<PAGE>
As filed with the Securities and Exchange Commission on May 31, 2000
Registration No. 333-83539
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT No. 4
To
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
THINWEB TECHNOLOGIES CORPORATION
(Name of small business issuer in its charter)
---------------
<TABLE>
<CAPTION>
Delaware 52-2102438 7372
<S> <C> <C>
(State or other jurisdiction
of (I.R.S. Employer (Primary Standard Industrial
incorporation or
organization) Identification Number) Classification Code Number)
</TABLE>
---------------
JAMES CAPPADOCIA
President and Chief Executive Officer
thinWEB Technologies Corporation
Suite 111, Phase 1
6 Antares Drive
Ottawa, Ontario K2E 8A9
(613) 225-8446
(Address and telephone number of principal executive offices and
principal place of business, and name, address and telephone number of agent
for service)
Copies to:
IRWIN M. LATNER, ESQ.
Sadis & Goldberg LLC
463 Seventh Ave, Suite 1601
New York, New York 10018
(212) 947-3793
---------------
Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the
same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Each Class of to Be Offering Price Aggregate Registration
Securities to be Registered Registered Per Unit Offering Price Fee(2)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock Held by Selling Security
Holders................................ 6,337,500 $0.02(1) $126,750 $331
-----------------------------------------------------------------------------------------------
Total................................. $126,750 $331
</TABLE>
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--------------------------------------------------------------------------------
(1) There is no current market for the securities and the price at which the
shares held by the selling security holders will be sold is unknown.
Pursuant to Rule 457(f)(2), the registration fee is based upon the
estimated book value per share of common stock of $0.02 as of September
30, 1999.
(2) Previously paid by electronic transfer.
---------------
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--------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Dated , 2000
THINWEB TECHNOLOGIES CORPORATION
6,337,500 shares of common stock
to be sold by certain selling security holders
-----------
This prospectus relates to the offer and sale of up to 6,337,500 shares of
common stock by certain selling security holders. We intend to solicit a market
maker to apply to have our common stock quoted on the OTC Bulletin Board market
maintained by Nasdaq under the symbol TNWB. No public market currently exists
for the shares of common stock.
We will not receive any proceeds from the sale of shares by the selling
security holders.
Investing in the common stock offered by this prospectus involves a high
degree of risk. See "Risk Factors" beginning on page 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
Prospectus dated , 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 4
Recent Developments...................................................... 9
The Company.............................................................. 11
Forward-looking Statements............................................... 14
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Business................................................................. 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 32
Management............................................................... 38
Security Ownership of Certain Beneficial Owners and Management........... 47
Selling Security Holders................................................. 49
Certain Relationships and Related Transactions........................... 54
Description of Securities................................................ 58
Plan of Distribution..................................................... 64
Legal Matters............................................................ 66
Experts.................................................................. 66
How to Get More Information.............................................. 66
Index to Financial Statements............................................ 68
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
ThinWEB Technologies Corporation
We are a recently created company formed to develop internet e-business
software applications targeted to organizations that require rapid access to
data and immediate interaction with customers and employees over the internet.
We have developed a core technology and two software applications, ThinAccess
and Webcrumbs. We are also in the process of developing a wireless product
suite based on our core technology to support wireless data access over the
internet and cellular networks.
Our executive offices are located at Suite 111, Phase 1, 6 Antares Drive,
Ottawa, Ontario K2E 8A9, and our telephone number is (613) 225-8446. Our web
site is located at www.thinweb.com. Information contained in our web site is
not part of this prospectus.
Offering and Trading Market
. This prospectus relates to the offering of 6,337,500 shares of our common
stock by certain selling security holders.
. We will not receive any proceeds from these sales.
. There is currently no trading market for our securities, including our
common stock.
. We intend to solicit a market maker to apply to have our common stock
quoted on the OTC Bulletin Board maintained by Nasdaq.
Selected Financial Data
The following summary historical consolidated financial information should
be read in conjunction with the consolidated financial statements and
accompanying notes included elsewhere in this prospectus. The following table
sets forth selected consolidated financial data for thinWEB Technologies
Corporation for the period from April 22, 1998 to December 31, 1998, the fiscal
year ended December 31, 1999 and the three month period ended March 31, 2000:
<TABLE>
<CAPTION>
Three Month
Period Ended Fiscal Year Ended Period Ended
December 31, 1998 December 31, 1999 March 31, 2000
----------------- ----------------- --------------
<S> <C> <C> <C>
Income statement data:
Revenues.................. 1,156 2,412 24,484
Research and development
expense.................. 43,888 3,220,657 174,349
Loss for the period....... (100,296) (8,943,973) (2,266,393)
<CAPTION>
December 31, 1998 December 31, 1999 March 31, 2000
----------------- ----------------- --------------
<S> <C> <C> <C>
Balance sheet data:
Current Assets............ 103,258 540,941 309,973
Total Current
liabilities.............. 200,906 1,275,533 1,727,423
</TABLE>
3
<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the following risks and the other information contained in
this prospectus before investing in our common stock. The price of our common
stock could decline due to any of these risks, and you could lose all or part
of your investment.
If any of the events described below were to occur, our business, prospects,
financial condition or results of operations or cash flow could be materially
adversely affected. When we say that something could or will have a material
adverse effect on us, we mean that it could or will have one or more of these
effects.
We will not be able to purchase existing software from third parties and will
be required to reduce our marketing and other expenditures if we are not able
to raise sufficient capital.
A major part of our business plan is to use anticipated revenues from
operations, proceeds from anticipated equity offerings, proceeds from licensing
of technology and borrowings under loan facilities to fund marketing and
advertising related expenditures and acquisitions of existing third party
software. If we do not obtain sufficient funding from such sources, we will not
be able to fund acquisitions of existing software from third parties and we
will be required to reduce or eliminate expenditures on marketing, sales and
advertising, and research and development. In addition, if we are unable to
raise any additional capital or only nominal capital from such sources, the
planned development of thinWEB and the completion, introduction and marketing
of our two software products would be severely curtailed.
Because we have a limited operating history, we may not be able to successfully
manage our business or achieve profitability.
Since we have been in operation only since April 1998 and have generated
insignificant revenues to date, we may not be able to successfully manage our
business to achieve or maintain profitability. The profitability of our
operations will depend upon many factors, some of which are beyond our control,
including market acceptance of our concepts, market awareness, reliability of
our software products, dependability and accuracy of technical support,
availability of competing software, initial user acceptance, and general market
conditions. We also do not have insurance to cover losses and liabilities
resulting from unforeseen events such as copyright infringement, product
liability, and employment related liability.
Although we have employment agreements with Bryan MacLean and Cory Reid, the
loss of the services of either of these individuals for any reason would have a
material adverse effect on our business.
We believe that the expertise of Bryan MacLean, a vice president and a
director, and Cory Reid, a vice president, the initial developers of our two
current software applications, is critical to our success in the software
business. The diminution or loss of the services of
4
<PAGE>
either Mr. MacLean or Mr. Reid would have a material adverse effect on our
business. We have employment agreements with both Mr. MacLean and Mr. Reid,
however, those agreements are terminable by us or the executive, subject to
various notice requirements. If we were to lose our rights under either of
these agreements, including as a result of their voluntary resignation,
retirement or any other termination, our business would be materially adversely
affected. The competition for information technology expertise, including
internet, computer and software programmers and developers, is intense and we
may have difficulty replacing these two individuals, if lost for any reason.
Our success will also depend on our ability to hire and retain other qualified
management, including competent marketing, technical and sales personnel. We do
not have life insurance on the lives of any of our executive officers.
We may not be able to successfully execute our business strategy if we were
required to register as an investment company under the Investment Company Act,
and we may need to sell, buy or retain assets when we would not otherwise wish
to, including selling our Innovium holdings, in order to avoid such
registration.
We believe that we are primarily and actively in the business of developing
e-business software applications for use over the internet and, accordingly,
are not an investment company under the Investment Company Act of 1940.
Generally, a company must register under the Investment Company Act and comply
with significant restrictions on its operations and activities if its
investment securities exceed 40% of the company's total assets, or if it holds
itself out as being primarily engaged in the business of investing, reinvesting
or trading in securities. In connection with our investment in our wireless
joint venture, NoTime Wireless Corp., we purchased stock and warrants of
Innovium Capital Corporation that, as of March 31, 2000, represented more than
40% of our total assets.
Due to several factors, we believe we are not an investment company. Through
our wholly-owned operating subsidiary, we hold ourselves out and conduct our
business as a software development company. Our management devotes
substantially all of its efforts to software development and we derive
substantially all of our income from this business. Nevertheless, we are
relying on a temporary one-year exemption from the registration requirements of
the Investment Company Act.
By December 2000, if our holdings of investment securities exceed 40% of our
total assets and we have not applied for and obtained an exemptive order from
the SEC, we may need to take certain actions to avoid the registration
requirements of the Investment Company Act. For example, we may be compelled to
sell assets that are considered to be investment securities, primarily the
Innovium securities. In addition, we may be forced to acquire additional
assets, or retain existing, income-generating or loss-generating assets which
we would not otherwise have acquired or retained. Additionally, we may need to
forego opportunities to acquire interests in companies that would benefit our
business. If we were forced to sell, buy or retain assets in this manner, we
may be prevented from successfully executing our business strategy.
5
<PAGE>
If we are not able to take the necessary steps to avoid registration as an
investment company, we will be forced to comply with substantive requirements
under the Investment Company Act, including:
. limitations on our ability to borrow;
. limitations on our capital structure;
. restrictions on acquisitions of interests in associated companies;
. prohibitions on transactions with affiliates;
. restrictions on specific investments; and
. compliance with reporting, record keeping, voting, proxy disclosure
and other rules and regulations.
If we were forced to comply with the rules and regulations of the Investment
Company Act, our operations would significantly change, and we would be
prevented from successfully executing our business strategy. Since Investment
Company Act regulation is, for the most part, inconsistent with our strategy of
developing software applications for use over the internet, we could not
feasibly operate our business as a registered investment company.
Over six million, or 36%, of our total outstanding shares may be resold
immediately by the selling security holders, which may cause the market price
of our common stock to drop significantly, even if our business is doing well.
We currently have a total of 17,627,385 shares of common stock outstanding.
Under this prospectus, 6,337,500 shares held by the selling security holders
may be resold in the public market immediately, subject to certain voluntary
trading restrictions agreed to by certain of the selling security holders. Most
of our remaining 11,289,885 outstanding shares may become available for resale
in the public market in limited amounts beginning April 22, 2000, or upon
expiration of the applicable one year holding period, in accordance with
applicable provisions of the federal securities laws.
The large number of shares available for sale immediately by the selling
security holders could significantly reduce the market price of our common
stock, if a market should develop. Also, the availability of low priced shares
offered by selling security holders could hinder our ability to sell our shares
in the future. The selling security holders may offer and sell their shares at
prices and at times they determine, in accordance with applicable federal and
state securities laws. The timing of such sales and the price at which such
shares are sold could have an adverse effect upon the public market for our
common stock, should one develop. In addition, after April 22, 2000, as
restrictions on resale end, the market price could drop significantly if the
holders of these restricted shares sell them or are perceived by the market as
intending to sell them.
Since we will be issuing approximately one million shares to certain executive
officers and may issue additional securities to offshore investors and under
our stock option plan in the future, the market price of our common stock could
decline.
We are committed to issuing approximately one million additional shares in
the aggregate to our chief executive officer and other officers over the next
two years under existing
6
<PAGE>
employment agreements with such persons. Shortly after this prospectus becomes
effective, we also plan to raise a minimum of $5,000,000 in net proceeds from
an offshore placement of our shares and warrants. We have agreed to file a
registration statement with respect to the shares placed in the offshore
offering within 60 days of completion of the offering. We have also reserved an
additional 2,669,834 shares of common stock for issuance under outstanding
stock options to employees and directors. We intend to file a registration
statement with respect to these shares and other shares that may be issued
under our stock option plan.
The foregoing shares issued to certain of our officers will become available
for resale in the public market in limited amounts after expiration of the
applicable one year holding period, and the option plan shares in accordance
with applicable provisions of the federal securities laws. The offshore shares
and the option plan shares that we register will become available for resale in
the public market immediately upon the effectiveness of such registration. The
availability for sale of all of these shares may significantly reduce the
market price of our common stock, if a market should develop. Additionally, the
availability of these shares for sale could adversely affect our ability to
sell our shares in the future.
Although we have not experienced any past delays in the release of our software
products, any such delay or unforeseen problems with our software would impair
our projected operations and business plan.
The success of our business plan depends, in part, on our ability to
continue to develop, release and license new software products and updates to
our existing products. Although we have not experienced any past delays in our
product releases, our development of new software is subject to unforeseen
delays or operating bugs. Any delay in the release of any of our software
products, or any recall or unforeseen impairment to the use of the software
once released, could drain resources that we expect to receive from potential
sales. This would have a detrimental impact on our projected operations and
business plan.
Because our software products are designed for use in the Java programming
language, any decrease in the use of Java as a computer platform would hurt our
potential sales.
Our software products are based on the Java computer programming language
(or computer platform), which is currently a widely used computer platform. If
wide-spread acceptance of Java does not continue or if a competitor to Java
develops a better and more widely used platform not compatible with our
software, the sales and marketability of our software products, as well as our
overall profitability, would be significantly diminished.
