<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30th, 1999
Pursuant to section 13 or 15(d) of the
Securities Exchange Act
THINWEB.COM CORPORATION
(Exact name as Specified in its Charter)
<TABLE>
<S> <C> <C>
Delaware 000-25419 522102438
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
</TABLE>
Suite 101, Phase 3, 6 Antares Drive
Ottawa Canada K2E 8A9
(Address of principal executive offices)
613/225-8446
Registrant's telephone number
WARWICK ACQUISITION CORPORATION
1504 R Street, N.W.
Washington, D.C. 20009
Former name and former address
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Actduring the last 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
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding at September 30, 1999
Common Stock, par value $0.0001 17,066,344
<PAGE>
thinWEB.com Corporation
(A Development Stage Company)
Consolidated Interim Financial Statements
(Unaudited)
September 30,1999
(expressed in U.S. dollars)
<PAGE>
thinWEB.com Corporation
(A Development Stage Company)
Consolidated Interim Balance Sheet
(Unaudited)
- -------------------------------------------------------------------------------
September 30, 1999
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
$ $
Assets
Current assets
<S> <C> <C>
Cash (note 3) 42,479 31,566
Investment tax credits receivable (note 4) 68,620 65,908
Other 65,040 5,784
----------------------------------------
176,139 103,258
Capital assets (notes 4 and 5) 68,502 10,895
Deferred charges (note 6) 1,051,323 -
Trademarks 1,210 555
----------------------------------------
1,297,174 114,708
----------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 97,214 21,470
Accrued salaries 16,406 89,657
Current portion of long-term debt - 2,957
Loans payable (note 7) 451,391 65,338
Amounts due to shareholders - 21,484
Other current liability (note 8) 340,136 -
----------------------------------------
905,147 200,906
Long-term debt - 13,754
----------------------------------------
905,147 214,660
----------------------------------------
Commitments (note 9)
Shareholders' Equity
Capital stock (note 10) 1,857 1
Additional paid in capital 7,933,252 -
Share subscriptions receivable (32,896) -
Deferred compensation (321,784) -
Warrants 15,000 -
Foreign currency translation adjustments 65,688 343
Deficit accumulated during the development stage (7,269,090) (100,296)
----------------------------------------
392,027 (99,952)
----------------------------------------
1,297,174 114,708
----------------------------------------
</TABLE>
<PAGE>
thinWEB.com Corporation
(A Development Stage Company)
Consolidated Interim Statement of Operations and Deficit
(Unaudited)
- -------------------------------------------------------------------------------
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
Cumulative Period from
April 22, Nine months April 22,
1998 to Three months ended ended 1998 to
September 30, September 30, September 30, September 30,
1999 --------------------------- 1999 1998
1999 1998
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Revenue 3,912 1,336 - 2,756 -
---------------------------------------------------------------------------------------
Expenses
Research and development
(note 4) 3,168,573 55,456 16,793 3,124,685 29,031
Selling, general and
administration 3,024,638 492,200 12,142 2,977,764 17,272
Interest 1,067,706 925,814 - 1,058,684 -
Amortization 12,085 3,156 218 10,417 320
---------------------------------------------------------------------------------------
7,273,002 1,476,626 29,153 7,171,550 46,623
---------------------------------------------------------------------------------------
Loss for the period (7,269,090) (1,475,290) (29,153) (7,168,794) (46,623)
Deficit accumulated during
the development stage -
Beginning of period - (5,793,800) (17,470) (100,296) -
---------------------------------------------------------------------------------------
Deficit accumulated during
the development stage -
End of period (7,269,090) (7,269,090) (46,623) (7,269,090) (46,623)
---------------------------------------------------------------------------------------
Basic and fully diluted
loss per common share (0.09) (29,153) (0.63) (46,623)
-----------------------------------------------------------------------------
Weighted average number of
shares outstanding during
the period 17,066,344 1 11,428,344 1
-----------------------------------------------------------------------------
</TABLE>
<PAGE>
thinWEB.com Corporation
(A Development Stage Company)
Consolidated Interim Statement of Cash Flows
(Unaudited)
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
Cumulative Nine Months Period from
April 22, 1998 ended April 22, 1998 to
September 30, September 30, September 30,
1999 1999 1998
$ $ $
Cash provided by (used in)
<S> <C> <C> <C>
Operating activities
Loss for the period (7,269,090) (7,168,794) (46,623)
Items not affecting cash
Amortization 12,085 10,417 320
Shares issued for employee compensation 4,783,608 4,783,603 -
Shares issued for financing costs 1,044,185 1,044,185 -
Shares and warrants issued for services 215,689 215,689 -
