, Choi Hung Estate, Kowloon, Hong Kong.
(4) Includes 1,570,000 shares of the Company's $.0001 par value common stock
owned by J & S and 230,000 unexercised warrants to purchase the Company's
$.0001 par value common stock at $.25 per share.
(5) Includes 537,575 unexercised warrants to purchase the Company's $.0001
common stock at $.25 per share, 1,062,425 shares of the Company's $.0001
par value common stock and 300,000 options to purchase the Company's $.0001
par value common stock held by Richard Angelo Holmes, beneficial owner of
Holm Investments Ltd.
(6) The beneficial owner of Holm Investment Ltd. is Richard Angelo Holmes.
(7) Includes 1,150,000 shares of the Company's $.0001 par value common stock
and 350,000 options to purchase the Company's $.0001 par value common
stock.
(8) Stock to be issued pursuant to the Company's agreement with Rising Phoenix.
(b) Security Ownership of Management. The directors and principal executive
officers of the Company directly or beneficially own, in the aggregate, 950,000
shares of the Company's common stock, or approximately 4.7 % of the issued and
outstanding common shares, as set forth on the following table (percentages are
rounded off to the nearest one-tenth of one percent):
<TABLE>
<CAPTION>
Title of Class Name of Beneficial Owner Amount and Nature of Percent of Class
- -------------- ------------------------ Beneficial Owner ----------------
--------------------
<S> <C> <C> <C>
Common Shares Jack Sha 300,000 shares 3.0%
5550 Cambie Street, Suite 306 300,000 options
Vancouver, British Columbia
V5Z 3A2 President and Director
Common Shares Ferdinand Marehard 300,000 shares 1.7%
1270 Robson Street, Suite 406 50,000 options
Vancouver, British Columbia Secretary/Treasurer
V6E 3Z6 and Director
</TABLE>
Beneficial Ownership. Beneficial ownership is determined in accordance with the
rules of the Commission and generally includes voting or investment power with
respect to securities. In accordance with Commission rules, shares of the
Company's common stock which may be acquired upon exercise of stock options or
warrants which are currently exercisable or which become exercisable within 60
days of the date of the table are deemed beneficially owned by the optionees.
Subject to community property laws, where applicable, the persons or entities
named in the table above have sole voting and investment power with respect to
all shares of the
16
<PAGE>
Company's common stock indicated as beneficially owned by them.
Changes in Control. We are not aware of any arrangements which may result in
"changes in control" as that term is defined by the provisions of Item 403(c) of
Regulation S-B.
Item 12. Certain Relationships and Related Transactions.
Related Party Transactions. Agreement to Purchase Rising Phoenix Development
Group Ltd.'s Corporate Assets was not the result of arms-length negotiations. As
specified above, on January 15, 1999, the Company signed a letter of intent to
acquire all of the corporate assets of Rising Phoenix Development Group, Ltd.
(previously defined as "Rising Phoenix") in exchange for 3,800,000 shares of the
Company's common stock and seventy-five thousand dollars (US$75,000). The
president of Rising Phoenix, Robert Klein, was on the Company's Board of
Directors from February 1, 1999 through early in March, 1999, at which time Mr.
Klein resigned from the Company's Board of Directors. It is anticipated that Mr.
Klein will not rejoin the Company's Board of Directors.
As of December 31, 1999, we had advanced a total of $80,495 to our subsidiary
CardStakes.com to pay for operating expenses. The Company and CardStakes.com
have not yet negotiated repayment terms. However, we anticipate that repayment
of such funds will be contingent on CardStakes.com's results of operations. The
outstanding amount due to the Company bears no interest.