Because our software products are intended to facilitate e-commerce over the
internet, the lack of continued development of the internet e-commerce market
would hamper sales of our products.
Our core technology is designed to enable us to develop e-business software
applications for use over the internet. To date, we have developed two
applications and are in the process of developing a third application of our
core technology, and the success of all of these applications is dependent upon
the continued development of the e-commerce market. Our
7
<PAGE>
business plan contemplates an expansion in the commercial use of the internet
for the foreseeable future. Use of the internet and world wide web for
commercial purposes is expanding and, as increased commerce takes place on the
internet, unforeseen overloads, lack of sufficient hardware, telephone
availability or other problems may develop. In addition, consumer use of the
internet for purchases, banking, and other commercial uses may decline for any
number of reasons such as security problems, overload difficulties, shopping
trends, or slow internet access. A reduction in the general use of the internet
for e-commerce would likely reduce sales of our products which would have an
adverse effect on our results of operations.
We face substantial competition in the software industry from more established
and experienced companies who may develop competing software products which
could hurt our potential sales and market share.
We are a start-up company with limited resources and limited operating
experience. We face substantial competition in the software industry from
international, national, regional and local software developers. Many of our
competitors are well established and have substantially greater resources than
we do. In addition, many of our competitors have significantly more experience
in successfully developing and introducing new software products. If a
competitor introduces a competitively successful product, we may not be able to
develop a better or cheaper product, which could have a material adverse effect
on our business, results of operations or financial condition.
8
<PAGE>
RECENT DEVELOPMENTS
During the fourth quarter of 1999, through our subsidiary, ThinWeb Software
Incorporated, we entered into a joint venture with Innovium Capital Corp. of
Toronto, Canada, a public Canadian company whose shares are traded on the
Montreal Exchange. 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 NoTime 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 for cash consideration of $168,268 ($250,000
CDN) and 100,000 of our share purchase warrants as described in the following
paragraph. Each of these units consists 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. 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, thinWEB 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 cause Cory Reid, one of
its vice presidents, to provide the following consulting services to NoTime
for additional compensation:
. Responsibility for day-to-day operations in accordance with the
guidelines established by NoTime's board of directors;
9
<PAGE>
. Serving as president of NoTime and performing the duties incidental to
such office;
. Preparation of quarterly reports for NoTime's board of directors on the
operations of NoTime; and
. Preparation of quarterly budgets for NoTime's board of directors.
Upon request of NoTime, other ThinWeb Software employees may provide additional
consulting services to NoTime, as designated by NoTime from time to time.
James Anthony, the chairman of our board, is a former director of Innovium.
10
<PAGE>
THE COMPANY
Founding of ThinWeb Software Incorporated. 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.
Advisory Agreement with E-Capital Management Inc. E-Capital Management Inc.
is a Canadian corporation controlled by J. Gregory Wilson who became one of our
directors in November 1999. E-Capital is a venture capital firm that provides
funding, incubator services and strategic consulting for emerging growth
companies. In March 1999, we entered into an agreement with E-Capital under
which E-Capital agreed to provide the following general advisory services:
. Introducing us to suitable financial institutions, investment funds and
investors for the purpose of arranging financings and underwriting or
investment commitments, and assisting us in negotiating with these
parties;
. Providing us with strategic advice and identifying qualified advisors
and consultants to assist us in obtaining financing and going public;
. Assisting us in identifying and evaluating going public alternatives;
and
. Other activities ancillary to the foregoing.
In addition to the foregoing general services, E-Capital also agreed to
assist us in a $500,000 private placement and in negotiating an acquisition of
a U.S. shell reporting company to facilitate our going public process. In
consideration for these services, we agreed to provide E-Capital with the
following compensation:
1. Reimbursement of all E-Capital's reasonable out-of-pocket expenses;
and
2. The issuance by thinWEB Technologies Corporation, the parent company,
of 1,500,000 shares of convertible preferred stock at a price of $.0001 per
share. E-Capital subsequently assigned these shares to its affiliate,
583317 British Columbia, Ltd., a British Columbia corporation also
controlled by J. Gregory Wilson. The amount and terms of the convertible
preferred stock we issued to E-Capital were the result of arms-length
negotiations with E-Capital who at the time was not affiliated with us.
E-Capital continues to provide the foregoing advisory services to us under
our agreement with them--the term of which was to expire on December 31, 1999
but has been extended by oral agreement of the parties.
11
<PAGE>
Share Exchange with Warwick Acquisition Corporation. 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 one shareholder and director and 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.
During early 1999, ThinWeb Software was exploring ways to become a public
reporting company with its shares publicly traded in the United States. In
early April 1999, representatives of our financial advisor, E-Capital
Management Inc., contacted James M. Cassidy, the indirect owner of 100% of the
stock of Warwick, regarding a proposed transaction involving ThinWeb Software
and Warwick. James Anthony, chairman of the board of ThinWeb Software,
continued negotiations with Warwick and Mr. Cassidy, with E-Capital acting as
intermediary, concerning a proposed transaction in which ThinWeb Software would
be acquired by a wholly-owned subsidiary of Warwick and the shareholders of
ThinWeb Software would become the beneficial owners of a majority of the shares
of a public 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 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; and
(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.
Under the share exchange transaction, the management and shareholders of
ThinWeb Software became the management and shareholders of Warwick.
Transactions with TPG Capital Corporation and James Cassidy. 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.
12
<PAGE>
In connection with the share exchange, we also granted 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. On April
10, 2000, we adopted a resolution stating that we will no longer honor our
obligations under the warrant granted to TPG due to our belief that TPG failed
to perform certain agreed upon services. We have notified TPG of this action.
The 150,000 common shares retained by TPG Capital and the 50,000 share
warrant granted to TPG in connection with the share exchange were the result of
arms-length negotiations between unaffiliated parties.
For accounting purposes, the Warwick acquisition has been treated as an
issuance of 150,000 shares and a 50,000 share purchase warrant by ThinWeb
Software Incorporated to the shareholder of Warwick in consideration for
services related to the corporate reorganization. These shares and warrant
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 as part of 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.
Structure of ThinWEB After Share Exchange. 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.
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FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. We intend to identify
forward-looking statements in this prospectus using words such as "believes,"
"intends," "expects," "may," "will," "should," "plan," "projected,"
"contemplates," "anticipates," or similar statements. These statements are
based on our beliefs as well as assumptions we made using information
currently available to us. Because these statements reflect our current views
concerning future events, these statements involve risks, uncertainties and
assumptions. Actual future results may differ significantly from the results
discussed in the forward-looking statements. Some, but not all, of the factors
that may cause these differences include those discussed in the Risk Factors
section beginning on page 5 of this prospectus. You should not place undue
reliance on these forward-looking statements, which apply only as of the date
of this prospectus.
USE OF PROCEEDS
We will not receive any proceeds from sales of the shares offered by the
selling security holders.
DIVIDEND POLICY
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.
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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 our obtaining the
necessary financing to complete our research and development projects and upon
future profitable operations.
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, portals
and software development teams within large organizations.
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, or 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
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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:
. 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.
. 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 developers.
. 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.
. 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.
. Easier adaptation. As applications evolve, components can be easily
added, updated or replaced with minimal effect at the application level.
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 believe that the core technology may be
marketable in certain circumstances and we are currently exploring the
potential for positioning it as an "intermediation' solution for Application
Service Providers or ASPs, web portals and web hosting entities.
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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. Such approval is 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:
. payroll and employee records departments;
. travel and reservation systems;
. financial services systems;
. accounting departments; and
. many other areas in both government and private industry organizations.
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:
. Decreases database application development cost;
. Can use any browser, any database, or any platform;
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. Reuses database connections across multiple clients;
. Provides remote management over the web;
. 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);
. Increases web page response time by avoiding large driver downloads;
. Saves redundant database processing by enabling multiple clients to
browse same query results;
. Ease of use and installation saves costs of installation of specialized
software;
. No software installations required of clients; and
. 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.
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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 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 an address that identifies a document or resource
locator 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.
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Technical Benefits of ThinAccess include:
. 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.
. 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.
. 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 user defined name. The
database could change but the ThinAccess application does not have to be
changed.
. One driver download for multiple databases. If an applet
requiresconnectivity to multiple databases, a user could be faced with
multiple downloads. With ThinAccess, one JDBC driver download is
sufficient.
. 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.
. 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.
. 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.
. 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.
. 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
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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 isintended 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.
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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, 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, or 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 e-mail, 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, or 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.
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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 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 e-mail systems without requiring any software package on
the cell phone. This is the type of e-mail 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.
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. Our future initiatives may include expanding
on the ThinAccess and WebCrumbs technologies to provide customized solutions,
leveraging our core technology as a framework to provide integration with the
supply chain and building on a wireless strategy by developing a WAP gateway.
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.
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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
(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 in accordance with 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.
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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 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.
PointBase, Inc. We have entered into an agreement with PointBase, Inc. of
Mountain View, California to license its Mobile Edition Master software for use
in an evaluation product which we may develop.
Marketing-General Strategy
We are targeting key vertical market segments such as financial, health,
telecommunications and transportation, as well as leading portal companies, and
providing infrastructure to B2B e-commerce exchanges. Additionally, we intend
to target second tier distribution venues via the systems integrator, VAR and
ASP channels. 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 nine
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 companies in specific vertical market
segments 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
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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 vertical market segments,
leading portals, channel intermediaries such as system's integrators, VARs, or
value-added resellers, and ASPs, and providing infrastucture to B2B e-commerce
exchanges. We are attempting to establish long-term 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, or ISPs,
Application Service Providers, or 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
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make available a software developers tool kit that will enable developers to
develop applications using 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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PointBase, Inc. We are a member of PointBase's Connection Partner Program
and benefits include a link to our web site from PointBase's web site and other
marketing opportunities.
Internet Screenphone Reference Forum. We are a member of the Internet
Screenphone Reference Forum, or 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
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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 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 reports by IDC (International
Data Corporation) and Zona."
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(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.
Government Regulation
As a result of our investment in Innovium, we may be deemed to be an
investment company and subject to the registration requirements of the
Investment Company Act of 1940. Although we believe we are not an investment
company under this Act, we are relying on a temporary one-year exemption from
such registration requirements. By December 2000, if our holdings of investment
securities exceed 40% of our total assets and we have not applied for and
obtained an exemptive order from the SEC, we may need to take certain actions,
including selling our Innovium holdings, to avoid the registration requirements
of such Act. Taking actions to avoid registration under the Investment Company
Act may prevent us from successfully executing our business strategy. See "RISK
FACTORS".
Investor Relations
We have engaged Brokerwise Communications Inc. to handle our investor
relations. Under 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.
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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 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 21 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.
Property
Our principal executive offices are located at Suite 111, Phase 1, 6 Antares
Drive, Ottawa, Canada. We lease such offices at an annual rent of $39,650
($61,000 CDN) and our telephone number there is (613) 225-8446. 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.
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MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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 captions "Business" and "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 respective consolidated
financial statements and notes included elsewhere in this prospectus.
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. From that time to March 31, 2000,
we expanded to 21 full-time employees located in Halifax, Nova Scotia, Ottawa,
Ontario and in Toronto, Ontario. We have incurred significant expenses in the
areas of research and development associated with the design, development and
testing of the code for our core technology and for our first e-commerce
software products discussed below. Substantial costs have also been incurred
in connection with presentations at industry trade shows, marketing and sales
activities, financing and expanded facilities in Halifax and Ottawa.
We have developed a core framework technology and two initial software
applications; ThinAccess, designed for organizations that require secure data
over the Internet, and WebCrumbs, for organizations that need web metrics and
analysis of e-visitor interaction. Through our joint venture subsidiary,
NoTime Wireless Corp., we are also engaged in research and development using
our framework to create a third product called ThinSuite that targets
companies wanting to provide wireless access to business information and
applications. Our unique Java-based core technology enables the rapid
development of applications for fast, online data access, mobile and wireless
devices, web analysis and other emerging technologies that require platform
independence, swift deployment, flexibility and low cost of implementation.
ThinWEB has 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".
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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. Other partner agreements include Oracle, PointBase,
and Borland-Inprise.
Additionally, our market strategy incorporates direct sales initiatives to
key vertical market segments--financial, telecommunications, healthcare and
transportation, leading portal companies, and B2B e-commerce exchanges. We are
also accelerating our market penetration via channel intermediaries such as
Application Service Providers or ASPs, resellers and Software Systems
Integrators and have signed reseller agreements with Web Data Solutions, Orion
Consulting and Qtech.
Results of Operations from Commencement of Business in 1998 to December 31,
1999
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. Accordingly, our early stage revenues in 1999 amounted
to a modest $2,400 and steps were taken as discussed in the March 2000 revenue
comments below to hire an experienced sales management team to build and direct
the sales function. 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.
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.
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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.
Interest. We incurred financing costs of $2,122,528 in 1999 and no costs of
a similar nature in 1998. 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. which was 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.
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 in
consideration for their undertaking to provide such financing. 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.
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
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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 offshore private placement at the $5 unit price offered
to investors.