Net change in non-cash working capital balances
related to operations
Increase in investment tax credits receivable (66,918) - (40,050)
Increase in other current assets (64,097) (58,224) (5,090)
Increase in accounts payable and accrued liabilities 95,653 73,854 3,383
Increase (decrease) in accrued salaries 15,125 (75,906) 60,247
Increase in other current liability 335,561 335,561 -
-----------------------------------------------------------
(898,199) (839,615) (27,813)
-----------------------------------------------------------
Financing activities
Proceeds of long-term debt 16,966 - 19,897
Repayments of long-term debt (17,164) (17,164) -
Proceeds of loans payable 511,659 445,319 67,221
Repayments of loans payable (67,112) (67,112) -
Issue of common shares 576,353 576,352 1
Proceeds from (repayment of) shareholder loans (240) (20,868) 22,094
-----------------------------------------------------------
1,020,462 916,527 109,213
-----------------------------------------------------------
Investing activities
Acquisition of capital assets (79,537) (66,806) (3,883)
Acquisition of trademarks (1,187) (623) -
-----------------------------------------------------------
(80,724) (67,429) (3,883)
-----------------------------------------------------------
Effect of exchange rate changes in cash 940 1,430 (1,944)
-----------------------------------------------------------
Increase in cash during the period 42,479 10,913 75,573
Cash - Beginning of period - 31,566 -
-----------------------------------------------------------
Cash - End of period 42,479 42,479 75,573
-----------------------------------------------------------
</TABLE>
<PAGE>
thinWEB.com Corporation
Consolidated Interim Statement of Changes of Shareholders' Equity
(Unaudited)
- --------------------------------------------------------------------------------
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
Common shares Preferred shares Additional Less
--------------------- ------------------ paid in subscriptions
Amount Amount capital receivable
Number $ Number $ $ $
<S> <C> <C> <C> <C> <C> <C>
Shares issued for
subscriptions 900,000 90 - - 32,579 (32,668)
------------------------------------------------------------------------
Change in foreign currency
translation account - - - - - -
Loss for the period - - - - - -
------------------------------------------------------------------------
Balance - December 31,
1998 900,000 90 - - 32,579 (32,668)
Shares issued for cash 1,505,000 151 - - 535,683 -
Shares issued for
compensation 10,401,344 1,040 - - 5,213,205 (51)
Shares issued for
financing costs 4,110,000 411 - - 2,076,800 (27)
Shares issued for a
corporate reorganization 150,000 15 - - 74,985 -
Warrants issued for
services - - - - - -
Convertible shares issued
for a financing
arrangement - - 1,500,000 150 - (150)
Change in foreign currency
translation account - - - - - -
Loss for the period - - - - - -
------------------------------------------------------------------------
Balance - September 30,
1999 17,066,344 1,707 1,500,000 150 7,933,252 (32,896)
------------------------------------------------------------------------
<CAPTION>
Deficit
Less accumulated Foreign
deferred Warrants during the currency Total Share- Compre-
compen- ---------------- Development translation holders' hensive
sation Amounts Stage adjustments Equity loss
$ Number $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C>
Shares issued for
subscriptions - - - - - 1 -
Change in foreign currency
translation account - - - - 343 343 343
Loss for the period - - - (100,296) - (100,296) (100,296)
-----------------------------------------------------------------------------------------
Balance - December 31, 1998 - - - (100,296) 343 (99,952) (99,953)
--------
Shares issued for cash - - - - - 535,834 -
Shares issued for
compensation (321,784) - - - - 4,892,410 -
Shares issued for
financing costs - - - - - 2,077,184 -
Shares issued for a
corporate reorganization - - - - - 75,000 -
Warrants issued for
services - 50,000 15,000 - - 15,000 -
Convertible shares issued
for a financing
arrangement - - - - - - -
Change in foreign currency
translation account - - - - 65,345 65,345 65,345
Loss for the period - - - (7,168,794) - (7,168,794) (7,168,794)
-----------------------------------------------------------------------------------------
Balance - September 30,
1999 (321,784) 50,000 15,000 (7,269,090) 65,688 392,027 (7,103,449)
-----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
thinWEB.com Corporation
(A Development Stage Company)
Consolidated Interim Financial Statements
(Unaudited)
September 30, 1999
- -------------------------------------------------------------------------------
(expressed in U.S. dollars)
1 Nature of operations and basis of presentation
Effective April 22, 1999, Thinweb.com Inc. (formerly 3028184 Nova Scotia
Limited), a wholly owned subsidiary of thinWEB.com Corporation (formerly
Warwick Acquisition Corporation), acquired all the outstanding common shares
of ThinWeb Software Incorporated in exchange for 16,916,344 Class "A"
exchangeable, non-voting, participating common shares of Thinweb.com Inc.
