UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - SB/A No. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
dot com Entertainment Group, Inc.
(Name of Small Business Issuer in its charter)
Florida 58-2466312
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
300 Pearl Street, Suite 200, Buffalo, NY 14202
(Address of principal executive offices) (zip code)
(905) 337-8524
Issuer's telephone number
Securities to be registered under section 12(b) of the Act:
None.
Securities to be registered under section 12(g) of the Act:
Title of Class
--------------
Common Stock, $.001 par value per share
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TABLE OF CONTENTS
Page
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PART I.........................................................................3
Item 1. Description of Business..........................................3
Item 2. Management's Discussion and Analysis or Plan of Operation.......16
Item 3. Description of Property.........................................21
Item 4. Security Ownership of Certain Beneficial Owners and Management..22
Item 5. Directors, Executive Officers and Significant Employees.........22
Item 6. Executive Compensation..........................................25
Item 7. Certain Relationships and Related Transactions..................25
Item 8. Description of Securities.......................................25
PART II.......................................................................26
Item 1. Market Price of and Dividends on the Registrant's Common
Equity and Other Shareholder Matters....................................26
Item 2. Legal Proceedings...............................................26
Item 3. Changes in and Disagreements with Accountants...................26
Item 4. Recent Sales of Unregistered Securities.........................26
Item 5. Indemnification of Directors and Officers.......................27
PART F/S......................................................................28
Item 1. Financial Statements............................................28
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS....................................28
PART III......................................................................30
Item 1. Index to Exhibits (Pursuant to Item 601 of Regulation SB).......30
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PART I
Description of Business
A. BUSINESS DEVELOPMENT AND SUMMARY
dot com Entertainment Group, Inc., hereinafter referred to as "dot com" or
the "Company", is a diversified Internet software development company,
specializing in the creation and support of Internet entertainment products and
related services. dot com is in the business of developing, supporting,
maintaining and promoting the sale of entertainment software products that can
be used either on or off the Internet. The Company focuses its efforts on
developing and supporting Internet gaming, lottery, entertainment and related
software products. The Company also develops, implements and manages the use of
entertainment software products and technical support services for the
not-for-profit and charitable business sectors, and develops and sells
commercial entertainment software for use by private users.
dot com is not an Internet gaming company, in that it is does not directly
or indirectly accept wagers used to play games of chance on the Internet.
Rather, it develops and licenses the use of its commercial software products and
trademarks, such as its CyberBingo(TM) software system, to independent third
parties located in jurisdictions that permit Internet gaming as a legitimate
business enterprise. On January 16, 1997, the Company launched a free beta
version of CyberBingo(TM) on the Internet. Based on the Company's research, as
at January 16, 1997 there was no other interactive java-based Bingo game
available on the Internet, making CyberBingo(TM) the world's longest running,
fully interactive, java-based Internet Bingo Hall. Java-based applications are
programs which are written and compiled using Sun Microsystems' JAVA
specification, allowing Internet software providers to maintain their
applications on central-based Internet servers, rather than manually deploying
applications directly to end-users.
dot com derives its revenues from several sources, including its assessment
of license fees and royalties from the use of its software. Additionally, dot
com provides licensees with technical support, maintenance, software upgrades,
information and systems consulting services, and marketing and promotional
initiatives and services geared toward generating goodwill and brand awareness
of its products.
Until its name change on February 2, 1999, dot com formerly carried on
business as Affiliated Adjusters, Inc. ("Affiliated") a State of Florida
corporation which was organized on December 11, 1981. Prior to its acquisition
of Precyse, Affiliated conducted no business and had only nominal assets and
liabilities. On January 27, 1999, Affiliated acquired 100% of the shares of The
Precyse Corporation ("Precyse"), a private corporation organized under the laws
of the Province of Ontario, Canada on November 22, 1996, for an aggregate price
of $1,000. The price was established amongst the management of Precyse and
Affiliated and was an arm's length negotiation. There was also an oral
understanding that some of the selling shareholders of
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Precyse would become the officers and directors of Affiliated and would be
invited to purchase shares of Affiliated pursuant to an offering of shares
exempt from registration under the Securities Act 1933 under Rule 504. Some
shareholders of Precyse did in fact become all of the officers and directors of
Affiliated and did subscribe for and purchase shares of Affiliated, resulting in
a change in control of Affiliated by the former shareholders of Precyse.
From the date of its organization to its acquisition by dot com on January
27, 1999, Precyse operated as a private company, had limited operations,
revenues and liabilities and was not the subject of any bankruptcy, receivership
or similar proceedings. There was also no material reclassification, merger,
consolidation, or purchase or sale of a significant amount of assets not in the
ordinary course of business. Precyse did not require nor did it retain the
services of any promoter. It was also engaged in the business of software
development, specifically the development of the CyberBingo(TM) software system
and its successful adaptation to the Internet as it is described above in the
description of dot com's business development. Until its acquisition by dot com,
Precyse maintained no full-time employees or permanent office facilities. The
principal shareholders, directors and officers of Precyse now comprise the
management group of dot com.
All information in this registration statement concerns the historical
business and financial results of Precyse Corporation. dot com has not been
subject to any bankruptcy, receivership or other similar proceeding.
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B. BUSINESS OF ISSUER
1. PRINCIPAL PRODUCT AND SERVICES AND PRINCIPAL MARKETS
In view of the dynamic growth of the Internet, the Company has focused its
software development on the creation and enhancement of CyberBingo(TM). As at
August 1, 1999, more than 19,000 people have registered to play CyberBingo(TM)
from five continents. Through international marketing and promotion, the Company
plans to assist its licensees in developing CyberBingo(TM) as the recognized
name for online Bingo entertainment throughout the world.
dot com's business model contemplates the sale of sub-licenses to parties
in different jurisdictions who will provide local marketing expertise in the
development of the Company's software brands, such as CyberBingo(TM).
Sub-licensees will be obligated to market CyberBingo(TM) and dot com's other
software offerings in their local market in an attempt to bring new participants
into the same Internet game. Although there are many different demographic
groups within the same geographic territory, who can each be the marketing focus
of a different sub-licensee, there will be some competition for market-share and
revenue should there be more than one sub-licensee in any given geographic
territory. As such, new Company products introduced through the CyberBingo(TM)
player infrastructure (including its sub-licensees) may result in sub-licensees
competing against each other for revenue, in jurisdictions where there are
multiple sub-licensees.
CyberBingo(TM)
CyberBingo(TM) is one of the world's first Internet Bingo games written in
the "java" programming language. CyberBingo(TM) was created to capitalize on the
growing demand for Internet based online gaming by offering players a
pleasurable, interactive, electronic version of the classic Bingo Hall-style
game. CyberBingo(TM) has been extensively tested on the Internet since January,
1997. Management believes that the software is fully Y2K compliant. During the
beta testing stage, a non-gaming version of CyberBingo(TM) was tested 96 times
per day, on a 24-hour basis. This beta version was successfully played worldwide
by anyone who had access to the Internet. Between May 1, 1998 and August 1,
1999, there have been more than 54,000 games played with winnings returned to
players exceeding $959,000. CyberBingo(TM) is presently accessed and played by
entering The CyberBingo Corporation's website at www.cyberbingo.net. The
CyberBingo Corporation licenses dot com's CyberBingo(TM) software, but otherwise
has no affiliation whatsoever with dot com.
How it Works
After players have found CyberBingo(TM) , either through a search-engine or
through dot com marketing initiatives, they register as a player by providing
basic information and a contact address. Upon registration, players receive a
unique player account number, which has a personal password. Bingo games are
initially purchased online using credit cards, on-line
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checking, 1-800 and 1-900 services, through secure commerce connections.
CyberBingo(TM) game cards can be purchased after a player deposits $10.00,
$20.00, $50.00 or $100.00 in his CyberBingo(TM) account. The player can then
purchase up to 24 cards in each of the 110 CyberBingo(TM) games played
throughout the day, with each card purchased for $0.25.
Any time after registration, the player can navigate directly to
CyberBingo(TM) and obtain additional credits by "recharging" their player
account either through a new E-commerce purchase or through previously won
CyberBingo(TM) dollars.
At the conclusion of each game, CyberBingo(TM) will award the winning
player(s) with a pre-determined cash prize. Multiple winners will split the
prize equally. The prize amount is announced prior to each game and is
established either as a minimum amount, a declining amount or as a percentage of
revenue collected for the current game.
Players that win CyberBingo(TM) cash, see proceeds from the win deposited
automatically into their account. Winnings can either be used to purchase new
game cards or returned to the player on a "pay-out" request.
The CyberBingo(TM) hardware system is a leased system which operates in the
secure premises of The CyberBingo Corporation in St. John's, Antigua ("TCC").
The lessor of this system is Equilease Corp. of Willowdale, Canada, which is not
related in any way to dot com. The CyberBingo(TM) hardware system consists of 5
Microsoft NT based Pentium class computers which participate together on a local
area network to form the back end of the CyberBingo(TM) 3-tier architecture. The
servers provide Database, Web Server and Application Server functionality in
addition to various e-commerce related automation services. The hardware system
is supported by a state-of-the art tape backup system, which provides for safe
keeping of all software and data systems. Because this system accesses the
Internet through a local Internet service provider in St. John's, Antigua,
temporary service interruptions will occur periodically, particularly in times
when the island has a communication service breakdown. Similarly, service
interruptions can occur when the island experiences power outages, which can not
be supported by back-up generating systems, in place at TCC's premises.
Income Streams
dot com plans to draw its revenues from several sources including:
o Royalty income
o Technology, support, maintenance and consulting fees
o Sub-license agreements and set-up fees
o License of commercial/non-gaming entertainment software products
o Software licensing, support and operating income and fees to the
not-for-profit and charitable business sector
o Advertising fees and revenue
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Royalties
Royalty fees are collected from individual licensees, who license the
Company's Internet entertainment software and operate their business from
jurisdictions that have embraced Internet gaming and entertainment.
In May of 1998, dot com concluded its first, and so far, its only, license
agreement with TCC. dot com's royalty fees from this license agreement are
established at 50% of TCC's gross revenue from sales of games to individual
players.
Technology, Support, Maintenance and Consulting Fees
In addition to generating a revenue stream from royalties, the Company
provides software support, consulting, strategic analysis and development
services to its licensees and to third parties. The Company is developing TV
support type interfaces for its software products, which will allow its Internet
games and entertainment to be used by technology, such as Web TV, in order to
increase user-friendliness and offer access through the Internet to a broader
user base. All support, consulting, strategic analysis and related services are
invoiced to clients on a per hour, per diem or per project basis.
Sub-License Agreements
As part of its license agreement, dot com is obligated to assist TCC in its
continued development of the world's largest Bingo hall. As such, and with the
consent of TCC, dot com is promoting the sale of sub-licenses, which will be
sold on a "territorial" basis to interested licensees worldwide who will promote
CyberBingo(TM) in their local jurisdiction.
