U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10SB/A
(AMENDMENT NO. 1)
General Form for Registration of Securities of Small Business Issuers
Under Section 12(b) or 12(g) of the Securities Act of 1934
TUGBOAT INTERNATIONAL, INC.
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(Name of Small Business Issuer)
Delaware 95-4735256
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(State or Other Jurisdiction of I.R.S. Employer Identification Number
Incorporation or Organization)
744 W Hastings St., Suite 316 Vancouver, BC, Canada V6C 1A6
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(Address of Principal Executive Offices including Zip Code)
604-687-7828
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(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:
Common Stock, $.0001 Par Value
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(Title of Class)
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TABLE OF CONTENTS
PART I
Item 1. Description of Business ........................................... 3
Item 2. Management's Discussion and Analysis or Plan of Operation ......... 12
Item 3. Property .......................................................... 14
Item 4. Security Ownership of Certain Beneficial Owners and Management .... 14
Item 5. Directors, Executive Officers, Promoters, and Control
Persons of the Company ............................................ 14
Item 6. Executive Compensation ............................................ 15
Item 7. Certain Relationships and Related Transactions .................... 16
Item 8. Description of Securities ......................................... 16
PART II
Item 1. Market Price of and Dividends on the Company's Common
Equity and Other Shareholder Matters .............................. 17
Item 2. Legal Proceedings ................................................. 18
Item 3. Changes In and Disagreements with accountants on
Accounting and Financial Disclosure ............................... 18
Item 4. Recent Sales of Unregistered Securities ........................... 18
Item 5. Indemnification of Directors and Officers ......................... 18
PART F/S
Index to Financial Statements .............................................. 19
PART III
Item 1. Index to Exhibits ................................................. 27
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ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Tugboat International, Inc. ("the Company") is filing this Form 10SB
registration statement on a voluntary basis and plans to continue filing interim
and periodic reports as required under the Exchange Act of 1934, as amended
("Exchange Act"), in order to maintain compliance with the Securities and
Exchange Commission's ("SEC") requirements to maintain the status of a reporting
company. The Company plans to become a reporting company in order to list its
securities for public trading on the over-the counter Electronic Bulletin Board
("OTCBB"). Under current National Association of Security Dealers ("NASD")
rules, in order for a company to become listed on the OTCBB, it must be a
reporting company under the Exchange Act.
FORWARD LOOKING STATEMENTS
Certain information detailed within this registration statement is based on
forward-looking statements. Generally, the words "anticipate," "believes,"
"expects," "intends," and similar expressions identify such forward-looking
statements. Forward-looking statements involved risks and uncertainties, and the
Company's actual results could differ materially from the results discussed in
the forward-looking statements. Forward-looking statements are current only as
of the date of this registration statement. All parties and individuals
reviewing this registration statement and considering the Company as an
investment should be aware of the financial risk involved with investing in a
development stage company. When deciding whether to invest or not, careful
review of the risk factors detailed in Item 1 of this document and consideration
of forward-looking statements contained in this registration statement should be
adhered to.
BUSINESS OF THE ISSUER
Tugboat International, Inc. ("the Company") was incorporated in the State of
Delaware on July 20, 1998. Tugboat International, Inc. ("the Company,"
"Company," "Our," "our," "We," "we,") business plan is to become actively
engaged in the business of buying, selling, trading and auctioning collectible
and valuable coins via an Internet web-site.
STRATEGY
The Company's planned operating strategy is to buy, sell, trade and auction
collectible and valuable coins via an Internet web-site. In addition, the
Company plans to integrate partner coin companies which buy, sell, trade and
auction collectible and valuable coins into a collaborative network by
developing long term relationships with and among them. The Company plans to use
and develop collective resources within the partner coin companies to actively
buy, sell, trade and auction collectible and valuable coins and currency. The
Company believes its current management team (See Item 5 - Directors, Executive
Officers, Promoters, and Control Persons) brings experience, industry
relationships, and specific expertise within the company that will enhance the
ability of the Company's proposed collaborative network to buy, sell, trade and
auction collectible and valuable coins via the Internet. The current management
team is limited to one officer of the company and the amount of time that he
plans to devote promoting the Company's business plan will be limited to a
part-time basis. In addition, the current officer currently has obligations
and/or employment that may take priority over that of the Company.