Each of these exchangeable shares are exchangeable into common shares of
thinWEB.com Corporation for no additional consideration on or before April
21, 2024. Under the provisions of various agreements between thinWEB.com
Corporation and Thinweb.com Inc., the holders of the exchangeable shares are
entitled to voting, dividend and liquidation rights as if the holder held the
equivalent number of common shares in thinWEB.com Corporation. thinWEB.com
Corporation has issued 16,916,344 common shares held in trust to be issued to
the holders of the exchangeable shares upon the exchange.
Prior to April 22, 1999, Warwick Acquisition Corporation did not have any
operations and had 5,000,000 common shares issued and outstanding. As part
of the transaction, Warwick Acquisition Corporation redeemed and retired
4,850,000 common shares and issued 50,000 warrants for no additional
consideration. The warrants which expire in five years entitle the holder to
acquire up to 50,000 common shares of thinWEB.com Incorporated for $1 per
share. For accounting purposes, the acquisition has been treated as an
issuance of 150,000 shares and 50,000 warrants by ThinWeb Software
Incorporated for the services related to the corporate reorganization. These
shares and warrants have been attributed a value of $90,000 based on the
value of services received. The historical financial statements prior to
April 22, 1999 are those of ThinWeb Software Incorporated. ThinWeb Software
Incorporated was incorporated on April 22, 1998. Pro forma financial
information giving effect to the acquisition has not been provided as the
transaction is not a business combination.
The company is primarily a software research and development company that has
not yet commenced commercial operations. All of the company's operations are
in Canada. These statements are prepared on a going-concern basis. There is
substantial doubt as to whether or not the company will be able to continue
as a going concern. The ability of the company to continue as a going-
concern is dependent upon it obtaining the necessary financing to
commercialize and market its products and upon future profitable operations.
Like other companies at this stage of development, the company is subject to
numerous risks, including the uncertainty of its chosen market, its ability
to develop its markets and other risks. The company plans to raise funds
through a public offering of its securities; however, there are no
commitments for the public offering and the public offering has not yet been
approved by the Securities and Exchange Commission. There can be no assurance
that the company will be successful in raising the required capital to
finance operations.
(1)
<PAGE>
thinWEB.com Corporation
(A Development Stage Company)
Consolidated Interim Financial Statements
(Unaudited)
September 30, 1999
- -------------------------------------------------------------------------------
(expressed in U.S. dollars)
2 Accounting policies
a) Financial statement presentation
These consolidated financial statements have been prepared in accordance
with U.S. generally accepted accounting principles and include the
accounts of thinWEB.com Corporation and its wholly owned subsidiaries.