Anti-Dilution Provision. In anticipation of the issuance of shares pursuant to
the license agreement entered into between the Company and CardStakes.com (more
particularly described in Item 1 of this Amendment No. 3 to the Company's Form
10-SB), on or about March 9, 1999, the Company's subsidiary, CardStakes.com
amended its Articles of Incorporation to include an Anti-Dilution Provision
("Provision") providing for the continuous and nondilutable 51% ownership of
CardStakes.com by the Company. In or around September, 1999, CardStakes.com and
the Company agreed that the Provision would be removed from CardStakes.com's
Articles of Incorporation. As consideration for the removal of the Provision,
CardStakes.com agreed to issue the Company 2,000,000 shares of its $.0001 par
value common stock. On or about September 10, 1999, CardStakes.com's President
and Secretary executed a Certificate of Amendment to CardStakes.com's Articles
of Incorporation removing the Provision.
Although we have not yet formally adopted a policy for the resolution of
conflicts regarding related party transactions, we do anticipate that we will
fully disclose any and all related party transactions, including, but not
limited to, (i) disclosing such transactions in prospectus' where required; (ii)
disclose in any and all filings with the Securities and Exchange Commission,
where required; (iii) obtain uninterested directors consent; (iv) obtain
shareholder consent where required; and (v) take any and all other action
required by relevant law and /or the Company's governing documents
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No.
3.1 Certificate of Incorporation
(Charter Document)*
17
<PAGE>
3.2 Amendment to Certificate of Incorporation
(Charter Document)*
3.3 Amendment to Certificate of Incorporation
(Charter Document)*
3.4 Bylaws*
4. Instruments Defining the Rights of Holders (Not Applicable)
9. Voting Trust Agreement (Not Applicable)
10.1 Letter of Agreement Between I.T.A. Enterprises, Inc., and the Company
(material contract)*
10.2 Letter of Agreement Between Rising Phoenix Development Group Ltd. and the
Company (material contract)*
10.3 Agreement to Sell URL Between Holm Investments and the Company
(material contract)*
10.4 Sub-Licensing Agreement Between the Company and CardStakes.com, Inc.
(material contract)*
10.5 Asset Purchase and Sale Agreement Between the Company and Rising Phoenix
Development Ltd.
(material contract)*
10.6 Agreement to Sell URL Between May Joan Liu and the Company
(material contract)*
10.7 Agreement to Sell URL Between CardTek (International) Holdings Ltd. and the
Company (material contract)*
10.8 Agreement to Sell URL Between R. Angelo Holmes and the Company
(material contract)*
10.6 Agreement to Sell URL Between Cybermall Consulting Services Ltd. and the
Company (material contract)*
11. Statement Re: Computation of Per Share Earnings(Loss)**
16. Letter on change in certifying accountant (Not Applicable)
18. Letter on Change in Accounting Principles (Not Applicable)
21. Subsidiaries of the Registrant**
18
<PAGE>
22. Published Report Regarding Matters Submitted to Vote (Not Applicable)
23.1 Consent of Auditors
23.2 Consent of Counsel
24. Power of Attorney (Not Applicable)
27. Financial Data Schedule
99. Additional Exhibits (Not Applicable)
*Previously filed as Exhibits to Registration Statement on Form 10-SB and all
amendments thereto filed with the Commission.
**Included in consolidated financial statements filed herewith.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K with the Commission announcing the
change of its name from Power Direct, Inc., to 2U Online.com, Inc., and the
related change in its symbol from "PWDR" to "TWOU".
19
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned in the City of
Vancouver, British Columbia, Canada, on April 6, 2000.
2U Online.com, Inc.,
a Delaware corporation
By: /s/ Jack Sha
------------------
Jack Sha
Its: President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
2U ONLINE.COM, INC.
/s/ Jack Sha April 6, 2000
- --------------------------------- -------------
Director
/s/ Ferdinand Marehand April 6, 2000
- --------------------------------- -------------
Director
20
<PAGE>
James E. Slayton, CPA
- --------------------------------------------------------------------------------
2858 WEST MARKET STREET
SUITE C
FAIRLAWN, OHIO 44333
1-330-864-3553
To Whom It May Concern:
The firm of James E. Slayton, Certified Public Accountant consents to the
inclusion of my report of November 19, 1999, on the Consolidated Financial
Statements of Power Direct, Inc. from the inception date of September 13, 1993
through December 31, 1999, in any filings that are necessary now or in the near
future to be filed with the U.S. Securities and Exchange Commission.