Tugboat International Inc. was incorporated with a view to becoming a
full-service provider of value-added services to dealers and collectors of coins
and rare currency. The Company plans to seek income from the sale of its
inventory of collectible coins by setting up an Internet web-site and receive
revenues from its trades, classifieds and planned auctions in the form of agent
commissions from buyers and sellers. The Company also plans to develop certain
relationships with other dealers and collectors to offer services in a
collaborative network via partner coin companies to assist in buying, selling,
trading and auctioning coins and rare currency.
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PRODUCT
The Company intends to conduct auctions in a variety of formats that allow coin
collectors to choose the format with which they are most comfortable. Most of
the collectible coins to be sold at the Company's auctions will be obtained on
consignment from third parties or supplied to the Company by selected dealers
who possess the expertise, integrity and the capacity to provide the Company
with high-end coin collectibles for auction on a regular basis. The Company is
currently seeking contractual arrangements with these suppliers that require
them to supply to the Company a minimum dollar value of collectible coins during
each contract period. Other coins to be sold at our auctions will be derived
from collectibles that have been acquired by us for resale. Acquiring
inventories of collectible coins will provide us with greater control over the
quality and value of the collectibles we can make available for sale at our
auctions and enables us to take advantage of opportunities to purchase highly
sought after collectible coins at favorable pricing. To avoid conflicts of
interest, the Company only will acquire collectible coins that have been
previously graded or authenticated, and such collectibles are sold without being
regraded by the Company. Maintaining inventories of coin collectibles, however,
presents valuation risks because of potential fluctuations in their market
prices. The Company will strive to mitigate the market risk of its inventory
through frequent turnover. The Company anticipates the average inventory
turnover, excluding rare coins, is fewer than 120 days. However, the Company may
acquire a large quantity of collectible coins when available, often at
significant discounts. The Company intends to utilize the services of
Professional Coin Grading Service or PCGS to provide an authentication and
grading service which will give collectors and dealers the confidence to buy
and sell high-end coins without physical inspection (commonly referred to as
sight-unseen) through Internet auctions.
COMMERCE
The Company intends to conduct its proposed auctions in a variety of formats
that allow coin collectors to choose the format with which they are most
comfortable. The proposed auctions will be offered in two forms - premium
auctions and monthly auctions. The proposed premium auctions will feature
special or unique coin collectibles. The Company intends for buyers to initially
place bids over the Internet. The Company will require consignors in our premium
auctions to ship their coin collectibles to the Company prior to auction. By
taking physical possession of the coin collectibles to be sold in auction, the
Company will ensure fulfillment of the transaction. Also, the Company plans to
ensure that upon delivery the auctioned item will meet the description made in
our auction materials to the buyer's complete satisfaction. The Company will
photograph and prepare descriptions for all items consigned to us for auction
and compile a listing of all items to be auctioned in advance of each of our
proposed premium auctions. Collectors can thus view all of the collectibles to
be auctioned, along with complete descriptions, by visiting our web-site and
viewing online. At the conclusion of the auction, the Company will handle
shipping and payment transactions. If the buyer is not satisfied, the Company
will refund to the buyer the amount paid for the item. In addition to
addressing concerns of buyers, the Company will also arrange for prompt payment
to sellers of the proceeds of transactions completed in our auctions. Thus, our
method of operation will eliminate the concerns of buyers and sellers in
completing sight-unseen transactions. Management believes that the Company must
be successful in raising equity or debt financing sufficient to meet its current
working capital requirements and to support the expenses associated with
developing the proposed monthly or premium auctions.
Monthly auctions will feature coin collectibles consigned to us by individuals
and by dealers of quality coin collectibles, as well as coin collectibles from
our own inventory. All proposed auctions will be conducted over the Internet and
enable collectors to sell their high-end collectibles in a more timely manner.
Initially, the Company intends to implement proposed monthly auctions and later
expand to offering premium auctions. There can be no assurances that the Company
can develop the proposed monthly or premium auctions, and if the Company cannot
enter into any favorable agreements with partner coin companies to offer the
proposed monthly or premium auctions, it would have a material adverse impact on
the Company. Management has not negotiated or entered into any agreements with
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any potential partner coin companies. In addition, management has not developed
any development plans or negotiation standards for dealing with potential
partner coin companies.