In the opinion of management, the accompanying financial statements
include all adjustments (consisting of normal recurring items) considered
necessary for a fair presentation of the results of operations for the
interim periods covered and of the financial condition of the company at
the date of interim balance sheet. The results for the interim periods
are not necessarily indicative of the results for the entire year.
b) Foreign currency translation
The company's functional currency is Canadian dollars; however, the
reporting currency is U.S. dollars. The assets and liabilities of the
company are translated into U.S. dollars at period-end exchange rates, and
income and expense items are translated at rates approximating the average
rates of exchange for the period. Gains and losses from the translation
are excluded from the statement of operations and deficit and are
accumulated in the cumulative foreign currency translation adjustment
account.
c) Capital assets and amortization
Amortization of the following capital assets is calculated using the
declining balance method at annual rates which will amortize their cost
over their estimated useful lives. These rates are:
Computer hardware 30%
Computer software 100%
Office furniture and equipment 20%
d) Deferred charges
Deferred charges represent prepaid costs of financing and are being
charged to expense over the estimated term of the financing arrangement.
e) Income taxes
The company uses the liability method of accounting for income taxes.
Under this method, current income taxes are recognized for the estimated
income taxes payable for the current year. Future income tax assets and
liabilities are recognized for temporary differences between the tax and
accounting bases of assets and liabilities as well as for the benefit of
losses available to be carried forward to future years for tax purposes.
Future income tax assets are evaluated and if realization is not
considered "more likely than not", a valuation allowance is provided.
(2)
<PAGE>
thinWEB.com Corporation
(A Development Stage Company)
Consolidated Interim Financial Statements
(Unaudited)
September 30, 1999
- -------------------------------------------------------------------------------
(expressed in U.S. dollars)
Investment tax credits relating to scientific research and experimental
development expenditures are recorded in the accounts in the fiscal period
the qualifying expenditures are incurred provided realization of the tax
credit is considered "more likely than not". Investment tax credits in
connection with research and development activities are accounted for
using the cost reduction method which recognizes the credits as a
reduction of the cost of the related assets or expenditures.
f) Revenue recognition
The company recognizes revenue at the time of delivery of its licensed
software products to customers, provided collectibility of proceeds from
the sale of licensed software is reasonably assured. Currently, all sales
are made from the company's web site. An electronic order form is filled
out on-line by the customer; payment for the order is then received when
the customer provides a credit card number; the product is then downloaded
by the customer. The product is not returnable; therefore, no provision
is required for sales returns. The customer is charged for future updates
to the version purchased and there is minimal support offered subsequent
to the purchase.
g) Research and development
Research and development costs are charged to expense when incurred,
unless, in the opinion of management, the technological feasibility of the
product has been established in accordance with Statement of Financial
Accounting Standards (SFAS) 86, in which case the costs are capitalized.
Capitalization of computer software costs ceases when the product is
available for general release. As of September 30, 1999, no computer
software costs have been capitalized.
h) Loss per common share
Basic loss per common share is calculated using the weighted number of
common shares issued and outstanding during each period. The exercise of
warrants and the conversion of convertible preferred shares would be
antidilutive. Accordingly, fully diluted loss per common share is the
same as basic loss per common share.
i) Use of estimates
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent liabilities at the date of the financial
statements and the reported amounts of revenues and expenditures during
the reported period. Actual results could differ from those reported.
(3)
<PAGE>
thinWEB.com Corporation
(A Development Stage Company)
Consolidated Interim Financial Statements
(Unaudited)
September 30, 1999
- -------------------------------------------------------------------------------
(expressed in U.S. dollars)
j) Financial instruments
The fair value of the company's cash, subscriptions receivable, investment
tax credits receivable, other current assets, accounts payable and accrued
liabilities, accrued salaries, long-term debt, loans payable, amounts
due to shareholders and other current liability approximate their carrying
values.
k) Recent pronouncements
In 1998, Statement of Financial Accounting Standards No. 133 (SFAS 133),
"Accounting for Derivative Instruments and Hedging Activities" was issued
and is effective for fiscal years commencing after June 15, 2000. The
company will comply with the requirements of SFAS 133 in fiscal year 2000
and does not expect the adoption of SFAS 133 will be material to the
company's results of operations.
In 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-
up Activities". SOP 98-5 is effective in fiscal years beginning after
December 15, 1998 with earlier adoption permitted. SOP 98-5 requires costs
of start-up activities and organization costs to be expensed as incurred.
