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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-KSB
(Mark One)
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
For the fiscal year ended December 31, 1999.
OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the transition period from __________ to _________.
Commission File Number: _____________
THINWEB TECHNOLOGIES CORPORATION
(Name of Small Business Issuer in its Charter)
DELAWARE 52-2102438
State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Suite 101, Phase 3, 6 Antares Drive, Ottawa, Ontario K2E 8A9
(Address of Principal Executive Offices) (Zip Code)
(613) 225-8446
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange
on Which Registered
----------------------------- ------------------------------
None None
----------------------------- ------------------------------
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, PAR VALUE $.0001 PER SHARE
(Title of Class)
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Check whether the issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers pursuant 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. [ ]
The issuer's revenues for its most recent fiscal year were $2,412.
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 prices of such common equity, as of
___________ was $__________. [NOT APPLICABLE TO ISSUER WHICH AT PRESENT HAS NO
PUBLIC MARKET FOR ITS SECURITIES]
As of March 15, 2000, there were 17,381,344 shares of the issuer's common
stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
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PART 1
Statements contained in the annual report that are not historical facts are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks and uncertainties, which could cause actual results to differ materially
from estimated results. Such risks and uncertainties are detailed in filings
with the Securities and Exchange Commission, including without limitation in
Item 1-- "DESCRIPTION OF BUSINESS" and Item 6-- "PLAN OF OPERATION" below.
ITEM 1. DESCRIPTION OF BUSINESS
In this section, all references to "thinWEB", "we", "our" or "us" include
the parent company, thinWEB Technologies Corporation, and its wholly-owned
subsidiaries, Thinweb.com Inc. and ThinWeb Software Incorporated, unless the
context otherwise requires. We are a start- up company with insignificant
revenues to date. Our ability to continue is dependent upon us obtaining the
necessary financing to complete our research and development projects and upon
future profitable operations.
We were incorporated in Delaware on June 2, 1998 under the name Warwick
Acquisition Corporation. Warwick was a shell reporting corporation with no
operations and one shareholder and director. Warwick filed a registration
statement on Form 10-SB with the Securities and Exchange Commission on February
19, 1999. Pursuant to a share exchange agreement effective April 22, 1999,
Warwick acquired all the outstanding stock of ThinWeb Software Incorporated and
changed its name to thinWEB.com Corporation, which later changed its name to our
present name, thinWEB Technologies Corporation. Pursuant to the share exchange
transaction, the management and shareholders of ThinWeb Software Incorporated
became the management and shareholders of the new company. See "Development of
Business".
Overview
ThinWEB is a company that develops e-business software applications for
organizations that require rapid access to data and immediate interaction with
customers or employees over the internet. We anticipate that all our software
applications will utilize Java, the language released in 1995 by Sun
Microsystems that provides a universal platform that can run on any computer and
on most operating systems without alteration. Our use of Java will enable us to
develop applications for mobile and wireless devices and other emerging
technologies that require platform independence, swift deployment, flexibility,
fast operation and low-cost.
We expect our customer base to consist of stand alone software development
companies, internet service providers, application service providers and
software development teams within large organizations.
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We have developed a core technology that will support current and future
e-commerce applications developed by us. Our core technology will provide the
framework for all future software developed by us and will eliminate the need
and cost for developing a particular framework for each application. Our first
two applications are targeted for the e-commerce web applications market.
On August 9, 1999, we introduced into the market our first product,
ThinAccess. To introduce ThinAccess, we issued a press release supplemented by
an informational mail-out to industry publications and research analysts, sent
an e-mail announcement to all users of the beta version (i.e. earlier testing
version) of ThinAccess, and hosted a tour for product reviewers, writers and
industry analysts. Several articles describing ThinAccess appeared in some
industry publications and management anticipates that after testing of the
product, additional reviews will be published in industry trade publications.
On October 6, 1999, at the internet World '99 trade show in New York, we
announced the release of a version of ThinAccess for the Java 2 Platform. At
this time we also announced release of the beta version of our second software
product, WebCrumbs 1.0, for free downloading from our web site.
Technology and Products
Core Technology. Through our subsidiary, ThinWeb Software Incorporated, we
have developed our core technology to be used for our e-commerce software
applications. The core technology uses Java software compliance and enterprise
Application Programming Interfaces (or APIs) from Sun Microsystems, Inc. to
retrieve data and business logic wherever located and integrate it into new
applications for use on the web. An API is a source code which programmers use
to develop software. The core technology approach treats applications as a
tapestry of inter-linked collaborating and intelligent modular objects called
components. Each component is responsible for encapsulation of its internal data
as well as displaying the designed behavior. Any component connected into the
core requiring a particular action of another component can send instructions
via that component's interpretation mechanism, the API. Our core technology
eliminates the need to build a new framework for each new application that we
develop.
We anticipate that our core technology will facilitate more rapid product
research and development of applications due to the following benefits:
o Decreasing duplication of effort. A problem encountered in a
development project can be solved once and abstracted for use by
others in the project with the same or similar problem.
o Decreased lines of code. Component specialization reduces needed lines
of code since specific functions are encapsulated in one place and can
be referenced by other
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developers.
o Developer specialization. A developer can specialize in one or a few
components with regard to performance, functions, and other areas and
not use time attempting tasks with which he is not familiar.
o Increase bug detection and fixing. Common operations and algorithms
are encapsulated into components shared by all the developers; when a
bug occurs with one of these operations or algorithms, it can be
quickly isolated to one component and fixed at one time for developers
utilizing the operation or algorithm.
o Easier adaptation. As applications evolve, components can be easily
added, updated or replaced with minimal effect at the application
level.
The core technology is not intended to be a directly marketable product;
the core technology was specifically developed to provide a competitive
technical advantage in the development of our web applications and is designed
for transmission control protocol/internet protocol (or TCP/IP) networks using
web clients such as web browsers, middle tier services such as web servers,
application servers and database middle-wares with support for industry standard
protocols. The transmission control protocol/internet protocol is a set of
protocols developed for the internet in the 1970's to get data from one network
device to another.
We have developed two marketable software applications utilizing the core
technology: ThinAccess and WebCrumbs. ThinAccess and WebCrumbs have been tested
and listed by Sun Microsystems on its web site as being approved Java cross
platform applications (referred to in the industry as "100% Pure Java").
ThinAccess was introduced into the market in August 1999, and WebCrumbs was
released on February 1, 2000. We have additional products in the design and
development phases, including a wireless data access product, ThinSuite, through
our joint venture subsidiary NoTime Wireless Corp. ThinSuite was announced via a
press release dated January 23, 2000, and is projected to be completed in June
2000.
ThinAccess Overview. Databases are widely used in computing and are crucial
to many e-commerce applications including:
o payroll and employee records departments;
o travel and reservation systems;
o financial services systems;
o accounting departments; and
o many other areas in both government and private industry
organizations.
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ThinAccess is designed to offer remote access to any database running in
any web browser over the internet with exceptional speed and an ultra-thin
download. An ultra-thin download refers to software downloaded over the internet
to a web browser which has under 100 kilobytes of memory. Timely access to
databases is crucial and ThinAccess is designed to provide such database access
in seconds. ThinAccess is a packaged software application that can be downloaded
from a web site. A customer is able to download this application in the form of
an installation program. ThinAccess is designed to work on any platform,
including cellular phones and personal data assistants.
Java Database Connectivity (or JDBC) is a standard defined by Sun
Microsystems to allow database access from Java applets and applications. An
applet refers to a program written in the Java language which is downloaded over
the internet and runs in a web browser. ThinAccess is intended to provide high
performance, powerful features and scalable JDBC database access to network
databases. This improves user responsiveness for web database applications and
gives web developers a single interface to access all databases enabling web
applications to manipulate all databases uniformly.
ThinAccess is specifically aimed at providing thin client Java database
access for Java applets, servlets and applications. A servlet is a Java code
that runs as part of a web server which when requested executes the code on the
server and returns any information to the web browser. ThinAccess is designed to
improve the performance at both the client and server level through the
following key features:
o Decreases database application development cost;
o Can use any browser, any database, or any platform;
o Reuses database connections across multiple clients;
o Provides remote management over the web;
o Connects to multiple databases with one driver download (a driver is a
software code designed to enable a particular device or program by
translating an independent format request into instructions the device
can understand);
o Increases web page response time by avoiding large driver downloads;
o Saves redundant database processing by enabling multiple clients to
browse same query results;
o Ease of use and installation saves costs of installation of
specialized software;
o No software installations required of clients; and
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o Ships with a structured query language (or SQL) compliant pure Java
database (SQL is an industry standard language for creating, updating
and querying relational databases).
ThinAccess' utilities include an Interactive SQL, a Query Tool, and a
Schema Viewer. A Query Tool is a software program whose sole purpose is to query
or retrieve information from a database and display it for the user. A Schema
Viewer is a a software program whose sole purpose is to view how data is stored
in a database and display the physical structure for the user.
ThinAccess Technical Data. ThinAccess first requires the ThinAccess Server
to be started. Once this product is initialized customers are able to configure
the ThinAccess Server using the graphical administrator contained in ThinAccess.
Configuration issues for customers include:
(1) importing database middlewares (middleware is software that mediates
between a program and a network, managing the interaction between disparate
applications across various computing platforms);
(2) specifying properties such as user name and password to connect to the
database; and
(3) pre-configuring database objects.
ThinAccess is shipped to customers pre-configured with an SQL compliant
Java database called InstantDB. With a configured ThinAccess Server running, web
clients are able to access their databases in Java applets, servlets or
applications using JDBC drivers or ultra-thin Thinlets.
Thinlets provide an ultra-thin download and high performance mechanism to
directly access a pre-configured component existing on the ThinAccess Server.
They drastically reduce the time to perform database operations because many
critical path issues can be performed before the user clicks on the button. For
example, it is possible to instantly access a pre- configured connection to save
on the time it takes to create a connection, access a pre-configured database
query result or access a pre-configured query to execute if required.
Three JDBC drivers are included with ThinAccess that support the JDBC
standard for Java database connectivity. The choice of driver depends on the
requirements of the project. Factors determining the appropriate driver include
the web browser support required, firewalls requiring HTTP tunneling, and JDK
version proxying. HTTP tunneling refers to communication between web servers and
web browsers through an agreed port using hypertext transfer protocol (or HTTP)
thereby allowing web servers to remain secure while still allowing the exchange
of information. JDK version proxying refers to the ability to determine and
react within software depending on which version of the JDK software is
currently running. ThinAccess can be used to connect to any database accessible
via a JDBC driver and supports access to any open database connectivity (or
ODBC) database as well. Open database connectivity refers to an
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industry standard application programming interface allowing developers to
access different database systems.
JDBC drivers involve low level protocols that connect to databases.
Downloading these drivers to web browsers introduces many potential obstacles
including breaking browser security models, Java sandbox issues, huge class
downloads from loading drivers, client software installation issues such as
dynamic link libraries (or DLLs), insecure transmission of database user id's
and passwords, complicated JDBC uniform resource locators (or URL's) and many
more. ThinAccess provides all the functionality of these JDBC drivers without
the downloading obstacles. The following technical terms used in this paragraph
are defined as follows:
Java sandbox a security model used in the Java
programming language which restricts certain
actions when running Javaapplets and
applications.
dynamic link library a code which is linked when programs are
executed instead of when they are compiled.
uniform resource locator an address that identifies a document or
resource on the world wide web.
ThinAccess provides remote access to these drivers, without the need to
download the driver. This immediately saves a class download that could take
minutes for network users to complete. When a JDBC request is made by the
client, ThinAccess proxies this request over to the middle tier server where it
is executed, then the results returned.
Technical Benefits of ThinAccess include:
o One location for all JDBC drivers. In environments where multiple
databases and database drivers exist, ThinAccess can simplify this
environment by organizing database connectivity in one place.
o Simplicity for web developers. ThinAccess gives web developers a
simple JDBC URL to access databases by simple names. Using the ThinWeb
JDBC URL means the web developer does not have to know underlying
database specifics including the need to know SQL.
o Seamless access when database changes occur. When databases are
upgraded, new JDBC driver versions are released, ports change,
database user identifications and passwords change, and the physical
location of the database changes. This means the user must change all
its database applications to reflect these changes. With ThinAccess
this is avoided since the web developer deals simply with the
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user defined name. The database could change but the ThinAccess
application does not have to be changed.
o One driver download for multiple databases. If an applet requires
connectivity to multiple databases, a user could be faced with
multiple downloads. With ThinAccess, one JDBC driver download is
sufficient.
o Pre-configuration for premium performance and scalability. It is
possible to pre- configure database connections, statements and result
sets so they can be instantly accessed and processed by many clients
simultaneously.
o Work in any version of any Java enabled web browser. Web browsers only
support one version of Java and if there is a download of an applet
with the wrong driver version, the application will not work.
ThinAccess contains a JDBC driver that works in any browser and avoids
having to keep a separate driver for every version of a web browser.
o Use of the more efficient Type 2 drivers. Web enabled databases using
type 2 drivers are regarded as the best performing and most reliable
since they use native database libraries. Most often the type 2 driver
is much more stable and preferred but it cannot be deployed over
networks without customer software installations. ThinAccess uses the
type 2 driver.
o Avoids transmitting database user identifications and passwords over
the network. Many JDBC drivers send user identifications and passwords
from the application over the internet and often are unprotected.
ThinAccess avoids transmitting any user identification or password
information.
o Flexibility of use. ThinAccess can plug into any web server, any
browser, or any database on any platform supporting the Java
specifications.
WebCrumbs Overview. WebCrumbs is designed to be a web site management and
smart agent analysis tool. A smart agent analysis tool is a term used to
describe software which both analyzes web site usage and gives web site
administrators the ability to smartly determine which page web visitors see.
WebCrumbs is a shrink-wrapped (or downloadable) packaged application which can
be graphically installed and easily used to run in correlation with the
corporate web server. WebCrumbs is intended to gather and analyze information
about a visitor to a particular web site and to generate a personalized look to
the web site in response to the information learned about that visitor.
WebCrumbs runs on any operating system supporting Java, any web server
supporting Java servlets, and communicates with any database supporting JDBC or
ODBC.
WebCrumbs Technical Data. As a web site analysis and reporting tool,
WebCrumbs is
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intended to offer a non-intrusive installation and integrated real- time
reporting, and the ability to use any in-house database customer reporting tool.
Real time, high performance database communication, via JDBC or ODBC, allows
WebCrumbs to provide web-based industry standard analysis reports, in both
hypertext markup language (or HTML) and 3D graphs quickly and accurately to any
web browser. Hypertext markup language refers to a standard set of tags or
characters which are used to format documents on the world wide web. This
database communication also allows WebCrumbs to serve up dynamic database pages
and complicated real time web pages.
Management believes that WebCrumbs is different from other web site
analysis tools because it uses Dynamic Navigation Technology, a technology
developed by thinWEB that automatically generates customized web pages based on
pre-defined business rules and tracks web site activity in real time. WebCrumbs'
smart agent technology learns about a visitor's preferences by monitoring the
visitor's web site usage patterns (such as pages visited and length of stay) and
utilizes such information in real time by instantly presenting on the web site
information and advertising most suitable.
We anticipate that WebCrumbs will be a commerce tool on many web sites.
These sites will display different pages to visitors based on the visitor's past
and current behavior. Web sites will present users with personalized content or
purchase recommendations based on individual interests and preferences. Since
this data is updated continuously in real-time, new suggestions for additional
purchases are available instantly.
WebCrumbs' personalization of the web site takes two basic forms:
collaborative filtering and profiling. Both are attempts to collect specific
information that will aid in generating additional traffic, click-throughs and
revenue on web sites.
Collaborative filtering is voluntary. It accepts information provided by
the user and predicts what information will be of interest to him or her. It can
also compare a user profile with those of other users to create common- interest
groups and make recommendations based on other customer preferences.
Profiling is not voluntary. A visitor's actions are observed and tracked.
Subsequent user clicks identify patterns of behavior and interests, which result
in the presentation of specific information to web sites visited.
We anticipate that all future versions of WebCrumbs will be based on the
core features WebCrumbs provides. The versions will include both an internet
service provider (or ISP) and Enterprise edition. ISPs have the unique problem
of having to handle multiple domain name web sites so all tools must be able to
handle their environment. The Enterprise edition will be a more scalable,
multi-server version.
The WebCrumbs Community edition should enable multiple sites, or community
of sites,
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to collaboratively share certain information obtained by WebCrumbs about
visitors as they move from one site to another in the community.
ThinSuite Overview. Through NoTime Wireless Corp., our joint venture with
Innovium Capital Corp., we are developing ThinSuite as a platform to enable
organizations to provide wireless business applications over WAP (Wireless
Application Protocol) to an assortment of WAP enabled devices. The initial
release of ThinSuite is scheduled to include several prebuilt business
applications, including server based email, scheduling, and contact management.
We are designing this software as a platform for organizations to readily deploy
custom business applications to their workforce. The client types supported in
the initial release will be WAP and WML (Wireless Markup Language) compliant.