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 under Regulation S of the
Securities Act. We anticipate that the proceeds from the offering will be
received within approximately two weeks of this registration statement 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 net proceeds to us from this 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 to establish a joint-venture corporation, NoTime
Wireless Corp. 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.
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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.
Results of Operations for the Three Months Ended March 31, 2000
Revenues. The revenue generating process remains in the initial stages of
development. In early April 2000 the Company and NoTime appointed an
experienced Vice President of Sales and Business Development to direct
corporate sales efforts of both companies and significantly expand their sales
force to meet the growing demand for customized solutions to meet specific
customer needs and to focus on selling data communications applications for
wireless devices. 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.
Research and Development Expenses. Research and development expenditures
amounted to $174,349, of which $43,230 relates to NoTime activities, for the
three-month period ended March 31, 2000 as compared to $2,435,537 for the
period ended March 31, 1999. The March 31, 1999 expenditure reflects the
issuance of common shares at nominal value to employees in the amount of
$2,397,638 whereas there is no comparable expense in the quarter ended March
2000. Overall, research and development expenses have increased $136,450 in the
March 2000 quarter, largely as a result of the increased cash salary costs,
when the non-cash compensation expense is eliminated. Compensation in the form
of shares is a non-cash charge against earnings and reflects the cost of
attracting highly skilled and qualified personnel.
The NoTime research and development expenditures were incurred in connection
with the development of ThinSuite pursuant to the agreement described "joint
venture company" below.
Selling, General and Administration. Selling, general and administration
expenses increased from $1,350,900 in the three months ended March 31, 1999 to
$2,076,237 in the comparable period in 2000. The largest component of these
costs ($1,298,000 in the 1999 quarter and $1,575,000 in the 2000 quarter) is
attributable to the issuance of common shares at nominal value to employees as
compensation. 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 going public
registration process.
We appointed a new President and Chief Executive Officer in February 2000
and, in early April 2000, both a Vice President of Sales and Business
Development and a Chief Technology Officer 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 continue to
reflect further charges of a similar nature as those incurred to date.
Interest. The Company incurred financing costs of $33,116 in the three
months ended March 31, 2000 in connection with the Gateway Research Management
Group Ltd. loan and incurred only minor costs of a similar nature with other
lenders in the comparable period in 1999. The Company financed its operations
during 1998 and the first quarter of 1999 by means of shareholder loans and
with services contributed freely by founding shareholders and employees.
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Liquidity and Capital Resources. The Company had negative working capital of
$1,417,450 as at March 31, 2000 compared with $734,592 at December 31, 1999.
The proposed private placement, discussed above, if completed as contemplated,
will strengthen working capital in the 2000 fiscal year by $5,000,000, less the
retirement of the Gateway loan which stood at $1,558,815 at March 31, 2000.
The Company experienced overall negative cash flow of $352,634 in the three-
month period ended March 31 2000 due primarily to an operating cash loss of
$827,962 net of the change in non-cash working capital balances related to
operations. Proceeds of $500,000 under the Gateway loan facility had a positive
impact on cash flow.
Lines of Credit. We have borrowed $1,558,815 including accrued interest
under the Gateway credit facility as of March 31, 2000 and the loan must be
repaid out of the proceeds of the private placement or, at the option of Lines,
be retired by applying the balance to the purchase of units in the private
placement at the $5 unit price offered to investors.
Other Comments
Joint Venture Company. NoTime is currently in the product development stage
and accordingly had no revenues from the commencement of activities to date.
Under the provisions of the Memorandum of Agreement each shareholder is
required to provide advances to fund operating expenses of NoTime or be subject
to a dilution of equity interest. The Company has advanced $43,230 to NoTime
for its share of the joint operating expenses for the three months ended March
31, 2000 which amount has been included in research and development expenses.
Tax Loss Carryforward. The Company has approximately $2,000,000 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.
Going Concern Assumption. 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.
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.
37
<PAGE>
MANAGEMENT
Officers and Directors
Our officers and directors are as follows:
<TABLE>
<CAPTION>
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
Alan J. Guneyler............ 42 Vice President
James E. Gillen............. 53 Chief Technology Officer
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.
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
38
<PAGE>
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
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.
39
<PAGE>
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. Prior to that, from 1984 to 1987 Mr. Fraser
was treasurer of Bow Valley Resource Services Ltd. in Calgary, Alberta, a
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 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.
Alan J. Guneyler was appointed as our vice-president of sales and
business development on April 3, 2000. From June 1993 until joining us, Mr.
Guneyler held increasingly senior sales management positions with Ricoh
Canada Inc., a leading Toronto based provider of digital solutions. His
responsibilities at Ricoh included directing the transition of its sales
force from analog hardware representatives to digital solution providers,
and developing strategy for building its business in document and
facilities management, document management software and re-engineering
processes.
40
<PAGE>
Between 1978 to 1993 he worked for 3M Lanier Canada Inc. in Toronto in
several sales and sales management positions. Mr. Guneyler received his
Bachelor of Arts in Applied Science from the University of Western Ontario
in 1978.
James E. Gillen was appointed as our chief technology officer effective
April 13, 2000. From March 1999 until joining us he was manager of
technical architecture and senior consultant, office of the chief
information officer, for Bell Mobility Cellular Inc., a leading wireless
solutions company in Toronto where his responsibilities included developing
architectural roadmaps and reference models for internet enabling dealer,
consumer, business and supply chain relationships, evaluating customer
relationship management solutions, deploying application servers, and
leading BCE Inc. initiatives in eSecurity and loyalty card programs.
Between 1997 and 1999 he was vice-president of product management and
business development at Minacom International in Montreal, a startup TMN
service assurance software company in the global OSS marketplace. Between
1996 and 1997 he worked as a managing consultant for Bell Sygma in Toronto
where he analyzed financial and functional benefits of new Bell enterprise
information technology architecture and developed new intellectual property
in workflow and process optimization models. From 1993 to 1997 he was chief
technical architect for Rydex Industries Corporation in Vancouver where he
directed development and product marketing of WAN data network solutions
for satellite, wireless and wireline applications and was responsible for
major projects in the Pacific Rim and Europe. Previous experience includes
networking and systems consulting in Asia, Europe and the United States.
Mr. Gillen received a Liberal Arts Honors B.A. from Bowdoin College in
1968 and completed a two year internship in applied statistics and
computing. He also received additional undergraduate and postgraduate
training at UCLA with internships in the Graduate School of Business
Administration and the Division of Biomedical Statistics.
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 the brokerage firms of 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.
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.
41
<PAGE>
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. 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.
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.
which 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. At Experience Total Communications, he was responsible
for sales activities in voice, data and wireless communications products
and services. From 1996 to 1998, Mr. Pacinelli served as a vice president
of sales at Claricom where he was responsible for sales of
telecommunications products and services in the southeast United States.
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.
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.
42
<PAGE>
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 $100,000 for services rendered during
such fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
-----------------------------
Awards Payouts
---------------- ------------
Annual Compensation
-------------------------------- Restricted
Name and Principal Stock All Other
Position(s) Year Salary($) 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 preceding 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 restricted 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, 200,000 of which
are registered for sale in this prospectus. All of Mr. Anthony'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 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, 200,000 of which are registered for sale in this prospectus. 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 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.
43
<PAGE>
Stock Option Plan
We have adopted a stock option plan for key employees, officers and
directors. The 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). Under the
agreement, we issued Mr. Cappadocia 315,000 shares of common stock for nominal
consideration upon his employment with us and 79,375 shares on May 3, 2000, and
have agreed to issue him an additional 555,625 shares (amounting to 950,000
shares in the aggregate) in seven equal quarterly installments of 79,375
shares. 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.
We have entered into an employment agreement with Alan Guneyler to serve as
vice president sales and business development at an annual salary of $100,000
($150,000 CDN) and a monthly automobile allowance of $500 ($750 CDN). Under the
agreement, we issued Mr. Guneyler 133,333 shares of common stock and 150,000
common share options for nominal consideration upon his employment with us and
have agreed to issue him an additional 266,667 shares (amounting to 400,000
shares in the aggregate) in two equal annual installments commencing in March
2001. 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.
44
<PAGE>
We have entered into an employment agreement with James Gillen to serve as
chief technology officer at an annual salary of $80,000 ($120,000 CDN). Under
the agreement, we issued Mr. Gillen 33,333 shares of common stock and 100,000
common share options for nominal consideration and have agreed to issue him an
additional 66,667shares (amounting to 100,000 shares in the aggregate) in two
equal annual installments commencing in April 2001. The agreement provides a
right to participate in the employee stock option plan, contains comprehensive
confidentiality and non-competition provisions and provides three months
notice of termination.
Limitation of Liability and Indemnification of Officers, Directors, Employees
and Agents
Overview. Under our charter and Delaware law, our directors are not liable
for monetary damages for breach of fiduciary duties except in special
situations as described below. In addition, under our charter and Delaware
law, we are required to indemnify our directors and officers against all
losses to the fullest extent permitted by Delaware law under a variety of
situations as described below. Finally, under our charter and Delaware law, we
are entitled to obtain insurance on behalf of our directors, officers agents
and employees to protect them against liabilities they may incur in their
official capacities even in situations where we may not have the power to
indemnify these individuals, and we have obtained such insurance, as described
below.
Limitations on Liability of Directors. Under Delaware law, a corporation
may adopt a charter provision eliminating or limiting the personal liability
of its directors to the corporation or its stockholders for breach of
fiduciary duties except for:
.any breach of the director's duty of loyalty to the corporation or its
stockholders;
. any acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. any payment of a dividend or approval of a stock purchase that is illegal
under Section 174 of the Delaware General Corporation Law; or
. any transaction from which the director derived an improper personal
benefit.
We have adopted a charter provision eliminating the personal liability of
our directors to the fullest extent permitted under Delaware law except under
the four provisions noted above.
Indemnification of Officers and Directors. Under Delaware law, a
corporation may indemnify its present and former directors, officers, agents
and employees for any claim in connection with a variety of court or
administrative proceedings against such persons in their official capacities
if such person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful.
45
<PAGE>
We have adopted a charter provision that requires us to indemnify all of our
present and former directors, officers, agents and employees to the fullest
extent permitted by Delaware law. In connection with our indemnification
obligations to such persons, we may make advances to cover a person's expenses
provided that we receive an undertaking from such person to repay the advances
unless the person is ultimately determined to be entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
thinWEB under the foregoing provisions, or otherwise, we have been advised that
in the opinion of the Securities and Exchange Commission indemnification for
such liabilities is against public policy as expressed in the Securities Act
and is therefore unenforceable.
Insurance. We have obtained director and officer liability insurance in the
amount of $2,000,000 ($3,000,000) CDN which insures such persons against
liabilities they may incur while acting in their official capacities.
46
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the date of this
prospectus 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 17,627,385 shares of our common stock outstanding as of
the date of this prospectus,
(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.
<TABLE>
<CAPTION>
Amount of Percent of
Common Stock Common Stock
Beneficially Beneficially
Owned or Right Owned or Right
Name to Direct Vote 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,............................... 394,375 2.2%
President, Chief Executive Officer, Director
33 Theobald's Circle
Richmond Hill, Ontario, Canada L4C 9C7
C. James Enman,................................. 3,090,000 17.5%
Vice President, Secretary
1883 Seldon Street
Halifax, Nova Scotia, Canada B3H 3X3
Bryan MacLean,.................................. 3,090,000 17.5%
Vice President, Director
5444 Victoria Road, #8
Halifax, Nova Scotia, Canada B3H 1M5
Cory Reid,...................................... 3,090,000 17.5%
Vice President
1360 Lower Water Street, Suite 207
Halifax, Nova Scotia, Canada B3S 3N2
Gary Hannah..................................... 1,181,344 6.7%
1250 Squire Drive
Manotick, Ontario, Canada K4M 1B8
All directors and executive officers as
a group (first 5 persons)....................... 9,835,000 56.1%
</TABLE>
47
<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, 200,000 of which are
registered for sale in this prospectus.
(2) Of the 394,375 shares beneficially owned by James Cappadocia, 200,000 are
registered for sale in this prospectus.
(3) 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, 200,000 of which are registered for sale in this prospectus.
(4) 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, 200,000 of which are registered for sale in this prospectus.
(5) 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,
200,000 of which are registered for sale in this prospectus.
(6) 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 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. 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% 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. For a discussion of the events which trigger the conversion
rights of these preferred shares, see "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS--Agreements with E-Capital Management, Inc." and "DESCRIPTION OF
SECURITIES--Preferred Stock."
48
<PAGE>
SELLING SECURITY HOLDERS
In this prospectus, we are registering for offer and sale 6,337,500 shares
of our common stock. The selling security holders may offer their shares for
sale on a continuous basis under Rule 415 under the 1933 Act. All of the shares
registered in this prospectus will become tradeable on the effective date of
this prospectus. Of the 6,337,500 shares that may be offered under this
prospectus, 4,890,000 shares are shares currently held by 12 of the selling
security holders listed below, and 1,447,500 shares are shares issuable upon
conversion of the Class A shares of our subsidiary, ThinWeb.com, Inc.,
currently held by 31 of the selling security holders listed below.