The company has complied with the requirements of SOP 98-5.
3 Restrictions on cash
Included in cash is $3,736 held in a trust account by the company's
solicitors, which requires the approval of two shareholders in order to be
released. The cash is to be used to fund certain expenditures within the
next year.
4 Investment tax credits receivable
For small, closely held Canadian corporations, a credit of approximately 40%
of eligible scientific research and experimental development expenditures is
available, refundable in cash if no taxes are owed. For all other Canadian
corporations, the credit is reduced to approximately 20% on a non-refundable
basis, available only against taxes otherwise payable. Eligible scientific
research and experimental development expenditures include direct current and
capital costs and an allowance for overhead in the amount of 65% of specified
salaries and wages.
During the year ended December 31, 1998, investment tax credits in the amount
of $63,862 have been applied to reduce research and development expenditures
and $3,056 have been credited to the cost of capital assets. During the
period ended September 30, 1998, investment tax credits in the amount of
$40,050 have been applied to reduce research and development expenditures.
(4)
<PAGE>
thinWEB.com Corporation
(A Development Stage Company)
Consolidated Interim Financial Statements
(Unaudited)
September 30, 1999
- -------------------------------------------------------------------------------
(expressed in U.S. dollars)
5 Capital assets
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------------------------------------------------------
Accumulated
Cost Amortization Net Net
$ $ $ $
<S> <C> <C> <C> <C>
Computer hardware 37,159 6,044 31,115 8,705
Computer software 6,544 3,221 3,323 972
Office furniture and equipment 37,069 3,005 34,064 1,218
-------------------------------------------------------------
80,772 12,270 68,502 10,895
-------------------------------------------------------------
</TABLE>
6 Deferred charges
During the period, the company issued 4,000,000 common shares at nominal
values for the commitment to provide debt financing of up to $907,000 until
such time as the company has raised funds pursuant to a major private
placement, public offering or other significant financing event (the
"Significant Financing Event"), if any (see note 8). These shares have been
recorded at the price established through an arm's length transaction which
occurred within 14 days of the date the shares were issued. The excess of
the recorded value of the shares over the nominal issue price is recorded as
financing costs. The portion of the financing costs related to future
periods has been recorded as deferred charges and is being charged to expense
over the estimated term of the financing arrangement estimated to be from
June 4, 1999 to February 28, 2000.
7 Loans payable
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
$ $
<S> <C> <C>
Demand loan, bearing interest at prime, plus 2.5% 51,020 -
Loan payable, authorized amount $255,000, without interest or fixed -
terms of repayment ("Credit Facility A"), $100,660 of Credit
Facility A is available and unused. 154,340 -
Loan payable, authorized amount $652,000, bearing interest at the
rate of 12%, without fixed terms of repayment ("Credit Facility B"),
$405,969 of Credit Facility B is available and unused. 246,031 -
Loan repaid during the period ended September 30, 1999 - 65,338
---------------------------------------------
451,391 65,338
---------------------------------------------
</TABLE>
(5)
<PAGE>
thinWEB.com Corporation
(A Development Stage Company)
Consolidated Interim Balance Sheet
(Unaudited)
September 30, 1999
- -------------------------------------------------------------------------------
(expressed in U.S. dollars)
The lenders may, at their sole option, elect to convert all, or any portion
of the outstanding amount, including interest, of Credit Facility B, into
securities of the company on the same terms and conditions as such securities
are issued pursuant to a Significant Financing Event, if any.
Credit Facility A and B become due and payable immediately upon completion of
a Significant Financing Event, subject to the option noted above.
The lenders of Credit Facility B shall have issued to them, for no additional
consideration, share purchase warrants of the company equal in number to the
amount of the facility which has been drawn down, divided by the price of the
company's shares issued pursuant to a Significant Financing Event. These
warrants will be exercisable on the basis of one warrant for one common
share, at a strike price equal to the price at which the company shares are
issued pursuant to a Significant Financing Event, for a period of one year
from the closing of such event. As these warrants will be issued upon a
Significant Financing Event, if any, they will be valued at that time and
recorded as a cost of financing.