Professionally,
/s/ James E. Slayton
James E. Slayton, CPA
Ohio License ID# 04-1-15582
<PAGE>
James E. Slayton, CPA
- --------------------------------------------------------------------------------
2858 WEST MARKET STREET
SUITE C
FAIRLAWN, OHIO 44333
INDEPENDENT AUDITOR'S REPORT
Board of Directors March 16, 2000
Power Direct, Inc. (the Company)
I have audited the Consolidated Balance Sheet of Power Direct, Inc. (A
Development Stage Company), as of December 31, 1999, December 31, 1998 and
December 31, 1997 and the related Consolidated Statements of Operations,
Stockholders' Equity and Cash Flows for the period January 1, 1999 to December
31, 1999 and the two years ended December 31, 1998, December 31, 1997 and the
period of September 13, 1993 (Date of Inception) to December 31, 1999. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis evidence supporting
the amounts and disclosures in the financial statement presentation. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis for my
opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Power Direct, Inc., (A
Development Stage Company), at December 31, 1999, December 31, 1998 and December
31, 1997, and the results of its operations and cash flows for the period
January 1, 1999 to December 31, 1999 and the two years ended December 31, 1998,
December 31, 1997, and the period September 13, 1993 (Date of Inception) to
December 31, 1999 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, The Company has had limited operations and has not
established a long term source of revenue. This raises substantial doubt about
its ability to continue as a going concern. Management's plan in regard to these
matters are also described in Note 3. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ James E. Slayton
James E. Slayton, CPA
Ohio License ID# 04-1-15582
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December December December
31, 1999 31, 1998 31, 1997
<S> <C> <C> <C>
ASSETS
Current Asset
Cash in Bank 117,999.00 2,246.00 0.00
Receivables 45,458.00 0.00 0.00
Other Current Assets 7,000.00
--------------------------------------------------
Total Current Assets 170,457.00 2,246.00 0.00
OTHER ASSETS
Property and Equipment (net of depreciation) 59,075.00
Other Assets 1,123.00 0.00 0.00
Universal Resource Locator (note of amortization) 817,181.00
Licensing agreement 3,102,882.00
Investment in Vertizonial 20,393.00
Investment in Rising Phoenix 75,000.00
Investment in Liberty Oil and Gas 44,400.00
--------------------------------------------------
Total Other Assets 4,120,034.00 0.00 0.00
TOTAL ASSETS 4,290,491.00 2,246.00 0.00
==================================================
</TABLE>
See accompanying notes to financial statements
-2-
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December December December
31, 1999 31, 1998 31, 1997
<S> <C> <C> <C>
LIABILITIES & EQUITY
Current Liabilities
Accounts Payable 17,137.00 13,042.99
Note Payable-Related Party 6,408.00
-----------------------------------------------
Total Liabilities 23,545.00 13,042.99 0.00
Minority Interest in Subsidiary ($26,971 at time
of acquisition less income attributable to
minority Interest $63,248.00) (36,277.00)
EQUITY 38,291.00
Common Stock, $.0001 par value, authorized
100,000,000 common shares; issued and
outstanding at 12/31/97, 6,000,000 common
shares; Issued and outstanding at 12/31/98,
6,000,000 common shares; issued and
outstanding at 12/31/99, 22,727,500 2,573.00 600.00 100.00
Additional paid in capital 5,744,677.00 400.00 900.00
Retained Earnings (Deficit) (1,444,027.00) (11,796.99) (1,000.00)
Total Stockholders' Equity 4,303,223.00 (10,796.99) 0.00
-----------------------------------------------
TOTAL LIABILITIES & OWNER'S EQUITY 4,290,491.00 2,246.00 0.00
===============================================
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR PERIODS ENDING
<TABLE>
<CAPTION>
Date of
Inception
to
December December December December