ThinSuite Technical Data. As a platform for wireless business deployment,
ThinSuite is intended to offer businesses the ability to readily deploy prebuilt
as well as custom built business applications to their workforce. This suite
will address two important problems at the enterprise wireless access level --
limited resources, or resource constrained devices, and the larger internal
problem of supporting two separate data systems, one for the wired and another
for wireless environments. Much of the anticipated growth in wireless data
access in the short term will be enabled by the availability of WAP. WAP is a
protocol standard for wireless integration with the internet sponsored by the
Symbian group which all major cellular phone manufacturers have joined. The WAP
phones are expected to be first introduced to the market later this year. These
phones will use WAP browsers to provide cross-platform wireless access to
internet and corporate infrastructures via the internet. WAP browsers display
WML, the wireless equivalent of HTML. Although these phones will be limited to
serving up only static web pages and no computing is done on the device, WAP is
a new standard designed to extend internet services to mobile telephony. We
believe it will provide an outstanding near-term market opportunity for software
developers.
The device resource constraints include small screens and keypads, limited
memory, narrow bandwidth (a baud rate of 14.4k or less) and continuing airtime
charges. As a consequence of these limitations, wireless devices will not be
able to run the same applications currently used in the wired environment. New
applications will be required such as those proposed by NoTime Wireless Corp.,
our joint venture with Innovium, which have very small footprints on the device,
operate with very small downloads, and are displayable in small graphical areas.
Enterprises will be faced with the costly problem of developing concurrent
back end infrastructures for supporting wireless client access to enterprise
data. Through ThinSuite, our software platform and application suite will enable
companies to plug-in to existing databases and legacy applications and provide
that information to the WAP enabled wireless device.
The initial suite of applications will consist of scheduling, e-
mail/messaging and contact management. The scheduling application will include
features for setting up meetings and
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making appointments, automatic notification of upcoming meetings and schedule
changes, weekly/monthly calendar overviews and calendar publishing. The
scheduling application will eventually communicate with all major scheduling
software in the industry.
The e-mail/messaging application includes cross-platform access from any
WAP device to server based email systems without requiring any software package
on the cell phone. This is the type of email which has become popular in the
enterprise and on the wired internet. Initially only text messages will be used
thereby not bogging down the device waiting for attachments or images.
The contact management application will handle addresses, phone numbers
and contact history for all personal and professional contacts.
The server-based ThinSuite platform will be responsible for managing all
ThinSuite applications including the security of information transferred, user
authentication and scalability.
Joint Venture with Innovium Capital Corp.
Through our subsidiary, ThinWeb Software Incorporated, we have entered into
a joint venture with Innovium Capital Corp. of Toronto, Canada. The joint
venture vehicle is a Canadian private corporation named NoTime Wireless Corp.,
which was incorporated under Canadian law on October 21, 1999. NoTime Wireless
will develop ThinAccess for application to the wireless database access market,
which includes the development of the ThinSuite product for database access for
wireless devices. As part of the joint venture agreement, ThinWeb Software has
provided NoTime Wireless with a perpetual license to use and market ThinAccess
accordingly. As consideration for this license, NoTime issued ThinWeb Software
1,250,000 shares of capital stock representing a 50% interest in the company and
a promissory note in the amount of $841,341 ($1,250,000 CDN), and agreed to pay
ThinWeb Software a continuing royalty, payable quarterly, equal to 5% of
NoTime's net revenues.
In consideration for 1,250,000 shares of capital stock representing a 50%
interest in NoTime, Innovium paid $841,341 ($1,250,000 CDN). These proceeds were
used by NoTime to repay the promissory note in the same amount to ThinWeb
Software. Also on December 16, 1999, ThinWeb Software purchased 500,000 units of
the capital stock of Innovium (each unit consisting of one common share and one
share purchase warrant exercisable for two years from the date of the
subscription agreement at an exercise price of $0.35 ($0.50 CDN) each) for cash
consideration of $168,268 ($250,000 CDN) and 100,000 of our share purchase
warrants as described in the following paragraph. Assuming the share purchase
warrants are exercised, we would own approximately 3% of the issued and
outstanding common shares of Innovium.
In addition, on December 16, 1999, the Company issued to Innovium 100,000
non- transferrable share purchase warrants, which expire on December 15, 2001,
exercisable for thinWEB common shares on a one-for-one basis at an exercise
price equal to the lower of $5.00
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or the lowest price at which we issue equity or convertible securities during
this period. These warrants were attributed a value of $256,373 based on the
fair value of the Innovium units received net of cash paid.
As long as ThinWeb Software owns at least 40% of the issued and outstanding
shares of NoTime, ThinWeb Software shall manage the day-to-day activities of
NoTime, in return for a fee of 2.5% of NoTime's operating costs. Each party
shall provide advances to fund operating expenses of NoTime. If a party is
unable or unwilling to continue funding operating expenses, that party's
interest in NoTime shall be subject to dilution by the other party or a third
party, which is prepared to fund operating expenses.
NoTime shall pay ThinWeb Software a royalty of 5% of net revenues realized,
paid quarterly in arrears. These royalties are accrued, but payments will only
commence once NoTime has reimbursed to the parties all advances made to NoTime.
In addition, ThinWeb Software has agreed to provide certain consulting services
to NoTime for additional compensation. James Anthony, the chairman of our board,
is a former director of Innovium.
Future Products and Research and Development
We intend to develop additional e-commerce focused internet applications
based on our existing core technology, in response to perceived market demands.
The development of newer versions of the two products currently developed and
the development of new e-commerce products will require a material investment of
resources and market research.
Trademarks
We do not have any patents. On December 4, 1998, we applied for trademark
registration in Canada for "WebCrumbs" and "ThinWeb" and on April 16, 1999, for
"ThinAccess". On June 4, 1999, we applied for trademark protection in the United
States for "WebCrumbs", "ThinWeb" and "ThinAccess". We cannot guarantee that
other companies do not already use these names as their company or product name
and we may not be able to prevent use of these marks by prior users. Even if
such trademark protection is granted, we may not be able to prevent competitors
from using the same or similar marks, concepts or appearances and we may not
have the financial resources necessary to protect our marks against infringing
use.
Licenses
Sun Microsystems, Inc. We have entered into a licensing agreement with Sun
Microsystems, Inc. for use of the 100% Pure Java Logo. The agreement with Sun
Microsystems grants us a non-exclusive, non-transferable, personal, royalty-
free license to use the 100% Pure Java logo and the "For Java" tagline
(1) on the products, splash screens and product packaging, and
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(2) in the marketing, advertising, distribution and sale of the products,
provided that ownership of the logo and tagline are attributed to Sun
Microsystems.
The license only extends to those products which have successfully passed
Sun Microsystem's certification tests. Both ThinAccess and WebCrumbs have passed
the certification tests. ThinSuite has not undergone certification testing.
Cloudscape, Inc. We have entered into a license agreement with Cloudscape,
Inc. of Oakland, California, by which Cloudscape granted us a non-exclusive,
non-transferable license to use its JBMS embedded client and workgroup server
deployment software to
(1) develop a limited use version of the software and
(2) distribute or otherwise deploy to end users the limited use version of
the software.
One year of maintenance and support of the software is included in the
license, including updates, upgrades, new versions, and new products within the
embedded software product family. The license agreement currently expires on
March 31, 2000; however, the agreement automatically renews year to year unless
canceled by us in writing not less than 90 days prior to the March 31
anniversary date. Cloudscape may terminate the agreement upon 30 days written
notice in the event that we are in breach of the agreement. We have agreed to
pay Cloudscape a royalty of 3% of the selling price of those products we sell
which include Cloudscape's products and are sold as customer development copies
and thus have a restricted limited use license. On those products sold as
customer deployment copies, and thus have an unrestricted license, Cloudscape
will be paid a royalty of 10% of the selling price. The agreement also entitles
Cloudscape to receive a minimum license fee of $5,000 per year in the event that
the royalty fees fail to total more than $5,000. Additionally, Cloudscape
charges us for technical support on a per call basis with the minimum 10 pack of
support calls at $1,000 to be charged against the initial prepayment.
Informix Software, Inc. We have also entered into a license agreement with
Informix Software, Inc. of Menlo Park, California whereby Informix has granted
us a non-exclusive, non- transferable license to internally use its products
provided under the Informix Solutions Alliance Program. This license is solely
for our development and support purposes and the agreement appoints us as an
Independent Software Vendor under the Informix Solutions Alliance Program.
Pricing for licensing of any products used is pursuant to the pricing
established in the Informix Solutions Alliance Program from time to time. The
agreement is for a 1 year term but automatically renews unless either party
provides written notice of its intention not to renew at least 30 days prior to
expiration.
Oracle Corporation. We have entered into a cooperative marketing agreement
with Oracle Corporation of Redwood City, California. The agreement is designed
to promote each company's products and, in particular, to demonstrate to
customers and potential customers the
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benefits of using ThinAccess in conjunction with Oracle's Jdeveloper product.
Under the agreement each company provides the other with a nontransferable,
nonexclusive and royalty free license to use the other's software product for
marketing and demonstrations, internal training and product compatibility
testing. Moreover, each company agrees to cooperate in joint marketing efforts,
including mutual links to the other's web site. The agreement is for a 1 year
term but automatically renews unless either party provides written notice of its
intention not to renew at least 30 days prior to expiration. Either party may
terminate the agreement at any time upon 30 days written notice.
Marketing-General Strategy
We are targeting software manufacturers (database and application),
software developers and internet service providers. We are marketing our
products directly to businesses. We also market our technology to developers
directly through internet sales on our web site in the form of a developers'
tool kit. We anticipate that our thinner and faster internet solution will have
a significant appeal to many software suppliers. Many of the current database
software companies have an application too thick to be easily internet ready.
We anticipate generating sales inquiries through an on-line marketing
campaign designed to lead Java software developers to our web site. Using
discussion forums, chat groups, and web site advertising banners to be placed on
strategic web sites, customers will be able to link directly to our web site and
learn more about and download our products.
We plan to support our on-line advertising with attendance at industry
trade shows and selected magazine advertisements.
We began to establish a marketing staff during the second quarter of 1999
with the employment of three industry-experienced personnel. We now have seven
sales and marketing employees and intend to expand our marketing staff by hiring
additional employees. In addition to our executive offices in Ottawa, Ontario,
Canada, we lease space in Halifax, Canada to accommodate our increased research
and development, administrative personnel and wireless operations, including
NoTime Wireless Corp.
Marketing and Sales Strategy-ThinAccess
The target markets for ThinAccess are database software development
companies that need to web-enable their products and developers seeking to
enable client server applications either for internal use or re-marketing. We
believe that a major shift is taking place in the way information and
applications are accessed and that such shift will provide users access to
powerful computer applications and information through inexpensive and easy to
use information access devices, i.e. thin clients.
ThinAccess sales efforts are initially focused on the major database
companies, sales force automation and customer relations vendors. We are
attempting to establish long-term
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agreements with original equipment manufacturing companies (or OEMs) whereby
ThinAccess would be bundled or embedded within that vendor's software and
shipped as a web enhancement. We intend to assist these vendors to enable their
products to remotely access the internet, intranet and extranet with the
eventual target of entering into a binding royalty or one-time fee structure
with these vendors. Pricing for ThinAccess starts at $5,000 per CPU (Central
Processing Unit) with OEM pricing based upon type of sales stream, i.e., either
bundled with a version of the database or sold embedded with all versions with
subsequent annual maintenance fees.
We are targeting the wireless business data application market with our
ThinSuite product. We are attempting to establish relationships with vendors who
require a faster and smaller footprint to allow effective deployment of their
application such as palm-held organizers, certain Windows applications, cellular
phones and pagers. Despite our efforts, however, we may not be able to meet
these expectations or establish agreements or relationships with the OEM or
wireless markets.
Marketing and Sales Strategy-WebCrumbs
Our target markets for WebCrumbs are internet service providers (ISPs),
Application Service Providers (ASPs), web marketers, call center application
vendors and web houses. We will attempt to market WebCrumbs to ISPs by focusing
on the use of WebCrumbs to increase the value of advertising on web sites. By
using WebCrumbs, we believe that an ISP will be able to charge a premium for
advertising. We anticipate that we will charge a "click charge" to the ISP; that
is, each time the ISP uses WebCrumbs, we will receive a fee. We will also try to
obtain a "powered by thinWEB" logo on the ISP's web site.
We anticipate marketing WebCrumbs to call center vendors to improve their
customer experience by having the ability to adjust to the caller's needs while
online. We anticipate that the fee for embedding WebCrumbs into the software
applications will be based on a royalty fee structure.
Web houses design and deploy web sites for other companies, including the
design, functionality enhancements and, often, the hosting. We expect to first
introduce the software developers tool kit (discussed below) to web houses to
assist them in improving web site features and then building WebCrumbs onto
that. We hope to eventually charge a license fee to such web houses for use of
WebCrumbs with subsequent annual maintenance fees. Despite our efforts, however,
we may not be able to meet these expectations or establish any such agreements
or relationships.
Software Developers Tool Kit
We believe that the key to the success of any software company is its
linking the input of customers and prospects with the input from the software
developer community. We will make available a software developers tool kit that
will enable developers to develop applications using
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thinWEB products. We sell the software developers tool kit directly, through our
web site, to assist in-house information technology departments and developers
to work with our technology. Both ThinAccess and WebCrumbs are available to be
downloaded directly from our web site for a 30-day no risk trial. After the
trial period, the software developers tool kit for ThinAccess and WebCrumbs will
be available for purchase at $995 and will include a 5-user license. The
software developers tool kit will be only for development use and once an
application is to be deployed to more than five users, we anticipate entering
into a license agreement.
Marketing-Specific Alliances
We have joined several alliances with certain major computer companies and
computer groups which we anticipate will assist in the promotion and sales of
our products.
Sun Developer Connection. We are a member of the Sun Developer Connection
Alliance, a free alliance open to 100% Pure Java certified companies. As a
member of the Sun Developer Connection Alliance, we anticipate the promotion of
our name and products on the Sun web site, a web site description of our
software and a link to our web site from the Javasoft web site, distribution of
evaluation copies of our products bundled on Sun Solutions' widely distributed
CD's, inclusion in the Sun Solutions Catalogue which is distributed to all Sun
Microsystem hardware customers, and possible Sun trade show participation (such
as Sun's Java One and Java Business Expo trade shows).
Microsoft Independent Software Vendors Program. We are a member of the
Microsoft Independent Software Vendors Program which is designed for independent
software vendors which produce shrink-wrapped or downloadable software that
supports or runs on Microsoft products, technologies and platforms. Benefits
include opportunities to promote our name and products within and outside of
Microsoft to potential customers and developers, regular receipt of current
information on the latest technology, product news and product strategy from
Microsoft, discounts and special pricing.
Novell. ThinAccess is listed on the Novell web site as an approved product
for use with Novell's operating system.
Informix Solutions Alliance Program. We are a member of the Informix
Solutions Alliance Program which is designed for independent software vendors
which support or use Informix products. Benefits include marketing tools in
accordance with the marketing opportunities under the Informix Solutions
Alliance Program from time to time.
Oracle Corporation. We have entered into a cooperative marketing agreement
with Oracle Corporation of Redwood City, California. The agreement is designed
to promote each companies' products and, in particular, to demonstrate to
customers, and potential customers, the benefits of using ThinAccess in
conjunction with Oracle's developer product. The companies have agreed to
cooperate in joint marketing efforts, including mutual links to the other's web
site.
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Internet Screenphone Reference Forum. We are a member of the Internet
Screenphone Reference Forum (ISRF), which was established in 1997 to help foster
the global development of new Java technology-based services to be offered
through screenphone terminals and includes many device manufacturers, software
vendors, network operators and service providers. The ISRF's working document is
intended to establish an open specification intended to standardize screenphone
access to the internet, giving consumers an easy-to-use, low cost alternative
for getting online and accessing an array of services that operate with any
compliant internet screenphone. Software designers who will be developing
end-user solutions are invited to provide their feedback.
Marketing-Alliance Strategy
We are attempting to form alliances with major database manufacturers,
operating system manufacturers, internet service providers and other software
manufacturers to establish technical, marketing and original equipment
manufacturer (or OEM) alliances.
We anticipate that technical alliances will enhance our current and future
products where there is a clear business advantage to incorporate the vendor's
product versus building elements of our products. A typical technical alliance
would involve our use of a vendor's technology to enhance our products.
We anticipate that marketing alliances will increase our market presence
through cross selling to other vendors' customers, reducing the costs of
marketing by combining efforts and shortening the sales cycle. We will attempt
to form marketing alliances with firms that have complimentary products. A
typical marketing alliance for ThinAccess would be for a database vendor to
recommend ThinAccess as a preferred remote access tool to its customers on its
web site and in its literature. These alliances should enable us to gain broader
coverage in media, trade shows, joint sales calls and promotions.
We will attempt to establish OEM alliances which would bundle our software
applications with the vendor's products. There are different levels of OEM
alliances depending on the manufacturer, product maturity and market potential.