In conjunction with the commitment to provide financing, the company issued
4,000,000 shares to the lender of Credit Facility A and B. For accounting
purposes, the issuance of these shares have been treated as financing costs
and have been attributed a value of $2,021,821.
8 Other current liability
On September 10, 1999, the company signed a Memorandum of Agreement with
Agritek Bio Ingredients Corporation ("Agritek") establishing a new
corporation to operate as a joint venture ("JV") with an equal and undivided
interest for the company and Agritek. The company will transfer to the JV,
an exclusive perpetual license for thinAccess for the wireless database
access market on signing of the definitive JV agreement.
In exchange for transferring the license to the JV, Agritek has agreed to pay
CDN$1,000,000 to the company, payable one-half upon signing of the Memorandum
of Agreement and one-half on signing of the definitive JV agreement. The
$340,136 included in other current liability as of September 30, 1999
represents the CDN$500,000 received upon the signing of the Memorandum of
Agreement. As the JV agreement has not been finalized, the amount is being
reflected as a current liability in the financial statements until such time
as a final agreement is reached. Subject to regulatory approval, Agritek
shall deliver 500,000 units of the capital stock of Agritek (each unit
consisting of one freely tradable common share and one non-transferrable
share purchase warrant exercisable for two years from the date of the signing
of the definitive JV agreement at an exercise price of CDN$0.50 each) to the
company upon signing of the definitive JV agreement.
The company shall issue to Agritek 100,000 non-transferrable share purchase
warrants exercisable for shares of the company on a one-for-one basis at an
exercise price equal to the lower of $5.00 or the price at which the company
next issues equity pursuant to a financing event.
(6)
<PAGE>
thinWEB.com Corporation
(A Development Stage Company)
Consolidated Interim Balance Sheet
(Unaudited)
As of September 30, 1999
- -------------------------------------------------------------------------------
The JV shall pay the company a royalty of 5% of net revenues realized by the
JV, paid quarterly in arrears. These royalty payments will only commence
once the JV has reimbursed to the parties all advances made to the JV.
The company shall be the manager of the JV, in return for a fee payable by
Agritek of 2.5% of Agritek's share of the JV's operating costs. Each party
shall provide advances to fund operating expenses of the JV. If a party is
unable or unwilling to continue funding operating expenses, that party's
interest in the JV shall be subject to dilution by the other party or a third
party, which is prepared to fund operating expenses.
9 Commitments
The minimum annual payments under long-term agreements for premises are as
follows:
$
Year ending September 30, 2000 28,271
2001 18,847
10 Capital stock
Authorized
100,000,000 common shares, of the par value of $0.0001 each
20,000,000 preferred shares, of the par value of $0.0001 each
The preferred shares issued at September 30, 1999 are convertible into common
shares of the company on a share-for-share basis at any time prior to June
30, 2000, provided the holders were instrumental in arranging financing for
the company of not less than $5,000,000. Starting June 30, 2000, the company
may redeem any of the outstanding preferred shares at a redemption price of
$0.0001 per share. As the preferred shares are convertible only if the
holders are instrumental in arranging financing of not less than $5,000,000
the beneficial conversion feature will be valued at that time and recorded as
a cost of financing.
Subscriptions receivable are presented as a reduction from capital stock
unless paid subsequent to the period end.