31, 1999 31, 1999 31, 1998 31, 1997
REVENUE
<S> <C> <C> <C> <C>
Services 0.00 0.00 0.00 0.00
COSTS AND
EXPENSES
General and Administrative 1,365,901.00 1,364,104.00 10,797.00 0.00
Commissions 99,500.00 99,500.00
Depreciation Expenses 2,037.00 2,037.00
Amortization Expense 43,008.00 43,008.00
------------------------------------------------------------------------
Total Costs and Expenses 1,510,446.00 1,498,649.00 10,797.00 0.00
------------------------------------------------------------------------
Other Income (Expenses):
Interest Income 3,170.00 3,170.00 0.00 0.00
------------------------------------------------------------------------
Total Other Income (Expense) 3,170.00 3,170.00 0.00 0.00
Net Income or (Loss) before Minority Interest (1,507,276.00) (1,495,479.00) (10,797.00) 0.00
------------------------------------------------------------------------
Less: Income or (Loss) attributed to Minority (63,249.00) (63,249.00) 0.00 0.00
Interest .41 $154,265.00
------------------------------------------------------------------------
Net Income or (Loss) (1,444,027.00) (1,432,230.00) (10,797.00)
========================================================================
Weighted average number of common shares
outstanding 15,568,611 15,568,611 6,000,000 2,000,000
Net Loss Per Share (0.09) (0.09) 0.00 0
</TABLE>
See accompanying notes to financial statements
-4-
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
STATEMNT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR PERIOD ENDING
December 31, 1997, December 31, 1998 and December 31, 1999
<TABLE>
<CAPTION>
Deficit
accumulated
Additional during Total
Common Stock paid-in development Stockholder's
Shares Amount capital stage Equity
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1995 6,000,000 600.00 400.00 (1,000.00) 0.00
Balance December 31, 1996 5,000,000 600.00 400.00 (1,000.00) 0.00
Balance December 31, 1997 6,000,000.00 600.00 400.00 (1,000.00) 0.00
Net loss year ended December 31, 1998 (10,797.00) (10,797.00)
------------------------------------------------------------------------------------
Balance December 31, 1998 6,000,000 $ 600.00 $ 400.00 ($ 11,797.00) (10,797.00)
------------------------------------------------------------------------------------
January 6, 1999 Issued for services 800,000 80.00 7,920.00 8,000.00
January 8, 1999 Issued for cash 800,000 60.00 5,940.00 6,000.00
January 28, 1999
Issued for consulting services 600,000 60.00 119,940.00 120,000.00
February 26, 1999 500,000 50.00 99,950.00 100,000.00
April 14, 1999 Issued for cash 7,127,500 712.75 999,287.25 1,000,000.00
April 28, 1999 Issued for services 400,000 40.00 55,960.00 56,000.00
On or about June 15, 1999
Issued for interest in
Cardstakes.com 3,000,000 300.00 1,499,700.00 1,500,000.00
June 15, 1999
Issued for services rendered 20,000 2.00 4,998.00 5,000.00
June 30, 1999
Issued for services rendered 250,000 25.00 49,975.00 50,000.00
July 20, 1999
Issued for cash 800,000 80.00 239,920.00 240,000.00
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR PERIOD ENDING
December 31, 1997, December 31, 1998 and December 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
September 15, 1999
issued for cash 100,000 10.00 29,990.00 30,000.00
September 15, 1999 granted options
for 1,250,000 shares of .0001 par
common stock 388,750.00 388,750.00
October 14, 1999 received cash
when warrants exercised 40,000 4.00 9,996.00 10,000.00
November 15, 1999 received cash
when warrants exercised 200,000 20.00 49,980.00 50,000.00
November 9, 1999 exchanged for
licensing agreement 3,000,000 300.00 1,499,700.00 1,500,000.00
November 19, 1999 exchanged for
URL 650,000 65.00 194,936.00 195,000.00
November 24, 1999 exchanged for
URL 800,000 80.00 239,920.00 240,000.00
November 25, 1999 exchanged for
URL 500,000 50.00 149,950.00 160,000.00
November 25, 1999 exchanged for
URL 250,000 25.00 74,975.00 75,000.00
November 29, 1999 warrants
exercised 40,000 4.00 9,996.00 10,000.00