If management's expectations are realized, the sale of sub-licenses could
provide an immediate increase in revenue to both TCC and dot com. As
contemplated by dot com, each sub-license will contain a requirement to
translate TCC's web-site and information pages into different languages. This
will open up entirely new player bases to CyberBingo(TM). Furthermore, through
the assistance of each sub-licensee, who will be obligated to help in the
marketing and promotion of CyberBingo(TM) in that jurisdiction, direct local
advertising will increase CyberBingo(TM)'s player base which will be managed by
the sub-licensee who will be familiar with the different elements of that local
market.
What should make this arrangement attractive to a sub-licensee is the
relatively small capital investment. It also allows the licensee to make use of
CyberBingo(TM)'s goodwill, e-commerce and player loyalty. Each sub-licensee will
pay dot com a development and licensing fee in the amount of $50,000, which will
cover all development costs incurred in creating the local website. The
sub-licensee will then receive 25% of the gross sales (after e-commerce charges)
which enter the CyberBingo(TM) game system in Antigua through the sub-licensee's
web-site. dot com believes that this sub-licensing agreement will immediately
increase CyberBingo(TM) player levels, which will lead to increased royalty
income to dot com. Although as of August 1, 1999, dot com had not concluded any
sub-license agreements, it is in discussion with several interested
sub-licensees.
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License of Individual Entertainment Software
The Company recently developed a Bingo game which can be purchased by
private or individual licensees and used either on the Internet, in Bingo halls,
in intranets, university and college campuses, hotel systems, airlines, at home
and in a variety of different settings. As the Company develops additional
entertainment products and games for Internet licensees, it will also add new
games to its sale of software to individual or private users, either through its
corporate website or in a retail setting.
In addition to the sale of "traditional" games, the Company has been
approached by potential licensees who require software development of virtual
entertainment products, and entertainment products which have their roots in
"traditional" games but have very different application and use. Various
entertainment providers are looking at traditional entertainment games such as
Bingo, to generate increased awareness and loyalty from their constituents and
dot com sees this as a new area of commercial software development and license
fees. No agreements have yet been signed to develop such software.
Software Licensing to the Not-for-Profit and Charitable Business Sector
Through limited customization of its Internet Bingo and other games, the
Company believes it is positioned to be an industry leader in the provision of
information technology solutions and support to charities, foundations and other
organizations, allowing them to easily transform and focus their fundraising
sources to the Internet as it matures. This may allow donors to enjoy Internet
Bingo and other games for the cost of their ticket purchases which may continue
to be characterized as a donation for tax purposes by the participant. The
Company is developing licensable versions of its first software product,
CyberBingo(TM), which will be followed by other games and systems.
The Company plans to provide charitable organizations with new media to
collect donations and subscription revenues in the not-for-profit business
sector. The Company would expect to provide software and technical support to
these organizations which will enable them, through their use of CyberBingo and
other similar entertainment products, to offer a medium through which donations
can be made as described previously. As at August 1, 1999 the Company had not
concluded any agreements with any not-for-profit organizations.
Advertising and Promotional Fees and Revenues
dot com plans to become a leader in the development of software products
that become "sticky sites" in the Internet entertainment business sector. A
"sticky site" is one that can attract repeat users for a longer period of time.
These have become the most desirable of websites since they are very attractive
to potential advertisers.
dot com plans to help its sub-licensees, if any, develop international
marketing and promotional campaigns for CyberBingo(TM). These campaigns, for
which dot com will receive fees to be negotiated amongst each sub-licensee, will
encourage and authorize sub-licensees to attract advertising on their local
website. The Company believes that this arrangement will give dot com a
competitive advantage over competing software development firms who simply sell
software. The Company's intention is to provide "added value" for the purchaser
of a sub-
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license. The sub-licensee will be positioned to benefit through royalty income
plus, if they are successful in their promotional efforts, local or other
advertising revenues. As the number of game players increases, the marketability
of each "sticky site" will improve, advancing the overall profile of dot com and
its products.
Each potential sponsor will deal with dot com on the development,
implementation and design of the advertising on the licensee site. The Company
anticipates that dot com will be able to generate significant marketing, design
and implementation fees, paid by the prospective sponsor and the licensee. There
can be no assurances that such fees will be generated. Changes and improvements
to the downloadable version of the CyberBingo(TM) software system have now been
made bringing banner and other advertising directly into the virtual Bingo card.
The Company intends to create this promotional ability within each game or card
as part of each new software innovation.
Overall Market
With the explosive growth of the Internet, particularly in areas outside of
North America, accompanied by technological innovations such as high-speed
Internet connectivity, the Company believes it is poised for tremendous growth.
According to International Gaming & Wagering Business Magazine, overall
revenues generated on the Internet are expected to exceed $1.2 trillion by 2002.
Forrester Research also predicts that online sales for business spending will
reach $327 billion by 2002. International Data Corporation and Deloitte & Touche
predict that revenues from on-line computer games will top $1 billion by 2000.
It is estimated that more than $10 billion dollars was wagered in Bingo halls
worldwide in 1996 and that approximately 500 million games were played that
year. The 1990s have been a breakthrough decade for casinos and other gaming
industries in both the United States and abroad. During this decade, gaming has
been one of the fastest growing industries in the U.S., with gross annual
revenues generated by casinos, Bingo, lotteries and racing exceeding $1 trillion
in gaming wagering according to International Gaming & Wagering Business
Magazine. Estimates of the current Internet gaming market in the U.S. alone
total $8.5 billion. Its potential is expected to exceed $50 billion worldwide by
the end of the century according to the Casino Gaming Business Market Research
Handbook. With the exception of the United States, governments of countries
worldwide, including Australia, Germany and South Africa are liberalizing and
developing their Internet gaming laws in order to regulate Internet gaming and
benefit from the "voluntary tax" monies that flow from Internet gaming
activities.
Based on data gathered from CyberBingo(TM) players and on information
available from other Internet Bingo games, the Company believes that there is a
large and growing player base which demands a quality Bingo game on the
Internet. The Company's research indicates that the demographics of the Bingo
player on the Internet are very different from those of the conventional Bingo
hall player, and that the number of Bingo enthusiasts migrating to the Internet
is rapidly growing. Also, the Company believes that an increasing number of
non-Bingo enthusiasts are participating in games like CyberBingo(TM) for
entertainment and the possibility of winning a cash prize. Since its inception
in May, 1998 and as at August 1, 1999, more than 19,000 players have become
CyberBingo(TM) members and have registered to play for cash prizes.
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The primary source of the Company's research into the online Bingo player
was assembled from a number of Internet Bingo portals and publications, who
provide valuable information on player volumes, game preferences and scheduling.
Some of these sources include the Bingo Bugle, Bingo Online and Bingo.com who
provide non-biased feature articles and player reviews on Internet Bingo sites
which review the specific likes and dislikes of the online Bingo player and
provide valuable marketing and demographic information.
In April of 1999, dot com provided TCC with the ability to offer integrated
chat room capability to its players. Since that time, dot com has conducted
research through its review of several hundred hours of CyberBingo(TM) chat
logs, which are archived, and provide valuable information about player
demographics, formatting, preferences and other information.
2. DISTRIBUTION METHODS OF THE PRODUCTS AND SERVICES
dot com's marketing strategy is built on the development of real-world and
online advertising campaigns. Leveraging existing real world and online
promotion through related organizations is intended to generate and capitalize
on momentum and build customer and licensee player relationships and loyalty. In
order for dot com to become an industry leader in the design, supply and support
of on-line entertainment software products, the Company believes that it must
reach as many of the possible target groups as possible within the first year of
operation. Through its creation of dot com product awareness, brand recognition
and reliability of product operation with all potential users, customers and
licensees, the Company expects that it will generate a competitive advantage
over current and future competition. Just as online consumers refer to
Amazon.com as the online bookstore and Yahoo! as the search engine and portal,
the Company intends to become known as the leading provider and developer of
Internet entertainment products. The Company intends to generate this awareness
through several media strategies, including:
o Online media
o Direct response media
o Traditional media
o Public and investor relations
o Promotion through the not-for-profit sector
The Company has concluded its first License and Technology and Support
Agreement. TCC of Antigua, West Indies was the first company to purchase a
CyberBingo(TM) license from dot com, and at the present, is the only such
licensee. The license provides for the full implementation, support and
operation of CyberBingo(TM) in Antigua. In order to operate CyberBingo(TM)
legally, TCC purchased a Virtual Gaming License, which was issued effective
January 1, 1998 in accordance with the regulatory requirements set out by the
Free Trade and Processing Zone Act (1994, Antigua and Barbuda).
The Company intends to sell additional License and Technology and Support
Agreements with other third parties (its "sub-licensees"), who will make use of
the existing infrastructure in Antigua. New licensees will operate and promote
CyberBingo(TM) in their local jurisdiction and cause their player base to "click
through" to the CyberBingo(TM) game in Antigua.
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The Company anticipates that additional license fees will be generated from the
sale of an interest in the software in locations throughout the world.
Assuming it can secure adequate capital, dot com intends to allocate
significant financial resources to the international marketing and sale of
sub-licenses, which will be sold on a "territorial" basis to interested
licensees. Assuming the Company is successful in selling sub-licenses,
CyberBingo(TM) will be promoted in local jurisdictions by sub-licensees, thereby
building the number of players per game and the resulting royalty streams to dot
com. As these sub-licenses are sold, CyberBingo(TM) will become available in
different languages, attracting entirely new players to CyberBingo(TM). Because
each sub-licensee will be obligated to help in the marketing and promotion of
CyberBingo(TM) in that jurisdiction, direct local advertising will also increase
CyberBingo(TM)'s player-base. dot com's intention is to attract quality
sub-licensees who will be familiar with the nuances of marketing in that local
market, thereby further increasing royalty revenues to dot com.
As part of its growth strategy, the Company will actively seek potential
acquisitions of businesses and business assets. The Company has already
identified some potential target acquisitions and is looking at the following
industry groups:
o Private Internet marketing and promotional firms
o Private software development firms
o Other complementary entertainment providers
The Company has not reached any agreements or understandings, oral or
written, to acquire any businesses.
On-line media
The Company intends to negotiate banners and links on widely used search
engines, both domestically and internationally, and on sites which offer
strategic advantage to the target audience. This will not only drive awareness
and traffic to licensee sites, but, to the extent exclusivity can be achieved,
it will pre-empt competitors from this vital medium.
dot com intends to develop as many associations as possible with other
comparable online websites, such as those maintained by clubs, organizations and
other international groups. Many of these groups have established an on-line
presence to promote and provide access to their membership and prospects.
dot com has investigated comparable websites and we hope to negotiate
suitable arrangements, which may provide the sites with the opportunity to earn
revenue (percent of sales) in exchange for hosting links. Some of the sites will
represent non-profit organizations, charities and other groups, in an attempt to
draw the commercial side of dot com's business into its Internet product base.
In those cases proceeds earned could be donated on the site's behalf.
Direct Response Media
The Company believes that direct response is by far the most efficient
medium to inform prospects about the features and benefits of dot com's products
and those offered by its licensees.