The most common methods that we anticipate being used for our software
applications are bundled and embedded. A bundling OEM alliance would have the
technology shipped or sold with selective models or products. An embedded OEM
Alliance would have the technology sold every time the vendor's product is sold.
Technical Support
We anticipate that we will develop a dedicated web site to support and
attract software developers. Our research and development team will provide the
support for such developers. We will also host online chat sessions to allow
developers to network and discuss issues and ideas. We anticipate providing
second level support for the OEM alliances, i.e. the manufacturer
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will be responsible for supporting its customers directly and we will provide
support for product issues and bug fixes to the manufacturer. We intend to
establish a secure section of our web site to list any known deficiencies in the
products and known "work arounds". This is intended to ensure that the OEM
manufacturers do not spend time debugging known issues.
The Market
Our first two products are intended to target the internet e-business
access and intelligence software applications markets. Our future prospects are
tied directly to the future growth and continued global acceptance of the
internet. The internet has grown in less than a decade from a limited research
tool to a global network consisting of millions of computers and users.
Management believes that the internet is becoming the computing structure of
choice for global business. Companies are introducing new web-based applications
in mainstream operations such as sales force automation, call center
integration, one-to-one marketing, remote training, and customer support.
Both of our products are "100% Pure Java" certified software solutions, the
Sun Microsystems standard of excellence in Java programming. We have developed
our applications in Java based on our belief that it is fast becoming the
standard for internet programming. We expect to benefit from investments being
made in Java technology by enterprises worldwide. We believe that application
development budgets for Java endeavors will almost double in the next 24 months,
and will continue to grow exponentially as Java microprocessors flourish in
internet devices such as TV set-top boxes, smart phones, personal digital
assistants, hand-held devices, pagers, and laser printers.
The primary target market for ThinAccess is companies utilizing internet
web applications with any database, any web browser and requiring "thin client"
database connectivity. We perceive a major initiative by e-commerce companies to
web-enable their business activity and to provide it as another medium for their
customers. Database access is crucial to web-enabling business activity as it is
the predominant mechanism to store and access information. We also perceive
wireless devices and sales force automation as a major target market for
ThinAccess. We agree with projections that predict the global thin client market
will expand dramatically, potentially aggregating over $1 billion annually. Such
predictions have been recently published in various articles including:
(1) An article in Computer World dated April 28, 1999 by Stacy Collett
which stated, "The thin-client market should reach 2.2 million units
shipped by 2001, with revenue exceeding $1 billion, according to a new
report by Zona Research Inc. in Redwood City, California."
(2) An article in Computer World dated May 10, 1999 by Stacy Collett
stated, "More hardware options and lower prices will join Microsoft's
blessing to propel thin-client sales to 2.2 million units by 2001, with
revenue of $1 billion, according to separate
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reports by IDC (International Data Corporation) and Zona."
(3) An article in Inter@ctive Week on line dated June 14, 1999 by Charles
Babcock stated, "Mobile databases are found on client devices, such as
laptops and handheld computers. A "boom in thin clients" is anticipated
between now and 2001, with 2.25 million internet-accessing devices totaling
$1 billion in value expected to be sold, according to Zona Research."
The primary target market for WebCrumbs is the web site management and
analysis market with a secondary target including internet service providers,
call center integrations and remote training. WebCrumbs targets companies that
desire to upgrade their web sites with the ability to learn about and respond to
web site visitors by instantly personalizing that company's web site for that
visitor. This personalization provides companies with the increased ability of
turning web visitors into clients. We believe that this will assist companies to
increase customer response and sales. We anticipate that as a result of the
growth of online applications (e.g., e- commerce, extranets, automated customer
service) and related businesses, web traffic analyzers will become an even more
strategic element with larger budgets for web traffic analysis tools and
services. We believe that companies that now analyze or will develop analysis
capabilities of web site traffic patterns or web site personalization, need
powerful data analysis solutions such as WebCrumbs that will integrate
effortlessly with other applications and platforms.
We believe that companies can increase their web site investment return by
better understanding the profiles and preferences of site visitors.
Investor Relations
We have engaged Brokerwise Communications Inc. to handle our investor
relations. Pursuant to our agreement with Brokerwise, Brokerwise is responsible
for our general investor relations, including without limitation, developing and
maintaining relations with investment dealers, fund managers, shareholders,
preparing news releases, etc. As compensation for its services, Brokerwise will
be paid $6,500 ($10,000 CDN) per month, plus reimbursement for authorized
expenses up to $2,925 ($4,500 CDN) per month. Our agreement with Brokerwise
terminates as of July 31, 2000.
Competition
We face competition from different companies for different aspects of our
technology and for our different software applications.
ThinAccess connects to any database over the web with swift high
performance downloads of web database applications. We consider the competitors
to ThinAccess to be those products that can provide thin client (under 100K
download) distributed access in Java. Software Synergy's JDBC Connect provides a
thin access database application product, but it is a
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Windows specific product supporting ODBC databases. IDS Software's IDS Server is
another competitor and is also a Windows/Linux product with support for ODBC and
Oracle databases.
We anticipate that WebCrumbs will face competition from companies in the
e-commerce field including Web Trends, Active Concepts, Net.Genesis, Andromedia
and Accrue. These companies primarily supply static web analyzer software
providing detailed reports on web site activity without the Dynamic Navigation
Technology used by WebCrumbs which allows a web page viewed by one visitor to be
different than the same web page viewed by another.
The software industry is highly competitive with frequent entries into all
markets and fields by new start-up companies and by established companies with
new products. Many of these competitors may have more experience and access to
resources, including financial and technological resources, than thinWEB.
Employees
We currently have 20 full-time employees and two part-time employees. We
are not a party to any collective bargaining agreements or labor union
contracts, nor have we been subjected to any strikes or employment disruptions
in our history.
Business Development
ThinWeb Software Incorporated was founded in April 1998 by two of thinWEB's
present officers, Bryan MacLean, also a director, and Cory Reid, to focus on
e-commerce business applications. Messrs. MacLean and Reid were part of the
initial software development team at Sanga International, Inc., a company
providing web-based software business solutions using Java technology. Messrs.
MacLean and Reid determined that a market opportunity existed to develop
web-based software applications targeted to software developers and internet
providers based on the use of Sun Microsystems' Java software programming
language. Messrs. MacLean and Reid began development of ThinAccess and WebCrumbs
and its core technology in March 1998, and thereafter established ThinWeb
Software Incorporated through which they continued development of the technology
and products. Late in 1999, through a wireless initiative with Innovium Capital
Corp., thinWEB commenced development of a wireless product, ThinSuite.
Warwick Acquisition Corporation was created on June 2, 1998 to provide a
method for a foreign or domestic private company to become a reporting company
whose securities would be qualified for trading in the United States secondary
market. Warwick was a shell company with no operations, revenues, material
assets or liabilities. On February 19, 1999, Warwick filed a Form 10-SB
registration statement under the Securities Exchange Act of 1934 making it a
reporting company.
On May 27, 1999, Warwick finalized and executed a share exchange agreement
with an effective date of April 22, 1999, among Warwick, Warwick's newly-created
wholly-owned
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subsidiary, Thinweb.com Inc., ThinWeb Software Incorporated, and the
shareholders of ThinWeb Software Incorporated. As part of the transaction,
Warwick changed its name to thinWEB.com Corporation. ThinWEB.com Corporation
later changed its name to our present name, thinWEB Technologies Corporation.
Under the terms of the share exchange agreement, Thinweb.com Inc. purchased all
the outstanding shares of ThinWeb Software Incorporated in consideration for:
(1) the issuance of 16,916,344 Class A exchangeable non-voting
participating common shares of Thinweb.com Inc. common stock to the shareholders
of ThinWeb Software Incorporated;
(2) the issuance by thinWEB Technologies Corporation, the parent company,
to StockTrans, Inc., Ardmore, Pennsylvania, as trustee for the ThinWeb Software
Incorporated shareholders, 16,916,344 shares of its common stock to be held in
trust under the terms of an exchange and voting agreement dated April 22, 1999;
and
(3) the issuance by thinWEB Technologies Corporation, the parent company,of
1,500,000 shares of convertible preferred stock to E-Capital Management Inc., a
Canadian corporation, at a price of $.0001 per share. E- Capital subsequently
assigned these shares to its affiliate, 583317 British Columbia, Ltd., a British
Columbia corporation. J. Gregory Wilson, one of our directors, is the president
and sole shareholder of 583317 British Columbia, Ltd. and the president of E-
Capital who we have engaged to assist us in raising capital.
Prior to April 22, 1999, Warwick did not have any operations and had
5,000,000 common shares issued and outstanding. At the same time as the share
exchange, Warwick redeemed and retired 4,850,000 of its 5,000,000 outstanding
shares of common stock. As consideration for services provided in connection
with the acquisition of Warwick, TPG Capital Corporation, the sole shareholder
of Warwick prior to the share exchange, retained 150,000 shares of the common
stock of Warwick, now thinWEB Technologies Corporation. In connection with the
share exchange, we also agreed to issue TPG a warrant to purchase 50,000 shares
of common stock of thinWEB Technologies Corporation at an exercise price of
$1.00 per share and expiring on April 22, 2004
For accounting purposes, the acquisition has been treated as an issuance of
150,000 shares and 50,000 warrants by ThinWeb Software Incorporated to the
shareholder of Warwick in consideration for services related to the corporate
reorganization. These shares and warrants issued as consideration for
acquisition related services have been attributed a value of $90,000 based on
the value of the services received.
James M. Cassidy, the sole officer and director of Warwick, resigned from
such positions pursuant to the share exchange. Mr. Cassidy is the controlling
shareholder of TPG Capital Corporation. In consideration for services provided
or caused to be provided to us by TPG Capital, we also agreed to pay TPG Capital
$150,000, $125,000 of which has been paid.
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At the time of the share exchange transaction, 24 shareholders received
Class A shares in our subsidiary, Thinweb.com Inc. Following the windup and
distribution of assets by a corporate shareholder, 3024704 Nova Scotia Limited,
certain share transfers, and conversions to common stock of the parent company,
there are currently 31 Class A shareholders. Each beneficial shareholder of the
Class A shares has, through the trustee, voting rights in thinWEB Technologies
Corporation, the parent company, equal to the number of Class A shares held for
his benefit by the trustee. Upon proper notice, the Class A shares may be
converted into or exchanged for an equal number of shares of the parent company
held by the trustee. By having the Class A shares exchangeable at some time in
the future for issued shares of the parent company held by the trustee, the
ThinWeb Software Incorporated shareholders were able to defer, until the
exchange of their Class A shares for thinWEB Technologies Corporation shares,
certain Canadian taxes otherwise payable upon the disposition of their ThinWeb
Software Incorporated shares while maintaining voting rights in the parent
company.
ThinWEB Technologies Corporation presently has two wholly-owned
subsidiaries, Thinweb.com Inc., a Nova Scotia corporation, and ThinWeb Software
Incorporated, a Nova Scotia corporation. Thinweb.com Inc. was created to effect
the exchange of stock with ThinWeb Software Incorporated shareholders and has no
operations. As a result of the share exchange transaction, effective April 22,
1999, ThinWeb Software Incorporated became a wholly-owned subsidiary of
Thinweb.com Inc. and, indirectly, a wholly-owned subsidiary of thinWEB
Technologies Corporation, the parent company.
ITEM 2. DESCRIPTION OF PROPERTY
Our principal executive offices are located at Suite 101, Phase 3, 6
Antares Drive, Ottawa, Canada. We lease such offices at an annual rent of
$23,400 ($36,000 CDN) and our telephone number there is (613) 225-8446. We have
signed a lease with our landlord in Ottawa for an additional 1500 square feet
and, effective April 1, 2000, our annual rent will increase to $39,650 ($61,000
CDN). We also lease research and development offices at Suite 1510, 1505
Barrington Street, Halifax, Canada at an annual rent of $27,050 ($41,615 CDN)
and our telephone number there is (902) 425-2802. Our web site is located at
http://www.thinweb.com.
We believe that our leased properties are in good condition, are well
maintained and are adequate for our current and immediately foreseeable
operating needs. We do not have any policies regarding investments in real
estate, securities or other forms of property.
ITEM 3. LEGAL PROCEDINGS
We are not a party to any litigation and management has no knowledge of any
threatened or pending litigation against us.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders through the
solicitation of
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proxies or otherwise during the fourth quarter of the fiscal year covered by
this report.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
There is currently no public trading market for our securities, including
our common stock.
Security Holders and Dividends
As of March 30, 2000, there were 33 holders of record of our common stock.
We have not paid any cash dividends on our common stock since inception and we
do not anticipate paying any cash dividends on our common stock in the
foreseeable future. We intend to reinvest earnings, if any, in the development
and expansion of our business. Our board of directors will determine, in its
sole discretion, whether to declare any dividends on our common stock in the
future, based on our earnings, capital requirements, financial position, general
economic conditions, and other pertinent factors.
Recent Sales of Unregistered Securities
Founding of Warwick
In connection with the founding of Warwick Acquisition Corporation, the
predecessor to thinWEB Technologies Corporation, Warwick issued 5,000,000 shares
of common stock to TPG Capital Corporation and Pierce Mill Associates, Inc.,
entities controlled by James Cassidy, for nominal consideration. The issuance of
these shares did not involve a public offering and was exempt from the
registration requirements of the Securities Act pursuant to the exemption from
registration provided by Section 4(2) thereof. Of these 5,000,000 shares,
4,850,000 were redeemed in connection with the share exchange transaction in
April 1999 pursuant to which the shareholders of ThinWeb Software Incorporated
acquired control of Warwick. The remaining 150,000 shares were retained by TPG
Capital.
Original Investments in ThinWEB Software Incorporated
Prior to the share exchange transaction, ThinWEB Software Incorporated
issued shares of common stock to the following individuals or entities for the
cash consideration listed below. Some of these holders of the shares listed
below may have subsequently transferred or disposed of their
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shares and the list does not purport to be a current listing of our
shareholders.
<TABLE>
<CAPTION>
Number of Number of
Date Shareholder Pre-Exchange Post-Exchange
- ---- ----------- Shares Shares or Right
------ to Direct Vote Consideration
-------------- -------------
<S> <C> <C> <C> <C>
6/9/98 Butternut Capital Limited 613,000 613,000 4*
International Shareholdings Corp. 387,000 387,000 3*
Seismic Investments Ltd. 577,000 577,000 4*
Amery Associates Inc. 473,000 473,000 3*
Cannon Equity Limited 398,000 398,000 3*
Corporate Solutions Limited 602,000 602,000 4*
Strathglen Capital Limited 479,000 479,000 3*
Greensted Equities Limited 471,000 471,000 3*
Arrendadora Solarsa S.A. 500,000 500,000 83,389*
Transatlantic Co., S.A. 250,000 250,000 2*
Cheetah Systems Ltd. 500,000 500,000 3*
Shaftesbury Global Limited 500,000 500,000 3*
Midland Shareholdings Limited 500,000 500,000 3*
B. MacLean Family Trust 2,666,667 2,666,667 16,349*
C. Reid Family Trust 2,666,667 2,666,667 16,349*
Enman Family Investment Trust 2,666,666 2,666,666 33,130*
J. Smyth Family Trust 175,000 175,000 1*
T. MacLean Family Trust 195,000 195,000 1*
3024704 Nova Scotia Limited 891,000 891,000 445,500*
Donald Wile 100,000 100,000 50,000*
Everest (Private) Trust Company 14,000 14,000 7,000*
Gary Hannah 1,181,344 1,181,344 8*
Paul Landry Sr. 100,000 100,000 0*
Paul Landry Jr. 10,000 10,000 0*
</TABLE>
In the preceding table,
(1) the * denotes the amount paid for the shareholder's original investment
in shares of ThinWeb Software Incorporated;
(2) 3024704 Nova Scotia Limited was subsequently dissolved and its shares
of ThinWeb Software Incorporated were distributed pro rata to shareholders;
and
(3) None of the original sales of ThinWEB Software Incorporated shares
involved a public offering and all were exempt from the registration
requirements of the Securities Act pursuant to the exemption from
registration provided by Section 4(2) thereof or Regulation S thereunder.
Share Exchange Transaction
The ThinWEB Software Incorporated shares reflected in the preceding table
were subsequently exchanged by the holders in the share exchange transaction for
16,916,344 Class A shares of our subsidiary, Thinweb.com Inc., and accompanying
voting rights in the parent company, thinWEB Technologies Corporation. This
exchange of ThinWEB Software Incorporated shares by the holders for Class A
shares of Thinweb.com Inc. was effected for Canadian tax purposes, did not
involve a public offering and was exempt from the registration
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requirements of the Securities Act pursuant to the exemption from registration
provided by Section 4(2) thereof.
In connection with such share exchange transaction, the parent company,
thinWEB Technologies Corporation, issued 16,916,344 shares of common stock to a
trustee as part of the consideration for the purchase of the outstanding stock
of ThinWEB Software Incorporated by a newly created subsidiary, Thinweb.com Inc.