We intend to apply to have our common stock quoted on the OTC Bulletin Board
market maintained by Nasdaq under the symbol TNWB. Despite our efforts,
however, we may not have our shares accepted for quotation on the OTC Bulletin
Board.
Based on information provided to us by the selling security holders, the
following table sets forth certain ownership and registration information
regarding the shares held by each person who is a selling security holder.
In this table, the * denotes less than 1% share ownership. Also, the
information given in this table
(1) is based on 17,627,385 shares of our common stock as of the date of
this prospectus,
(2) assumes sale of all the shares offered by the selling security
holders,
(3) assumes that there has been no conversion of convertible preferred
stock or convertible loans or exercise of warrants, and
(4) includes rights to acquire common stock through exercise of
exchangeable Class A shares of our subsidiary, Thinweb.com Inc.
<TABLE>
<CAPTION>
Number of
Shares of Amount and
Common Stock Percent of
Beneficially Registered Stock Owned
Name and Address of Beneficial Owner Owned for Sale After Offering
------------------------------------ ------------ ---------- --------------
<S> <C> <C> <C>
James Cappadocia..................... 394,375 200,000 115,000(*)
33 Theobald's Circle
Richmond Hill, Ontario, Canada L4C
9C7
C. James Enman....................... 3,090,000 200,000 2,890,000(16.4%)
1883 Seldon Street
Halifax, Nova Scotia, Canada B3H
3X3
Bryan MacLean........................ 3,090,000 200,000 2,890,000(16.4%)
5444 Victoria Road, #8
Halifax, Nova Scotia, Canada B3H
1M5
Cory Reid............................ 3,090,000 200,000 2,890,000(16.4%)
1360 Lower Water Street, Suite 207
Halifax, Nova Scotia, Canada B3S
3N2
T. MacLean Family Trust.............. 300,000 100,000 200,000(1.1%)
1338 Molli Street
Halifax, Nova Scotia Canada B3J 1T9
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Amount and
Number of Shares Percent of
Name and Address of Beneficial of Common Stock Registered Stock Owned
Owner Beneficially Owned for Sale After Offering
------------------------------ ------------------ ---------- --------------
<S> <C> <C> <C>
J. Smyth Family Trust.......... 300,000 100,000 200,000(1.1%)
1991 Brunswick Street,
Apartment 620
Halifax, Nova Scotia Canada
B3J 3N2
Amery Associates Inc........... 473,000 473,000 0
Apartada Postal 1802-1002
Passeo de los Estudiantes
San Jose, Costa Rica
Anjula Ltd..................... 5,000 2,500 2,500(*)
Bahamas Financial Centre
Shirley & Charlotte Street
3rd Floor, PO Box CB13135
Nassau, Bahamas
Arrendadora Solarsa S.A........ 500,000 500,000 0
600 mts. Sur oeste de la
Antigua Fabrica
Paco, San Rafael
San Jose, Costa Rica
Stephanie Bigelow.............. 80,000 40,000 40,000(*)
10 Crichton Park Road
Dartmouth, Nova Scotia Canada
Patrick Birmingham............. 10,000 5,000 5,000(*)
322 Millwood Drive
Sackville, Nova Scotia Canada
Butternut Capital Limited...... 613,000 613,000 0
Apartada Postal 7-3330-1000
San Jose, Costa Rica
Cannon Equity Limited.......... 498,000 448,000 50,000(*)
Avenida 7, Calle 3 Bix
Edifico Teresa 3 Piso
San Jose, Costa Rica
Dale Chaisson Auto Sales,
Inc........................... 20,000 10,000 10,000(*)
218 Micmac Boulevard
Dartmouth, Nova Scotia Canada
Corporate Solutions Limited.... 602,000 602,000 0
Apartada Postal 1555-1000
San Jose, Costa Rica
Everest Private Trust.......... 14,000 7,000 7,000(*)
PO Box HM2706
4th Floor, Jardine House
33 Reid Street
Hamilton HM 12 Bermuda
The Foundation for the Study of
Objective Art................. 250,000 200,000 50,000(*)
80 Gerard Street East
Toronto, Ontario Canada M5B
1G6
James Gillen................... 33,000 10,000 23,333(*)
47 Hutton Cr.
Caledon, Ontario, Canada
Greensted Equities Limited..... 471,000 471,000 0
Apartada Postal 7-3330-1000
San Jose, Costa Rica
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Amount and
Number of Shares Percent of
Name and Address of Beneficial of Common Stock Registered Stock Owned
Owner Beneficially Owned for Sale After Offering
------------------------------ ------------------ ---------- --------------
<S> <C> <C> <C>
Alan Guneyler................... 133,333 65,000 68,333(*)
30 Ivy Crescent
Stouffville, Ontario, Canada
International Shareholdings
Corp........................... 387,000 387,000 0
Apartada Postal 1802-1002
Paseo de los Estudiantes
San Jose, Costa Rica
Althea Lacas.................... 5,000 2,500 2,500(*)
1005 Beaufort Avenue
Halifax, Nova Scotia Canada
Andrew Lacas.................... 5,000 2,500 2,500(*)
1005 Beaufort Avenue
Halifax, Nova Scotia Canada
Betty Lacas..................... 12,000 6,000 6,000(*)
1005 Beaufort Avenue
Halifax, Nova Scotia Canada
Peter Lacas..................... 14,000 7,000 7,000(*)
1005 Beaufort Avenue
Halifax, Nova Scotia Canada
Paul Landry, Sr................. 100,000 50,000 50,000(*)
32 Greenwood Drive
Antigonish, Nova Scotia Canada
B2G 2H8
Paul Landry, Jr................. 10,000 10,000 0
32 Greenwood Drive
Antigonish, Nova Scotia Canada
B2G 2H8
Darlene Letun................... 100,000 50,000 50,000(*)
107 Douglas Park View SE
Calgary, Alberta Canada
Scott MacKinnon................. 70,000 35,000 35,000(*)
69 Chameau Crescent
Dartmouth, Nova Scotia Canada
Michael MacDonald & Natasha
Pavlinovic..................... 80,000 40,000 40,000(*)
14 Stratford Way
Halifax, Nova Scotia Canada
William Mahody.................. 50,000 25,000 25,000(*)
Suite 205--99 Portland Street
PO Box 1126
Dartmouth, Nova Scotia Canada
Diane Marsh..................... 50,000 25,000 25,000(*)
7365 Bradner Road
Mt. Leyman, British Columbia
Canada
Curtis Mayert................... 50,000 25,000 25,000(*)
1422 Joliet Avenue, SW
Calgary, Alberta Canada
Brian McAvoy.................... 20,000 10,000 10,000(*)
Trysail Circle
Tampa, Florida 33607
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
Amount and
Number of Shares Percent of
Name and Address of Beneficial of Common Stock Registered Stock Owned
Owner Beneficially Owned for Sale After Offering
------------------------------ ------------------ ---------- --------------
<S> <C> <C> <C>
Christine Musgrave............... 10,000 5,000 5,000(*)
6 Stonepoint Avenue
Napean, Ontario Canada
Sean O'Regan..................... 50,000 25,000 25,000(*)
11 Gladstone Avenue
Dartmouth, Nova Scotia Canada
Gary Rubenstein.................. 50,000 25,000 25,000(*)
3 Sandhurst Close
Halifax, Nova Scotia Canada
Richard Shirley.................. 30,000 15,000 15,000(*)
41 Bayside Drive
Bayside, Nova Scotia Canada
Seismic Investments Ltd.......... 577,000 577,000 0
Apartada Postal 1555-1000
San Jose, Costa Rica
Strathglen Capital Limited....... 479,000 479,000 0
Apartada Postal 1802-1002
Passeo de los Estudiantes
San Jose, Costa Rica
Louis Toth....................... 60,000 30,000 30,000(*)
32 Craigburn Drive
Dartmount, Nova Scotia Canada
Gary West........................ 20,000 10,000 10,000(*)
38 Chadwick Street
Dartmouth, Nova Scotia Canada
Donald Wile...................... 100,000 50,000 50,000(*)
82 Empire Street
Bridgewater, Nova Scotia Canada
</TABLE>
--------
In the preceding table:
(1) James Cappadocia, a selling security holder, is our president, chief
executive officer and a director;
(2) James Enman, a selling security holder, is our vice president and
secretary;
(3) Bryan MacLean, a selling security holder, is our vice president and a
director;
(4) Cory Reid, a selling security holder, is our vice president;
(5) The T. MacLean Family Trust is controlled by an employee of thinWEB and the
shares of common stock held by it are deemed to be beneficially owned by
such employee;
(6) The J. Smyth Family Trust is controlled by an employee of thinWEB and the
shares of common stock held by it are deemed to be beneficially owned by
such employee; and
(7) James Anthony is the founder, director and President of The Foundation for
the Study of Objective Art and may be deemed the beneficial owner of the
shares held by it.
(8) Kevin Gunther is the ultimate beneficial owner of 100,000 of the 498,000
shares held by Cannon Equity Limited, and 50,000 of Mr. Gunther's shares
are being registered in this prospectus.
(9) Except with respect to Cannon Equity Limited, which is discussed in note
(8) above, we have been informed by each entity listed in the table above
of the name(s) and address(es) of the individuals that control those
entities and, accordingly, have beneficial ownership of the shares listed:
52
<PAGE>
<TABLE>
<CAPTION>
Name of Listed Name of Individual Address of Individual
Beneficial Owner Beneficial Owner Beneficial Owner
---------------- ------------------ ------------------------------
<C> <S> <C>
Anjula Ltd......................... Diana Chaverri Apartada Postal 1802-1002
Paseo de los Estudiantes
San Jose, Costa Rica
Amery Associates, Inc.............. Julio Flores Apartada Postal 1802-1002
Paseo de los Estudiantes
San Jose, Costa Rica
Arrendadora Solarsa Ltd............ Patricia Del Solar 600 mts. Sur oestes
de la Antigua Fabrica
Paco, San Rafael
San Jose, Costa Rica
Butternut Capital Limited.......... Pilar Picado Apartada Postal 7-3330-1000
San Jose, Costa Rica
Cannon Equity Limited.............. Hernan Cruz Avenida 7, Calle 3 Bis
Edifico Teresa 3 Piso
San Jose, Costa Rica
Corporate Solutions Limited........ Alfonso Jiminez Apartada Postal 1555-1000
San Jose, Costa Rica
Dale Chaisson Auto Sales Inc....... Dale Chiasson 218 Micmac Boulevard
Dartmouth, Nova Scotia
Canada
Everest Private Trust Company...... Eindiya Varma and PO Box HM2706
Dilip Varma 4th Floor, Jardine House
33 Reid Street
Hamilton HM 12, Bermuda
Greensted Equities Limited......... Maria Rodriguez Apartada Postal 7-3330-1000
San Jose, Costa Rica
Iguana Investments Ltd. ........... Kevin Gunther Buckingham Square
West Bay Road
Seven Mile Beach, Grand Cayman
International Shareholders Corp. .. Floria Vargas Segura Apartada Postal 1802-1002
Paseo de los Estudiantes
San Jose, Costa Rica
Seismic Investments Ltd............ Ricardo Rojas Apartada Postal 1555-1000
San Jose, Costa Rica
Strathglen Capital Limited......... Diana Chaverri Apartada Postal 1802-1002
Paseo de los Estudiantes
San Jose, Costa Rica
</TABLE>
In the event the selling security holders receive payment from sales of
their shares, we will not receive any of the proceeds from such sales. We are
bearing all expenses in connection with the registration of the selling
security holder shares offered by this prospectus.
The shares owned by the selling security holders are being registered under
Rule 415 of the Securities and Exchange Commission pertaining to continuous
offerings and sales of securities. In regard to the selling security holder
shares offered under Rule 415, we have made certain undertakings in Part II of
the registration statement of which this prospectus is a part pursuant to
which, in general, we have committed to keep this prospectus current during any
period in which offers or sales are made under Rule 415.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Agreements with E-Capital Management Inc.
We have retained E-Capital Management Inc. to provide us with strategic
advice and 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 president and sole shareholder of 583317
British Columbia Ltd. Neither E-Capital nor 583317 British Columbia Ltd. are
registered broker-dealers.
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 strategic
advice and assistance in locating 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 selling security holders herein and
clients of Lines Overseas Management Limited. In March 1999 prior to the loan
agreement, we issued 4,000,000 common shares to those lenders in consideration
for 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
$646,200 ($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
54
<PAGE>
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 and financial assistance programs for which we may be eligible. We
have agreed to reimburse all of E-Capital's 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,
under 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 under
Regulation S of the Securities Act. We anticipate that this offering will
commence shortly after this registration statement 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 net 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. Upon the effectiveness of such registration
statement, such shares will be freely tradeable.
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 $1,558,815 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 of this loan can be applied towards the purchase of units
in the offshore offering at the $5 unit price offered to investors. This loan
is to be secured by a lien on all of our assets.
55
<PAGE>
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.
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 for cash consideration of $168,268 ($250,000
CDN) and 100,000 of our share purchase warrants. Each of these units consists
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. Assuming the share purchase warrants are exercised, we would
own approximately 3% of the issued and outstanding common shares of Innovium.
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. In addition,
ThinWeb Software has agreed to provide certain consulting services to NoTime
for additional compensation.