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Targeted direct response typically takes the form of personally addressed direct
mail. Management believes the cost of traditional direct response is prohibitive
to our industry competitors, particularly on an international scale. Our
intention is to sufficiently capitalize dot com so it can take advantage of this
medium. There can be no assurance that dot com will be able to obtain adequate
financing to achieve this goal. Some of the competing Bingo software systems
available on the Internet today include Ibingo, Bingomania, BingoZone and
HomeBingo. Companies who develop or have announced plans to develop on-line
Bingo systems include Bingo.com, Dion Entertainment Inc., Cryptologic Inc.,
Venturetech Inc., Internet Casinos Ltd., Starnet Communications, Interactive
Gaming and Communications Corp., Wager Net Inc., Casinos of the South Pacific,
World Wide Web Casinos and Virtual Vegas.
On a city by city basis, dot com plans to also develop relationships with
top Internet service providers and hopes to enter into agreements with these
service providers and organizations. The agreements may offer advertising
listings on dot com or licensee sites in exchange for client lists. An
advertising presence or the right to place inserts, or "piggy-back", in their
direct mailing will save dot com postage, ensure access to well-targeted
prospect groups and leverage the existing loyalty between the service providers
and their customers. The inserts could include customer discounts, free licensee
game activity or other promotional items. "Piggy-backing" is significantly more
efficient than traditional direct response media. The Company will segment
various sub-sets of the direct response target groups and test insert designs,
lists, incentives etc.
Outbound e-mail is also a unique opportunity and a relevant medium. This
type of "push medium" has received some negative response from the on-line
community, and as such, dot com will proceed with this initiative only after it
studies the issues more carefully, and deems it appropriate and a valuable
option.
Traditional Media
Traditional media including consumer magazines, industry specific programs,
commercial advertising, television and radio coverage and related offerings,
will be developed with the assistance of digital agencies and marketing
consulting firms who are specialists in marketing and promotion and who the
Company will retain as agencies of record for fees and or fee/equity
arrangements which will be negotiated amongst the parties. With the assistance
of our advisers, dot com plans to use page dominant advertising for its products
and participating licensees, sustaining weight and frequency in selected
publications thereafter.
In addition, the Company will work aggressively with its licensees to
provide information on product incentives, such as free games or million dollar
prizes. The data based nature of the business provides the technology capable of
truly carrying on a one-to-one relationship with every single user, providing
the added value features that are relevant to that particular Internet
entertainment customer.
Not For Profit Sector
We have commenced positive discussions with not-for-profit organizations in
Toronto, Canada. dot com intends to provide sponsorship, fundraising, charitable
representation and other
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relationships and programs using our software, support and industry knowledge to
help the not-for-profit business sector increase donation revenues. This
represents a highly cost effective tactical strategy to support our "first
mover" status in this industry. It also serves as a pre-emptive function,
excluding potential competitive on-line vendors from leveraging the same
opportunity.
3. NEW PRODUCTS
In addition to CyberBingo(TM), the Company plans to develop other Internet
entertainment products, along with corresponding e-commerce systems which can be
used in conjunction with its online games to process credit cards over the
Internet. The Company has set a goal of releasing a new software product
approximately every three months.
In order for the Company to realize its goal of releasing a new software
product every three months and successfully marketing its existing software
products, it will be required to successfully complete a public or private
financing. The Company intends to raise up to $10,000,000 in the form of a
private equity placement, in order to accomplish these objectives. There can be
no assurance that the Company will in fact be able to raise this much equity.
In addition to its software products, the Company intends to provide value
to customers in terms of development support, such as in the design and
implementation of websites which distribute the core entertainment software to
end users.
4. COMPETITION AND E-COMMERCE
Although other Bingo games exist on the Internet, many employ technologies
which management considers inferior, that produce substandard game interfaces,
require lengthy downloads or are otherwise not appealing to customers.
Management has re-developed the CyberBingo(TM) game system on several occasions
over the past 12 months, with the most recent version 4.5 being released in May
of 1999. As such and based on licensee comments derived from customer input,
management believes that the games are functionally superior and more visually
appealing, when compared to those developed by its competitors.
Software development for the Internet gaming business is a newly emerging
and highly competitive business and there is competition from North American and
foreign software development companies, some of which have their business focus
only in software development and others operating both as a developer and owner,
directly or indirectly, of subsidiary companies who operate Internet casinos.
There are presently more than 300 on-line casinos offering gaming on the
Internet, with more than 30 such businesses offering Bingo, in one form or
another. Ibingo, Bingomania, BingoZone and HomeBingo are some of the competing
software products which compete with CyberBingo(TM), with other companies such
as Bingo.com and Dion Entertainment Inc. attempting to enter the industry.
The Company's primary competition includes, but is not limited to,
Cryptologic Inc., Venturetech Inc., Internet Casinos Ltd., Starnet
Communications, Interactive Gaming and Communications Corp., Wager Net Inc.,
Casinos of the South Pacific, World Wide Web Casinos and Virtual Vegas. Some of
these companies deliver software solutions also and participate in
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Internet gaming as operators. dot com is a software development company only
with no corporate affiliation between its business and that of its licensees.
A barrier to entry into this business sector is the availability and/or
cost of e-commerce systems. The term "e-commerce" encompasses business to
consumer transactions conducted over the Internet and the World Wide Web.
Present sub-merchant arrangements for operators of Internet entertainment
software costs operators 15-20% of e-commerce sales, based upon management's
research. Further, there are very significant application processing periods for
e-commerce services in online entertainment, particularly Internet gaming, with
many North American financial institutions not participating.
Given this environment, dot com has entered into an agreement with an
e-commerce system which uses "cGate" technology. This agreement gives dot com
and its licensees access to a comprehensive and secure e-commerce solution with
more reasonable e-commerce processing charges. cGate uses powerful encryption to
protect credit and debit card transactions transmitted over the Internet. In
North America, the maximum encryption key legally available to export for
e-commerce merchants is 40 bit. cGate Secure raises the level of security for
transaction processing to 256 bit key encryption for international merchants.
Using state of the art encryption methodology, cGate Secure provides a high
level of processing security between the CyberBingo(TM) software and hardware
systems and the e-commerce provider.
Management believes that the way in which products and services will be
directly or indirectly sold in the future will shift to e-commerce means of
transaction processing. As such, the integrity of the e-commerce system used by
any "virtual" company and its corresponding financial institution will become
critical to the success of the business. In view of the nature of the Company's
business, it cannot assure you that our products and services will continue to
be supported by our e-commerce provider or any other on-line e-commerce system.
Further, the Company is also unable to assure you that its e-commerce and or
financial institutional support will continue to be available for its operations
or any of its licensees.
Management believes that the advantages of its e-commerce arrangement for
its software products include: (1) secure communication systems between dot com
licensees and the e-commerce provider on a 24 hour basis, 7 days per week; (2)
the development of state-of-the-art encryption systems, which protect payment
information between licensees and the customer; (3) the authentication of
messages which identify the parties sending and receiving payment information;
and (4) operation of e-commerce processing systems under credit card protocol
and agreements, which have been established and implemented for countries such
as Bermuda and Antigua, located in the Caribbean.
5. RAW MATERIALS AND SUPPLIERS
The Company is a software technology business, and thus does not use raw
materials or have any principal suppliers.
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6. CUSTOMERS
As stated above, TCC of Antigua, West Indies was the first, and so far is
the only, company to purchase a CyberBingo(TM) license from dot com. The Company
intends to sell additional License and Technology and Support Agreements with
other sub-licensees, who will make use of the existing infrastructure in
Antigua.
Through its intended allocation of significant financial resources to the
international marketing and sale of sub-licenses, which will be sold on a
"territorial" basis to interested licensees, CyberBingo(TM) will be promoted in
local jurisdictions by sub-licensees, thereby building significantly the number
of players per game and the resulting royalty streams to dot com. As these
sub-licenses are sold, CyberBingo(TM) will become available in different
languages, attracting entirely new players to CyberBingo(TM).
7. PATENTS, TRADEMARKS, LICENSES, FRANCHISES,
CONCESSIONS, ROYALTY AGREEMENTS OR LABOR CONTRACTS
The Company has applied to register its CyberBingoTM trademark in the
United States and Canada. These applications are active and pending in both
jurisdictions.
8. GOVERNMENT REGULATION
The Company's business is not presently regulated by any governmental
entity. While dot com provides only the CyberBingo(TM) software solution to its
licensees, a government may take the position that dot com is an integral
component of its licensees' businesses, because the software runs on dot com's
server.
Many countries are currently analyzing the issues surrounding wagering on
the Internet. More particularly, they are considering the merits, limitations
and enforceability of prohibition, regulation or taxation of Internet wagering
transactions. There are significant differences of opinion and law between
countries such as the United States, Canada, Australia, Liechtenstein and
Antigua. For example, in Queensland, Australia there is now regulation which
authorizes and regulates Internet wagering; the United Kingdom has now chosen to
sponsor a national lottery which will be operated over the Internet; and many
Caribbean countries have now regulated Internet gaming.
In the United States, on the other hand, ownership and operation of
land-based gaming facilities are often regulated on a state by state basis.
Certain of these Internet casino operators of have been the subject of criminal
complaints in the states of New York, Missouri and Minnesota. See, for example,
Minnesota v. Granite Gate Resorts, Inc., 568 N.W.2nd 715 (1997); Missouri V.
Interactive Gaming & Communications Corp., No. CV 97-7808 (Mo.Cit.Ct. 6\16\97)
and New York V. World Interactive Gaming Corporation (filed 07/13/98, injunction
granted 8/99).
The United States Federal Interstate Wire Act provides language which inter
alia makes it a crime to use interstate or international telephone lines to
transmit information assisting in the placing of wagers, unless the wagering is
authorized in law in the jurisdiction from which and into which the transmission
is made. There is also other similar legislation which arguably can
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be used to limit or prohibit Internet gaming in the United States. Further,
United States regulatory and legislative agencies have conducted study of the
on-line wagering and through the National Gambling Impact Study, now intend to
develop enforcement strategies to curtail Internet wagering in the United
States. The Kyl Bill (S-692) may also provide for the prohibition of intrastate
or interstate gaming and wagering.
While CyberBingo(TM) licensees operate from Antigua, where such business is
lawful if licensed, governments elsewhere, including the federal, state or any
local governments in the United States may take the position that CyberBingo(TM)
is being played unlawfully in their jurisdiction. Accordingly, the Company may
face criminal prosecution in any number of jurisdictions, either for operating
an illegal gaming operation, or as aiding and abetting others, such as its
licensees, in operating an illegal gaming operation. The Company has not devoted
any of its limited resources to investigating the legal climate in which it
operates. Many of the issues facing the Company are the same as those facing all
other e-commerce providers, as current laws are not clear as to who, if anyone,
has jurisdiction over Internet based commerce. As we noted above, a number of
proposals have been presented in the United States congress to expressly ban
Internet gaming, although none of these proposals have yet been enacted.