The issuance of these shares by thinWEB Technologies Corporation to the trustee
did not involve a public offering and was exempt from the registration
requirements of the Securities Act pursuant to the exemption from registration
provided by Section 4(2) thereof. As a result of the share exchange, ThinWeb
Software Incorporated became a subsidiary of Thinweb.com Inc. and, indirectly, a
subsidiary of thinWEB Technologies Corporation, the parent company.
Preferred Stock Issuance
We have issued 1,500,000 shares of convertible preferred stock to E-Capital
Management Inc. at the price of $.0001 per share, as compensation for
E-Capital's assistance in locating and providing both interim and equity
financing. E-Capital has since assigned the shares to 583317 British Columbia
Ltd. J. Gregory Wilson is the president of E-Capital which is owned by The Greg
Wilson Family Trust, the beneficiaries of which are the spouse and children of
J. Gregory Wilson. Mr. Wilson is also the president and sole shareholder of
583317 British Columbia Ltd. The issuance of the convertible preferred shares to
E-Capital and the subsequent transfer of these shares by E-Capital to 583317
British Columbia Ltd. did not involve a public offering and was exempt from the
registration requirements of the Securities Act pursuant to the exemption from
registration provided by Section 4(2) thereof.
Joint Venture with Innovium Capital Corp.
In consideration for 1,250,000 shares of capital stock representing a 50%
interest in NoTime Wireless Corp, our wireless joint venture with Innovium
Capital Corp., Innovium paid $841,341 ($1,250,000 CDN). These proceeds were used
by NoTime to repay a promissory note in the same amount to ThinWeb Software. The
issuance of stock by NoTime Wireless to Innovium did not involve a public
offering and was exempt from the registration requirements of the Securities Act
pursuant to the exemption from registration provided by Section 4(2) thereof.
As part of the transaction, we issued to Innovium 100,000 non-transferrable
share purchase warrants, which expire on December 15, 2001, exercisable for
thinWEB common shares on a one-for-one basis at an exercise price equal to the
lower of $5.00 or the lowest price at which we issue equity or convertible
securities during this period. The issuance of this warrant to Innovium did not
involve a public offering and was exempt from the registration requirements of
the Securities Act pursuant to the exemption from registration provided by
Section 4(2) thereof.
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Employment Agreement with James Cappadocia
Pursuant to our employment agreement with James Cappadocia, our president
and chief executive officer, we issued 315,000 shares of common stock to him for
nominal consideration upon his employment with us and agreed to issue him an
additional 635,000 shares in equal quarterly amounts of 79,375 shares over a two
year period. Such issuance to Mr. Cappadocia did not involve a public offering
and was exempt from the registration requirements of the Securities Act pursuant
to the exemption from registration provided in Section 4.2 thereof.
ITEM 6. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-looking statements
The following discussion contains forward-looking statements that involve
risks and uncertainties. ThinWEB's actual results could differ materially from
those discussed in any forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in this section, as well as under the caption "Business", including "Additional
Risk Factors." All forward-looking statements included in this document are
based on information available to thinWEB on the date hereof, and thinWEB
assumes no obligation to update any such forward-looking statements. The
following discussion should be read in conjunction with the consolidated
financial statements and notes included elsewhere herein.
Overview
During the period ending December 31, 1998, our business activity was
undertaken through ThinWeb Software Incorporated, which subsequently became our
wholly owned subsidiary, with a staff of four software developers located in a
small office in Halifax, Nova Scotia. During 1999 we expanded to 20 full-time
employees and incurred significant expenses on costs and activities for which
there are no direct comparables in 1998. These expenses included increased
research and development costs, presentations at industry trade shows, marketing
and sales expenses, financing costs, expanded premises in Halifax, Nova Scotia
and a new sales and marketing office in Ottawa, Ontario.
We have developed a core technology and two software applications,
ThinAccess, designed for organizations that require rapid access to data over
the internet, and WebCrumbs, designed for organizations that require immediate
interaction with customers and employees. Through our joint venture subsidiary
we are also engaged in research and development using our core technology to
develop a third product called ThinSuite that targets companies wanting to
provide wireless access to business applications. Our use of Java enables us to
develop applications for mobile and wireless devices and other technologies as
they emerge that require platform independence, swift deployment, flexibility,
fast operation and low-cost. ThinWEB has
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commenced marketing its products on a worldwide basis through its direct sales
force, distributors and value-added resellers.
We believe that the internet as a source of e-business will continue to
experience rapid technological and user growth and that Java-based technology
will continue to increasingly become the user standard. Our first two
applications have been certified by KeyLabs on behalf of Sun Microsystems as
"100% Pure Java" which is considered the industry seal of approval and assures
customers that these products are of the highest quality, interpretable Java
solutions. We anticipate that all our future applications will be certified as
"100% Pure Java".
We have developed a sales and marketing strategy to introduce these
products into the market and assembled an experienced marketing team to lead
those activities. As part of our marketing strategy, we anticipate entering into
license arrangements and alliance relationships with major database
manufacturers, operating system manufacturers, internet services providers and
others to establish technical, marketing and original equipment manufacturer
alliances. We have a license agreement with Sun Microsystems, Inc. to utilize
the Pure Java logo and for Java tagline in its packaging and advertising. We
have a license agreement with Cloudscape, Inc. to use Cloudscape's JBMS embedded
client and workgroup server deployment software to develop a limited use version
of the software and to distribute it to end users. We have a license agreement
with Informix Software, Inc. to use Informix's products internally for
development and support purposes, further to the Informix Solutions Alliance
Program.
Results of operations
Revenues. Although the first minor sale of product occurred in 1998, our
product launch announcement took place on August 9, 1999. An announcement of
the new version of ThinAccess 1.0 for the Java 2 Platform at the Fall Internet
World '99 Show in New York City on October 6, 1999 attracted considerable
industry awareness of our product and started the revenue generating process.
WebCrumbs was released on February 1, 2000 and our joint venture subsidiary is
targeted to release ThinSuite for the wireless data base market on June 30,
2000. Our activities to date have focused on strengthening our senior
operational and sales management team, developing software applications and
marketing strategies for our new products, preparing for a private placement of
common equity and assembling a slate of high profile industry leaders from major
telecommunications and high tech corporations in North America to join our Board
of Directors.
Revenues have accelerated in the first quarter of 2000 due to increasing
market acceptance of our products and the installation of an aggressive and
highly experienced sales executive and management team. Nevertheless, our
ability to continue operations is dependent upon generating cash flow through
revenues from the sale of our products and arranging alternate sources of debt
and equity financing as required.
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Research and Development Expenses. Research and development expenses
increased from $43,888 in the eight months ended December 31, 1998 to $3,220,657
for the year ended December 31, 1999. The issuance of common shares at nominal
value to employees as compensation accounted for $2,987,000 of the $3,176,769
increase in research and development expense. Compensation in the form of shares
is a non-cash charge against corporate earnings and reflects the cost of
attracting highly skilled and qualified personnel. The balance of increased
research and development spending resulted primarily from increased cash
salaries and wages.
Selling, General and Administration. Selling, general and administration
expenses increased from $55,896 in the period ended December 31, 1998 to
$3,584,069 in 1999, an increase of $3,528,173. The issuance of shares and
warrants at nominal value to attract a president and chief executive officer,
sales personnel and to pay for legal services accounted for $2,102,000 or 60% of
the increase. The remainder of the increase is attributable to developing a
sales, marketing and administrative infrastructure in the new Ottawa, Ontario
location and professional services to assist us with the private placement
registration process and the negotiation of short-term lines of credit.
We appointed a new president and chief executive officer in February 2000,
a vice president of sales in March 2000 and other senior management staff all of
whom were provided with a combination of shares and stock options as inducements
to join our organization. Accordingly, the 2000 financial statements will
reflect further charges of a similar nature as those incurred in 1999.
Interest. We incurred financing costs of $2,122,528 in 1999 and no costs of
a similar nature in the preceding period. We financed operations during 1998
by means of shareholder loans and with services contributed freely by founding
shareholders and employees. In July 1999 we entered into a loan agreement with
E-Capital Management, Inc. ("E-Capital") who were acting on behalf of a group of
offshore corporate investors who provided us with a two-tier credit facility for
an aggregate amount of $898,600 (CDN $1,335,000). The A tranch provided for a
borrowing of $252,400 (CDN $375,000) without interest and the B tranch provided
for a borrowing of $646,200 (CDN $960,000) at 12% interest per annum. We
borrowed $252,400 under the A facility and $243,437 (CDN$361,665) under the B
facility and repaid both facilities in full in the fourth quarter of 1999 from
proceeds received from the sale of an interest in our joint venture company,
discussed below.
Under the E-Capital loan agreement the lenders are entitled to receive, for
no additional consideration, common stock purchase warrants equal in number to
the amount of the B facility drawn down divided by the price of our shares of
common stock issued pursuant to a significant financing event. The warrants will
be exercisable at the foregoing price for an exercise period of one year from
the date of closing of such transaction. Assuming a significant financing event
at $5, we would be obliged to issue 48,687 warrants. The cost of the warrants
will be recognized when the financing event occurs.
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In conjunction with the foregoing commitment to provide financing, we
issued 4,000,000 common shares to the lenders of the A and B credit facility for
nominal consideration. For accounting purposes, these shares have been treated
as a financing cost and have been attributed a value of $2,087,000, representing
98% of the total financing costs incurred in 1999.
Liquidity and Capital Resources
We had negative working capital of $734,592 as at December 31, 1999 as
compared with $97,648 at the end of 1998. The proposed private placement
discussed below, if completed as contemplated, will strengthen working capital
in 2000 by a minimum of $5,000,000, less the retirement of the Gateway Research
Management Group Ltd. ("Gateway") loan which stood at $1,000,000 at December 31,
1999 and approximately $1,500,000 at March 31, 2000.
We experienced overall positive cash flow of $396,103 in 1999 due primarily
to financing activities that contributed $1,472,647 of which $1,000,000 was
received from proceeds of the Gateway loan facility and $578,013 from the
private placement of common equity. Investing activities contributed a further
$585,818 of which $673,073 was realized from the sale of a 50% interest in our
joint venture subsidiary, net of the acquisition of shares and warrants of the
purchaser discussed below. An operating cash loss of $1,665,020, net of the
change in non- cash working capital balances related to operations, negatively
impacted on cash flow.
Lines of Credit
Lines Overseas Management Limited, ("Lines"), a registered broker-dealer
based in Hamilton, Bermuda, has provided us with an interim credit facility of
$2,000,000 through its affiliate, Gateway. The credit facility bears interest at
the rate of 12% per annum and is secured by a lien on all of our assets. We have
borrowed $1,000,000 under this facility as of December 31, 1999 and the loan
must be repaid out of the proceeds of the private placement. At the option of
Lines, the outstanding balance of the Gateway loan can be retired by purchasing
units in the private placement.
Private Placements
Since inception, ThinWeb Software Incorporated has received an aggregate of
$578,014 from the private placement of its shares. On January 31, 2000 we
entered into a private placement agreement with Lines pursuant to which Lines
has agreed to act as our placement agent on a best efforts basis in connection
with an offshore private placement of common stock and warrants with certain
non-US institutions and high net worth individuals pursuant to Regulation S of
the Securities Act. We anticipate that the proceeds from the offering will be
received within approximately two weeks of our pending registration statement on
Form SB-2 becoming effective. The offering will consist of a minimum of
1,000,000 units at a price of $5 per unit, with each unit consisting of one
share of common stock and one warrant to purchase an additional share for a two
year period at $7. If successful, the minimum proceeds to us from this
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offering will be $5,000,000 before repaying the outstanding Gateway loan
discussed above. Lines will receive a commission of five percent of the total
proceeds of the offering with the right to receive the commission in units
instead of cash. We have agreed to use our best efforts to file a registration
statement with the SEC with respect to the common shares placed in this offering
within 60 days of completion of the offering.
Sale of Interest in Joint Venture Company
On September 10, 1999, we entered into a Memorandum of Agreement
with Innovium Capital Corporation ("Innovium") to establish a joint-venture
corporation, NoTime Wireless Corp. ("NoTime") to be owned equally by the two
parties. Notes 6 and 7 to the financial statements for the year ended December
31, 1999 outline the nature of the ownership, financing and royalty obligations
of the joint venture company. On December 16, 1999, we sold a 50%
interest in NoTime to Innovium for a cash consideration of $841,341
($1,250,000 CDN). On the same day we purchased 500,000 units of the capital
stock of Innovium (each unit consisting of one freely tradable common share and
one share purchase warrant exercisable for two years from the date of the
subscription agreement at an exercise price of $0.35 ($0.50 CDN) each) for cash
consideration of $168,268 ($250,000 CDN) and 100,000 of our share purchase
warrants. The Innovium warrants are carried on the balance sheet at their
historical cost of $162,832 and the shares at their estimated fair market value
of $266,766 at December 31, 1999.
NoTime is obligated to pay us a royalty of 5% of net revenues
realized on the sale of its licensed software products after it has reimbursed
all advances from its shareholders. NoTime had no revenues during its initial
operating period in the fiscal period ended December 31, 1999.
Other
We have approximately $1,400,000 in losses for income tax purposes
available to reduce future taxable income which begin to expire in 2005. We have
no commitments for capital expenditures of a material nature in the near future.
The financial statements appearing elsewhere in this report have been
prepared on the assumption that we will continue as a going concern. We believe
that the proceeds from the proposed private placement, borrowings from Lines,
anticipated revenues from operations, the proceeds from the sale of a 50%
interest in NoTime and funds from earlier stock subscriptions will be sufficient
to cover our currently anticipated expenses, including salaries, rent and
professional fees and allow us to continue our research, developmental and
marketing operations for the next 12 months. Beyond that date, our ability to
continue operations is dependent upon generating cash flow from operations
through the sale of our software applications or raising additional equity or
debt or any combination of the foregoing.
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Year 2000 Issues
We conducted Year 2000 compliance reviews including assessment,
implementation, validation and testing for current versions of our products and
are satisfied that they are substantially Year 2000 compliant. However, it is
not possible to conclude that all aspects of the Year 2000 issue that may affect
us, including those related to customers, suppliers, or other third parties have
been fully resolved.
Although we have not experienced any Year 2000 system or software issues to
date, we cannot be certain that our systems or the systems of our clients and
critical vendors will in the future be Year 2000 compliant, nor can we be
certain that we have identified all of the potential risks to our business that
could result from matters related to the Year 2000. For example, disruptions
caused by Year 2000 issues could affect internet usage generally, which could
result in a decline in the use of our services. Additionally, the purchasing
patterns of our clients and potential clients may be materially adversely
affected by Year 2000 issues because they may be required to expend significant
resources on compliance matters, rather than investing in new online products
and services such as those we offer. If any of these risks were to materialize,
there could be a serious and adverse disruption of our operations, operating
results and financial condition.
Recent Accounting Pronouncements
In 1998, SFAS No. 133 ("FAS 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 FAS 133 in
fiscal year 2000 and does not expect the adoption of FAS 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") No. 98-5 - Reporting on the Costs of
Start-up Activities ("SOP 98-5"). 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.
In 1998, the AICPA issued SOP 98-1 - Accounting for the Costs of Computer
Software Purchased for Internal Use, which provides guidance regarding costs
associated with the implementation of computer software for internal use. The
Company adopted SOP 98-1 during the fiscal year and the adoption did not have a
material impact.
ITEM 7. FINANCIAL STATEMENTS
Information with respect to this item is contained in the financial
statements appearing on
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Item 13 of this Report. Such information is incorporated herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants on accounting
and financial disclosure for the two most recent fiscal years.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
Officers and Directors
<TABLE>
<CAPTION>
Our officers and directors are as follows:
Name Age Title
---- --- -----
<S> <C> <C>
James S. Anthony............................ 52 Chairman of the Board
James Cappadocia............................ 40 President, Chief Executive Officer and Director
C. James Enman.............................. 46 Vice President and Secretary
Bryan C. MacLean............................ 31 Vice President and Director
Cory Reid................................... 29 Vice President
George R. Fraser............................ 61 Chief Financial Officer and Director
J. Gregory Wilson........................... 36 Director
Donald Woodley.............................. 54 Director
George A. Pacinelli......................... 42 Director
</TABLE>
All of our directors hold office until the next annual meeting of
shareholders or until their successors are elected and qualified. At present,
our bylaws provide for not less than one nor more than nine directors.
Currently, we have seven directors. Our bylaws permit the board of directors to
fill any vacancy and such director may serve until the next annual meeting of
shareholders or until his successor is elected and qualified. Officers serve at
the discretion of the board of directors.
Our directors do not receive any salary or fee for acting as directors.
However, directors are entitled to participate in our stock option plan and may
be issued options. We pay all expenses incurred by the directors relating to
attending board of director meetings.
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The principal occupation and business experience for each of our officers
and directors for at least the last five years are as follows:
James S. Anthony has served as our chairman of the board since March 1999.
Since June 1974, Mr. Anthony has been the president of J. S. Anthony & Co. Ltd.,
Toronto, Canada, which provides consulting services to corporations, including
thinWEB, including strategic planning, finance and corporate organization. Mr.