Consulting Agreement with J.S. Anthony & Co. Ltd.
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
In connection with the share exchange as a result of which the shareholders
of ThinWeb Software acquired control of Warwick Acquisition Corporation, we
granted to TPG Capital Corporation, the sole shareholder of Warwick and a
current shareholder of thinWEB, a five year warrant to purchase 50,000 common
shares at an exercise price of $1.00 per share. James M. Cassidy is the
controlling shareholder of TPG Capital and principal of Cassidy & Associates,
the law firm which prepared initial versions of this registration statement.
56
<PAGE>
Mr. 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, including among other
services, the preparation and filing of initial versions of this registration
statement, we also agreed to pay TPG Capital $150,000, of which $125,000 has
been paid.
Due to TPG's failure to perform certain agreed upon services after the share
exchange, we have notified TPG that we will no longer honor our obligations
under the warrant granted to TPG.
Voluntary Trading Restrictions Agreements with TPG Capital and Certain Selling
Security Holders
TPG Capital has entered into a voluntary trading restrictions agreement with
us under which TPG Capital has agreed not to sell more than 25,000 shares in
any 30 day period. In addition, certain selling security holders owning a total
of 1,105,000 shares have also entered into a voluntary trading restrictions
agreement with us under 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.
57
<PAGE>
DESCRIPTION OF SECURITIES
We have authorized capital of 100,000,000 shares of common stock, $.0001 par
value, and 20,000,000 shares of preferred stock, $.0001 par value. As of the
date of this prospectus, we have 17,627,385 shares of common stock issued and
outstanding and 1,500,000 shares of convertible preferred stock outstanding.
In accordance with a share exchange agreement, effective as of April 22,
1999, our subsidiary, Thinweb.com Inc., purchased all the outstanding shares of
common stock of ThinWeb Software Incorporated (16,916,344 shares) in
consideration for:
(1) the issuance of 16,916,344 Class A exchangeable non-voting
participating common shares of common stock of Thinweb.com Inc.; and
(2) the issuance to StockTrans, Inc., a Pennsylvania corporation, as
trustee for the ThinWeb Software Incorporated shareholders, 16,916,344
shares of our common stock to be held in trust under the terms of an
exchange and voting agreement dated April 22, 1999.
As a result of the transaction, thinWeb Software Incorporated became a
subsidiary of Thinweb.com Inc., and, indirectly, a subsidiary of thinWEB
Technologies Corporation, the parent company.
Each beneficial shareholder of the Class A shares has, through the trustee,
voting rights in thinWEB equal to the number of Class A shares held for his
benefit by the trustee. The Class A shares may be converted into or exchanged
for an equal number of the common shares of thinWEB held by the trustee. Thirty
one of the 43 selling security holders in this prospectus are registering
parent company common shares which are issuable to such holders upon exercise
of their right to convert Class A shares of our subsidiary, Thinweb.com Inc.
Class A Shares
General. Our subsidiary, Thinweb.com Inc., has an authorized 20,000,000
Class A exchangeable non-voting shares of which 16,916,344 have been issued to
the ThinWeb Software Incorporated shareholders. The Class A shares are not
entitled to receive notice of or to attend any meeting of the shareholders of
Thinweb.com Inc. nor to vote on any matters that come before its shareholders.
The Class A shares have voting rights in thinWEB equal to one vote for each
Class A share held on all matters that properly come before the shareholders of
thinWEB at a meeting of shareholders or in connection with any action taken by
shareholder consent. The holders of the Class A shares are entitled to receive
notice of and attend any meeting of shareholders of thinWEB and to vote at any
such meetings.
The Class A shares may be converted into or exchanged for an equal number of
shares of the thinWEB which shares are held by the trustee for such conversion
or exchange.
58
<PAGE>
The trust agreement with StockTrans, Inc. sets forth the rights and
restrictions pertaining to the Class A shares and the shares of common stock of
thinWEB held by StockTrans, Inc., as trustee. Upon conversion, the shares held
by the trustee will be released to the converting holder and an equal number of
Class A shares will be delivered to thinWEB. The holders of the Class A shares
have the right to vote their interests in thinWEB directly or through the
trustee as holder of thinWEB shares.
Our shares, while held by the trustee, will not be entitled to participate
in dividends declared by us; however, we have agreed that should we declare a
dividend on our common stock we will ensure that our subsidiary, Thinweb.com
Inc., has the means to pay a like dividend on its Class A shares.
Summary of Class A Share Agreements. We have issued to and placed with the
trustee 16,916,344 shares of our common stock for use in exchange of the Class
A shares under an exchange and voting agreement. The Class A shares contain
certain rights and provisions as set forth in the trust agreement and
summarized below.
(1) Exchange Rights on the Liquidation of the Purchaser. Holders of the
Class A shares have the right, upon the occurrence and during the
continuance of any proceeding in bankruptcy, insolvency, dissolution or
winding up commenced by Thinweb.com Inc. or against it, to require us to
purchase from each or any holder of the Class A shares all or any part of
the Class A shares held at an amount equal to (a) the current market price
of our common stock on the last business day prior to the day of purchase
plus (b) an additional amount equal to the full amount of all dividends
declared on such Class A shares and all dividends declared on our common
stock which have not been declared on the Class A shares.
(2) Automatic Exchange on the Liquidation of thinWEB. In order that
holders of the Class A shares will be able to participate on a pro rata
basis with the holders of our common stock in the event of a voluntary or
involuntary dissolution, liquidation or winding-up of thinWEB, all of the
then outstanding Class A shares shall be automatically exchanged for shares
of our common stock in the absence of an affirmative written election from
a holder of Class A shares not to participate in the automatic exchange.
(3) Retraction by Holder. A holder of Class A shares is entitled at any
time to require Thinweb.com Inc. to redeem any or all of the Class A shares
held by it in an amount equal to (a) the current market price of our common
stock on the last business day prior to the retraction date which may be
satisfied in full by Thinweb.com Inc. causing to be delivered to such
holder one share of our common stock for each Class A share held by the
retracting holder plus (b) an additional amount equal to the full amount of
all dividends declared on such Class A shares and all dividends declared on
our common stock which have not been declared on the Class A shares.
(4) Automatic Redemption by the Purchaser. On the 25th anniversary of
the closing date of the stock exchange transactions, unless otherwise
extended or accelerated, Thinweb.com Inc. shall redeem all the then
outstanding Class A shares for an amount
59
<PAGE>
per share equal to (a) the current market price of our common stock on the
last business day prior to the redemption date which may be satisfied in
full by Thinweb.com Inc. causing to be delivered to such holder one share
of our common stock for each Class A share held by the retracting holder
plus (b) an additional amount equal to the full amount of all dividends
declared on such Class A shares and all dividends declared on our common
stock which have not been declared on the Class A shares.
(5) Purchase for Cancellation. Thinweb.com Inc. may at any time and from
time to time offer to purchase for cancellation all or any of the
outstanding Class A shares at any price by tender to all of the holders of
the Class A shares then outstanding at any price per share determined by it
plus an amount equal to all declared and unpaid dividends thereon. If in
response to such tender offer, more Class A shares are tendered than
Thinweb.com Inc. is willing to purchase, then Thinweb.com Inc. shall
purchase as nearly as possible pro rata according to the number of shares
tendered by each holder.
(6) Reciprocal Changes. If we issue or distribute warrants, options or
other rights to purchase our securities to the holders of our outstanding
common stock, or if we issue shares or securities of any other class than
the common stock exchangeable for the Class A shares, or evidences of
indebtedness or assets, then Thinweb.com Inc. shall issue to the holders of
the Class A shares the economic equivalent on a per share basis of such
rights, options, securities, shares, evidences of indebtedness or other
assets.
(7) Reclassifications. If we subdivide, redivide or change the
outstanding number of our common stock into a greater number or reduce,
combine or consolidate the outstanding number of our common stock into a
lesser number or reclassify or otherwise change our common stock or effect
an amalgamation, merger, reorganization or other transaction affecting our
common stock, then Thinweb.com Inc. will make the same or an economically
equivalent change simultaneously to, or in the rights of the holders of,
the Class A shares.
Common Stock
Holders of the common stock do not have preemptive rights to purchase
additional shares of common stock or other subscription rights. The common
stock carries no conversion rights and is not subject to redemption or to any
sinking fund provisions. All shares of common stock are entitled to share
equally in dividends from legally available sources when, as and if declared by
the board of directors and, upon our liquidation or dissolution, whether
voluntary or involuntary, to share equally in our assets available for
distribution to stockholders. All outstanding shares are validly authorized and
issued, fully paid and non- assessable, and all shares to be offered and sold
by this prospectus will be validly authorized and issued, fully paid and non-
assessable.
Our board of directors is authorized to issue additional shares of common
stock, not to exceed the amount authorized by our certificate of incorporation,
and to issue options for the purchase of such shares, on such terms and
conditions and for such consideration as the board may deem appropriate without
further stockholder action.
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<PAGE>
Noncumulative Voting
Each holder of common stock is entitled to one vote per share on all
matters on which such stockholders are entitled to vote. Shares of common
stock do not have cumulative voting rights. The holders of more than 50
percent of the shares voting for the election of directors can elect all the
directors if they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any person to the board of
directors.
Warrants
As part of our joint venture with Innovium Capital Corp., we issued to
Innovium 100,000 non-transferable common stock purchase warrants with an
expiration date of December 15, 2001 and an exercise price per share equal to
the lower of $5.00 and the lowest price at which we issue equity or securities
convertible into equity during this period.
Preferred Stock
Our board of directors is authorized to approve the issuance from time to
time of up to 20,000,000 shares of preferred stock in one or more series and
can also establish the number of shares to be included in each such series and
the respective rights, powers and restrictions of the shares of each such
series without any further vote or action by the shareholders. Any shares of
preferred stock so issued may have priority over our common stock with respect
to dividend or liquidation rights. Any issuance of preferred stock may have
the effect of delaying, deferring or preventing a change in control of thinWEB
without further action by the shareholders, and may adversely affect the
voting and other rights of the holders of common stock.
Our board of directors has designated 1,500,000 preferred shares as Series
1 preferred stock. All of the Series 1 preferred stock has been issued and is
outstanding. The holder of the preferred 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. These convertible preferred
shares are not entitled
to dividends and are non-voting. In the event of our liquidation or
dissolution, the preferred stockholders are entitled to receive the par value
of their preferred share before any property or assets are distributed to the
holders of common stock. After payment in full to the holders of the preferred
shares, any surplus assets shall be divided among our other stockholders. At
any time after June 30, 2000, we may redeem any of the outstanding Series 1
preferred shares at their par value.
At present, we haveno plans to issue any additional preferred stock or
adopt any additional series, preferences or other classification of preferred
stock.
Admission to Quotation on OTC Bulletin Board Maintained by Nasdaq
Prior to the date of this prospectus, no public trading market existed for
our common stock. A public trading market for our common stock may not develop
or if developed, may
61
<PAGE>
not be sustained. If we meet the qualifications, we intend to apply for
quotation of our common stock on the OTC Bulletin Board maintained by Nasdaq.
Until we meet such qualifications, our securities may be quoted in the daily
quotation sheets of the National Quotation Bureau, Inc., commonly known as the
pink sheets. If our common stock is not quoted on the OTC Bulletin Board, a
holder may have difficulty selling, or obtaining accurate quotations as to the
market value of, such stock.
In order to have its securities quoted on the OTC Bulletin Board, a company
must:
(1) be a company that reports its current financial information to the
Securities and Exchange Commission, banking regulators or insurance
regulators; and
(2) have at least one market maker who completes and files a Form 211
with the National Association of Securities Dealers, Inc.
The OTC Bulletin Board is a dealer-driven quotation service. Unlike the
Nasdaq Stock Market, companies cannot apply to be quoted on the OTC Bulletin
Board, only market makers can initiate quotes, and quoted companies do not have
to meet any quantitative financial requirement. Any equity security of a
reporting company not listed on Nasdaq or on a national securities exchange is
eligible.
Penny Stock Regulation
Penny stocks generally are equity securities with a price of less than $5.00
per share other than securities registered on certain national securities
exchanges or listed on the Nasdaq Stock Market, provided that current price and
volume information with respect to transactions in such securities are provided
by the exchange or system. The penny stock rules impose additional sales
practice requirements on broker-dealers who sell such securities to persons
other than established customers and accredited investors (generally those with
assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000
together with their spouse).
For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the transaction, of a
disclosure schedule prescribed by the SEC relating to the penny stock market.
The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements must be sent disclosing recent price
information on the limited market in penny stocks. Because of these penny stock
rules, broker-dealers may be restricted in their ability to sell our common
stock. The foregoing required penny stock restrictions will not apply to our
common stock if such stock reaches and maintains a market price of $5.00 or
greater.
Transfer Agent and Registrar and Trustee
StockTrans, Inc., Ardmore, Pennsylvania, serves as our transfer agent and as
trustee for the Class A shares.
62
<PAGE>
Reports to Shareholders
We will furnish to holders of our common stock annual reports containing
audited financial statements examined and reported upon, and with an opinion
expressed by, an independent accountant. We may issue other unaudited interim
reports to our shareholders as we deem appropriate.