December 6, 1999 warrants
exercised 50,000 5.00 12,486.00 12,500.00
Net loss January 1, 1999 to
December 31, 1999
Balance December 31, 1999 (1,432,230.00) (1,432,230.00)
-------------------------------------------------------------------------------------
5,630,000 $ 563.00 $ 2,660,687.00 ($1,432,230.00) $ 1,229,020.00
=====================================================================================
</TABLE>
See accompanying notes to financial
-6-
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
STATEMENT OF CASH FLOWS FOR PERIOD
<TABLE>
<CAPTION>
Date of January 1,
inception 1999
to to
December December December December
31, 1999 31, 1999 31, 1998 31, 1997
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) from operations (1,444,027.00) (1,432,230.00) (10,797.00) 0.00
Adjustments to reconcile net income to net cash
provided
Depreciation Expense 2,037.00 2,037.00
Amortization of Intangible Assets 43,008.00 43,008.00
Amortization of Intangible Assets (Minority
Interest) 41,667.00 41,667.00
Service rendered in exchange for stock 439,000.00 439,000.00
Compensation expense for options 388,750.00 388,750.00
Increase in current assets (52,458.00) (52,458.00)
Increase(Decrease) in cuuent
liabilities 23,545.00 10,502.00 13,043.00
--------------------------------------------------------------------------
Net Cash provided by Operating Activities (558,478.00) (559,724.00) 2,246.00 0.00
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Long Term Investments (766,655.00) (766,865.00)
Purchase of property and equipment (61,112.00) (61,112.00)
Settlement of Lansource dispute 144,954.00 144,954.00
--------------------------------------------------------------------------
Net cash provided by investing
activities (683,023.00) (683,023.00) 0.00
CASH FLOWS FORM FINANCING ACTIVITIES
Issuance of Capital Stock 1,359,500.00 1,358,500.00
Net cash provided by financing
activities 1,359,500.00 1,358,500.00 0.00 0.00
Net increase (decrease) in cash 117,999.00 115,753.00 2,246.00 0.00
Cash and cash equivalents, beginning
of period 0.00 2,246.00 0.00 0.00
Cash and cash equivalents, end of
year 117,999.00 117,999.00 2,246.00 0.00
</TABLE>
See accompanying notes to financial statements
-7-
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized September 13, 1993, under the laws of the State
of Delaware, as Power Direct, Inc. The Company currently has no operations and
in accordance with SFAS #7, the Company is considered a development stage
company.
On September 30, 1993, the company issued 10,000 Shares of its .01 par
value common stock for cash of $1,000.00.
On July 30, 1998, the State of Delaware approved the Company's restated
Articles of Incorporation, which increased its capitalization from 10,000 common
shares to 25,000,000 common shares. The par value was changed from $.01 par
value to $0.0001.
On July 30, 1998, the Company forward split its common stock 200:1, thus
increasing the number of outstanding common stock shares from 10,000 to
2,000,000 shares.
On October 21, 1998, the Company forward split its common stock 3:1, thus
increasing the number of outstanding common stock shares from 2,000,000 to
6,000,000 shares.
On December 16, 1998, the Company increased its capitalization from
25,000,000 common shares to 100,000,000 common shares. The par value remained at
$0.0001.
The Statement of Stockholder's equity reflects changes in par value and
common stock splits retroactively.
On January 6, 1999, the Company issued 600,000 shares of its $0.0001 par
value common stock for $6,000.00 in cash.
On January 16, 1999, the Company issued 800,000 shares of its $0.0001 par
value common stock for $8,000.00 in services rendered.
On January 28, 1999, the Company issued 600,000 shares of its $0.0001 par
value common stock for services rendered in the amount of $120,000.00
On February 26, 1999, the Company issued 500,000 shares of its $0.0001 par
value common stock for service rendered in the amount of $100,000.00.