Anthony is the founder of The Foundation for the Study of Objective Art, a
charitable foundation which operates an art gallery in Toronto and funds art
education programs for the public. Mr. Anthony also serves on the board of
directors of Seabridge Resources Limited, Toronto, Canada, a precious metals
company listed on the Canadian Venture Exchange. Mr. Anthony formerly served on
the board of directors of Innovium Capital Corp., Toronto, Canada, a technology
investment company listed on the Montreal Exchange and with whom thinWEB has
entered into a joint venture; Denbridge Capital Corporation, Toronto, Canada, a
digital radar imaging company listed on the Toronto Stock Exchange; Borneo Gold
Corporation, Toronto, Canada, a gold exploration company listed on the Venture
Exchange; and Independence Resources Ltd., Toronto, Canada, a gold exploration
company listed on the Venture Exchange. From 1986 to 1993, Mr. Anthony served as
a director and strategist for Softkey Software, Inc., a public company traded on
the Toronto Stock Exchange, which subsequently through mergers became The
Learning Company and was acquired in 1999 by Mattel. Mr. Anthony received his
Bachelor of Arts degree from the University of Manitoba in 1968 and attended
Carleton University from 1968 to 1970.
James Cappadocia was appointed our president, chief executive officer and a
director on February 3, 2000. From 1997 to 2000, through a consulting company
which he founded to provide executive level services to various companies, Mr.
Cappadocia functioned as president (1998-2000) of PC Outlet Inc., a Toronto,
Ontario distributor of end of life new and used Compaq products for which it is
Compaq Canada's primary channel partner, and as executive vice president sales
and marketing (1997-1998) of Sidus Canada Inc., a Toronto, Ontario systems
integrator and computer manufacturer. In 1997, Mr. Cappadocia was general
manager, strategic accounts for Cantel AT&T of Toronto, Ontario, the second
largest wireless communications company in Canada. From 1995 to 1997, he held
the position of director, sales operations for Shaw MobileComm in Toronto,
Ontario, the third largest wireless communications company in Canada. Mr.
Cappadocia was director, sales and operations (commercial) for Savin Canada
Inc., Canada's exclusive Ricoh distributor of digital and multifunctional
copiers and facsimile products from 1992 to 1995. He previously held executive
management positions from 1990 to 1992 with NEC Canada Inc. a computer
manufacturer, and from 1983 to 1990 with SHL Inc., a technology systems
integrator. Mr. Cappadocia received his Bachelor of Business Administration
degree from Lakehead University in 1982.
C. James Enman, Esq. has served as our vice president and secretary since
March 1999. He also serves as secretary of NoTime Wireless Corp., our wireless
joint venture with Innovium Capital Corp. From 1990 until 1999, Mr. Enman was a
member of the law partnership of Goldberg Thompson, Halifax, Nova Scotia, where
he practiced in the areas of corporate and
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commercial law, including securities, financing and intellectual property. Mr.
Enman received his Bachelor of Arts degree from Acadia University in 1977 and
his LL.B. degree from Dalhousie University in 1980. Mr. Enman is a member of the
Nova Scotia Barristers Society, Canadian Tax Foundation, and is a Canadian
Trademark Agent. Mr. Enman serves as general counsel to the Company.
Bryan C. MacLean has served as our vice president and a director since our
inception in April 1998. Mr. MacLean is the co-founder of ThinWeb Software
Incorporated and co- developer of our Java software e-commerce applications.
From 1996 to 1998, Mr. MacLean was a software engineer for Sanga International
Research, Boston, Massachusetts specializing in Java software solutions. From
1994 to 1996, Mr. MacLean was a software engineer for Northern Telecom, Ottawa,
Canada specializing in asynchronous transfer software switch development. During
1996, Mr. MacLean was employed by Bell Canada, Ottawa, Canada as a software
engineer where he served as one of the lead developers of that company's project
to process telephone bills over the web using electronic data interchange. Mr.
MacLean obtained his Bachelor Commerce degree from St. Francis Xavier University
in 1990 and his Bachelor of Computer Science degree from DalTech University of
Nova Scotia in 1994.
Cory Reid has served as our vice president since our inception in April
1998. He also serves as the president and a director of NoTime Wireless Corp.,
our wireless joint venture with Innovium Capital Corp. Mr. Reid is the
co-founder of ThinWeb Software Incorporated and co- developer of our Java
software e-commerce applications. From 1996 to 1998, Mr. Reid was a senior
designer for Java internet software at Sanga International Research, Boston,
Massachusetts and Halifax, Nova Scotia. From 1995 to 1996, Mr. Reid was a senior
software designer at AT&T, Herndon, Virginia specializing in telecommunications.
Mr. Reid received his Bachelor of Computer Science degree from DalTech
University of Nova Scotia in 1993.
George R. Fraser, C.A. has served as our chief financial officer and a
director since August 16, 1999. Since 1997, Mr. Fraser has served as vice
president of Fraser Financial Consultants, an Oakville, Ontario based private
company providing specialized financial services to public corporations on
mergers and acquisitions and international treasury financing. From 1995 to
1997, Mr. Fraser was president of TRC Sports Medical Products Inc., a private
company located in Toronto, Ontario engaged in the distribution of strength and
cardiovascular equipment (StairMaster, Quinton and Cybex) and related health
products across Canada. From 1988 to 1993, he was chief financial officer and
corporate secretary of Crowntek Business Centres Inc. in Toronto, which was the
largest privately owned Canadian distributor of IBM and Compaq computer
equipment and related software with annual sales exceeding CDN $350 million
($227 million US) and 600 employees. Prior to that, from 1984 to 1987 Mr. Fraser
was treasurer of Bow Valley Resource Services Ltd. in Calgary, Alberta a major
public company engaged in land and offshore drilling, heavy truck manufacturing
and waste management operations. From 1974 to 1984 he was employed in several
positions, the last of which was as assistant treasurer, at Cominco Inc., the
Vancouver, British Columbia based multinational producer of zinc, lead, copper,
precious metals and chemicals. Mr. Fraser began his professional career with
Price
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Waterhouse, where he obtained his Chartered Accountant designation in Manitoba
in 1962 and was employed as a Manager of Taxation Services when he left in 1974.
J. Gregory Wilson has served as a director since November 1999. Mr. Wilson
is the president of E-Capital Investment Inc. which he founded in 1998.
E-Capital is a venture capital firm that provides funding, incubator services
and strategic consulting for emerging-growth companies. From 1994 until 1998,
Mr. Wilson worked as an investment advisor in Ottawa, Canada with two of
Canada's largest brokerage firms, ScotiaMcLeod and Midland Walwyn (now Merrill
Lynch Canada), where his client base consisted of high net worth individuals,
financial institutions, and corporations. From 1992 until 1994, Mr. Wilson was a
business development consultant for Programmed Communications, a Canadian
corporate communications company, specializing in IPO's and annual shareholder
meetings. From 1988 to 1992, Mr. Wilson obtained the Ottawa franchise rights to
Nutri/Systems, a weight loss company, and built up 11 locations and annual
revenues in excess of $13 million before selling the business in 1992. Mr.
Wilson received his degree in economics and finance from Queens University in
Kingston, Ontario in 1985. Mr. Wilson has completed the Canadian Investment
Management (CIM) Program administered by the Canadian Securities Institute and
has been awarded the Fellowship of the Canadian Securities Institute (FCSI)
designation.
Donald Woodley has served as a director since March 2000. Since October
1999, he has served as president of The Fifth Line Enterprise, a consulting firm
engaged in providing strategic advisory services to the Canadian information
technology industry. From February 1997 to October 1999, Mr Woodley served as
president and general manager of Oracle Corporation Canada, Inc. where he was
responsible for profit and loss and operations of Oracle Corporation's Canadian
subsidiary which had 1998 annual revenues of approximately $360 million and over
1000 employees. From September 1987 to January 1997, he served as president and
general manager of Compaq Canada, Inc. where he was responsible for profit and
loss and operations of Compaq 's Canadian subsidiary which had 1996 annual
revenues of approximately $760 million and over 300 employees. Mr. Woodley
received an MBA in 1970 from the University of Western Ontario and a degree in
Business Communications in 1967 from the University of Saskatchewan. He
currently serves on the board of directors of the following companies and
associations in addition to thinWEB: BCT.Telus Corporation Inc., Star Data
Systems Inc., Delano Technology Corporation, Intellitactics Inc.,
GemhouseOnline.com Inc., ITAC - The Information Technology Association of Canada
(member of board of governors) and The Stratford Festival of Canada (vice chair
of board of governors).
George A. Pacinelli has served as a director since March 2000. Since 1998,
he has served as president of Experience Total Communications Inc. ("ETC")
where he was responsible for negotiating and contracting for over $3 million in
voice, data and wireless communications products and services in 1998. ETC also
provides consulting services to clients in all areas of communications,
including local/long distance, voice/data networking, cellular/wireless,
internet access, structured cable systems and computer telephony platforms. From
1996 to 1998, Mr. Pacinelli served as a vice president of sales at Claricom
where he was responsible for over $30 million in sales of
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telecommunications products and services in the southeast United States. While
at Claricom, he managed 13 district sales managers with over 100 sales
representatives and was involved in numerous sales training, marketing and
database management programs and advertising campaigns. From 1994 to 1996, Mr.
Pacinelli was a regional sales manager for Executone Business Solutions, Inc.
where he was responsible for the Florida sales organization with offices in
South Florida, Tampa, Fort Myers and Jacksonville. Mr. Pacinelli received a BS
in Business Administration from the University of Florida, Gainesville in 1980.
Family Relationships
There are no family relationships among our directors, executive officers
or other persons nominated or chosen to become officers or executive officers.
Involvement in Certain Legal Proceedings
We are not aware of any material legal proceedings that have occurred
within the past five years concerning any director, director nominee, promoter
or control person which involved a criminal conviction, a pending criminal
proceeding, a pending or concluded administrative or civil proceeding limiting
one's participation in the securities or banking industries, or a finding of
securities or commodities law violations.
Section 16(a) Beneficial Ownership Reporting Compliance.
Section 16(a) of the Securities Exchange Act of 1934 requires our officers
and directors, and persons who own more than ten percent of a registered class
of our equity securities, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission (the "SEC"). Officers, directors and
greater than ten percent shareholders are required by SEC regulation to furnish
us with copies of all Section 16(a) forms they file.
Based solely on our review of the copies of such forms received by us, if
any, or written representations from certain reporting persons, we believe that,
during the fiscal year ended December 31, 1999, all filing requirements
applicable to our officers, directors and greater than ten percent beneficial
owners were complied with except that James Anthony, C. James Enman, Bryan
MacLean, Cory Reid, Gary Hannah and J. Gregory Wilson have never filed a Form 3.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the total compensation that we have paid or
accrued on behalf of our chief executive officer and president during 1998 and
1999, our only two completed fiscal years to date. None of our officers received
a salary and bonus in excess of $100,000 for services rendered during such
fiscal years.
Summary Compensation Table
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<PAGE>
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards Payouts
Restricted
Stock All Other
Name and Principal Position(s) Year Salary($) Bonus($) Other($) Awards(#shares) Compensation
- ------------------------------ ---- --------- -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
James Anthony 1999 0 0 0 250,000 0
Chairman of the Board 1998 0 0 0 0 0
Gary Hannah 1999 $ 92,750 0 0 1,181,344 0
Former President and 1998 0 0 0 0 0
Chief Executive Officer
Bryan MacLean 1999 $ 55,250 0 0 3,090,000 0
Former President 1998 $ 51,986 0 0 0 0
</TABLE>
In the preceeding table:
(1) Gary Hannah's employment as our president, chief executive officer and
a director, ended effective February 3, 2000. At such time, James
Cappadocia became our new president, chief executive officer and a
director. In 1999, Mr. Hannah was issued 1,181,344 shares of common stock
for nominal consideration in connection with his initial employment by
thinWEB. These shares have no dollar value assigned to them since there is
no public trading market for our common stock. The figure in the table
represents Mr. Hannah's aggregate restricte stock holdings at the end of
1999. These shares may be redeemed pursuant to certain repurchase rights
held by us or we may redeem all or a portion of such shares as part of the
severance package we are presently negotiating with Mr. Hannah.
(2) James Anthony is the founder, director and president of The Foundation
for the Study of Objective Art, a charitable trust, and may be deemed to be
the beneficial owner of the 250,000 shares owned by it. All of Mr.
Anthony's shares were issued in 1999 in connection with the corporate
reorganization transactions that led to thinWEB's creation. These share
have no dollar value assigned to them since there is no public trading
market for our common stock. The figure in the table represents Mr.
Anthony's aggregate restricted stock holdings at the end of 1999.
(3) Bryan MacLean is the trustee and beneficiary of the B. MacLean Family
Trust and is deemed to be the beneficial owner of the 3,090,000 shares
owned by it. All of Mr. MacLean's shares were issued in 1999 in connection
with the corporate reorganization transactions that led to thinWEB's
creation. These shares have no dollar value assigned to them since there is
no
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public trading market for our common stock. The figure in the table
represents Mr MacLean's aggregate restricted stock holdings at the end of
1999.
Stock Option Plan
We have adopted a stock option plan for key employees, officers and
directors. Th plan allows for the issuance of options at the discretion of the
board of directors to such employees, officers and directors and in such amounts
as the directors choose. The total amount of the options issued, if converted,
may not exceed 17% of our total issued and outstanding shares. Options issued
under the plan expire five years after the date of issuance.
No stock options were issued or exercised during 1999 to or by any of our
named executive officers.
Employment Agreements
We have entered into an employment agreement with James Cappadocia to serve
as president and chief executive officer at an annual salary of $130,000
($200,000 CDN) and a monthly automobile allowance of $500 ($750 CDN). Pursuant
to the agreement, we issued Mr. Cappodocia 315,000 shares of common stock for
nominal consideration upon his employment with us and have agreed to issue him
an additional 635,000 shares (amounting to 950,000 shares in the aggregate) in
equal quarterly amounts of 79,375 shares over a two year period. The agreement
provides a right to participate in the employee stock option plan, contains
comprehensive confidentiality and non-competition provisions and provides one
year's notice of termination.
We have entered into an employment agreement with Bryan MacLean to serve as
vice president of technology at an annual salary of $78,000 ($120,000 CDN). The
agreement provides a right to participate in the employee stock option plan,
contains comprehensive confidentiality and non- competition provisions and
provides one year's notice of termination.
We have entered into an employment agreement with Cory Reid to serve as
vice president of product development at an annual salary of $78,000 ($120,000
CDN). The agreement provides a right to participate in the employee stock option
plan, contains comprehensive confidentiality and non- competition provisions and
provides one year's notice of termination.
We have entered into an employment agreement with James Enman to serve as
vice president of corporate affairs and general counsel at an annual salary of
$65,000 ($100,000 CDN). The agreement provides a right to participate in the
employee stock option plan, contains comprehensive confidentiality and
non-competition provisions and provides one year's notice of termination.
37
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the date of this
report regarding the beneficial ownership of our common stock by
(1) each of our executive officers and directors, individually and as a
group; and
(2) each person who beneficially owns in excess of five percent of our
common stock after giving effect to the exercise of warrants or options
held by the named security holder.
The information given in this table
(1) is based on 17,381,344 shares of our common stock outstanding as of the
date of this report,
(2) assumes that there has been no conversion of convertible preferred
stock or convertible loans or exercise of warrants by other security
holders, and
(3) includes rights to acquire common stock through exercise of
exchangeable Class A shares of our subsidiary, Thinweb.com Inc.
38
<PAGE>
<TABLE>
<CAPTION>
Amount of Common Percent of
Stock Beneficially Common Stock
Owned or Right to Beneficially Owned
Name Direct Vote or Right to Direct Vote
- ---- ------------ -----------------------
<S> <C> <C>
James S. Anthony 250,000 1.4%
Chairman of the Board
158 Amelia Street
Toronto, Canada M4X 1E7
James Cappadocia 315,000 1.8%
President, Chief Executive Officer, Director
33 Theobald's Circle
Richmond Hill, Ontario, Canada L4C 9C7
C. James Enman 3,090,000 17.8%
Vice President, Secretary
1883 Seldon Street
Halifax, Nova Scotia, Canada B3H 3X3
Bryan MacLean, 3,090,000 17.8%
Vice President, Director
5444 Victoria Road, #8
Halifax, Nova Scotia, Canada B3H 1M5
Cory Reid 3,090,000 17.8%
Vice President
1360 Lower Water Street, Suite 207
Halifax, Nova Scotia, Canada B3S 3N2
Gary Hannah 1,181,344 6.8%
1250 Squire Drive
Manotick, Ontario, Canada K4M 1B8
All directors and 9,835,000 56.6%
executive officers as
a group (first 5 persons)
</TABLE>
39
<PAGE>
In the preceding table:
(1) James Anthony is the founder, director and president of The Foundation
for the Study of Objective Art, a charitable trust, and may be deemed to be
the beneficial owner of the 250,000 shares owned by it.