63
<PAGE>
PLAN OF DISTRIBUTION
Sale of the Selling Security Holder Shares
We will not receive any proceeds from the sale of shares by the selling
security holders. The selling security holders may sell their shares directly
to purchasers from time to time or they may offer their securities for sale
through underwriters, dealers or agents, who may receive compensation in the
form of underwriting discounts, concessions or commissions from the selling
security holders and/or the purchasers of the securities for whom they may act
as agents. Any underwriters, dealers or agents who participate in the
distribution of the securities may be deemed to be "underwriters" under the
Securities Act and any discounts, commissions or concessions received by any
such underwriters, dealers or agents may be deemed to be underwriting discounts
and commissions under the Securities Act.
At the time a particular offer is made by or on the behalf of the selling
security holders, a prospectus, including any necessary supplement, will be
distributed which will set forth the number of shares of common stock and other
securities being offered and the terms of the offering, including the names of
any underwriters, dealers or agents, the purchase price paid by any underwriter
for the shares purchased from the selling security holders, any discounts,
commissions and other items constituting compensation from the selling security
holders, any discounts, commissions or concessions allowed, reallowed or paid
to dealers, and the proposed selling price to the public.
Under Regulation M of the of the Securities and Exchange Commission, any
person engaged in a distribution of securities, including on behalf of a
selling security holder, may not simultaneously bid for, purchase or attempt to
induce any person to bid for or purchase securities of the same class for a
period of five business days prior to the commencement of such distribution and
continuing until the selling security holder (or other person engaged in the
distribution) is no longer a participant in the distribution. In addition and
without limiting the foregoing, the selling security holders will be subject to
applicable provisions of the Exchange Act and the rules and regulations under
such Act in connection with transactions in the securities during the
effectivenessof the registration statement of which this prospectus is a part.
If, at some time in the future, we meet the listing requirements of the
Nasdaq SmallCap Market, we may apply to have our shares listed on such market.
If we qualify and are accepted for listing, then certain underwriters may
engage in passive market making transactions in our common stock in accordance
with Rule 103 of Regulation M.
The shares sold by the selling security holders may be sold from time to
time in one or more transactions:
(1) at an offering price that is fixed or that may vary from transaction
to transaction depending upon the time of sale or
(2) at prices otherwise negotiated at the time of sale.
64
<PAGE>
Such prices will be determined by the selling security holders or by agreement
between the selling security holders and any underwriters.
In order to comply with the applicable securities laws, if any, of certain
states, the shares of the selling security holders will be offered or sold in
such states through registered or licensed brokers or dealers in those states.
In addition, in certain states, the securities may not be offered or sold
unless they have been registered or qualified for sale in such states or an
exemption from such registration or qualification requirement is available and
with which we have complied.
We will pay all of the expenses incident to the registration of the shares
for sale by the selling security holders (including registration under the
securities laws of certain states) other than commissions, expenses,
reimbursements and discounts of underwriters, dealers or agents, if any.
Voluntary Trading Restrictions Agreements with TPG Capital and Certain Selling
Security Holders
TPG Capital Corporation has entered into a voluntary trading restrictions
agreement with us under which TPG Capital has agreed not to sell more than
25,000 shares in any 30 day period. In addition, the following selling security
holders owning a total of 1,105,000 shares, have also entered into a voluntary
trading restrictions agreement with us under which each shareholder has agreed
not to sell more than 10 percent of the original number of the shareholder's
shares in any 30 day period:
. Anjula Ltd. . William Mahody
. Stephanie Bigelow . Diane Marsh
. Patrick Birmingham . Curtis Mayert
. Dale Chaisson Auto Sales Inc. . Brian McAvoy
. Everest Private Trust . Christine Musgrave
. Cannon Equity Limited . Sean O'Regan
. Althea Lacas . Gary Rubenstein
. Andrew Lacas . Richard Shirley
. Betty Lacas . Louis Toth
. Peter Lacas . Gary West
. Paul Landry Sr. . Donald Wile
. Darlene Letun . Scott MacKinnon
. Michael MacDonald and Natasha
Pavlinovic
Cannon Equity Limited is subject to the voluntary trading restrictions
agreement only with respect to the 100,000 shares it holds for Kevin Gunther,
the beneficial owner of such shares.
65
<PAGE>
LEGAL MATTERS
Legal Proceedings
We are not a party to any litigation and management has no knowledge of any
threatened or pending litigation against us.
Legal Opinion
Sadis & Goldberg LLC, New York, New York, has given its opinion as
attorneys-at-law that the shares of common stock offered by the selling
security holders will be fully paid, validly issued and non-assessable. Sadis &
Goldberg has passed on the validity of the common stock offered by the selling
security holders but purchasers of such common stock should not rely on Sadis &
Goldberg with respect to any other matters.
EXPERTS
The audited financial statements for the periods ended December 31, 1999 and
1998 included in this prospectus have been so included in reliance on the
report of PricewaterhouseCoopers LLP, Ottawa, Canada, independent accountants,
given on the authority of such firm as experts in auditing and accounting.
HOW TO GET MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2 under the Securities Act with respect to this offering.
This prospectus does not contain all the information contained in that
registration statement and the accompanying exhibits and schedules, as
permitted by the rules and regulations of the Commission. For further
information about thinWEB and the securities offered under this prospectus,
reference is made to the registration statement including the accompanying
exhibits and schedules, which may be inspected without charge at the public
reference facilities of the Commission's Washington, D.C. office, 450 Fifth
Street, N.W., Washington, D.C. 20549. Each statement contained in this
prospectus with respect to a contract or other document filed as an exhibit to
the registration statement is qualified by reference to the exhibit for its
complete terms and conditions.
We will provide without charge to each person who receives a copy of this
prospectus, upon written or oral request, a copy of any of the information
incorporated in this prospectus by reference, not including exhibits. Such
requests should be made in writing to James Cappadocia, President, thinWEB
Technologies Corporation, Suite 111, Phase 1, 6 Antares Drive, Ottawa, Ontario
K2E 8A9 Canada, or by telephone at (613) 225-8446.
We are subject to the informational requirements of the Securities Exchange
Act of 1934 and file reports and other information with the Commission,
including annual reports on Form 10-KSB and quarterly reports on Form 10-QSB.
Reports, proxy statements and other information filed by us, including our
registration statement, can be inspected and copied on
66
<PAGE>
the Commission's home page on the world wide web at http://www.sec.gov or at
the public reference facilities of the Commission, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as the following Regional
Offices: 7 World Trade Center, Suite 1300, New York, N.Y. 10048; and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies can be obtained from the Commission by mail at prescribed rates.
Requests should be directed to the Commission's Public Reference Section,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 or by telephone
at (800) SEC-0330.
We intend to send our stockholders annual reports containing audited
financial statements and such other reports as we may determine or as may be
required by law.
67
<PAGE>
INDEX TO FINANCIAL STATEMENTS
The audited consolidated financial statements for the periods ended December
31, 1999 and December 31, 1998 are included herein on pages F-1 to F-17.
The unaudited consolidated interim financial statements for the three months
ended March 31, 2000 and March 31, 1999 are included herein on pages F-18 to F-
31.
68
<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
Ottawa, Canada
F-1
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------ ------------
$ $
<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
========== ========
</TABLE>
Signed on behalf of the Board:
_____________________________Director _____________________________Director
F-2
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Consolidated Statement of Loss and Comprehensive Loss
<TABLE>
<CAPTION>
Cumulative For the period
April 22, 1998 Year ended from April 22, 1998
to December 31, 1999 December 31, 1999 to December 31, 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>
F-3
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Cumulative For the period from
April 22, 1998 to Year ended April 22, 1998
December 31, 1999 December 31, 1999 to December 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>
F-4
<PAGE>
thinWEB Technologies Corporation
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Accumulated other
Deficit comprehensive income
accumulated --------------------
Additional Less during the Foreign
Preferred paid in subscriptions Development currency translation
Common shares shares capital receivable Warrants Stage adjustments
---------------- ------------- ---------- ------------- --------------- ----------- --------------------
Number $ Number $ $ $ Number $ $ $
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares issued
for
subscriptions.. 900,000 90 -- -- 32,579 (32,668) -- -- -- --
Net loss for the
period......... -- -- -- -- -- -- -- -- (100,296) --
Foreign currency
translation
adjustments.... -- -- -- -- -- -- -- -- -- 343
---------- ----- --------- --- --------- ------- ------- ------- ---------- ------
Balance--
December 31,
1998........... 900,000 90 -- -- 32,579 (32,668) -- -- (100,296) 343
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... -- -- -- -- -- -- 50,000 15,000 -- --
Warrants issued
for
investment..... -- -- -- -- -- -- 100,000 256,373 -- --
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......... -- -- -- -- -- -- -- -- (8,943,973) --
Foreign currency
translation
adjustments.... -- -- -- -- -- -- -- -- -- 44,190
---------- ----- --------- --- --------- ------- ------- ------- ---------- ------
Balance--
December 31,
1999........... 17,066,344 1,707 1,500,000 150 8,551,364 (32,896) 150,000 271,373 (9,044,269) 44,533
========== ===== ========= === ========= ======= ======= ======= ========== ======
<CAPTION>
Total
Shareholders'
Equity
-------------
$
<S> <C>
Shares issued
for
subscriptions.. 1
Net loss for the
period......... (100,296)
Foreign currency
translation
adjustments.... 343
-------------
Balance--
December 31,
1998........... (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... 15,000
Warrants issued
for
investment..... 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)
Foreign currency
translation
adjustments.... 44,190
-------------
Balance--
December 31,
1999........... (208,038)
=============
</TABLE>
F-5
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
December 31, 1999
1Nature 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
F-6
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements--(Continued)
December 31, 1999
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.
2Accounting 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.
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:
<TABLE>
<S> <C>
Computer hardware................................................... 3 years
Computer software................................................... 1 year
Office furniture and equipment...................................... 5 years
</TABLE>
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.
F-7
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements--(Continued)
December 31, 1999
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.
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
F-8
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements--(Continued)
December 31, 1999
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.
3Recent 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.
4Investment 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.
F-9
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements--(Continued)
December 31, 1999
1The 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.
5Other 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>
6Available 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 Exchange. Although management does not
intend to hold the Innovium common shares for the long term, these
securities have not been bought and are not held principally for the
purpose of selling them in the near term. In accordance with SFAS No. 115
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.
In addition, primarily as a result of its investment in Innovium, the
Company may be deemed to be an investment company and subject to the
registration requirements of the Investment Company Act of 1940. Although
the Company believes it is not an investment company under this Act, it is
relying on a temporary one-year exemption from such registration
requirements. By December 2000, if the Company's holdings of investment
securities exceed 40% of its total assets and it has not applied for and
obtained an exemptive order from the SEC, it may need to take certain
actions, including selling its Innovium holdings, to avoid the registration
requirements of such Act.
Should the Company be unable to avoid the registration requirements of such
Act, it would be required to comply with Article 6 of Regulation S-X in the
preparation of its financial statements. This could result in, among other
things, substantial changes to the carrying value of certain assets and in
the presentation of the results of its operations, particularly as to the
inclusion of unrealized gains or losses on its Innovium investment in
ordinary income instead of comprehensive income.
F-10
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements--(Continued)
December 31, 1999
7NoTime 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.
F-11
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements--(Continued)
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
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.
8Capital 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>
9Loan 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 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.
F-12
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements--(Continued)
December 31, 1999
10Commitments
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>
11Capital 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 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 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
F-13
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements--(Continued)
December 31, 1999
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
based on the issue price of that financing (see note 14(a)).
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
F-14
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements--(Continued)
December 31, 1999
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.
12Income 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>
Net operating loss carryforwards for income tax purposes are available to
reduce future taxable income and expire as follows:
<TABLE>
<S> <C> <C>
2005................................................. $ 61,500
2006................................................. 556,100
The primary temporary differences which gave rise to deferred taxes are as
follows:
<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>
F-15
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements--(Continued)
December 31, 1999
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.
13Net 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>
14Subsequent 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. These shares will be recorded as compensation expense based on
the fair value of the common shares at the time they are issued.
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.
F-16
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements--(Continued)
December 31, 1999
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.