<PAGE>
thinWEB.com Corporation
Consolidated Interim Schedule of Issues of Capital Stock
(Unaudited)
- -------------------------------------------------------------------------------
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
Number of Price per Total value
shares share $ Comments
<S> <C> <C> <C> <C>
Common shares
April 22, 1998 1 1.00000 1 Share subscriptions
December 31, 1998 449,999 0.03630 16,334 Share subscriptions
December 31, 1998 450,000 0.03630 16,334 Share subscriptions
- (32,668) Unpaid share subscriptions
--------- ---------
Balance - December 31, 1998 900,000 1
March 31, 1999 2,216,667 0.50000 1,108,334 Shares issued for compensation
March 31, 1999 2,216,667 0.50000 1,108,334 Shares issued for compensation
March 31, 1999 2,666,666 0.50000 1,333,333 Shares issued for compensation
March 31, 1999 195,000 0.50000 97,500 Shares issued for compensation
March 31, 1999 175,000 0.50000 87,500 Shares issued for compensation
March 31, 1999 891,000 0.50000 445,500 Share subscriptions
March 31, 1999 100,000 0.50000 50,000 Share subscriptions
March 31, 1999 14,000 0.50000 7,000 Share subscriptions
April 5, 1999 500,000 0.16678 83,389 Shares issued for financing costs
April 5, 1999 100,000 0.50340 50,340 Shares issued for financing costs
April 5, 1999 10,000 0.50340 5,034 Shares issued for compensation
April 7, 1999 1,181,344 0.50340 594,690 Shares issued for financing costs
April 14, 1999 613,000 0.50546 309,847 Shares issued for financing costs
April 14, 1999 387,000 0.50546 195,613 Shares issued for financing costs
April 14, 1999 577,000 0.50546 291,650 Shares issued for financing costs
April 14, 1999 473,000 0.50546 239,082 Shares issued for financing costs
April 14, 1999 398,000 0.50546 201,173 Shares issued for financing costs
April 14, 1999 602,000 0.50546 304,286 Shares issued for financing costs
April 14, 1999 479,000 0.50546 242,115 Shares issued for financing costs
April 14, 1999 471,000 0.50546 238,071 Shares issued for financing costs
April 14, 1999 423,333 0.50546 213,978 Shares issued for compensation
April 14, 1999 423,333 0.50546 213,978 Shares issued for compensation
April 14, 1999 423,334 0.50546 213,978 Shares issued for compensation
April 14, 1999 105,000 0.50546 53,073 Shares issued for compensation
April 14, 1999 125,000 0.50546 63,182 Shares issued for compensation
April 14, 1999 250,000 0.50546 126,365 Shares issued for compensation
May 27, 1999 150,000 0.50000 75,000 Shares issued for a corporate
reorganization
(78) Change in unpaid share
subscriptions
(321,784) Deferred compensation
(50,055) Share issue costs
--------------- --------------
Balance - September 30,
1999 17,066,344 7,580,429
--------------- --------------
</TABLE>
Shares subscribed for have been recorded at the value received for the shares
which is considered to be fair value. Shares issued for compensation, financing
costs, and a corporate reorganization were issued at nominal values. These
issues have been recorded at the price established through an arm's length
transaction. The excess of the recorded value of the shares over the nominal
issue price is recorded as compensation, financing and professional fees
expense over the estimated term of the related service. The unearned portion of
the compensation related to the share issues has been recorded as a reduction
of shareholders' equity. The portion of the financing costs related to future
periods has been recorded as deferred charges.
<PAGE>
thinWEB.com Corporation
Consolidated Interim Schedule of Issues of Capital Stock...continued
(Unaudited)
- -------------------------------------------------------------------------------
(expressed in U.S. dollars)
<TABLE>
<CAPTION>
Number of Price per Total value
shares share $ Comments
<S> <C> <C> <C> <C> <C>
Preferred shares
Balance - December 31, 1998 - -
May 27, 1999 1,500,000 0.00010 150 Convertible shares issued for a
financing arrangement
(150) Unpaid share subscriptions
------------ ----------
Balance - September 30, 1,500,000 -
1999
------------ ----------
</TABLE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The registrant is a development stage company for the three month and nine month
periods ended September 30, 1999. Accordingly, there were insignificant revenues
for the periods covered by the financial statements. During the periods covered
the registrant incurred substantial administrative and development costs. The
primary activity of the registrant was the design, development and testing of
code for the registrant's core technology and for its first two e-commerce
software products, ThinAccess and WebCrumbs. Version 1.0 of ThinAccess was
released during the third quarter and the beta version of WebCrumbs was released
in the fourth quarter.
During the three month period ended September 30, 1999, the registrant hired two
additional employees to its research and development staff, a second
salesperson, and an experienced Chief Financial Officer.