(2) James Enman is the trustee and beneficiary of the Enman Family
Investment Trust and is deemed to be the beneficial owner of the 3,090,000
shares held by it.
(3) Bryan MacLean is the trustee and beneficiary of the B. MacLean Family
Trust and is deemed to be the beneficial owner of the 3,090,000 shares held
by it.
(4) Cory Reid is the trustee and beneficiary of the C. Reid Family Trust
and is deemed to be the beneficial owner of the 3,090,000 shares held by
it.
(5) With respect to the shares owned by Gary Hannah, our former president
and chief executive officer, these shares may be redeemed pursuant to
certain repurchase rights held b us or we may redeem all or a portion of
such shares as part of the severance package we are presently negotiating
with Mr. Hannah. Any such redemption will affect the total number of
outstanding shares for purposes of the percentages calculated in the table.
Because our executive officers and directors, together with entities
affiliated with them, beneficially own approximately 56.6% of the outstanding
common stock, they are able to exercise a controlling influence over the
election of directors and other matters requiring stockholder approval,
including change of control transactions. The effect of such management control
could be to delay or prevent any change of management control of thinWEB.
Ownership of Preferred Stock
We issued 1,500,000 shares of non-voting convertible preferred stock to E-
Capital Management, Inc. at a price of $.0001 per share. E-Capital has since
assigned the shares to 583317 British Columbia Ltd. J. Gregory Wilson, one of
our directors, may be deemed to be the beneficial owner of these shares which
represent 100% of our issued and outstanding preferred stock. These shares are
convertible into common shares and are redeemable by us upon the happening of
certain events.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Agreements with E-Capital Management Inc.
We have retained E-Capital Management Inc. to assist us in raising capital.
J. Gregory Wilson, one of our directors, is the president of E-Capital
Management which is owned by The Greg Wilson Family Trust, the beneficiaries of
which are Mr. Wilson's spouse and children. Mr. Wilson is also the
40
<PAGE>
president and sole shareholder of 583317 British Columbia Ltd.
We have issued 1,500,000 shares of convertible preferred stock to E-Capital
at the price of $.0001 per share, as compensation for E-Capital's assistance in
locating and providing both interim and equity financing. E-Capital has since
assigned the shares to 583317 British Columbia Ltd. The holder of these shares
is entitled to convert such shares into shares of our common stock on a
one-for-one basis at any time before June 30, 2000, provided that the holder (or
its affiliate) has been instrumental in arranging an equity financing which has
resulted in our receipt of net proceeds of at least $5,000,000. After June 30,
2000, we may redeem any remaining outstanding convertible preferred stock at a
redemption price of $.0001 per share. To date, E-Capital has assisted us in the
sale of certain of our securities to 3024701 Nova Scotia Limited, Everest
(Private) Trust Company and Donald Wile for a total investment of $502,500.
We have entered into a loan agreement with E-Capital which is acting on
behalf of Amery Associates Inc., Arrendadora Solarsa S.A., Butternut Capital
Limited, Cannon Equity Limited, Corporate Solutions Limited, Greensted Equities
Limited, International Shareholdings Corp., Seismic Investments Limited and
Strathglen Capital Limited, all of whom are thinWEB shareholders and clients
of Lines Overseas Management Limited. In March 1999 prior to the loan agreement,
we issued 4,000,000 common shares to these lenders for nominal consideration
based on their undertaking to provide such financing.
The loan agreement set up a two part credit facility for borrowing up to
$898,600 ($1,335,000 CDN). One part of the credit facility provided us with an
interest free loan of $252,400 ($375,000 CDN), which was to be repaid from the
proceeds of our first significant financing event. This loan has been repaid in
its entirety.
The second part of the E-Capital credit facility allows us to borrow up to
$646,20 ($960,000 CDN) on an as needed basis at an interest rate of 12% per
annum. Interest on this facility is calculated and payable monthly at the rate
of 1% per month on the outstanding balance. We have the option of repaying the
accrued interest monthly or adding the accrued interest to the outstanding
balance. The outstanding balance of this facility shall become due and payable
upon completion of a significant financing event. However, at the time that any
securities are issued pursuant to a significant financing event, E-Capital has
the option to convert all or any portion of the outstanding balance of this
credit facility into securities of thinWEB on the same terms and conditions as
the securities which are issued pursuant to the significant financing event. We
borrowed $243,437 ($361,665 CDN) under this facility but repaid the entire
amount.
E-Capital will be issued, for no additional consideration, common stock
purchase warrants equal to the largest amount drawn down under the interest-
bearing facility divided by the price of our common stock issued pursuant to a
significant financing event. Such warrants will be exercisable at a per share
price equal to the price at which our common stock is issued pursuant to such
significant financing event for an exercise period of one year from the date of
closing of such transaction.
E-Capital has also been involved in identifying applicable government
financing an financial assistance programs for which we may be eligible. We have
agreed to reimburse all of E-Capital's
41
<PAGE>
approved expenses.
On August 31, 1999, E-Capital, further to a corporate reorganization,
assigned its contract with us to an affiliated company, E-Capital Investment
Inc. E-Capital Management Inc. and E-Capital Investment Inc. are both owned by
The Greg Wilson Family Trust.
Agreements with Lines Overseas Management Limited
We have entered into a Private Placement Agreement with Lines Overseas
Management Limited, a registered broker-dealer based in Hamilton, Bermuda,
pursuant to which Lines has agreed to act as our placement agent, on a best
efforts basis, in connection with an offshore private placement of common stock
and warrants with certain non-US institutions and high net worth individuals
pursuant to Regulation S of the Securities Act. We anticipate that this offering
will commence shortly after our pending registration statement on Form SB-2
becomes effective. The offering will consist of a minimum of 1,000,000 units at
a price of $5.00 per unit, with each unit consisting of one share of common
stock and one warrant to purchase an additional share for a two year period at
$7.00. If successful, the minimum proceeds to us from this offering will be
$5,000,000. Lines will receive a commission of five percent of the total
proceeds of the offering with the option to receive the commission in units
instead of cash. We have agreed to use our best efforts to file a registration
statement with the SEC with respect to the common shares placed in this offering
within 60 days of completion of the offering.
Lines has also agreed to provide us with an interim credit facility of up
to $2,000,000 through its affiliate, Gateway Research Management Group Ltd. The
credit facility will bear interest at the rate of 12% per annum. To date, we
have borrowed $1,500,000 under the facility. This loan shall be repaid out of
the proceeds of the offshore offering or, at the option of Lines, the
outstanding balance can be applied towards the purchase of units in the offshore
offering. This loan is to be secured by a lien on all of our assets.
Joint Venture with Innovium Capital Corp.
We are a party to a joint venture with Innovium Capital Corp. pursuant to
which each of us owns a 50% interest in NoTime Wireless Corp, a Canadian
corporation established in October 1999. The joint venture was organized for the
purpose of further developing our ThinAccess software for sales to the wireless
database access market. James Anthony, the chairman of our board, is a former
director of Innovium.
As part of the joint venture agreement, ThinWeb Software has provided
NoTime Wireless with a perpetual license to use and market ThinAccess
accordingly. As consideration for this license, NoTime issued ThinWeb Software
1,250,000 shares of capital stock representing a 50% interest in the company and
a promissory note in the amount of $841,341 ($1,250,000 CDN), and agreed to pay
ThinWeb Software a continuing royalty, payable quarterly, equal to 5% of
NoTime's net revenues.
42
<PAGE>
In consideration for 1,250,000 shares of capital stock representing a 50%
interest in NoTime, Innovium paid $841,341 ($1,250,000 CDN). These proceeds were
used by NoTime to repay the promissory note in the same amount to ThinWeb
Software. Also on December 16, 1999, ThinWeb Software purchased 500,000 units of
the capital stock of Innovium (each unit consisting of one common share and one
share purchase warrant exercisable for two years from the date of the
subscription agreement at an exercise price of $0.35 ($0.50 CDN) each) for cash
consideration of $168,268 ($250,000 CDN) and 100,000 of our share purchase
warrants as described in the following paragraph. Assuming the share purchase
warrants are exercised, we would own approximately 3% of the issued and
outstanding common shares of Innovium.
In addition, on December 16, 1999, we issued to Innovium 100,000
non-transferrable share purchase warrants, which expire on December 15, 2001,
exercisable for thinWEB common shares on a one-for-one basis at an exercise
price equal to the lower of $5.00 or the lowest price at which we issue equity
or convertible securities during this period. These warrants were attributed a
value of $256,373 based on the fair value of the Innovium units received net of
cash paid.
As long as ThinWeb Software owns at least 40% of the issued and outstanding
shares of NoTime, ThinWeb Software shall manage the day-to-day activities of
NoTime, in return for a fee of 2.5% of NoTime's operating costs. Each party
shall provide advances to fund operating expenses of NoTime. If a party is
unable or unwilling to continue funding operating expenses, that party's
interest in NoTime shall be subject to dilution by the other party or a third
party, which is prepared to fund operating expenses.
NoTime shall pay ThinWeb Software a royalty of 5% of net revenues realized,
paid quarterly in arrears. These royalties are accrued, but payments will only
commence once NoTime has reimbursed to the parties all advances made to NoTime.
In addition, ThinWeb Software has agreed to provide certain consulting services
to NoTime for additional compensation. James Anthony, the chairman of our board,
is a former director of Innovium.
Consulting Agreement with J.S. Anthony & Associates Limited
We have retained, J.S. Anthony & Co. Ltd., a consulting firm owned by James
Anthony, to serve as consultants and, more specifically, to provide advice to us
on financing, business strategy and other corporate matters. In consideration
for these services, J.S. Anthony receives a monthly fee of $3,250 ($5,000 CDN)
and reimbursement of reasonable expenses.
Transactions with TPG Capital Corporation and James Cassidy
James M. Cassidy is the controlling shareholder of TPG Capital Corporation,
one o our shareholders. James Cassidy was the sole officer and director of our
predecessor company, Warwick Acquisition Corporation, prior to the share
exchange transaction with the thinWEB companies and their shareholders. In
consideration of services provided or caused to be provided to us by TPG
Capital, we agreed to pay TPG Capital $150,000, of which $125,000 has been paid.
43
<PAGE>
Voluntary Trading Restrictions Agreements with Selling Security Holders
TPG Capital has entered into a Voluntary Trading Restrictions Agreement
with us pursuant to which TPG Capital has agreed not to sell more than 25,000
shares in any 30 day period. Certain other selling security holders owning a
total of 1,002,500 shares have also entered into a Voluntary Trading
Restrictions Agreement with us pursuant to which each shareholder has agreed not
to sell more than 10 percent of the shareholder's shares in any 30 day period.
Severance Arrangement with Gary Hannah
The employment of Gary Hannah, our former president and chief executive
officer, ended effective February 3, 2000. We are presently negotiating a
severance package with Mr. Hannah which may involve the redemption of all or a
portion of his thinWEB shares.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) Financial Statements
- Report of Independent Accountants
- Consolidated Balance Sheets - December 31, 1999 and 1998
- Consolidated Statements of Loss and Comprehensive Loss -
December 31, 1999 and for the period from April 22, 1998 to
December 31,1999
- Consolidated Statements of Cash Flows - December 31, 1999 and
for the period from April 22, 1998 to December 31,1998
- Consolidated Statements of Shareholders' Equity - December 31,
1999 and 1998
- Notes to Consolidated Financial Statements - December 31, 1999
3.1 Certificate of Incorporation, filed with the registration
statement of Warwick Acquisition Corporation on Form 10-SB (file
no. 0-25419) filed with the Commission on February 19, 1999 and
incorporated herein by reference
3.2 By-Laws of the Company, filed with the registration statement of
Warwick Acquisition Corporation on Form 10-SB (file no. 0-25419)
filed with the Commission on February 19, 1999 and incorporated
herein by reference
3.3* Amendments to Certificate of Incorporation
3.4** Certificate of Designation for Series 1 Preferred Shares
4.1 Share Exchange and Share Purchase Agreement among Warwick
44
<PAGE>
Acquisition Corporation, Thinweb.com Inc.,ThinWeb Software
Incorporated, and all of the shareholders of ThinWeb Software
Incorporated, filed with the Form 8-K of Warwick Acquisition
Corporation (file no. 0-25419) filed with the Commission on May
28, 1999, and incorporated herein by reference.
4.2 Exchange and Voting Agreement among Warwick Acquisition
Corporation, ThinWeb Software Incorporated, the Trustee, and all
of the shareholders of ThinWeb Software Incorporated, and all of
the shareholders of ThinWeb Software Incorporated, filed with
the Form 8-K of Warwick Acquisition Corporation (file no.
0-25419) filed with the Commission on May 28, 1999, and
incorporated herein by reference
10.1** License Agreement with Sun Microsystems
10.3** License Agreement with Cloudscape, Inc.
10.4** List of Beneficial Owners of Selling Security Holders
10.5** Agreement with E-Capital Management
10.6* Employment Agreement with Mr. Cappadocia
10.7** Agreement with Brokerwise Communication, Inc.
10.8* Joint Venture Agreements with Innovium Capital Corp.
10.9** License Agreement with Informix Software, Inc.
10.10** Loan Agreement with E-Capital Management, Inc.
10.11* Private Placement Agreement with Lines Overseas Management
Limited
10.12** Stock Option Plan
10.13* Employment Agreement with Mr. MacLean
10.14* Employment Agreement with Mr. Reid
10.15* Employment Agreement with Mr. Enman
10.16* Voluntary Trading Restrictions Agreements
10.17 Cooperative Marketing Agreement with Oracle Corporation
* Incorporated by reference from Amendment No. 2 to Form SB-2 Registration
Statement dated February 17, 2000.
** Incorporated by reference from Amendment No. 1 to Form SB-2 Registration
Statement dated November 2, 1999.
(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this Report.