F-17
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
(Unaudited)
Consolidated Interim Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
$ $
<S> <C> <C>
Assets
Current assets
Cash............................................. 75,035 427,669
Amounts receivable from NoTime Wireless joint
venture......................................... 86,495 32,868
Other current assets (note 5).................... 148,443 80,404
----------- ----------
309,973 540,941
Investment in Innovium Capital Corporation
Available for sale securities (note 6).......... 636,395 266,766
Warrants, at cost (note 7)...................... 162,832 162,832
Capital assets (note 8).......................... 100,888 95,724
Trademarks....................................... 4,092 1,232
----------- ----------
1,214,180 1,067,495
=========== ==========
Liabilities
Current liabilities
Accounts payable and accrued liabilities......... 160,402 242,180
Loan payable (note 9)............................ 1,558,815 1,020,142
Obligation under capital leases.................. 8,206 13,211
----------- ----------
1,727,423 1,275,533
----------- ----------
Commitments (note 10)
Shareholders' Equity
Capital stock issued and outstanding--17,381,344
(1999 - 17,066,344) common shares and 1,500,000
(1999--1,500,000) preferred shares
(note 11)....................................... 1,888 1,857
Additional paid in capital....................... 10,126,333 8,551,364
Share subscriptions receivable................... (32,896) (32,896)
Warrants......................................... 271,373 271,373
Deficit accumulated during the development
stage........................................... (11,310,662) (9,044,269)
Foreign currency translation adjustments......... 59,204 44,533
Unrealized gain on available for sale
securities...................................... 371,517 --
----------- ----------
(513,243) (208,038)
----------- ----------
1,214,180 1,067,495
=========== ==========
</TABLE>
F-18
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
(Uanudited)
Consolidated Interim Statements of Loss and Comprehensive Loss
<TABLE>
<CAPTION>
Cumulative
April 22, 1998 For the three For the three
to March 31, months ended months ended
2000 March 31, 2000 March 31, 1999
$ $ $
-------------- -------------- --------------
<S> <C> <C> <C>
Revenue
Product.......................... 26,588 23,020 253
Management fees.................. 1,464 1,464 --
----------- ---------- ----------
28,052 24,484 253
----------- ---------- ----------
Expenses
Research and development (note
4).............................. 3,438,894 174,349 2,435,537
Selling, general and
administration.................. 5,716,202 2,076,237 1,350,900
Interest......................... 2,155,644 33,116 8,545
Amortization..................... 27,974 7,175 1,622
----------- ---------- ----------
11,338,714 2,290,877 3,796,604
----------- ---------- ----------
Net loss for the period.......... (11,310,662) (2,266,393) (3,796,351)
Other comprehensive income
Foreign currency translation
adjustments..................... 59,204 14,671 --
Unrealized gain on available for
sale securities................. 371,517 371,517 --
----------- ---------- ----------
Comprehensive loss for the
period.......................... (10,879,941) (1,880,205) (3,796,351)
=========== ========== ==========
Basic and fully diluted loss per
Common share (note 11).......... (0.14) (3.82)
========== ==========
Weighted average number of shares
outstanding during the period... 16,770,077 994,167
========== ==========
</TABLE>
F-19
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Consolidated Interim Statements of Cash Flows
<TABLE>
<CAPTION>
Cumulative For the three For the three
April 22, 1998 months ended months ended
to March 31, 2000 March 31, 2000 March 31, 1999
$ $ $
----------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from (used in)
Operating activities
Net loss for the period....... (11,310,662) (2,266,393) (3,796,351)
Items not affecting cash:
Amortization................ 27,974 7,175 1,622
Shares issued for employee
compensation............... 6,446,388 1,574,969 3,695,468
Shares issued for financing
costs...................... 2,087,418 -- --
Shares and warrants issued
for services............... 216,316 -- --
Accrued interest on non-
current loan payable....... 58,815 58,815 --
Net change in non-cash working
capital balances related to
operations (note 12)......... (77,884) (202,528) 75,782
----------- ---------- ----------
(2,551,635) (827,962) (23,479)
----------- ---------- ----------
Financing activities
Proceeds from Gateway loan.... 1,500,000 500,000 --
Repayment of loans payable.... -- -- (794)
Proceeds from E-Capital loan.. 495,829 -- --
Repayment of E-Capital loan... (495,829) -- --
Capital lease repayments...... (15,927) (14,493) 251,132
Issue of common shares........ 578,045 31 --
----------- ---------- ----------
2,062,118 485,538 250,338
----------- ---------- ----------
Investing activities
Acquisition of capital
assets....................... (102,790) (3,429) (5,878)
Acquisition of trademarks..... (4,057) (2,868) --
Proceeds from technology
licence transfer to NoTime
Wireless joint venture....... 841,341 -- --
Investment in Innovium Capital
Corporation common shares and
warrants..................... (168,268) -- --
----------- ---------- ----------
566,226 (6,297) (5,878)
----------- ---------- ----------
Effect of exchange rate
changes in cash.............. (1,674) (3,913) 827
----------- ---------- ----------
Increase (decrease) in cash
during the period............ 75,035 (352,634) 221,808
Cash--Beginning of period..... -- 427,669 31,566
----------- ---------- ----------
Cash--End of period........... 75,035 75,035 253,374
=========== ========== ==========
</TABLE>
F-20
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Consolidated Interim Statements of Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Preferred Accumulated other
Common shares shares Warrants Comprehensive income
---------------- ------------- --------------- ----------------------
Deficit Unrealized
accumulated Foreign gain on
Additional Less during the currency available
paid in subscriptions Development translation for sale
capital receivable stage adjustments securities
Number $ Number $ $ $ Number $ $ $ $
---------- ----- --------- --- ---------- ------------- ------- ------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares issued
for
subscription.... 900,000 90 -- -- 32,579 (32,668) -- -- -- -- --
Net loss for the
period.......... -- -- -- -- -- -- -- -- (100,296) -- --
Foreign currency
translation
adjustments..... -- -- -- -- -- -- -- -- -- 343 --
---------- ----- --------- --- ---------- ------- ------- ------- ----------- ------ -------
Balance--
December 31,
1998............ 900,000 90 -- -- 32,579 (32,668) -- -- (100,296) 343 --
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.... -- -- -- -- -- -- 50,000 15,000 -- -- --
Warrants issued
for investment.. -- -- -- -- -- -- 100,000 256,373 -- -- --
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.......... -- -- -- -- -- -- -- -- (8,943,973) -- --
Foreign currency
translation
adjustments..... -- -- -- -- -- -- -- -- -- 44,190 --
---------- ----- --------- --- ---------- ------- ------- ------- ----------- ------ -------
Balance--
December 31,
1999............ 17,066,344 1,707 1,500,000 150 8,551,364 (32,896) 150,000 271,373 (9,044,269) 44,533 --
Shares issued
for
compensation.... 315,000 31 -- -- 1,574,969 -- -- -- -- -- --
Net loss for
period.......... -- -- -- -- -- -- -- -- (2,266,393) -- --
Foreign currency
translation
adjustment...... -- -- -- -- -- -- -- -- -- 14,671 --
Unrealized gain
on available for
sale
securities...... -- -- -- -- -- -- -- -- -- 371,517
---------- ----- --------- --- ---------- ------- ------- ------- ----------- ------ -------
Balance--March
31, 2000........ 17,381,344 1,738 1,500,000 150 10,126,333 (32,896) 150,000 271,373 (11,310,662) 59,204 371,517
========== ===== ========= === ========== ======= ======= ======= =========== ====== =======
<CAPTION>
Total
shareholders'
equity
$
-------------
<S> <C>
Shares issued
for
subscription.... 1
Net loss for the
period.......... (100,296)
Foreign currency
translation
adjustments..... 343
-------------
Balance--
December 31,
1998............ (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.... 15,000
Warrants issued
for investment.. 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)
Foreign currency
translation
adjustments..... 44,190
-------------
Balance--
December 31,
1999............ (208,038)
Shares issued
for
compensation.... 1,575,000
Net loss for
period.......... (2,266,393)
Foreign currency
translation
adjustment...... 14,671
Unrealized gain
on available for
sale
securities...... 371,517
-------------
Balance--March
31, 2000........ (513,243)
=============
</TABLE>
F-21
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements (Unaudited)
March 31, 2000
1Nature 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.
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 (see note 13 (b)).
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
F-22
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements (Unaudited)
March 31, 2000
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.
These unaudited interim consolidated financial statements reflect all
adjustments which are, in the opinion of the Company's management,
necessary to a fair statement of results for these interim periods.
2Accounting 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.
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:
<TABLE>
<CAPTION>
<S> <C>
Computer hardware.................................................. 3 years
Computer software.................................................. 1 year
Office furniture and equipment..................................... 5 years
</TABLE>
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.
F-23
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements (Unaudited)
March 31, 2000
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.
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 March 31, 2000, 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
F-24
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements (Unaudited)
March 31, 2000
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, other current
assets, investments, accounts payable and accrued liabilities, loans
payable, and obligation under capital leases approximate their carrying
values unless otherwise noted.
3Recent 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.
4Investment 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 the
first quarter of 2000 and accordingly no amounts have been applied in the
current fiscal period to reduce research and development expenditures or
the cost of capital assets.
5Other current assets
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
$ $
<S> <C> <C>
Refundable commodity taxes.......................... 78,036 64,413
Prepaid expenses.................................... 58,784 12,526
Other............................................... 11,623 3,465
------- ------
148,443 80,404
======= ======
</TABLE>
F-25
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements (Unaudited)
March 31, 2000
6Available 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 Exchange. Although management does not
intend to hold the Innovium common shares for the long term, these
securities have not been bought and are not held principally for the
purpose of selling them in the near term. In accordance with SFAS No. 115
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. At March 31, 2000, the value of the Innovium common share investment
was $636,395 (CDN$925,000). The unrealized gain on these available for sale
securities has been included in comprehensive income for the period.
In addition, primarily as a result of its investment in Innovium, the
Company may be deemed to be an investment company and subject to the
registration requirements of the Investment Company Act of 1940. Although
the Company believes it is not an investment company under this Act, it is
relying on a temporary one-year exemption from such registration
requirements. By December 2000, if the Company's holdings of investment
securities exceed 40% of its total assets and it has not applied for and
obtained an exemptive order from the SEC, it may need to take certain
actions, including selling its Innovium holdings, to avoid the registration
requirements of such Act.
Should the Company be unable to avoid the registration requirements of such
Act, it would be required to comply with Article 6 of Regulation S-X in the
preparation of its financial statements. This could result in, among other
things, substantial changes to the carrying value of certain assets and in
the presentation of the results of its operations, particularly as to the
inclusion of unrealized gains or losses on its Innovium investment in
ordinary income instead of comprehensive income.
7NoTime 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
F-26
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements (Unaudited)
March 31, 2000
$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. This fee
has been recorded as management fee revenue. 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 has had no revenues during its initial operating period to
date.
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
conducted by NoTime. Additional funding advanced to NoTime, of $43,230
during the three- month period ended March 31, 2000, has been charged to
research and development expense as incurred.
F-27
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements (Unaudited)
March 31, 2000
8Capital assets
<TABLE>
<CAPTION>
March 31, 2000
----------------------------
Accummulated
Cost Amortization Net
------- ------------ -------
$ $ $
<S> <C> <C> <C>
Computer hardware............................... 78,035 16,551 61,484
Computer software............................... 7,718 5,443 2,275
Office furniture and equipment.................. 43,595 6,466 37,129
------- ------ -------
129,348 28,460 100,888
======= ====== =======
<CAPTION>
December 31, 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
======= ====== =======
</TABLE>
9Loan payable
<TABLE>
<CAPTION>
March 31, December
2000 31, 1999
--------- ---------
$ $
<S> <C> <C>
Gateway Research Management Group Ltd. loan payable,
authorized amount of $2,000,000, bearing interest at
the rate of 12% payable monthly, repayable June 30,
2000 or upon a Significant Financing Event........... 1,500,000 1,000,000
Accrued interest on Gateway loan...................... 58,815 20,142
--------- ---------
1,558,815 1,020,142
========= =========
</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.
10Commitments
The minimum annual payments under long-term agreements for premises are as
follows:
<TABLE>
<CAPTION>
$
------
<S> <C>
Year ending March 31, 2001............................... 92,000
2002.................................... 31,000
2003.................................... 29,000
2004.................................... 2,000
2005.................................... 2,000
</TABLE>
F-28
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements (Unaudited)
March 31, 2000
11Capital 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.
In 1999, the Company issued 4,000,000 common shares at nominal values to
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 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.
During the current period, the Company appointed a new Chief Executive
Officer. As part of the terms of the employment agreement, the Chief
Executive Officer will be issued a total of 950,000 common shares of the
Company from treasury for nominal consideration. Of these shares, 315,000
were issued during the three-month period ended March 31, 2000 and the
remainder will vest in eight equal quarterly instalments. These issued
shares have been recorded at $5.00 per share based on their fair market
value at the time of issuance. Similarly, the remainder of shares vesting
quarterly will be recorded as compensation expense based on their fair
market value at the time of issuance.
Preferred shares
The Preferred shares issued and outstanding as of March 31, 2000 are
convertible into common shares of the Company on a share-for-share basis at
any time prior to June 30,
F-29
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements (Unaudited)
March 31, 2000
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 based on the issue price of that
financing.
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
(see note 13 (b)).
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,
proposed options, and non-vested shares have been excluded from the
calculation of fully diluted loss per share as the impact of their exercise
is anti-dilutive in both the three-month periods ended March 31, 2000 and
1999.
F-30
<PAGE>
thinWEB Technologies Corporation
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements (Unaudited)
March 31, 2000
Employee stock option plan
At March 31, 2000 options had been granted to purchase 2,319,834 common
shares in accordance with the Company's Employee Stock Option Plan (the
"Plan") all having an exercise price of $5.00. Under the terms of the Plan,
the option term may not exceed five years and options will vest one-third
on the employment date, one-third on the first anniversary of employment
and one-third on the second anniversary of employment, provided that no
options are to be exercisable until the 90th day after the shares of the
Company become publicly traded. The total number of shares to be made
available under the Plan shall not exceed 17% of the Company's common
shares.