During the comparable 1998 fiscal period the registrant's funding was primarily
in the form of advances from the principals and "sweat equity" from the
development team. During the three month period ended September 30, 1999 the
registrant's operations were funded by additional advances under the loan
agreement previously made with E-Capital Management Limited on behalf of several
foreign shareholders and the receipt of $500,000 CDN ($330,000 USD) as the first
advance under a joint venture with Agritek Bio Ingredients Corporation.
On September 10, 1999 the registrant signed a Memorandum of Agreement with
Agritek Bio Ingredients Corporation ("Agritek") to establish a joint venture
(the "JV") to develop the application of ThinAccess to the wireless database
access market. The registrant had identified the wireless database access
market as having enormous potential for future applications of ThinAccess; but
recognized that a large investment in ongoing development would be required
before any revenues were likely. Agritek was willing to buy a part of that
potential and fund part of the necessary future development costs. Agritek
agreed to pay the registrant $1,000,000 CDN ($660,000 USD), half upon signing
the Memorandum and half upon signing of the definitive joint venture agreement,
in exchange for the registrant licensing ThinAccess to the JV. Subject to
regulatory approval Agritek will also issue the registrant 500,000 units of its
capital stock (each unit consisting of one freely tradable common share and one
non-transferable share purchase warrant exercisable for two years from the date
of signing the definitive JV agreement at an exercise price of $0.50 CDN each).
The registrant shall also issue to Agritek 100,000 non-transferable share
purchase warrants each exercisable for shares of the registrant on a one-for-one
basis at an exercise price equal to the lower of $5.00 or the price at which the
registrant next issues equity pursuant to a financing event. The JV will also
pay the registrant a royalty of 5% of net revenues realized by the JV, and as
manager of the JV the registrant will receive a fee equal to 2.5% of Agritek's
portion of operating costs.
On September 14, 1999 the registrant signed a Memorandum of Agreement with
Lines Overseas Management Limited ("Lines") of Bermuda by which Lines agreed to
provide the registrant with a credit facility of up to $2,000,000 at an interest
rate of 12% per annum. To date $500,000 has been advanced under the facility.
It is estimated that the current financing arrangements will fund the
registrant's operations to the end of September, 2000.
The registrant recently filed its first amendment to its Registration Statement
following the receipt of comments from the Securities and Exchange Commission.
The Registration Statement is for the sale of 4,000,000 of the registrant's
common shares to the public, and the registrant intends to obtain trading
approval for its common stock on the OTC Bulletin Board, which is maintained by
Nasdaq. The registrant does not have sufficient capital resources to finance
its operations beyond September, 2000. The registrant is therefore dependent on
raising additional capital through the public markets to fund its ongoing
operations or else finding other funding means.
There can be no assurance that the registrant will become a public issuer or
that it will be able to access the needed capital resources within the time
frames and on the terms required for the registrant to continue its
<PAGE>
operations. The registrant's first product was only recently introduced to the
market and the acceptance among prospective purchasers of it and future products
is uncertain. The market for e-commerce solutions is highly competitive;
products of a similar nature sold by other software companies may prove to be
superior in performance, better marketed or less expensive, resulting in
marketing failure for the registrant. The current enthusiasm for the Internet
and e-commerce among businesses, consumers and investors may not continue and
the demand for e-commerce software products could be less than anticipated,
resulting in a significant setback to the registrant's marketing and financing
initiatives.
During the comparable three month period of fiscal 1998, the registrant was a
newly incorporated entity that was not carrying on any operations and ThinWeb
Software Incorporated, which is now its wholly owned subsidiary, consisted of 4
software developers who were writing computer software programs in a small
office. During the three month and nine month periods ended September 30, 1999,
the registrant incurred significant expenses on activities for which there are
no comparables in 1998. These include increased research and development
costs, attendance at industry trade shows, marketing and sales expenses,
financing costs, larger premises in Halifax, Nova Scotia and a new office in
Ottawa, Ontario, and professional fees associated with the going public process.
The registrant has grown from 4 employees to 16 full-time employees and 1 part-
time employee in the past year.
PART II OTHER INFORMATION
Items 1 through 6.
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THINWEB.COM CORPORATION
By:/s/Gary T. Hannah
Chief Executive Officer
By/s/ George R. Fraser
Chief Financial Officer
Dated November 15, 1999