45
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THINWEB TECHNOLOGIES CORPORATION
By /s/ James Cappadocia
-----------------------
James Cappadocia,
President, Chief Executive
Officer and Director
Date: March 29, 2000
By /s/ George R. Fraser
-----------------------
George R. Fraser,
Chief Financial Officer,
Principal Accounting Officer
and Director
Date: March 29, 2000
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ James S. Anthony Chairman of the Board March 29, 2000
- --------------------
James S. Anthony
/s/ Bryan C. MacLean Director March 29, 2000
- --------------------
Bryan C. MacLean
/s/ J. Gregory Wilson Director March 29, 2000
- ---------------------
J. Gregory Wilson
/s/ George Pacinelli Director March 29, 2000
- --------------------
George Pacinelli
46
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Consolidated Financial Statements
December 31, 1999
<PAGE>
[LETTERHEAD]
PricewaterhouseCoopers
March 3, 2000
Auditors' Report
To the Shareholders of
thinWEB Technologies Corporation
We have audited the consolidated balance sheets of thinWEB Technologies
Corporation as of December 31, 1999 and 1998 and the consolidated statements of
loss and comprehensive loss, cash flows and shareholders' equity for the periods
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform an 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 statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1999
and 1998 and the results of its operations and its cash flows for the periods
ended December 31, 1999 and 1998 in accordance with accounting principles
generally accepted in the United States.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and has a net capital deficiency that raises substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 1. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ PricewaterhouseCoopers LLP
Chartered Accountants
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Consolidated Balance SheetS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
$ $
--------------------------
<S> <C> <C>
Assets
Current assets
Cash 427,669 31,566
Amounts receivable from Innovium Capital Corporation 32,868 --
Investment tax credits recoverable (note 4) -- 65,908
Other current assets (note 5) 80,404 5,784
--------------------------
540,941 103,258
Investment in Innovium Capital Corporation
Available for sale securities (note 6) 266,766 --
Warrants, at cost (note 7) 162,832 --
Capital assets (note 8) 95,724 10,895
Trademarks 1,232 555
--------------------------
1,067,495 114,708
--------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 242,180 111,127
Amounts due to shareholders -- 21,484
Loans payable (note 9) 1,020,142 65,338
Current portion of long-term debt -- 2,957
Obligation under capital leases 13,211 --
--------------------------
1,275,533 200,906
Long-term debt -- 13,754
--------------------------
1,275,533 214,660
--------------------------
Commitments (note 10)
Shareholders' Equity
Capital stock issued and outstanding - 17,066,344
(1998 - 900,000) common shares and 1,500,000
(1998 -nil) preferred shares (note 11) 1,857 90
Additional paid in capital 8,551,364 32,579
Share subscriptions receivable (32,896) (32,668)
Warrants 271,373 --
Deficit accumulated during the development stage (9,044,269) (100,296)
Foreign currency translation adjustments 44,533 343
--------------------------
(208,038) (99,952)
--------------------------
1,067,495 114,708
--------------------------
Signed on behalf of the Board:
___________________________ Director ___________________________ Director
</TABLE>
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Consolidated Statement of Loss and Comprehensive Loss
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
Cumulative from April 22,
April 22, 1998 Year ended 1998 to
to December December 31, December 31,
31, 1999 1999 1998
$ $ $
---------------------------------------------
<S> <C> <C> <C>
Revenue 3,568 2,412 1,156
---------------------------------------------
Expenses
Research and development (note 4) 3,264,545 3,220,657 43,888
Selling, general and administration 3,639,965 3,584,069 55,896
Interest 2,122,528 2,122,528 --
Amortization 20,799 19,131 1,668
---------------------------------------------
9,047,837 8,946,385 101,452
---------------------------------------------
Net loss for the period 9,044,269 8,943,973 100,296
---------------------------------------------
Other comprehensive income
Foreign currency translation adjustments 44,533 44,190 343
---------------------------------------------
Comprehensive loss for the period 8,999,736 8,899,783 99,953
---------------------------------------------
Basic and fully diluted loss per
Common share (note 11) (0.70) (28.30)
----------------------------
Weighted average number of shares outstanding during the period 12,849,429 3,544
----------------------------
</TABLE>
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cumulative For the period
April 22, 1998 Year ended from April 22,
to December December 31, 1998 to December
31, 1999 1999 31, 1998
$ $ $
--------------------------------------------
<S> <C> <C> <C>
Cash flows from (used in)
Operating activities
Net loss for the period (9,044,269) (8,943,973) (100,296)
Items not affecting cash:
Amortization 20,799 19,131 1,668
Shares issued for employee compensation 4,871,483 4,871,483 --
Shares issued for financing costs 2,087,418 2,087,418 --
Shares and warrants issued for services 216,316 216,316 --
Net change in non-cash working capital balances related
to operations (note 13) 124,644 84,605 40,039
-------------------------------------------
(1,723,609) (1,665,020) (58,589)
-------------------------------------------
Financing activities
Proceeds from (repayment of) long-term debt -- (16,966) 16,966
Proceeds from Gateway loan 1,000,000 1,000,000 --
Proceeds from (repayment of) loans payable -- (66,339) 66,339
Proceeds from E-Capital loan 495,829 495,829 --
Repayment of E-Capital loan (495,829) (495,829) --
Capital lease repayments (1,434) (1,434) --
Issue of common shares 578,014 578,013 1
Proceeds from (repayment of) shareholder loans -- (20,627) 20,627
-------------------------------------------
1,576,580 1,472,647 103,933
-------------------------------------------
Investing activities
Acquisition of capital assets (99,361) (86,630) (12,731)
Acquisition of trademarks (1,189) (625) (564)
Proceeds from technology licence transfer to
NoTime Wireless joint venture 841,341 841,341 --
Investment in Innovium Capital Corporation
Common shares and warrants (168,268) (168,268) --
-------------------------------------------
572,523 585,818 (13,295)
-------------------------------------------
Effect of exchange rate changes in cash 2,175 2,658 (483)
-------------------------------------------
Increase in cash during the period 427,669 396,103 31,566
Cash - Beginning of period -- 31,566 --
-------------------------------------------
Cash - End of period 427,669 427,669 31,566
-------------------------------------------
</TABLE>
<PAGE>
thinWEB Technologies Corporation
Consolidated Statements of Shareholders' Equity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common shares Preferred shares Additional Less
-------------------------- ------------------------ paid in subscriptions
capital receivable
Number $ Number $ $ $
<S> <C> <C> <C> <C> <C> <C>
Shares issued for subscriptions 900,000 90 -- -- 32,579 (32,668)
Net loss for the period -- -- -- -- -- --
Foreign currency translation
adjustments -- -- -- -- -- --
---------------------------------------------------------------------------------------------
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 -- -- 4,965,246 (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 -- -- -- -- -- --
Warrants issued for investment -- -- -- -- -- --
Convertible shares issued for a
financing arrangement -- -- 1,500,000 150 -- (150)
Additional paid in capital on
organization of joint venture -- -- -- -- 866,071 --
Net loss for the period -- -- -- -- -- --
Foreign currency translation
adjustments -- -- -- -- -- --
---------------------------------------------------------------------------------------------
Balance - December 31, 1999 17,066,344 1,707 1,500,000 150 8,551,364 (32,896)
---------------------------------------------------------------------------------------------
<CAPTION>
Accumulated
other
compre-
hensive
income
-----------
Deficit
accumulated Foreign
during the currency Total
Warrants Development translation Shareholders'
--------------------- Stage adjustments Equity
Number $ $ $ $
<S> <C> <C> <C> <C> <C>
Shares issued for subscriptions -- -- -- -- 1
Net loss for the period -- -- (100,296) -- (100,296)
Foreign currency translation
adjustments -- -- -- 343 343
------------------------------------------------------------------------
Balance - December 31, 1998 -- -- (100,296) 343 (99,952)
Shares issued for cash -- -- -- -- 535,834
Shares issued for compensation -- -- -- -- 4,966,235
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
Warrants issued for investment 100,000 256,373 -- -- 256,373
Convertible shares issued for a
financing arrangement -- -- -- -- --
Additional paid in capital on
organization of joint venture -- -- -- -- 866,071
Net loss for the period -- -- (8,943,973) -- (8,943,973)
Foreign currency translation
adjustments -- -- -- 44,190 44,190
------------------------------------------------------------------------
Balance - December 31, 1999 150,000 271,373 (9,044,269) 44,533 (208,038)
------------------------------------------------------------------------
</TABLE>
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 1999
- --------------------------------------------------------------------------------
1 Nature of operations and basis of presentation
thinWEB Technologies Corporation and its wholly-owned subsidiaries are
collectively referred to herein as the "Company". Effective April 22, 1999,
Thinweb.com Inc. (formerly 3028184 Nova Scotia Limited), a wholly owned
subsidiary of thinWEB Technologies Corporation (formerly Warwick
Acquisition Corporation, a Delaware 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 Class "A" shares of Thinweb.com Inc. are
exchangeable into common shares of thinWEB Technologies Corporation for no
additional consideration on or before April 21, 2024. Under the provisions
of various agreements between thinWEB Technologies 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 Technologies Corporation. In
conjunction with these agreements, thinWEB Technologies Corporation has
issued 16,916,344 common shares in trust to be issued to the holders of the
exchangeable shares upon such exchange. This total number of common shares
may be subject to downward adjustment as a result of negotiations described
in note 14 (b).
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 Technologies Corporation
for $1 per share. For accounting purposes, the acquisition has been treated
as an issuance of 150,000 shares and 50,000 warrants by the Company 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 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.
2 Accounting policies
Financial statement presentation
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States and
include the accounts of thinWEB Technologies Corporation and its wholly
owned subsidiaries.
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 1999
- --------------------------------------------------------------------------------
Foreign currency translation
The Company's functional currency is the Canadian dollar. However, the
Company's reporting currency is the United States dollar. Assets and
liabilities of the Company are translated into United States 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 resulting from such translation are reported in comprehensive income
and the accumulated foreign currency translation adjustment component of
shareholder's equity.
Capital assets and amortization
Amortization of the following capital assets is calculated using the
straight line method at annual rates which will amortize their cost over
their estimated useful lives. These rates are:
Computer hardware 3 years
Computer software 1 year
Office furniture and equipment 5 years
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. Deferred 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.
Deferred income tax assets are evaluated and if realization is not
considered more likely than not, a valuation allowance is provided.
Investment tax credits
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.
Revenue recognition
The Company records revenue in accordance with the Statement of Position
("SOP") 97-2, "Software Revenue Recognition" and SOP 98-4, "Deferral of the
Effective Date of a Provision of SOP 97-2" which provide guidance on
applying generally accepted accounting principles in recognizing revenue
from software transactions.
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 1999
- --------------------------------------------------------------------------------
The Company records revenue from packaged software and irrevocable
commitments to purchase products when persuasive evidence of an arrangement
exists, the software product has been shipped, there are no significant
uncertainties surrounding product acceptance, the fees are fixed and
determinable, and collection is considered probable.
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") No. 86 - Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed ("FAS 86"), in which case
the costs are capitalized. Capitalization of computer software costs ceases
when the product is available for general release. As of December 31, 1999,
no computer software costs have been capitalized.
Stock based compensation
The Company has elected to follow Accounting Principles Board Opinion
("APB") No. 25 - Accounting for Stock Issued to Employees ("APB 25") and to
present the pro forma information that is required by SFAS No. 123 -
Accounting for Stock Based Compensation ("FAS 123").
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 assets and liabilities at the dates of the
financial statements and the reported amounts of revenues and expenditures
during the reporting periods. Actual results could differ from those
estimates.
Financial instruments
The fair value of the Company's cash, amounts receivable, investment tax
credits recoverable, other current assets, available for sale securities,
investments, accounts payable and accrued liabilities, long-term debt,
loans payable, amounts due to shareholders and obligation under capital
leases approximate their carrying values unless otherwise noted.
3 Recent pronouncements
In 1998, SFAS No. 133 ("FAS 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 FAS 133 in fiscal year 2000 and does not expect the
adoption of FAS 133 will be material to the Company's results of
operations.
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 1999
- --------------------------------------------------------------------------------
In 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position ("SOP") No. 98-5 - Reporting on the Costs of
Start-up Activities ("SOP 98-5"). 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.
In 1998, the AICPA issued SOP 98-1 - Accounting for the Costs of Computer
Software Purchased for Internal Use, which provides guidance regarding
costs associated with the implementation of computer software for internal
use. The Company adopted SOP 98-1 during the fiscal year and the adoption
did not have a material impact.
4 Investment tax credits recoverable
For small, closely held Canadian corporations, a credit of approximately
40% of eligible scientific research and experimental development
expenditures is available and is 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 allowance for
overhead in the amount of 65% of specified salaries and wages.
The Company is conducting a review of eligible scientific research and
experimental development expenditures incurred throughout 1999, and
accordingly, no amounts have been applied in the current fiscal period to
reduce research and development expenditures or the cost of capital assets.
As at December 31, 1998, investment tax credits in the amount of $63,862
had been applied to reduce research and development expenditures and $3,056
had been credited to the cost of capital assets.
5 Other current assets
<TABLE>
<CAPTION>
1999 1998
$ $
<S> <C> <C>
Refundable commodity taxes 64,413 5,430
Prepaid expenses 12,526 354
Other 3,465 --
--------------------
80,404 5,784
--------------------
</TABLE>
6 Available for sale securities
On December 16, 1999, the Company purchased 500,000 common shares of the
capital stock of Innovium Capital Corporation ("Innovium") valued at
$266,766 (CDN $385,000). Innovium is a publicly listed company with its
shares trading on the Montreal Stock Exchange. The Company is accounting
for its interest in the Innovium common shares as available for sale
securities, and accordingly, carries the investment on its balance sheet as
an asset valued at fair value as of the balance sheet date.
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 1999
- --------------------------------------------------------------------------------
7 NoTime Wireless Corporation joint venture
On September 10, 1999, the Company entered into a Memorandum of Agreement
with Innovium Capital Corporation ("Innovium") to establish a joint-venture
corporation - NoTime Wireless Corp. ("NoTime") owned equally by the two
parties.
NoTime was incorporated on October 21, 1999. On December 15, 1999, the
Company transferred to NoTime an exclusive perpetual license for
thinAccess, a proprietary software application for the wireless access
market, in return for 1,250,000 Class A common shares of NoTime and a
promissory note in the amount of $841,341 (CDN $1,250,000). On December 16,
1999, Innovium acquired 1,250,000 Class B common shares of NoTime,
representing a 50% interest in NoTime, for cash consideration of $841,341
(CDN $1,250,000). NoTime then repaid the promissory note.
Also on December 16, 1999, the Company purchased 500,000 units of the
capital stock of Innovium (each unit consisting of one freely tradeable
common share (as described in note 6) and one share purchase warrant
exercisable for two years from the date of the subscription agreement at an
exercise price of $0.35 (CDN $0.50) each) for cash consideration of
$168,268 (CDN $250,000) and 100,000 share purchase warrants of the Company
as described in the following paragraph. Assuming the share purchase
warrants are exercised, the Company would own approximately 3% of the
issued and outstanding common shares of Innovium. The warrants are carried
at their historical cost of $162,832, which was their estimated fair value
on December 16, 1999.
In addition, on December 16, 1999, the Company issued to Innovium 100,000
non-transferrable share purchase warrants, which expire on December 15,
2001, exercisable for common shares of the Company on a one-for-one basis
at an exercise price equal to the lower of $5.00 or the lowest price at
which the Company issues equity or convertible securities during this
period. These warrants were attributed a value of $256,373 based on the
fair value of the Innovium units received net of cash paid.
As long as the Company owns at least 40% of the issued and outstanding
shares of NoTime, the Company shall manage the day-to-day activities of
NoTime, in return for a fee of 2.5% of NoTime's operating costs. Each party
shall provide advances to fund operating expenses of NoTime. If a party is
unable or unwilling to continue funding operating expenses, that party's
interest in NoTime shall be subject to dilution by the other party or a
third party, which is prepared to fund operating expenses.
NoTime shall pay the Company a royalty of 5% of net revenues realized, paid
quarterly in arrears. These royalties are accrued, but payments will only
commence once NoTime has reimbursed to the parties all advances made to
NoTime. NoTime had no revenues during its initial operating period in the
fiscal period ended December 31, 1999.
The Company has not recorded its portion of the gain on the transfer of the
licence for thinAccess to NoTime as this transfer did not result in a
culmination of the earnings process. In addition, the Company has recorded
as additional paid in capital that portion of the gain related to the
transfer of a 50% interest in NoTime to Innovium, as the Company has an
on-going funding requirement for future research and development to be
<PAGE>
conducted by NoTime. Additional funding advanced to NoTime, including
$32,868 during the period ended December 31, 1999, is charged to research
and development expense as incurred.
8 Capital assets
<TABLE>
<CAPTION>
1999
-----------------------------
Accumulated
Cost Amortization Net
$ $ $
<S> <C> <C> <C>
Computer hardware 66,268 12,148 54,120
Computer software 7,772 4,717 3,055
Office furniture and equipment 43,119 4,570 38,549
-----------------------------
117,159 21,435 95,724
-----------------------------
<CAPTION>
1998
-----------------------------
Accumulated
Cost Amortization Net
$ $ $
<S> <C> <C> <C>
Computer hardware 9,618 913 8,705
Computer software 1,567 595 972
Office furniture and equipment 1,353 135 1,218
-----------------------------
12,538 1,643 10,895
-----------------------------
</TABLE>
9 Loan payable
<TABLE>
<CAPTION>
1999 1998
$ $
<S> <C> <C>
Gateway Research Management Group Ltd. loan payable,
authorized amount of $2,000,000, bearing interest at the
of 12% payable monthly, repayable June 30, 2000 or
rate upon a Significant Financing Event 1,020,142 --
Other -- 65,338
---------------------
1,020,142 65,338
---------------------
</TABLE>
The lenders may, at their sole option, elect to convert all, or any portion
of the outstanding amount, including interest, into common shares of the
Company on the same terms and conditions as such securities are issued
pursuant to a Significant Financing Event, if any (see note 14 (a)). As at
December 31, 1999, the loan payable balance is comprised of principal
advances of $1,000,000 plus accrued interest capitalized of $20,142.
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 1999
- --------------------------------------------------------------------------------
10 Commitments
The minimum annual payments under long-term agreements for premises are as
follows:
<TABLE>
<CAPTION>
$
<S> <C>
Year ending December 30, 2000 99,800
2001 17,300
</TABLE>
11 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
Common shares
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 cash sales of shares to arms' length parties which occurred within
14 days of these issues. 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.
During the current period, the Company issued 4,000,000 common shares at
nominal values to E-Capital Management Inc. ("E-Capital") for a commitment
to provide debt financing until such time as the Company has raised funds
pursuant to a major private placement, public offering or other significant
financing event ("Significant Financing Event"), if any. These shares have
been recorded at the price established through an unrelated arm's length
transaction which occurred within 14 days of the date the shares were
issued. The excess of the fair value of the shares over the nominal issue
price has been charged to interest expense during the current period.
Preferred shares
The preferred shares issued and outstanding as of December 31, 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 are 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.
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 1999
- --------------------------------------------------------------------------------
Warrants
As described in note 1, on April 22, 1999 the Company issued 50,000
warrants in connection with the transaction on that date. These warrants,
which expire in five years, entitle the holder to acquire up to 50,000
common shares of the Company for $1.00 per share. These warrants were
attributed a value of $15,000 based on the value of the services received.
Under the terms of the E-Capital agreement described herein, E-Capital
shall have issued to them, for no additional consideration, certain share
purchase warrants of the Company. 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 connection with the NoTime Wireless joint venture transaction described
in note 7, the Company issued to Innovium 100,000 non-transferable share
purchase warrants. These warrants expire on December 15, 2001 and are
exercisable for common shares of the Company on a one-for-one basis at an
exercise price equal to the lower of $5.00 or the lowest price at which the
Company issues equity or convertible securities during this period. These
warrants were attributed a value of $256,373 based on the fair value of the
Innovium units received net of cash paid.
Basic and fully diluted loss per share
The calculations of the loss per common share are based on the weighted
average number of shares outstanding during the period. All warrants and
proposed options have been excluded from the calculation of fully diluted
loss per share as the impact of their exercise is anti-dilutive in both the
period ended December 31, 1999 and 1998.