Although the Company intends to do business worldwide, any enforceable ban on
Internet gaming in the United States would have a material adverse effect on the
Company's business.
9. RESEARCH AND DEVELOPMENT
Present allocations to research and development are 21% of total expenses.
Subject to receipt of adequate financing, our intention is to spend between
10-15% of future revenues on development of new software products and services.
10. EMPLOYEES
The Company presently has 5 employees, 3 of which are full time employees.
Item 2. Management's Discussion and Analysis or Plan of Operation
PLAN OF OPERATION
The Company (including Precyse) has historically generated limited
operating revenues, having operated without revenue until May, 1998. As of
August 1, 1999, the Company is generating gross sales in the $25,000-35,000 per
month range, which are adequate to cover current general, administrative and
marketing expenses.
In order for the Company to realize on its goal of releasing a new software
product every three months and successfully marketing its existing software
products on an international level, it will be required to successfully complete
a public or private financing. The Company intends to raise up to $10 million in
the form of a private equity placement, in order to accomplish these objectives,
where approximately 30-35% of the proceeds will be used to market the dot com
brand name and its products on an international basis.
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We intend to expand operations through the development of our sub-license
model and the addition of new software products. Should the company not complete
suitable financing, it will continue operating, with the expectation that
revenue will continue to increase on a quarterly basis.
If the Company raises adequate financing, it expects to add 10-20 employees
during the next twelve months. If the Company cannot obtain the financing it
seeks, the Company will add employees only as cash flow allows. There are
presently no plans to purchase a new facility or significant new equipment.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three Months Ended June 30, 1999 Compared to June 30, 1998
Revenues increased to $77,215 for the three months ended June 30, 1999 as
compared to $30,795 for the same period in the prior year. The primary reason
for the increase is the heightened level of activity of the Company's licensee,
resulting in higher royalty and support revenues in fiscal 1999. Further
contributing to the increase in revenues is that the fiscal 1998 results only
represent two months of revenue since revenue-generating activities only began
in May of 1998. In its efforts to market and improve the Company's products, dot
com's expenses increased significantly over the prior year resulting in a loss
of $96,218 for the six months ended June 30, 1999 as compared to a profit of
$23,488 for the comparable period in 1998. The increased expenses are primarily
related to staffing, office, overhead, support and maintenance, development and
marketing, and public company regulatory expenses which are associated with the
Company's increased business activity during fiscal 1999. During fiscal 1998,
the Company had limited very limited operations resulting in very low expense
levels.
The comparative income statements and cash flow statements for the three
and six months 1998 contained in this registration statement have been prepared
on a consolidated basis as if Affiliated had purchased Precyse at the beginning
of the respective periods. Since Affiliated conducted no business during those
periods, the results reflect the operations of Precyse.
Six Months Ended June 30, 1999 Compared to June 30, 1998
Revenues increased to $143,264 for the six months ended June 30, 1999 as
compared to $30,795 for the same period in the prior year. The primary reason
for the increase is that the fiscal 1998 results only represent two months of
revenue since revenue-generating activities only began in May of 1998. Further
contributing to the increase in revenues is the heightened level of activity of
the Company's licensee, resulting in higher royalty and support revenues in
fiscal 1999. In its efforts to market and improve the Company's products, dot
com's expenses increased significantly over the prior year, resulting in a loss
of $95,333 for the six months ended June 30, 1999 as compared to a profit of
$15,751 for the comparable period in 1998. The increased expenses are primarily
related to staffing, office, overhead, support and maintenance, development and
marketing, and public company regulatory expenses which are associated with
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the Company's increased business activity during fiscal 1999. During fiscal
1998, the Company had limited very limited operations resulting in very low
expense levels.
The comparative income statements and cash flow statements for the three
and six months 1998 contained in this registration statement have been prepared
on a consolidated basis as if Affiliated had purchased Precyse at the beginning
of the respective periods. Since Affiliated conducted no business during those
periods, the results reflect the operations of Precyse.
Six Month Comparative Balance Sheet ending June 30, 1999 Compared to December
31, 1998
At the end of the financial period ended June 30, 1999, total assets
increased to $164,086 from $15,686 at December 31, 1998. The increase was due
primarily to a higher level of activity resulting in the increase of accounts
receivable to $144,474 at June 30, 1999 compared with $12,267 at December 31,
1998.
Year Ended December 31, 1998 Compared to December 31, 1997
As dot com's predecessor company for financial reporting purposes, Precyse
had a limited operating and financial history during the years ending December
31, 1998 and December 31, 1997. Revenue for the fiscal period ending on December
31, 1998 was $121,535 compared to $1,536 for the same period ending December 31,
1997. The increase reflects eight months of revenue-generating activities in
1998, where there were essentially none in 1997. Throughout the 1997 fiscal
period, the Precyse management team operated the business on a part-time basis.
As such, there were limited expenses for the period ending December 31, 1997
when compared to $101,589 for the period ending December 31, 1998, when the
development and operation of the CyberBingo(TM) software system was in process.
In 1998, Precyse management began to discuss possible uses of the CyberBingo(TM)
software system with interested licensees. In May of 1998, Precyse finalized the
re-development of CyberBingo(TM) for use on the Internet for TCC, at which point
royalty, license, technology and support income was received as a result of its
agreement with TCC. Throughout 1998, Precyse management remained employed on a
part-time basis, with no permanent office location or management salaries paid.
The balance sheets are fairly consistent representing the low level of activity
at that time.
Risks and Uncertainties
We have identified that there is uncertainty in North America relating to
the lawfulness of Internet gaming. As such, notwithstanding the fact that the
CyberBingo(TM) game system is licensed by TCC, which operates from Antigua,
where such business is lawful if licensed, governments elsewhere, including the
federal, state or any local governments in the United States may take the
position that CyberBingo(TM) is being played unlawfully in their jurisdiction.
Accordingly, the company may face criminal prosecution in any number of
jurisdictions, either for operating an illegal gaming operation, or as aiding
and abetting others, such as its licensees, in operating an illegal gaming
operation. The Company has not devoted any of its limited resources to
investigating the legal climate in which it operates. Many of the issues facing
the
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Company are the same as those facing all other e-commerce providers, as current
laws are not clear as to who, if anyone, has jurisdiction over Internet based
commerce. As we noted above, a number of proposals have been presented in the
United States congress to expressly ban Internet gaming, although none of these
proposals have yet been enacted. Although the Company intends to do business
worldwide, any enforceable ban on Internet gaming in the United States would
have a material adverse effect on the Company's business and both its short-term
and long-term liquidity and its revenues from operations.
Liquidity and Capital Resources
In February 1999, dot com raised an aggregate of $249,420 in capital
through the sale of shares pursuant to a private placement made in accordance
with Rule 504 under the Securities Act. These funds allowed the Company to
increase its marketing and development efforts. Management believes the Company
has sufficient cash-flow to meet its ongoing obligations through increased
revenue and managing expenses. Management also believes that it must raise
additional funds in order to meet its objectives, which are to release new
software products every three months and successfully market its existing
software products on an international level. dot com's business plan is to
become a first mover in this emerging on-line entertainment industry.
Management believes that if it can successfully consummate a $10,000,000
private placement, it will have sufficient resources to initiate an
international marketing infrastructure for its software products, make possible
acquisitions of related businesses, which it has not yet identified, and fund
all development and other operations. As such, management anticipates this
capital will be raised through additional sales of unregistered shares of our
common stock conducted under exemptions provided by the Securities Act or by the
rules of the SEC. There are presently no material commitments for capital
expenditures.
YEAR 2000 ISSUES
State Of Readiness: Company Internal Computer Systems
All of the software and hardware systems used in the development and
operation of dot com's products and services have been certified Y2K compliant
by its hardware and software vendors. All personal computer desktops, servers
and laptops are Y2K compliant. All Company hardware systems are supplied by
either Dell or Compaq and have all been manufactured after June of 1998. All
Company computer stations run Microsoft NT 4.0 and SP4 operating systems and
have been certified compliant by Microsoft Corporation. All development tools
and database management systems have been certified compliant by Imprise
Corporation and Microsoft Corporation. (Delphi 4.0, MS-MDAC MSODBC, MS SQL
Server 6.5 SP5)
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State Of Readiness - TCC Computer Systems:
All hardware and software systems are Y2K ready. Network computer servers
and routers are certified Y2K compliant by the vendors (Compaq Computers and
Cisco Systems) with all computer systems supplied by Compaq and have all been
manufactured after July 1997.
All computer systems are running Microsoft NT 4.0 SP4 operating systems and
have been certified compliant by Microsoft Corporation. TCC's DataBase
Management Platform (back end database services) are implemented on Microsoft
SQL Server Version 6.5. with Service Pack 5. Microsoft Corporation certifies
that this configuration is Y2K compliant.
Client Applications Developed by Dot Com
All of dot com's software applications currently running on TTC systems are
Y2K ready. All date specific code segments have been analysed and the Company
has verified that all date-time variables are using 4-digit date formats and are
therefore Y2K compliant.
Costs to Address the Company's Readiness:
The Company anticipates that there will be no additional costs associated
with the implementation of Y2K hardware or software systems.
The Risks:
The potential exists and we are exposed to a risk that certain of our
systems or those of our licensees will fail or suffer impairment as a result of
the Y2K issue. Although management believes that all hardware is Y2Kcompliant,
there is a risk that the Company's reliance on certain hardware systems,
software and related services could result in a complete system failure to its
software and/or hardware systems and/or any related information technology
system including communication systems. Although the Company relies on systems
developed using current technology and on systems designed to be Y2K compliant,
we may have to replace, upgrade or re-engineer or program certain systems to
ensure that all technology will be Y2K compliant when operating together.
Other identified risks include the failure of necessary services such as
power and Internet service access.
Contingency Plans:
The Company does not have a plan to resolve potential service interruptions
due to long term power or Internet service outages. Short term power
fluctuations are being addressed through the use of un-interruptable power
supplies and diesel generator backup systems.
Unanticipated date related issues that originate due to the Y2K event will
be immediately corrected or fixed by our software developers. Y2K related issues
which originate due to bugs
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in Microsoft software systems which have not been identified by Microsoft will
be analysed by dot com and an attempt will be made to immediately implement
work-around systems to correct problems.
FORWARD LOOKING STATEMENTS
dot com is a development-stage company. Certain of the information contained in
this document constitutes "forward-looking statements", including but not
limited to those with respect to the future revenues, the Company's development
strategy, involve known and unknown risks, uncertainties, and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the continued acceptance of the Internet, number of visits to the
Company and its affiliates' web sites, as well as those factors disclosed in the
Company's documents filed from time to time with the United States Securities
and Exchange Commission.
Item 3. Description of Property
The Company's interim corporate headquarters are located at 300 Pearl
Street, Suite 200, Buffalo, NY 14202. The Company has use of this space through
a sublease arrangement from US Address Inc. in Buffalo, New York. The lease is
for six months ending in August, 1999. This is a shared office facility.
Management will be leasing permanent office facilities in the next twelve (12)
month period.