12Net change in non-cash working capital balances related to operations
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, 2000 March 31, 1999
-------------- --------------
$ $
<S> <C> <C>
Increase in amounts receivable from NoTime
Wireless joint venture..................... (53,855) --
Increase in other current assets............ (68,599) (8,002)
Increase (decrease) in accounts payable and
accrued liabilities........................ (80,074) 83,784
--------- -------
(202,528) 75,782
========= =======
</TABLE>
13Subsequent events
a) On April 1, 2000, the Company appointed a Chief Technology Officer and a
Vice President of Sales and Marketing. As part of the terms of these
agreements, the Chief Technology Officer was issued 100,000 common shares
and 100,000 options. Of the common shares, 33,333 vested immediately with
the remainder vesting in two equal annual instalments commencing 12 months
from the date of employment. The Vice President of Sales and Marketing was
issued 400,000 common shares and 150,000 options. Of the common shares,
133,333 vested immediately with the remainder vesting in two equal annual
instalments commencing 12 months from the date of employment. These shares
will be recorded as compensation expense based on their fair value at the
time they are issued.
b) On April 11, 2000 the Company cancelled the 50,000 warrants associated
with the Warrick Acquisition Corporation transaction which is described in
note 1. The value attributed to the warrants of $15,000 will be transferred
to additional paid in capital.
F-31
<PAGE>
THINWEB TECHNOLOGIES CORPORATION
6,337,500 shares of common stock to be sold by certain selling security
holders
----------------
PROSPECTUS
----------------
, 2000
We have not authorized any dealer, salesperson or other person to provide
any information or make any representations about thinWEB except the
information or representations contained in this prospectus. You should not
rely on any additional information or representations if made.
This prospectus does not constitute an offer to sell, or a solicitation of
an offer to buy any securities:
. except the common stock offered by this prospectus;
. in any jurisdiction in which the offer or solicitation is not authorized;
. in any jurisdiction where the dealer or other salesperson is not
qualified to make the offer or solicitation;
. to any person to whom it is unlawful to make the offer or solicitation;
or
. to any person who is not a United States resident or who is outside the
jurisdiction of the United States.
The delivery of this prospectus or any accompanying sale does not imply
that:
. there have been no changes in the affairs of thinWEB after the date of
this prospectus; or
. the information contained in this prospectus is correct after the date of
this prospectus.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 24. Indemnification of Directors and Officers
ThinWEB is incorporated in Delaware. Under Section 145 of the General
Corporation Law of the State of Delaware, a Delaware corporation has the
power, under specified circumstances, to indemnify its directors, officers,
employees and agents in connection with actions, suits or proceedings brought
against them by a third party or in the right of the corporation, by reason of
the fact that they were or are such directors, officers, employees or agents,
against expenses incurred in any action, suit or proceeding. The certificate
of incorporation and the by-laws of thinWEB provide for indemnification of
directors and officers to the fullest extent permitted by the General
Corporation Law of the State of Delaware.
The General Corporation Law of the State of Delaware provides that a
certificate of incorporation may contain a provision eliminating the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director provided that such
provision shall not eliminate or limit the liability of a director
(1) for any breach of the director's duty of loyalty to the corporation
or its stockholders,
(2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
(3) under Section 174 (relating to liability for unauthorized
acquisitions or redemptions of, or dividends on, capital stock) of the
General Corporation Law of the State of Delaware, or
(4) for any transaction from which the director derived an improper
personal benefit.
ThinWEB's certificate of incorporation contains such a provision.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers or persons
controlling thinWEB pursuant to the foregoing provisions, it is the opinion of
the Securities and Exchange Commission that such indemnification is against
public policy as expressed in the Act and is therefore unenforceable.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth our expenses in connection with this
registration statement. All of such expenses are estimates, other than the
filing fees payable to the Securities and Exchange Commission.
<TABLE>
<S> <C>
Filing Fee--Securities and Exchange Commission.................. $ 8,000
Fees and Expenses of Accountants and legal counsel.............. 200,000
Blue Sky Fees and Expenses...................................... 4,000
Printing and Engraving Expenses................................. 5,000
Miscellaneous Expenses.......................................... 1,000
--------
Total........................................................... $218,000
========
</TABLE>
II-1
<PAGE>
Item 26. 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 to the founders of Warwick 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. ThinWeb Software was a foreign private issuer
under the Securities Act and Regulation S thereunder at the time of these
issuances, the offerings were made to non-U.S. persons in offshore
transactions and no directed selling efforts were made in the United States.
Accordingly, the issuance of these shares to the persons set forth below 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 Regulation S thereunder. Some of these holders of the shares
listed below may have subsequently transferred or disposed of their shares and
the list does not purport to be a current listing of our shareholders.
<TABLE>
<CAPTION>
Number of
Number of Post-Exchange
Pre-Exchange Shares or Right
Date Shareholder Shares to Direct Vote Consideration
---- ----------- ------------ --------------- -------------
<C> <S> <C> <C> <C>
Butternut Capital
4/14/99 Limited.................. 613,000 613,000 $ 4*
International
4/14/99 Shareholdings Corp....... 387,000 387,000 3*
Seismic Investments
4/14/99 Ltd...................... 577,000 577,000 4*
4/14/99 Amery Associates Inc..... 473,000 473,000 3*
4/14/99 Cannon Equity Limited.... 398,000 398,000 3*
Corporate Solutions
4/14/99 Limited.................. 602,000 602,000 4*
Strathglen Capital
4/14/99 Limited.................. 479,000 479,000 3*
Greensted Equities
4/14/99 Limited.................. 471,000 471,000 3*
Arrendadora Solarsa
4/14/99 S.A...................... 500,000 500,000 83,389*
4/14/99 Transatlantic Co., S.A... 250,000 250,000 2*
4/14/99 Cheetah Systems Ltd...... 500,000 500,000 3*
Shaftesbury Global
4/14/99 Limited.................. 500,000 500,000 3*
Midland Shareholdings
4/14/99 Limited.................. 500,000 500,000 3*
3/31/99 B. MacLean Family Trust.. 2,666,667 2,666,667 16,349*
3/31/99 C. Reid Family Trust..... 2,666,667 2,666,667 16,349*
Enman Family Investment
3/31/99 Trust.................... 2,666,666 2,666,666 33,130*
3/31/99 J. Smyth Family Trust.... 175,000 175,000 1*
3/31/99 T. MacLean Family Trust.. 195,000 195,000 1*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Number of
Number of Post-Exchange
Pre-Exchange Shares or Right
Date Shareholder Shares to Direct Vote Consideration
---- ----------- ------------ --------------- -------------
<C> <S> <C> <C> <C>
3024704 Nova Scotia
3/31/99 Limited.................. 891,000 891,000 445,500*
3/31/99 Donald Wile.............. 100,000 100,000 50,000*
Everest (Private) Trust
3/31/99 Company.................. 14,000 14,000 7,000*
4/7/99 Gary Hannah.............. 1,181,344 1,181,344 8*
4/5/99 Paul Landry Sr........... 100,000 100,000 0*
4/5/99 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) With respect to the entities listed below, who are not selling security
holders, we have been informed by each entity of the name and address of
the individual that controls it and, accordingly, has beneficial ownership
of the shares listed:
--Transatlantic Co. S.A. is controlled by Alvaro Villalobos, located at
Avenida 7, Calle 3 Bis, Edifico Teresa 3 Piso, San Jose, Costa Rica.
--Cheetah Systems Ltd. is controlled by Rosalyn Rodriguez, located at
Avenida 7, Calle 3 Bis, Edifico Teresa 3 Piso, San Jose, Costa Rica.
--Shaftsbury Global Limited is controlled by Isabel Salas, Apartada Postal
7-3330-1000, San Jose, Costa Rica.
--Midland Shareholdings Limited is controlled by Jean Guillemard, Apartada
Postal 7-3330-1000, San Jose, Costa Rica.
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 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
II-3
<PAGE>
exchange, ThinWeb Software Incorporated became a subsidiary of Thinweb.com Inc.
and, indirectly, a subsidiary of thinWEB Technologies Corporation, the parent
company.
Also in connection with the share exchange transaction, in consideration for
certain services related to the corporate reorganization, we granted a warrant
to purchase up to 50,000 shares of our common stock at a strike price of $1.00
per share, exercisable for a period of five years from April 22, 1999, to TPG
Capital Corporation, a shareholder and an affiliated company of Cassidy &
Associates, the law firm which prepared initial versions of this registration
statement. The granting of this warrant to TPG Capital 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.
Preferred Stock Issuance
Pursuant to our agreement with E-Capital Management Inc., effective March
15, 1999, we 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 advice and assistance pursuant to such agreement in locating both
interim and equity financing and in the going public process. E-Capital has
since assigned the shares to 583317 British Columbia Ltd. J. Gregory Wilson,
one of our directors, 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.
Mr. Wilson is a sophisticated investor who, prior to the issuance of the
convertible securities, made several trips to our headquarters to meet with
management and review product demos, and was provided with all relevant
information concerning our business plan and operations. Accordingly, 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. (entities
controlled and represented by Mr. Wilson) 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.
As part of our joint venture with Innovium Capital Corp., a publicly traded
Canadian company whose shares are listed on the Montreal Exchange, we issued to
Innovium 100,000 non-transferable common stock purchase warrants with a two
year exercise term and an exercise price per share equal to the lower of $5.00
and the lowest price at which we issue equity or securities convertible into
equity during this period pursuant to a financing. In consideration for
entering into the joint venture transaction, we received net proceeds of
$673,073 ($1,000,000 CDN) and a 50% interest in the joint venture company, as
more fully discussed in note 7 to the financial statements. Innovium is an
accredited investor who was provided with extensive information about our
operations and products in connection with the joint venture transaction.
Accordingly, 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.
II-4
<PAGE>
Employment Agreements
Pursuant to our employment agreement with James Cappadocia, our recently
appointed president and chief executive officer, we issued 315,000 shares of
common stock to him for nominal consideration upon his employment with us and
79,375 on May 3, 2000, and have agreed to issue him an additional 555,625
shares in seven equal quarterly installments of 79,375 shares. Such issuances
to Mr. Cappadocia did not involve a public offering and were exempt from the
registration requirements of the Securities Act pursuant to the exemption from
registration provided in Section 4.2 thereof.
Pursuant to our employment agreement with Alan Guneyler, our recently hired
Vice President Sales and Business Development, we issued 133,333 common shares
and 150,000 common share options to him for nominal consideration upon his
employment with us and agreed to issue him an additional 266,667 shares in two
equal annual installments commencing in March 2001. Such issuance of shares and
options to Mr. Guneyler 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.
Pursuant to our employment agreement with James Gillen, our recently hired
Chief Technology Officer, we issued 33,333 common shares and 100,000 common
share options to him for nominal consideration and agreed to issue him an
additional 66,667 shares in two equal annual installments commencing in April
2001. Such issuance of shares and options to Mr. Gillen 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.
Stock Option Plan
Pursuant to our stock option plan, since January 1, 2000, we issued options
to purchase 2,669,834 common shares to certain of our employees, officers and
directors. The option issuances to non-U.S. persons under the plan were exempt
from the registration requirements of the Securities Act pursuant to Regulation
S thereunder. The option issuances to U.S. persons were exempt under Section
4(2) thereof.
Item 27. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<C> <S>
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
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S>
4.1* Share Exchange and Share Purchase Agreement among Warwick
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
5.1* Opinion of Sadis & Goldberg LLC
10.1* License Agreement with Sun Microsystems
10.3* License Agreement with Cloudscape, Inc.
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, filed with
the Annual Report on Form 10-KSB filed with the Commission on March
30, 2000 (file no. 000-25419) and incorporated herein by reference
10.18* Consulting Agreement with J.S. Anthony & Co. Ltd.
10.19* Software License Agreement with PointBase, Inc.
10.20* Employment Agreement with Alan Guneyler
10.21* Employment Agreement with James Gillen
23.1 Consent of Accountants
23.2 Consent of Sadis & Goldberg LLC (included in Exhibit 5.1)
</TABLE>
--------
* Previously filed
(b) The following financial statement schedules are included in this
registration statement.
None.
II-6
<PAGE>
Item 28. Undertakings.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(1) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(2) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(3) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrant hereby undertakes that for the purpose
of determining any liability under the Securities Act of 1933, each post-
effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
thinWEB Technologies Corporation certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form SB-2 and
authorized this registration statement to be signed on its behalf by the
undersigned in Ottawa, Ontario, Canada on May 30, 2000.
Thinweb Technologies Corporation
By: /s/ James Cappadocia
__________________________________
James Cappadocia,
President, Chief Executive
Officer and Director
By: /s/ George R. Fraser
__________________________________
George R. Fraser,
Chief Financial Officer,
Principal Accounting Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James S. Anthony Director May 30, 2000
______________________________________
James S. Anthony
/s/ Bryan C. MacLean Director May 30, 2000
______________________________________
Bryan C. MacLean
/s/ J. Gregory Wilson Director May 30, 2000
______________________________________
J. Gregory Wilson
/s/ George A. Pacinelli Director May 30, 2000
______________________________________
George A. Pacinelli
/s/ Donald Woodley Director May 30, 2000
______________________________________
Donald Woodley
</TABLE>
II-8