Employee stock option plan
On July 13, 1999, the Board of Directors approved the Company's Stock
Option Plan (the "Plan") for key employees, directors and officers of the
Company subject to the approval of the Company's shareholders, which was
received prior to December 31, 1999. The total number of shares to be made
available under the Plan shall not exceed 17% of the Company's common
shares. The exercise price of the shares to be purchased pursuant to stock
options granted under the Plan shall be not less than the price permitted
by the applicable regulations and policies of any stock exchange or
exchanges upon which any securities of the Company may from time to time be
listed and of any applicable regulatory authorities. Options to be granted
under the Plan shall be for a term not exceeding five years. As at December
31, 1999, the Company had committed, subject to approval by the Company's
shareholders (see note 14 (d)), to issue a total of 2,059,500 options.
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 1999
- --------------------------------------------------------------------------------
12 Income taxes
A reconciliation of the combined Canadian federal and provincial income tax
rate with the Company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
1999 1998
$ $
<S> <C> <C>
Expected statutory rate (recovery) (44%) (44%)
Expected recovery of income tax (3,946,000) (42,100)
Permanent differences relating to share issuances recorded at fair value 3,160,500 --
Temporary differences for which no tax benefit was recognized 229,400 --
Temporary differences for which no accounting benefit was recognized -- (19,400)
Benefit of losses not recognized 556,100 61,500
-------------------------
Provision for income taxes -- --
-------------------------
</TABLE>
The primary temporary differences which gave rise to deferred taxes are as
follows:
<TABLE>
<CAPTION>
1999 1998
$ $
<S> <C> <C>
Deferred tax assets:
Net operating loss carry forwards 617,600 61,500
Capital gain on transfer of technology to joint venture 286,600 --
Less: valuation allowance (893,200) (42,100)
--------------------
11,000 19,400
--------------------
Deferred tax liabilities:
Investment tax credits -- 19,400
Depreciation and amortization 11,000 --
-------------------
11,000 19,400
------------------
Net deferred tax assets (liabilities) -- --
------------------
</TABLE>
The valuation allowance for deferred taxes is required due to the Company's
operating history and management's assessment of various uncertainties
related to their future realization.
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 1999
- --------------------------------------------------------------------------------
13 Net change in non-cash working capital balances related to operations
<TABLE>
<CAPTION>
1999 1998
$ $
<S> <C> <C>
Increase in amounts receivable from Innovium Capital Corporation (31,929) --
Decrease (increase) in investment tax credits recoverable 67,894 (66,918)
Increase in other current assets (72,149) (5,873)
Increase in accounts payable and accrued liabilities 120,789 112,830
-------------------
84,605 40,039
-------------------
</TABLE>
14 Subsequent events
a) On January 31, 2000, the Company entered into a Private Placement
Agreement with Lines Overseas Management Limited ("Lines"), an
affiliate of Gateway Research Management Group Ltd. ("Gateway"). The
private placement contemplated by this agreement is to consist of a
minimum of 1,000,000 units of the Company's securities and will be
conducted on a best-efforts basis. Any election by Gateway to convert
its loan into equity (see note 9) may serve to reduce Lines'
commitment under the Private Placement Agreement by a like amount.
Each unit shall cost $5.00 and consist of one share of common stock
and one warrant to purchase an additional share for a two-year period
at $7.00. The Company will pay Lines a commission equal to 5% of the
total proceeds of the private placement. As at the date of these
financial statements, no funds have been raised under this Private
Placement Agreement.
b) On February 3, 2000, the Company terminated the employment of its
Chief Executive Officer. The Company is currently negotiating the
final terms of his severance package including the adjustment, if any,
to his equity interest in the Company.
c) On February 3, 2000, the Company appointed a new Chief Executive
Officer. As part of the terms of the employment agreement, the Chief
Executive Officer was issued 950,000 common shares of the Company from
treasury for nominal consideration. Of these shares, 315,000 vest
immediately and the remainder will vest in eight equal quarterly
instalments. Additionally, the new Chief Executive Officer is entitled
to options on 300,000 common shares of the Company to be issued at
such time as the shares become publicly traded, at a strike price
equal to $5.00.
d) On March 7, 2000, the Board of Directors fixed the exercise price of
the options described in note 11 at $5.00. In addition, the Board of
Directors proposed that options will vest effective upon the starting
employment date as to 1/3 of the options, with another 1/3 vesting on
the first anniversary of employment and the remaining 1/3 to vest on
the second anniversary of employment, provided that no options are to
be exercisable until the 90th day after the Company's shares become
publicly traded.
46
<PAGE>
Exhibit 10.17
COOPERATIVE MARKETING AGREEMENT
This Agreement is made and entered into by and between Oracle Corporation
("Oracle"), with offices at 500 Oracle Parkway, Redwood City, CA 94065 and
thinWEB.com Corporation ("thinWeb"), 6 Antares Drive, Suite 101, Phase III,
Ottawa, Ontario Canada K2E 8A9.
Whereas, thinWeb is developing and marketing a product called ThinAccess;
and
Whereas, Oracle is developing and marketing the Oracle JDeveloper product
for its Internet platform (the "Oracle Program"); and
Whereas, Oracle and thinWEB wish to enter into a cooperative marketing
agreement to demonstrate to customers and potential customers the benefits of
using ThinAccess in conjunction with the Oracle Program (referred to
collectively as "the Products").
Now, Therefore, in consideration of the mutual promises set forth below,
Oracle and thinWeb agree as follows:
1. Cooperative Relationship and Licenses.
1.1 In General. Oracle and thinWeb agree to cooperate and coordinate in
good faith relating to the marketing of the Oracle Program and ThinAccess.
1.2 License of the ThinAccess to Oracle. thinWEB hereby grants to Oracle
and its subsidiaries a nontransferable, nonexclusive, royalty-free,
worldwide license to use object code versions of ThinAccess and related
documentation and marketing collateral solely for Oracle's use for the
marketing effort under this Agreement. thinWEB shall provide Oracle with
one (1) beta version of each new release and thereafter a mutually agreed
upon number of production versions of ThinAccess for that purpose.
1.3 License of Oracle Program to thinWEB. Oracle hereby grants to thinWEB
and its subsidiaries a nontransferable, nonexclusive, royalty-free,
worldwide license to use object code versions of Oracle Program and related
documentation solely for thinWEB's use for the marketing effort under this
Agreement. Oracle shall provide thinWEB with one (1) beta version of each
new release and thereafter a mutually agreed upon number of production
versions of Oracle Program for that purpose.
1.4 License Restrictions. The licenses described in this Section 1 are
limited to use under this Agreement only for the following purposes:
marketing and demonstraton to customers and potential customers; internal
training; providing technical support to customers solely in conjunction
with the party's own Product; product compatibility testing as set forth in
Section 1.5 herein; and to copy the Products for archival or backup
purposes. No other copies shall be made without the licensor's prior
written consent. All titles,
Page 1
<PAGE>
trademarks and copyright and restricted rights notices shall be reproduced
in such copies. All archival and backup copies of the Products are subject
to the terms of this Agreement. Neither party may:
A. License, sublicense, distribute (electronically or otherwise), use in
any manner not specified in this Agreement, duplicate, or make the
other party's Product available to unauthorized third parties;
B. Market the other party's Product other than as specified in this
Agreement, unless first obtaining written approval from the other
party;
C. Modify the other party's Product; or
D. Cause or permit the reverse engineering, disassembly, or decompilation
of the other party's Product.
Each party shall retain all title, copyright, and other proprietary rights
in its respective Product, and any modifications or translations thereof.
Neither party acquires any rights in the other Party's Product other than
those specified in this Agreement.
1.5 Compatibility Testing. thinWEB shall verify to Oracle that every
version and update of ThinAccess is compatible with the latest version of
the Oracle Program, specifically, that ThinAccess can be used for access to
Oracle [?] on the web through a firewall. Should either party discover a
compatibility issue during the verification process, the parties agree to
promptly make reasonable commercial efforts to resolve the issue. However,
neither party is obligated to alter its product in any way.
1.6 Technical Support. Each party is responsible for providing technical
support of its own product. However, the parties agree to use reasonable
commercial efforts to cooperate with each other when a support issue arises
during the course of activities undertaken pursuant to this Agreement.
2. Cooperative Marketing Responsibilities.
2.1 Marketing Cooperation. Each party will create a link to the other
party's web site as follows:
A. Oracle will create a link to thinWEB's web site from the Oracle
JDeveloper Partner page located at
http://www.oracle.com/tools/jdeveloper; and
B. Consistent with Oracle's policies on web site linking thinWEB will
create a link on its web site to the Oracle JDeveloper web site to
promote the Oracle Program.
2.2 Marketing Options. Oracle and thinWEB shall use reasonable commercial
efforts to cooperate in other joint marketing activities, which may include
the following:
Page 2
<PAGE>
A. Oracle may:
(i) Make available to thinWEB an early access version of the Oracle
Program via the Oracle Technology Network program;
(ii) Make available to Oracle sales representatives and consultants
marketing collateral provided by thinWEB, via the Oracle
JDeveloper internal web site; and
(iii) Provide to thinWEB a list of additional marketing activities in
which thinWEB has the option to participate.
B. thinWEB may:
(i) Make available to Oracle marketing collateral, in digital form,
including, but not limited to, FAQs, white papers, customer
success stories, reference sites and/or integrated demos, that
Oracle can distribute on its internal JDeveloper web site; and
(ii) In addition to any authorized statements subsequently agreed to
by the parties, state in marketing collateral that ThinAccess is
compatible with the Oracle Program, provided that such
compatibility has been verified pursuant to Section 1.5.
The parties may participate jointly in public relations activities
subsequently agreed to by the parties.
3. Costs and Expenses. Except as otherwise set forth in this Agreement, each
party hereto shall bear all costs, risks and liabilities by it arising out
of its performance under this Agreement. No party shall have a right to any
reimbursement, payment or compensation from the other party for products,
resources supplied, or services performed by a party in furtherance of this
Agreement, except as otherwise expressly provided under this Agreement.
4. Cooperative Marketing Manager. Each party agrees to appoint a manager to
coordinate its respective activities under this Agreement and to act as the
primary point of contact for all activities hereunder. The Cooperative
Marketing Managers for each party are as follows:
For thinWEB: For Oracle:
------------ -----------
Gary T. Hannah Pei Wong
President and CEO Principal Product Manager, Java Tools
6 Antares Drive, Suite 101 200 Oracle Pkwy, Suite 1274
Ottawa, Ontario Redwood Shores, California
Canada, K2E 8A9 USA 94065
(877)844-6932 (650)506-2681
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The two Cooperative Marketing Managers will be the individuals responsible
for planning and implementing this relationship, working to resolve any
disputes which may arise, and for focusing priorities and resources
necessary to facilitate the success of this relationship. Oracle and
thinWEB may each change their appointed Cooperative Marketing Manager by
written notification to the other party.
5. Term of Agreement.
5.1 Term. This Agreement shall become effective on the Effective Date set
forth below and shall remain in effect for one (1) year from the Effective
Date, unless the Agreement is terminated previously as provided below. The
initial term of this Agreement will be renewed automatically upon each
anniversary date.
5.2 Termination. Either party may terminate this Agreement on thirty (30)
days written notice without cause.
5.3 Effect of Termination. Upon termination, the licenses granted hereunder
shall terminate, and each party shall discontinue the web site
cross-linking activities set forth in Sectoin 2.1 and cease using the other
party's marketing materials. Sections 6,7,8,9 and 10 shall survive
termination of this Agreement.
6. Publicity and Trademarks
6.1 Publicity. No information regarding the existence of this Agreement, or
the activities covered under this Agreement, will be publicly released
without the prior written authorization of the other party.
6.2 Trademarks. This Agreement grants neither party any rights to use the
other party's trademarks.
7. Warranties.
7.1 WARRANTY. Each party warrants that it has the right to enter into this
Agreement and to perform its obligations hereunder. NEITHER PARTY WARRANTS
THAT ITS PRODUCTS WILL MEET ITS CUSTOMERS' REQUIREMENTS OR OPERATE IN THE
COMBINATION WHICH MAY BE SELECTED FOR USE BY ITS CUSTOMERS. ORACLE PROVIDES
NO WARRANTY AS TO THE OPERATION OF THE ORACLE PROGRAM.
7.2 EXCLUSION. THE WARRANTIES STATED HEREIN ARE EXCLUSIVE AND IN LIEU OF
ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
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8. Confidential Information. By virtue of this Agreement, the parties may have
access to information that is confidential to one another ("Confidential
Information"). Confidential Information shall include: (a) confidential
information which is disclosed by either party in writing and is marked as
confidential at the time of disclosure; or (b) confidential information
which is disclosed by either party in any other manner and is clearly
marked as confidential at the time of disclosure and is also summaried and
designated as confidential in a written memorandum and delivered to the
receiving party writing 30 days of disclosure.
A party's Confidential Information shall no include information which: (a)
is or becomes a part of the public domain through no act or omission of the
other party; or (b) was in the other party's lawful possession prior to the
disclosure and had not been obtained by the other party either directly or
indirectly from the disclosing party; or (c) is lawfully disclosed to the
other party by a third party without restriction on disclosure; or (d) is
independently developed by the other party. thinWEB shall not disclose the
results of benchmark tests or other evaluations of the Program to any third
party unless Oracle grants thinWEB prior written consent to such
disclosure.
The parties agree, both during the term of this Agreement and for a period
of five (5) years after termination of this Agreement, to hold each other's
Confidential Information in confidence and to protect the disclosed
confidential information by using the same degree of care, but not less
than a reasonable degree of care, to prevent the unauthorized use,
dissemination or publication of the confidential information as they use to
protect their own confidential information of a like nature. The parties
agree not to make each other's Confidential Information available in any
form to any third party or to use each other's Confidential Information for
any purpose other than the implementation of this Agreement. Each party
agrees to take all reasonable steps to ensure that Confidential Information
is not disclosed or distributed by its employees or agents in violation of
the provisions of this Agreement.
9. LIMITATION OF LIABILITY, EXCEPT FOR LIABILITY FOR VIOLATION OF A PARTY'S
INTELLECTUAL PROPERTY RIGHTS, (A) NEITHER PARTY SHALL BE LIABLE FOR ANY
INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF
PROFITS, REVENUE, DATA, OR USE, INCURRED BY EITHER PARTY OR ANY THIRD
PARTY, WHETHER IN AN ACTION IN CONTRACT OR TORT, IN ANY WAY ARISING FROM
EITHER PARTY'S PERFORMANCE OR NONPERFORMANCE OF THIS AGREEMENT, EVEN IF THE
OTHER PARTY OR ANY OTHER PERSON HAS BEEN ADVISED OF THE POSSIBLITY OF SUCH
DAMAGES, AND (B) NEITHER PARTY'S LIABILITY FOR DAMAGES HEREUNDER SHALL
EXCEED $25,000.
10. Assignment. The rights granted in this Agreement may not be assigned or
transferred by either party without the prior written approval of the other
party. Neither party shall be
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permitted to delegate its responsibilities or obligations hereunder without
the prior written approval of the other party.
11. Controlling Law; Jurisdiction. This Agreement shall be governed by the laws
of the State of California, U.S.A., without regard for its conflict of laws
provisions. This Agreement shall be deemed to be executed in Redwood City,
California.
In any legal action relating to this Agreement, thinWeb agrees: (a) to the
exercise of jurisdiction ever it by a state or federal court in San
Francisco or San Mateo County, California, U.S.A. and (b) that if thinWeb
brings the action, it shall be instituted in one of the courts specified in
Subparagraph (a) above. Oracle may institute legal aciton in any
appropriate jurisdiction.
12. Relationship Between Parties. In all matters relating to this Agreement,
each party will act as an independent contactor. Neither party will
represent that it has any authority to assume or create any obligation,
express or implied, on behalf of the other party, nor to represent the
other party as agent, employee, or in any other capacity.
Nothing in this Agreement shall preclude either party from entering into
relationships with any other companies which are similar to the
relationship between the parties, nor shall this Agreement preclude either
party from independently developing or marketing any products that are
similar to or compete with the other party's products provided however,
that neither party shall use the other's Confidential Information to
develop, promote or market such similar or competing products.
13. Notice. All notices including notices of address changes, required to be
sent hereunder shall be in writing to the Cooperative Marketing Manager
identified in Section 4 above. Notice shall be deemed to have been given
upon addressee's receipt.
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14. Entire Agreement. This Agreement sets forth the entire Agreement between
the parties and supersedes prior proposals, agreements, and representations
between them, whether written or oral relating to the cooperative marketing
of Oracle products and thinWEB products and services. This Agreement may be
changed only if agreed to in writing signed by an authorized signatory of
each party.
The Effective Date of this Cooperative Marketing Agreement is October 18, 1999.
ThinWEB.com Corporation Oracle Corporation
By: /s/ Gary Hannah By: /s/ [ILLEGIBLE]
-------------------- ------------------
Name: Gary Hannah Name: [ILLEGIBLE]
Title: President & CEO Title: Sr. Vice President
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