The Company has additional facilities located at 345 Lakeshore Blvd. W.,
Suite 207 in Oakville, Ontario, Canada, which houses the offices of its
wholly-owned subsidiary, Precyse Corporation. The lease is for one year and ends
on March 31, 2000. The total lease obligation is CAD$1,186.00 per month. This
office will also be replaced by larger premises should dot com be successful in
its acquisition of suitable financing.
There are currently no proposed programs for the renovation, improvement or
development of the properties currently leased by the Company.
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Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information with respect to ownership of the
Company's securities by its officers and directors and by any person (including
any "group") who is the beneficial owner of more than 5% of the Company's common
stock:
Name And Address Amount and Nature of Percent Of
Of Owner (1) Beneficial Owner (2) Class
------------ -------------------- -----
Ken Lusk 1,078,000(3) 10.2%
Scott White 1,012,000(3) 9.9
Perry Malone 987,000(3) 9.3
Ted Colivas 1,012,000(3) 9.9
Marie Rose Holdings Limited 650,000(4) 6.2
Howard Rubinoff 100,000(5) 1.68
George White 50,000(5) Nil
John Reilly 50,000(5) Nil
Andre Kern 100,000(5) Nil
All officers and directors as a 4,389,000 39.4%
group (eight persons)
(1) All persons have an address c/o the Company, 300 Pearl Street, Suite
200, Buffalo, NY 14202, except Marie Rose Holdings Limited, whose
address is P.O. Box 588, St. Peter Port, Guernsey, C.I.
(2) Includes shares of common stock currently owned and any shares as to
which the holder may become the owner within 60 days, such as by the
exercise of options.
(3) Includes options granted in 1999 to purchase common stock at $3.00 per
share of 50,000 for Mr. Lusk, 100,000 for each of Messrs. Scott White
and Ted Colivas and 75,000 for Perry Malone.
(4) The ultimate beneficial owner of these securities is Michael A.
Fielding.
(5) Consists solely of options granted in 1999 to purchase common stock at
$3.00 per share.
Item 5. Directors, Executive Officers and Significant Employees
A. MANAGEMENT, EXECUTIVE OFFICERS AND DIRECTORS
The Company's executive officers and directors are as follows:
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<TABLE>
<CAPTION>
Name Age Position Term Period Served
- ---- --- -------- ---- -------------
<S> <C> <C> <C>
Ken Lusk............ 50 Director and Chairman One (1) Year 02/1999 to Present
Scott White......... 37 Director, President and CEO One (1) Year 02/1999 to Present
George White........ 65 Director One (1) Year 02/1999 to Present
Perry Malone........ 37 Director and Vice President of One (1) Year 02/1999 to Present
Technology
Ted Colivas......... 38 Vice President, Operations
Andre Kern.......... 37 Controller and Vice President,
Investor Relations
Howard Rubinoff..... 42 Secretary and General Counsel
John Reilly......... 40 Director One (1) Year 02/1999 to Present
</TABLE>
Scott White - President and CEO: Mr. White is a lawyer, called to the bar in the
Province of Ontario in 1989. He is a graduate from the University of Toronto
with a bachelor of arts degree and the University of Windsor with a bachelor of
laws degree. Mr. White has provided legal services to his clients several areas
of law, including corporate/commercial, administrative and business
acquisitions. He has acquired business management experience as the managing
partner of Bush, Frankel & White, Barristers & Solicitors and as a company
director with Vista International Petroleums Ltd. (1993-1996) and as a corporate
secretary with Nova Continental Development Corporation (1994-1997).
Perry Malone - Director and Vice President Technology: Mr. Malone graduated from
Ryerson University in Toronto with a bachelor degree in Engineering in 1985. He
has acquired extensive experience as a computer systems architect and engineer,
providing consulting services to some of Canada's leading corporations. From
February 1988 to January 1999, through his wholly-owned consulting company
Pericom Systems Corporation, Mr. Malone provided IT consulting services as a
Senior Systems Analyst to Canadian Pacific Limited, Bell Canada, IBM Canada and
Toronto Dominion Securities. Mr. Malone has served as the Company's Vice
President of Technology since February 1999, in which position he is still
incumbent.
Ted Colivas - Vice President Operations: Mr. Colivas graduated from the
University of Toronto in 1987 with a bachelor of science degree in Physics. He
has acquired extensive experience as a computer systems specialist in a wide
variety of enterprise wide IT/IS operations and management. Mr. Colivas has
served as a Senior Business Applications Consultant with Ericsson Communications
Canada (May 1997-January 1999) and a Computer Operations Manager and Systems
Performance Engineer with Canadian Pacific Limited (August 1990- October 1996).
Mr. Colivas has served as the Company's Vice President of Operations since
February 1999, in which position he is still incumbent.
Andre Kern - Controller: Mr. Kern was appointed to the position of Controller in
January 1999. Since 1996, Mr. Kern has served as Corporate Controller for Devtek
Corporation, a Canadian public company, listed on the Toronto and Montreal Stock
Exchanges. Prior to his
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employment with Devtek, from 1994-1996, Mr. Kern served as a Financial Analyst
responsible for financial reporting with American Sensors Inc., a public company
traded on NASDAQ and the Toronto Stock Exchange. Mr. Kern completed his bachelor
of commerce degree from the University of Toronto in 1986 and is a Professional
Chartered Accountant.
Howard D. Rubinoff - Secretary and Corporate Counsel: Mr. Rubinoff is a partner
of Fogler, Rubinoff Barristers & Solicitors and was called to the Ontario bar in
1985. Mr. Rubinoff graduated with a bachelor degree in arts from York University
and a bachelor of laws degree from the University of Windsor. He also attended
the Detroit College of Law for one semester and took courses at the University
of Detroit. Mr. Rubinoff practices primarily in the area of corporate/commercial
law with emphasis on mergers and acquisitions and financing. In the last few
years, he has been involved in a number of major restructurings of public
companies.
Kenneth R. Lusk - Director and Chairman: Mr. Lusk is a Professional Chartered
Accountant in the Province of Ontario and possesses a bachelor of commerce
degree from Queens University in Kingston. Since 1991, Mr. Lusk has worked as a
Management Consultant with major North American real estate developers and major
Federal Crown corporations including the Canadian Broadcasting Corporation and
Canada Post. Prior to his self-employment, from 1981 to 1991, Mr. Lusk served as
an Executive Vice President with Bramalea Limited, where his responsibilities
included overseeing the property development activities in both the United
States and Canada, and a variety of financial, treasury management and corporate
planning functions.
George S. White - Director: Mr. White has acquired more than 30 years of
experience as a senior officer, director and management consultant with Fortune
500 companies. From 1974 to 1994, Mr. White occupied several senior management
positions including Vice President and General Manager with United Westburne
Inc., which is North America's largest distributor of electronic, electrical and
plumbing supplies. In addition to his experience with Fortune 500 companies,
over the past 30 years, Mr. White has provided consulting advice on mergers,
acquisitions, marketing and public relations for a variety of public small-cap
companies in Canada and the United States. He presently serves as a director of
Holmer Gold Mines Ltd., which is a company listed for trading on the Toronto
Stock Exchange.
John F. Reilly - Director: Since 1998, Mr. Reilly has served as the Managing
Director for State Street Brokerage Services (Canada) Inc. State Street is one
of the world's largest financial institutions specializing in custody, trust,
investment management and brokerage. Prior to joining State Street, in 1992 Mr.
Reilly became the CEO of Versus Brokerage Services, President of Versus
Brokerage Services (US), and Managing Director CEO of Versus Technologies. He
was primarily responsible for bringing E*Trade, the Internet securities dealer,
to Canada and launching it under Versus Brokerage Services. Prior to co-founding
Versus, Mr. Reilly was Vice President Electronic Trading at RBC Dominion
Securities. Mr. Reilly obtained a Bachelor of Business Administration, Finance
from Wilfrid Laurier in 1981 and has taken numerous industry-related courses and
qualifications including the Partners, Officer and Directors Exam.
All directors are elected annually. George S. White and Scott F. White are
father-son. There are no other family relationships among the Company's officers
and directors.
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No director, officer, significant employee or consultant has been convicted
in a criminal proceeding, exclusive of traffic violations.
No director, officer, significant employee or consultant has been
permanently or temporarily enjoined, barred, suspended or otherwise limited from
involvement in any type of business, securities or banking activities.
No director, officer or significant employee has been convicted of
violating a federal or state securities or commodities law.
Item 6. Executive Compensation
A. REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
No compensation was paid in 1998 to any officer or director of the Company.
In March of 1999, Mr. Malone entered into a Consulting Agreement with the
Company, which agreement provides for his full-time and attention to the
Company's information technology requirements. The Consulting Agreement provides
for remuneration based at a rate of $85.00 per hour, payable monthly. The term
of this agreement is for one year, renewable automatically for additional
one-year terms. Mr. Malone's reasonable expenses are paid by the Company.
In May of 1999, Mr. Colivas entered into a Consulting Agreement with the
company, which agreement provides for his full-time an attention to the
company's information technology requirements. The Consulting Agreement provides
for remuneration based at a rate of $65.00 per hour, payable monthly. The term
of this agreement is for six months, renewable automatically for additional one
year terms. Mr. Colivas' reasonable expenses are paid by the Company.
B. COMPENSATION OF DIRECTORS
No compensation was paid to any director in 1998. The Company has no plans
to pay its directors in 1999 other than to reimburse them for actual expenses in
attending meetings.
Item 7. Certain Relationships and Related Transactions
None applicable.
Item 8. Description of Securities
The Company's authorized capital consists of 50,000,000 shares of common
stock. At June 15, 1999, there were 10,500,000 shares of common stock issued and
outstanding. In addition, the Company has outstanding options to purchase
1,445,000 shares of common stock at a price of $3.00 per share, all of which
were granted in 1999. The holders of common stock are
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entitled to one vote per share on all matters voted on by the stockholders,
including elections of directors. The holders of shares of common stock will
exclusively possess all voting power. The holders of common stock are entitled
to receive dividends when, as and if declared by the board of directors out of
funds legally available therefor. The terms of the common stock do not grant to
the holders thereof any preemptive, subscription, redemption, conversion or
sinking fund rights. The holders of common stock are entitled to share ratably
in the assets of dot com legally available for distribution to stockholders in
the event of the liquidation, dissolution or winding up of dot com.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
Until August 3, 1999, dot com's common stock was listed on the OTC Bulletin
Board under the symbol "DCEG". The shares currently trade on the Pink Sheets but
management intends to have them again quoted on the Bulletin Board following the
effective date of this registration statement. For each quarter since the
beginning of 1999, the high and low bid quotations for our common stock, as
reported by Nasdaq, were as follows:
High Low
---- ---
1999
- ----
First Quarter 5-1/4 3-3/8
Second Quarter (through June 18, 1999) 5-3/8 3-3/4
The foregoing bid quotations reflect inter-dealer prices, without retail
mark-up, mark-downs or commissions and may not necessarily represent actual
transactions.