On April 14, 1999, the Company completed a Regulation D, Rule 504 offering,
issuing 7,127,500 shares of its $0.0001 par value common stock for $1,000,000.00
in cash. These shares were issued at varying prices which reflected market
prices at time of subscription.
On April 28, 1999, the Company issued 400,000 shares of its $0.0001 par
value common stock for services rendered in the amount of $56,000.00
-8-
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY - continued
On or about April 28, 1999, the Company issued 3,00,000 shares of its
$0.0001 par value common stock in exchange for a licensing agreement with Compte
De Sierge Accomodative Corp. The shares exchanged were valued at $.50 per share,
the market price at the time the agreement was reached. On November 9, 1999,
3,000,000 shares of the Company's $0.0001 par value common stock was issued to
finalize the agreement.
On June 15, 1999, the Company issued 20,000 shares of its $0.0001 par value
common stock for services rendered in the amount of $5,000.00.
On June 30, 1999, the Company issued 250,000 shares of its $0.0001 par
value common stock for services rendered in the amount of $50,000.00
On July 20, 1999, the Company issued 800,000 shares of its $0.0001 par
value common stock for cash in the amount of $240,000 and redeemed 800,000
warrants.
On September 15, 1999, the Company issued 100,000 shares of its $0.0001 par
value common stock for cash in the amount of $30,000 and redeemed 100,000
warrants.
On October 14, 1999, the Company issued 40,000 shares of common stock for
$10,000.00 in cash when 40,000 warrants were issued.
On November 15, 1999, the Company issued 200,000 shares of common stock for
$50,000.00 in cash when 200,000 warrants were issued.
On November 19, 1999, the Company exchanged 650,000 shares of common stock
for URL's valued at $195,000.
On November 24, 1999, the Company exchanged 800,000 shares of common stock
for URL's valued at $240,000.
On November 25, 1999, the Company exchanged 500,000 shares of common stock
for URL's valued at $150,000.
On November 25, 1999, the Company exchanged 250,000 shares of common stock
for URL's valued at $75,000.
On November 29, 1999, the Company issued 40,000 shares of common stock for
$10,000.00 in cash when 40,000 warrants were issued.
On December 6, 1999, the Company issued 50,000 shares of common stock for
$12,500.00 in cash when 50,00 warrants were issued.
-9-
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
Accounting policies and procedures have not been determined except as
follows:
1. The Company used the accrual method of accounting.
2. Basic earnings per share is computed using the weighted average number
of shares of common stock outstanding. Diluted earnings per share were not
included as the inclusion of warrants is anti-dilutive.
3. The Company has adopted December 31 as its fiscal year end.
4. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
5. The Company has not yet adopted all accounting pronouncements issued.
The effect on the financial statements is deemed insignificant and immaterial
and there were no adjustments made to the financial statements.
6. Organization costs were expensed when incurred.
7. The Company records its inventory at cost.
8. The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates and
assumptions which affect the reported amounts of assets and liabilities as at
the date of the financial statements and revenues and expenses for the period
reported. Actual results may differ from these estimates.
9. The Company's Statement of Cash Flows is reported utilizing cash
(currency on hand and demand deposits) and cash equivalents (short-term, highly
liquid investments). The Company's Statement of Cash Flows is reported utilizing
the indirect method of reporting cash flows. The Company had several noncash
investing and financing activities. See schedule below.
Schedule of non cash investing and financing activities.
Investing Activities
Purchase of licensing agreement 3,000,000.00
Financing Activities
Issued common stock for services rendered 339,000.00
Issued common stock for Universal Resource
Locators 660,000.00
-10-
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
10. The cost of plant and equipment is depreciated over the estimated
useful life of the equipment utilizing the straight line method of depreciation.
The amount of depreciation recorded during this period was $2,037.00
11. Power Direct, Inc. purchased a majority interest in Cardstakes.com. The
Company has accounted for the business combination as a pooling of interest and
consolidation. All intercompany eliminations have been made. This interest was
recorded at fair value based on the market price of the Company's stock given
up. The interest is not available for sale.