At August 1, 1999, the Company had 35 shareholders of record. The Company
has never paid a dividend, and has no intention of paying dividends for the
foreseeable future.
Item 2. Legal Proceedings
The Company is not a party to any litigation.
Item 3. Changes in and Disagreements with Accountants
Not applicable.
Item 4. Recent Sales of Unregistered Securities
The Company issued 9,420,000 shares of common stock at a price of $0.001
per share for total proceeds of $9,420 on January 29, 1999 (the date when
Affiliated Adjusters acquired the Precyse Corporation) to 19 investors, 13 of
whom were accredited investors, in an offering exempt from registration under
the Securities Act of 1933 pursuant to Rule 504. No broker was
26
<PAGE>
engaged in such offering. The Company issued 80,000 shares of common stock at a
price of $3.00 per share for total proceed of $240,000 on February 2, 1999 to
one accredited investor, in an offering exempt from registration under the
Securities Act if 1933 pursuant to Rule 504. No broker was engaged in such
offering. The Company has granted options to 14 employees, officers, directors
and consultants totaling options to purchase up to 1,445,000 shares, all at an
exercise price of $3.00 per share. Such options were granted pursuant to an
exemption from registration under the Securities Act of 1933 pursuant to Rule
701.
Item 5. Indemnification of Directors and Officers
The Company's Articles of Incorporation provide that the Company's officers
and directors shall have no liability to the Company or its shareholders to the
maximum extent permitted by Florida law. The Company's bylaws provide for the
maximum indemnification of officers and directors permitted by Florida law.
27
<PAGE>
PART F/S
Item 1. Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
A. dot com Entertainment Group, Inc.
<TABLE>
<S> <C>
Consolidated Balance Sheets, June 30, 1999 (Unaudited) and December 31, 1998...............
Consolidated Income Statements for the
Three and Six Month Periods ended June 30, 1999 and 1998 (Unaudited).............
Consolidated Statements of Cash Flows for the
Three and Six Month Periods ended June 30, 1999 and 1998 (Unaudited)..............
Notes to Consolidated Financial Statements ................................................
B. Precyse Corporation
Independent Auditors' Report...............................................................
Balance Sheets, December 31, 1998 and 1997.................................................
Statements of Income, Years ended December 31, 1998 and 1997...............................
Statements of Changes in Financial Position
Years ended December 31, 1998 and 1997...........................................
Notes to Financial Statements..............................................................
C. Precyse Corporation
Independent Auditor's Report...............................................................
Balance Sheets at January 27, 1999 and December 31, 1998...................................
Statement of Income, period January 1, 1999 - January 27, 1999.............................
Statement of Changes in Financial Position, period January 1, 1999 - January 27, 1999......
Notes to Financial Statements..............................................................
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
D. Affiliated Adjusters, Inc.
Independent Auditor's Report...............................................................
Balance Sheets, December 31, 1998, 1997 and 1996...........................................
Statements of Operations, Years ended December 31, 1998, 1997 and 1996.....................
Statements of Changes in Stockholders' Equity, Years Ended
December 31, 1998, 1997 and 1996.................................................
Statements of Cash Flows, Years ended December 31, 1998, 1997 and 1996
Notes to Financial Statements..............................................................
E. Pro Forma Financial Statements
Pro Forma Consolidated Condensed Balance Sheet
at December 31, 1998 (unaudited).................................................
Pro Forma Consolidated Condensed Income Statement, Year
Ended December 31, 1998 (unaudited)..............................................
Notes to Pro Forma Financial Statements....................................................
</TABLE>
29
<PAGE>
PART III
Item 1. Index to Exhibits (Pursuant to Item 601 of Regulation SB)
Exhibit
Number Name and/or Identification of Exhibit
- ------ -------------------------------------
2.1 Memorandum of Agreement among Affiliated Adjusters, Inc. and the
stockholders of The Precyse Corporation dated as of January 27, 1999*
3.1 Articles of Incorporation, as amended*
3.2 Bylaws*
10.1 Technology License and Maintenance Agreement between The Precyse
Corporation and The CyberBingo Corporation dated December 4, 1997*
10.2 Consulting Agreement between registrant and Colivas Enterprises Ltd.
dated March 16, 1999*
10.3 Consulting Agreement between registrant and Pericom Systems Corp.,
undated*
21 List of subsidiaries of the registrant*
27 Financial data schedule
* Previously filed
30
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
dot com Entertainment Group, Inc.
By: /s/ Scott White
-----------------------------
Scott White, CEO
Principal Executive Officer
Date: August 12, 1999
/s/ Scott White Principal August 12, 1999
- ----------------------- Executive Officer
Scott White and Principal Accounting Officer
- ----------------------- Director ________, 1999
Ken Lusk
/s/ George White Director August 12, 1999
- -----------------------
George White
/s/ Perry Malone Director August 12, 1999
- -----------------------
Perry Malone
- ----------------------- Director _______, 1999
John Reilly
31
<PAGE>
DOT COM ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Audited)
June 30, (Note 1)
1999 December 31,
(unaudited) 1998
===============================
Cash $ 19,612 $ 3,419
Accounts receivable 144,474 12,267
- --------------------------------------------------------------------------------
Current assets 164,086 15,686
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$ 164,086 $ 15,686
================================================================================
Current Liabilities $ 9,999 $ 5,885
- --------------------------------------------------------------------------------
Total liabilities 9,999 5,885
- --------------------------------------------------------------------------------
Stockholders' equity
Common stock, $0.001 par value
authorized 50,000,000 shares
issued and outstanding at
June 30, 1999 - 10,500,000 shares, 1998 - 130 10,500 130
Additional paid in capital 242,554 --
Retained earnings (deficit) (98,967) 9,671
- --------------------------------------------------------------------------------
154,087 9,801
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$ 164,086 $ 15,686
================================================================================
(See accompanying notes)
<PAGE>
DOT COM ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
CONSOLIDATED INCOME STATEMENTS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
Proforma (2) Proforma (2)
==================================== ====================================
<S> <C> <C> <C> <C>
Revenues
Royalties $ 62,215 $ 30,795 $ 117,521 $ 30,795
Support & Maintenance 15,000 -- 25,000 --
Advertising -- -- 743 --
- ------------------------------------------------------------------------------------------------------------------------------------
77,215 30,795 143,264 30,795
Expenses
Marketing 60,000 -- 85,800 --
Development 67,147 4,626 81,368 7,447
General and administrative 46,286 2,681 71,429 7,597
- ------------------------------------------------------------------------------------------------------------------------------------
173,433 7,307 238,597 15,044
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (96,218) $ 23,488 $ (95,333) $ 15,751
====================================================================================================================================
Weighted average number of shares
outstanding 10,500,000 1,000,000 9,583,333 1,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share $ (0.01) $ 0.02 $ (0.01) $ 0.02
====================================================================================================================================
</TABLE>
(See accompanying notes)
<PAGE>
DOT COM ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
CONSOLIDATED CASH FLOW STATEMENTS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1999
Pro Forma(2) Pro Forma (2)
============================= ===============================
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) for the period $ (96,218) $ 23,488 $ (95,333) $ 15,751
- ------------------------------------------------------------------------------------------------------------------------------------
(96,218) 23,488 (95,333) 15,751
Changes in non-cash working capital related to operations
Accounts receivable (56,772) (20,484) (143,474) (20,484)
Prepaid expenses 16,500 -- -- --
Accounts payable 2,881 (10,087) 9,999 (88)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash used in operating activities (133,609) (7,083) (228,808) (4,821)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Acquisition of The Precyse Corporation -- -- (1,000) --
- ------------------------------------------------------------------------------------------------------------------------------------
Cash used in investment activities -- -- (1,000) --
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of common stock -- -- 9,500 --
Addional paid in capital -- 2,634 239,920 2,634
- ------------------------------------------------------------------------------------------------------------------------------------
Cash provided by financing activities -- 2,634 249,420 2,634
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase(decrease) in cash during the period (133,609) (4,449) 19,612 (2,187)
Cash position, beginning of period 153,221 13,307 -- 11,045
- ------------------------------------------------------------------------------------------------------------------------------------
Cash position, end of period $ 19,612 $ 8,858 $ 19,612 $ 8,858
====================================================================================================================================
A. Cash position
Cash position is defined as cash on hand and balances with banks
B. Interest and income taxes paid
Interest paid -- -- -- --
Income taxes paid -- -- -- --
</TABLE>
(See accompanying notes)
<PAGE>
DOT COM ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
1. December 31, 1998 Comparative Balance Sheet
The December 31, 1998 comparative balance sheet is the audited balance sheet of
Precyse Corporation, (dot com's predecessor company) as at December 31, 1998,
which is the most recent audited period. Until its name change on February 2,
1999, dot com formerly carried on business as Affiliated Adjusters, Inc.
("Affiliated"), a State of Florida corporation which was organized on December
11, 1981. Prior to its acquisition of Precyse, Affiliated conducted no business
and had only nominal assets and liabilities. On January 27, 1999, Affiliated
acquired 100% of the shares of The Precyse Corporation.
2. Pro forma Comparatives for the Three and Six Months ended June 30, 1998.
The pro forma comparative income statements and cash flow statements for the
three and six months 1998 have been prepared on a consolidated basis as if
Affiliated had purchased Precyse at the beginning of the respective periods.
Since Affiliated conducted no business during those periods, the results
primarily reflect the operations of Precyse.
<PAGE>
PRECYSE CORPORATION
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
DECEMBER 31, 1998
<PAGE>
PRECYSE CORPORATION
DECEMBER 31, 1998
CONTENTS
Page
----
Auditors' Report 1
Financial statements
(Stated in U.S. Dollars)
Balance sheet 2
Statement of income and retained earnings 3
Statement of changes in financial position 4
Notes to financial statements 5 - 6
<PAGE>
AUDITORS' REPORT
To the shareholders of
Precyse Corporation
We have audited the balance sheet of Precyse Corporation as at December 31, 1998
& December 31, 1997 and the statements of income and retained earnings, and
changes in financial position for the years 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1998 &
December 31, 1997 and the results of its operations and changes in its financial
position for the years then ended in accordance with generally accepted
accounting principles.
Toronto, Canada Rosenswig Carere McRae
August 12, 1999 Chartered Accountants
2
<PAGE>
PRECYSE CORPORATION
BALANCE SHEET
(Stated in U.S. Dollars)
DECEMBER 31, 1998
1998 1997
-------- --------
ASSETS
Current
Cash $ 3,419 $ 11,045
Accounts receivable 12,267 15,449
-------- --------
$ 15,686 $ 26,494
======== ========
LIABILITIES
Current
Deferred revenue $ -- $ 30,550
Income taxes payable 3,400 --
Shareholder's loan 2,485 2,689
-------- --------
5,885 33,239
-------- --------
SHAREHOLDERS' EQUITY
Share capital (Note 3) 130 130
Retained earnings (deficit) 9,671 (6,875)
-------- --------
9,801 (6,745)
-------- --------
$ 15,686 $ 26,494
======== ========
Approved on behalf of the Board:
_____________________________________________, Director _________________
See accompanying notes.
3
<PAGE>
PRECYSE CORPORATION
STATEMENT OF INCOME AND RETAINED EARNINGS
(Stated in U.S. Dollars)
YEAR ENDED DECEMBER 31, 1998
1998 1997
--------- ---------
Revenue $ 121,535 $ 1,536
--------- ---------
Expenses
Development 73,856 --
General and administrative 27,733 8,411
--------- ---------
101,589 8,411
--------- ---------
Income (loss) before income taxes 19,946 (6,875)
Income taxes - current 3,400 --
--------- ---------
Net income (loss) for the year 16,546 (6,875)
Retained earnings (deficit), beginning of year (6,875) --
--------- ---------
Retained earnings (deficit), end of year $ 9,671 $ (6,875)
========= =========
See accompanying notes.
4
<PAGE>
PRECYSE CORPORATION
STATEMENT OF CHANGES IN FINANCIAL POSITION
(Stated in U.S. Dollars)
YEAR ENDED DECEMBER 31, 1998
1998 1997
-------- --------
Cash provided from:
Operating activities
Net income (loss) for the year $ 16,546 $ (6,875)
Changes in non-cash working capital
Accounts receivable 3,182 (15,449)
Income taxes payable 3,400 --
Deferred revenue (30,550) 30,550
-------- --------
(7,422) 8,226
-------- --------
Financing activities
Shareholder loan (204) 2,789
Share capital -- 30
-------- --------
(204) 2,819
-------- --------
Change in cash during year (7,626) 11,045
Cash, beginning of year 11,045 --
-------- --------
Cash, end of year $ 3,419 $ 11,045
======== ========
See accompanying notes.
5
<PAGE>
PRECYSE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
DECEMBER 31, 1998
1. Incorporation
The Company was incorporated on November 26, 1996 under The Business
Corporations Act of Ontario.
2. Significant accounting policies
These financial statements have been prepared in United States Dollars
using accounting principles generally accepted in Canada ("Canadian GAAP")
and accepted in the United States ("U.S. GAAP").
3. Share capital
The Company's authorized share capital consists of an unlimited number of
Class A shares, Class B shares, Class C shares and common shares.
At December 31, 1998, 130 common shares had been issued for aggregate
consideration of $130.
4. Commitments
(a) The Company has entered into operating leases for computers. The
aggregate payments under the leases are as follows:
1999 $18,780
2000 $18,780
(b) Subsequent to year end the company entered into a one year lease for
premises for $14,000 per year.
5. U.S. Dollar presentation
The United States dollar is the principal currency of the company's
business and accordingly these financial statements are expressed in United
States dollars.
6
<PAGE>
PRECYSE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
DECEMBER 31, 1998
6. Year 2000 issue
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 issue
may be experienced before, on or after January 1, 2000 and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 issue affecting the entity
including those related to the efforts of customers, suppliers or other
third parties, will be fully resolved.
7. Financial instruments
a) Nature of operations
The Company is in the business of the development and licensing of
intellectual property.
b) Fair value
The carrying amount of cash, accounts receivable and accounts payable,
and accrued liabilities approximate their fair value due to the
short-term maturity of theses instruments.
8. Subsequent event
Subsequent to the year-end, all the common shares of the Company were
purchased by a public company.
7
<PAGE>
PRECYSE CORPORATION
FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
JANUARY 27, 1999
<PAGE>
PRECYSE CORPORATION
JANUARY 27, 1999
CONTENTS
Page
----
Auditors' Report 1
Financial statements
(Stated in U.S. Dollars)
Balance sheet 2
Statement of income and retained earnings 3
Statement of changes in financial position 4
Notes to financial statements 5 - 6
<PAGE>
AUDITORS' REPORT
To the shareholders of
Precyse Corporation
We have audited the balance sheet of Precyse Corporation as at January 27, 1999
and the statements of income and retained earnings, and changes in financial
position for the period January 1, 1999 to January 27, 1999. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at January 27, 1999 and the
results of its operations and changes in its financial position for the period
January 1, 1999 to January 27, 1999 in accordance with generally accepted
accounting principles.
Toronto, Canada Rosenswig Carere McRae
August 12, 1999 Chartered Accountants
2
<PAGE>
PRECYSE CORPORATION
BALANCE SHEET
(Stated in U.S. Dollars)
JANUARY 27, 1999
Jan. 27 Dec. 31
1999 1998
------- -------
ASSETS
Current
Cash $ 8,170 $ 3,419
Accounts receivable 21,644 12,267
------- -------
$29,814 $15,686
======= =======
LIABILITIES
Current
Accounts payable and accrued liabilities $ 2,469 $ --
Income taxes payable 6,500 3,400
Shareholder's loan 2,479 2,485
------- -------
11,448 5,885
------- -------
SHAREHOLDERS' EQUITY
Share capital (Note 3) 136 130
Retained earnings 18,230 9,671
------- -------
18,366 9,801
------- -------
$29,814 $15,686
======= =======
Approved on behalf of the Board:
_____________________________________________, Director ____________________
See accompanying notes.
3
<PAGE>
PRECYSE CORPORATION
STATEMENT OF INCOME AND RETAINED EARNINGS
(Stated in U.S. Dollars)
FOR THE PERIOD JANUARY 1, 1999 TO JANUARY 27, 1999
Revenue $14,377
Expenses
General and administrative 2,718
-------
Income before income taxes 11,659
Income taxes - current 3,100
-------
Net income for the period 8,559
Retained earnings, beginning of period 9,671
-------
Retained earnings, end of period $18,230
=======
See accompanying notes.
4
<PAGE>
PRECYSE CORPORATION
STATEMENT OF CHANGES IN FINANCIAL POSITION
(Stated in U.S. Dollars)
FOR THE PERIOD JANUARY 1, 1999 TO JANUARY 27, 1999
Cash provided from:
Operating activities
Net income for the period $ 8,559
Changes in non-cash working capital
Accounts receivable (9,377)
Income taxes payable 3,100
Accounts payable and accrued liabilities 2,469
-------
4,751
-------
Financing activities
Issuance of share capital 6
Shareholder`s loan (6)
-------
--
-------
Change in cash during the period 4,751
Cash, beginning of period 3,419
-------
Cash, end of period $ 8,170
=======
See accompanying notes.
5
<PAGE>
PRECYSE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
JANUARY 27, 1999
1. Incorporation
The Company was incorporated on November 26, 1996 under The Business
Corporations Act of Ontario.
2. Significant accounting policies
These financial statements have been prepared in United States Dollars
using accounting principles generally accepted in Canada ("Canadian GAAP")
and accepted in the United States ("U.S. GAAP").
3. Share capital
The Company's authorized share capital consists of an unlimited number of
Class A shares, Class B shares, Class C shares and common shares.
At January 27, 1999, 136 common shares had been issued for aggregate
consideration of $136. During the period 6 common shares were issued for
aggregate consideration of $6.
4. Commitments
The Company has entered into operating leases for computers and premises.
The aggregate payments under the leases are as follows:
1999 $33,000
2000 $33,000
5. U.S. Dollar presentation
The United States dollar is the principal currency of the company's
business and accordingly these financial statements are expressed in United
States dollars.
6
<PAGE>
PRECYSE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Stated in U.S. Dollars)
JANUARY 27, 1999
6. Year 2000 issue
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 issue
may be experienced before, on or after January 1, 2000 and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 issue affecting the entity
including those related to the efforts of customers, suppliers or other
third parties, will be fully resolved.
7. Financial instruments
a) Nature of operations
The Company is in the business of the development and licensing of
intellectual property.
b) Fair value
The carrying amount of cash, accounts receivable and accounts payable,
and accrued liabilities approximate their fair value due to the
short-term maturity of theses instruments.
8. Subsequent event
Subsequent to January 27, 1999 all the common shares of the Company were
purchased by a public company.
7
<PAGE>
BARRY L. FRIEDMAN, P.C.
Certified Public Accountant
1582 TULITA DRIVE OFFICE (702) 361-8414
LAS VEGAS, NEVADA 89123 FAX NO. (702) 896-0278
INDEPENDENT AUDITORS'-REPORT
Board Of Directors February 10, 1999
Affiliated Adjusters, Inc.
Miami, Florida
I have audited the accompanying Balance Sheets of Affiliated Adjusters,
Inc., (A Development Stage Company), as of December 31, 1998, December 31, 1997,
and December 31, 1996, and the related statements of operations, stockholders'
equity and cash flows for the three years ended December 31, 1998, December 31,
1997, and December 31, 1996. These financial statements are the responsibility
of the Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Affiliated Adjusters, Inc.
(A Development Stage Company) as of December 31, 1998, December 31, 1997, and
December 31, 1996, and the results of its operations and cash flows for the
three years ended December 31, 1998, December 31, 1997, and December 31, 1996,
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note #4 to the
financial statements, the Company has no established source of revenue. This
raises substantial doubt about its ability to continue as a going concern.
Management's plan in regard to these matters are also described in Note #4. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
- -------------------------------
Barry L. Friedman
Certified Public Accountant
<PAGE>
AFFILIATED ADJUSTERS, INC.
(A Development Stage Company)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997 December 31, 1996
------------------ ------------------ ------------------
<S> <C> <C> <C>
CURRENT ASSETS: $ 0 $ 0 $ 0
------------------ ------------------ ------------------
TOTAL CURRENT ASSETS $ 0 $ 0 $ 0
------------------ ------------------ ------------------
OTHER ASSETS: $ 0 $ 0 $ 0
------------------ ------------------ ------------------
TOTAL OTHER ASSETS $ 0 $ 0 $ 0
------------------ ------------------ ------------------
TOTAL ASSETS $ 0 $ 0 $ 0
------------------ ------------------ ------------------
</TABLE>
See accompanying notes to financial statements & audit report
-2-
<PAGE>
AFFILIATED ADJUSTERS, INC.