12. The Company has incurred Universal Resources Locator's costs as part
of web site development. The costs of the web site are amortized over 60 months.
Amortization in the amount of $43,008.00 was recorded in 1999. Universal
Resources Locators were recorded at the fair market value of the Universal
Resources Locator's (URL's). Each reporting period the Company will evaluate
whether event or changes have occured which would call for a review for
impairment of value.
13. The Company experienced losses since its inception September 13, 1993
(Date of inception) to December 31, 1999. The Company will review its need for
a provision for federal income tax after each operating quarter and each period
for which a statement of operations is issued. There has not been any deferred
tax benefits recorded as management has deemed it less than likely that the net
operating losses will be utilized. The net operating loss carry forwards will
begin to expire in 2008.
14. The Company has purchased interests in Vertizonal, Rising Phoenix and
LANSource. Vertizonal and Rising Phoenix investments have been recorded
utilizing the equity method of accounting. The Company has settled a dispute
with LANSource and the monies which it paid to LANSource have been returned to
the Company. The above interests were not purchased with the intent to trade or
make available for trade and were recorded at fair value.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has no current source of revenue. Without
realization of additional capital or revenues, it would be unlikely for the
Company to continue as a going concern. It is management's plan to seek
additional capital through loans or private placements.
-11-
<PAGE>
Power Direct, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - RELATED PARTY TRANSACTION
The Company does not own any real or personal property. Office services are
provided without charge by a director. Such costs are immaterial to the
financial statements and, accordingly, have not been reflected therein. The
officers and directors of the Company are involved in other business activities
and may, in the future, become involved in other business opportunities. If a
specific business opportunity becomes available, such persons may face a
conflict in selecting between the Company and their other business interests.
The Company has not formulated a policy for the resolution of such conflicts.
NOTE 5 - WARRANTS AND OPTIONS
On July 15, 1999, the Company issued warrants to J & S Overseas Holding as
part of the purchase agreement for URL. At December 31, 1999, there were 760,000
of these warrants outstanding. The warrants may be exercised one warrant for one
share of the Company's common stock and $0.25 cents per share.
On April 30, 1999, the Company issued warrants to Yenn Assets as part of a
Regulation S offering. At December 31, 1999, there were 810,000 of these
warrants outstanding. The warrants may be exercised one warrant for one share of
the Company's common stock and $0.30 cents per share.
The warrants have not been assigned a value, as the monetary value of these
warrants is not readily determined since the warrants are not trading.
The Company has options agreements with the following individuals.
May Joan Liu 600,000
R. Angelo Holmes 300,000
Jack Sha 300,000
Ferdinand Marchard 50,000
The options may be exercised on a one option for one share of the Company's
common stock and $0.25 cents per share. The options are good for a period of 18
months from grant date.
The Company following the guidelines of the fair value method and recorded
a compensation expense $388,750.00 based on the difference between option price
and market price on the grant.
The Company has a short term note form a related party which does not have
a due date and in non interest bearing.
NOTE 6 - LONG TERM COMMITMENTS
The Company does not have any long term rental agreements nor does it have
any long term debt obligations.
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 117,999 2,246
<SECURITIES> 0 0
<RECEIVABLES> 45,458 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 170,457 2,246
<PP&E> 59,075 0
<DEPRECIATION> (2,037) 0
<TOTAL-ASSETS> 4,290,491 2,246
<CURRENT-LIABILITIES> 23,545 13,042
<BONDS> 0 0
0 0
0 0
<COMMON> 2,573 600
<OTHER-SE> 4,300,650 (10,198)
<TOTAL-LIABILITY-AND-EQUITY> 4,290,491 2,246
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 1,498,649 10,797
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,432,230) (10,797)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,432,230) (10,797)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,432,230) (10,797)
<EPS-BASIC> (0.09) (0.00)
<EPS-DILUTED> (0.09) (0.00)
</TABLE>