(A Development Stage Company)
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997 December 31, 1996
------------------ ------------------ ------------------
<S> <C> <C> <C>
CURRENT LIABILITIES: $ 0 $ 0 $ 0
------------------ ------------------ ------------------
TOTAL CURRENT LIABILITIES $ 0 $ 0 $ 0
------------------ ------------------ ------------------
STOCKHOLDERS' EQUITY: (Note 1) $ 0 $ 0 $ 0
------------------ ------------------ ------------------
Common stock, $1.00 par
value authorized 100 Shares
issued and outstanding at
December 31, 1996 - 100 shares $ 100
December 31, 1997 - 100 shares $ 100
Common stock, $.001 par
value authorized 50,000,000
shares issued and outstanding
at December 31, 1998-
1,000,000 shares $ 1,000
Additional paid in Capital 2,634 900 900
Accumulated loss -3,634 -1,000 -1,000
------------------ ------------------ ------------------
TOTAL STOCKHOLDERS' EQUITY $ 0 $ 0 $ 0
------------------ ------------------ ------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 0 $ 0 $ 0
------------------ ------------------ ------------------
</TABLE>
See accompanying notes to financial statements & audit report
-3-
<PAGE>
AFFILIATED ADJUSTERS, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Dec. 11, 1981
Year Ended Year Ended Year Ended (inception) to
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCOME:
Revenue $ 0 $ 0 $ 0 $ 0
--------------- --------------- --------------- ---------------
EXPENSES:
General, Selling
and Administrative $ 2,634 $ 0 $ 0 $ 3,634
--------------- --------------- ----------------------------------
Total Expenses $ 2,634 $ 0 $ 0 $ 3,634
--------------- --------------- --------------- ---------------
Net Loss $ -2,634 $ 0 $ 0 $ -3,634
--------------- --------------- --------------- ---------------
Net Loss
per weighted
share (Noted 2) $ -.0058 $ .0000 $ .0000 $ -.0302
--------------- --------------- --------------- ---------------
Weighted average
number of common
shares outstanding 452,603 100,000 100,000 120,461
--------------- --------------- --------------- ---------------
</TABLE>
See accompanying notes to financial statements & audit report
-4-
<PAGE>
AFFILIATED ADJUSTERS, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
------------------------ paid-in Accumulated
Shares Amount Capital Deficit
--------- --------- ----------- --------
<S> <C> <C> <C> <C>
Balance, 100 $ 100 $ 900 $ -1,000
December 31, 1995
Net loss year ended
December 31, 1996 0
--------- --------- ----------- --------
Balance,
December 31,1996 100 $ 100 $ 900 $ -1,000
Net loss
December 31,1997
--------- --------- ----------- --------
Balance,
December 31,1997 $ 100 $ 100 $ 900 $ -1,000
August 11, 1998
Changed par value -99
from $1.00 to $.001 +99
August 11, 1998
forward stock split
1,000:1 99,900 +99 -99
August 11, 1998 900,000 +900 +934
Issued for cash
Capital contributed -99 +800
during 1998
Net loss year ended
December 31, 1998 -2,634
--------- --------- ----------- --------
Balance,
December 31, 1998 1,000,000 $ 1,000 $ 2,634 $ -3,634
--------- --------- ----------- --------
</TABLE>
See accompanying notes to financial statements & audit report
-5-
<PAGE>
AFFILIATED ADJUSTERS, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Dec. 11, 1981
Year Ended Year Ended . Year Ended (inception) to
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cash Flows from
Operating Activities: $ -2,634 $ 0 $ 0 $ -3,634
Net Loss
Adjustment to
reconcile net loss
to net cash
provided by operating 0 0 0 0
activities
Issue common stock 0 0 0 +1,000
for services
Changes in assets
and liabilities:
Increase in current liabilities: 0 0 0 0
------------- ------------- ------------- -------------
Net cash used in $ -2,634 $ 0 $ 0 $ -2,634
operating activities
Cash Flows from
Investing activities: 0 0 0 0
Cash Flows from
Financing Activities: +800 0 0 +800
Capital contribution
Issuance of common
Stock for cash +1,834 0 0 +1,834
------------- ------------- ------------- -------------
Net increase(decrease)
in cash $ 0 $ 0 $ 0 $ 0
Cash,
Beginning of period 0 0 0 0
Cash,
End of period $ 0 $ 0 $ 0 $ 0
------------- ------------- ------------- -------------
</TABLE>
See accompanying notes to financial statements & audit report
-6-
<PAGE>
AFFILIATED ADJUSTERS, INC.
(A Development Stage Company)
December 31, 1998, December 31, 1997, and December 31, 1996
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - History and Organization of the Company
The Company was organized December 11, 1981, under the laws of the State of
Florida as Affiliated Adjusters, Inc. The Company currently has no operations
and, in accordance with SFAS #7, is considered a development company.
On March 30, 1982, the Company issued 100 shares of it's $1.00 par value
common stock for services of $ 1,000.
On August 11, 1998, the State of Florida approved the Company's restated
Articles of Incorporation, which increased its capitalization from 100 common
shares to 50,000,000 common shares. The par value was changed from $1.00 to
$0.001.
On August 11, 1998, the Company forward split its common stock 1:000:1,
thus increasing the number of outstanding common stock shares from 100 shares to
100,000 shares.
On August 11, 1998, the Company issued 900,000 shares of it's $.001 par
value common stock for cash of $ 1,834.
During 1998, a shareholder paid a bill on behalf of the Company and decided
that rather than collect the funds due to him that he would make a contribution
to additional paid in capital.
NOTE 2 - Accounting Policies and Procedures
The Company has not determined its accounting policies and procedures,
except as follows:
1. The Company uses the accrual method of accounting.
2. Earnings or loss per share is calculated using the weighted averaged
number of common shares outstanding.
3. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
NOTE 3 - Warrants and options
There are no warrants or options outstanding to issue any additional shares
of common stock of the Company.
-7-
<PAGE>
AFFILIATED ADJUSTERS, INC.
(A Development Stage Company)
December 31, 1998, December 31, 1997, and December 31, 1996
NOTES TO FINANCIAL STATEMENTS CONTINUED
NOTE 4 - Going Concern
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has no current source of revenue. Without
realization of additional capital, it would be unlikely for the Company to
continue as a going concern. It is management's plan to seek additional capital
through a merger with an existing operating company.
NOTE 5 - Related Party Transactions
The Company neither owns or leases any real or personal property. Office
services are provided without charge by an officer. Such costs are immaterial to
the financial statements and accordingly, have not been reflected therein. The
officers and directors of the Company are involved in other business activities
and may, in the future, become involved in other business opportunities. If a
specific business opportunity becomes available, such persons may face a
conflict in selecting between the Company and their other business interests.
The Company has not formulated a policy for the resolution of such conflicts.
See accompanying notes to financial statements & audit report
-8-
<PAGE>
DOT COM ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
(p/k/a Affiliated Adjusters, Inc.)
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
As at December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Dot Com The Pro Forma
Entertainment Precyse Adjustments Pro Forma
Group Corporation Debit Credit Notes Consolidated
------------- ----------- ----------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Current assets $ -- $ 15,686 $ 249,420 13,072 4(a), 4(b) $ 252,034
--------- --------- ---------
$ -- $ 15,686 $ 252,034
========= ========= =========
Current Liabilities $ -- $ 2,614 $ 2,614
--------- --------- ---------
Total liabilities -- 2,614 2,614
--------- --------- ---------
Stockholders' equity
Common stock, $0.001 par value
authorized 50,000,000 shares
issued and outstanding at
December 31, 1998 - 10,500,000 shares 1,000 1 1 9,500 4(a), 4(b) 10,500
Additional paid in capital 2,634 239,920 4(b) 242,554
Retained earnings (deficit) (3,634) 13,071 13,071 4(a) (3,634)
--------- --------- ---------
-- 13,072 249,420
--------- --------- ---------
--------- --------- ---------
$ -- $ 15,686 $ 252,034
========= ========= =========
</TABLE>
<PAGE>
DOT COM ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
(p/k/a Affiliated Adjusters, Inc.)
PRO FORMA CONSOLIDATED CONDENSED INCOME STATEMENT
Year ended December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Dot Com The Pro Forma
Entertainment Precyse Adjustments Pro Forma
Group Corporation Debit Credit Notes Consolidated
------------- ----------- ----------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ -- $ 121,535 $ 121,535
General and administrative 2,634 27,733 30,367
Development 73,856 73,856
--------- --------- -----------
2,634 101,589 104,223
--------- --------- -----------
--------- --------- -----------
Net income (loss) $ (2,634) $ 19,946 $ 17,312
========= ========= ===========
Weighted average number of shares 10,500,000
outstanding
-----------
Earnings (loss) per share $ 0
===========
</TABLE>
<PAGE>
DOT COM ENTERTAINMENT GROUP, INC.
(A Development Stage Company)
(p/k/a Affiliated Adjusters, Inc.)
Notes to Pro Forma Consolidated Condensed Financial Statements
(unaudited)
1. Basis of Presentation
The unaudited pro forma consolidated condensed financial statements (the
"Statements") give effect to the acquisition of The Precyse Corporation by
Dot Com Entertainment Group, Inc. effective January 27, 1999 and the effect
of the sale of shares by Dot Com Entertainment Group, Inc. since December
31, 1998. The statements have been prepared in accordance with generally
accepted accounting principles.
The pro forma consolidated condensed balance sheet as at December 31, 1998
is based on the audited financial statements of Affiliated Adjusters, Inc.
and the unaudited financial statements of The Precyse Corporation as at
December 31, 1998 and gives effect to the acquisition of The Precyse
Corporation as though it had taken place on December 31, 1998.
The pro forma consolidated condensed income statement for the year ended
December 31, 1998 is based on the audited financial statements of
Affiliated Adjusters, Inc. for the year ended December 31, 1998 and the
unaudited financial statements of The Precyse Corporation for the year
ended December 31, 1998 and give effect to the acquisition of The Precyse
Corporation and the issuance of 9,500,000 shares (see 4b) as though it had
taken place at the beginning of the year.
2. Accounting Treatment for the Business Combination
The acquisition of The Precyse Corporation by Affiliated Adjusters, Inc.
has been accounted for using the purchase method of accounting.
3. Purchase Price Allocation
Total Purchase Cost $ 1,000
Book Value of net assets acquired 13,072
--------
Reduction in accounts receivable $(12,072)
========
4. Pro Forma Consolidated Condensed Balance Sheet
(a) The purchase consideration as described in note 3 was $1,000 giving
rise to a reduction in accounts receivable of $12,072 on the
elimination of the equity of The Precyse Corporation
(b) Cash proceeds of $249,420 were realized on the sale of 9,420,000
shares at a price of $0.001 per share on January 28, 1999 and 80,000
shares at a price of $3.00 per share on February 2, 1999 bringing the
total outstanding shares to 10,500,000.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999 DEC-31-1998
<PERIOD-END> DEC-31-1998 JUN-30-1999 JUN-30-1998
<CASH> 3,419 12,512 0
<SECURITIES> 0 0 0
<RECEIVABLES> 12,267 144,474 0
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 15,686 164,086 0
<PP&E> 0 0 0
<DEPRECIATION> 0 0 0
<TOTAL-ASSETS> 15,686 164,086 0
<CURRENT-LIABILITIES> 5,885 9,999 0
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 130 10,500 0
<OTHER-SE> 0 242,554 0
<TOTAL-LIABILITY-AND-EQUITY> 15,686 164,086 0
<SALES> 121,535 25,743 0
<TOTAL-REVENUES> 121,535 143,264 30,795
<CGS> 0 0 0
<TOTAL-COSTS> 101,589 238,597 15,044
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 0 0 0
<INCOME-PRETAX> 19,946 (95,333) 15,731
<INCOME-TAX> 3,400 0 0
<INCOME-CONTINUING> 16,546 (95,333) 15,751
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 16,546 (95,333) 15,751
<EPS-BASIC> 123 (0.01) 0.02
<EPS-DILUTED> 123 (0.01) 0.02
</TABLE>