SALES AND MARKETING
The number and dollar value of transactions in the coin collectibles markets we
serve are not easily ascertainable. However, PCGS estimates that the annual
dollar value of transactions for certain coin collectibles markets are as
follows: modern commemorative and gold coins - $20 billion; rare coins (U.S.
only) - $1.0 billion. To achieve the Company's goal of becoming the full-service
market place of choice for high-end coin collectibles, the Company intends to
publicize and attract people to its proposed web-site through Internet
advertising and print advertisements placed in weekly and monthly trade
publications targeted at coin collectors. The Company plans to maintain an
industry presence by attending most major coin collectible trade shows. By
seeing the coin items on display in the Company's booth, visitors will then be
able to log on to our web-site at the booth and participate in auctions by
bidding for coins online.
The Company intends to devote significant resources to providing personalized,
customer service and support in a timely manner. The first level of support will
be the electronic and automated communications with customers, consignors and
bidders. This will keep buyers and sellers updated on the status of auctions and
coin collectibles submitted for auction. The next level of support will be the
development of the Company's computer-assisted telephone and Internet
information system, through which the Company can track the status of the coins
the Company will receive for auction. The Company is currently reviewing
different auction software for purchase to accomplish this support level.
Management believes that the Company must be successful in raising equity or
debt financing sufficient to meet its current working capital requirements and
to support the expenses associated with purchasing auction software.
The Company also intends to enter into a strategic relationship with e-Bay or
another such entity that will enable all of its users to access our services and
coin auction. The Company anticipates that numerous customers will gain
immediate access to our co-branded web-site and the Company's database.
Management has not negotiated or entered into any agreements with e-Bay or
another such entity. In addition, management has not developed any development
plans or negotiation standards for dealing with any of these entities.
The Company also anticipates establishing relationships with partner coin
companies with leading coin experts in high-end coin collectible markets. The
experts will provide the Company with collectibles while others will provide
content such as price guides and authoritative information in their areas of
expertise for our web-site. Management has currently not negotiated or entered
into any agreements with any potential coin partner company. There can be no
assurance that the terms negotiated by the Company will be acceptable to
potential coin partner companies, and if favorable agreements cannot be made it
would have a material adverse impact on the Company.
OPERATIONS AND TECHNOLOGY
The Company intends to purchase software to maintain monthly auctions and
provide data with respect to previous auctions. This system will handle all
aspects of the auction process and enable users to follow and participate in the
bidding during the course of the auction. The auction system will be integrated
with additional internal software systems to provide full support of the auction
process including: and inventory management system that keeps track of consigned
collectibles as they progress through the system from receipt, to photography,
to auction creation and all the way to final shipment; a customer information
system; and a corporate accounting system. This system will create and send
bidder invoices and consignor sales information immediately after completion of
an auction. The system will support credit card transactions for the winning
bidders. Management believes that the Company must be successful in raising
equity or debt financing sufficient to meet its current working capital
requirements and to support the expenses associated with purchasing software to
maintain monthly auctions.
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COMPETITION
The trading of collectibles over the Internet is new, rapidly evolving and
intensely competitive. In the Internet auctions business generally, our
competitors include eBay, Amazon.com, Yahoo!, Onsale, Auction Universe, a
division of Classified Ventures, Inc. and Excite. Our competitors in the
Internet collectibles auction business include Collectit.net, Collectors
Supermall, and Numismatists Online. Large corporations with recognized
capabilities in business-to-consumer commerce, including America Online,
Microsoft, Cendant, and QVC, have large resources which could also be directed
to compete in the Internet auction market. Barriers to entry are relatively low
and current and new competitors can launch new sites at a relatively low cost
using commercially available software. The Company believes that the principal
competitive factors in our Internet auction business will be expertise in the
coin collectibles offered for sale; quality of coin collectibles; population of
buyers and sellers that use the service; availability of related services, such
as authentication and grading, customer service and staff expertise; reliability
of delivery and timely payment; and web-site convenience and accessibility.
The traditional auction business is also highly competitive. The Company
competes directly with other companies that specialize in coin collectibles and
have an industry reputation for hosting premium collectibles auctions. Our
competitors in traditional auction markets include Heritage Numismatic Auctions
as well as other reputable companies such as Sotheby's and Christie's which do
not specialize in, but do conduct coin auctions. In addition, other significant
auction companies that do not presently engage in coin auctions, may decide to
enter our markets to compete with us.
If the Company is unable to attract, develop, and maintain relationships with
the proposed partner coin companies, it would have a material adverse impact on
the success of the Company. Reference is made throughout this registration
statement to "partner coin companies" in which the Company anticipates
developing a strategic interest with leading coin experts in high-end coin
collectible markets to provide the Company with collectibles, price guides and
authoritative information in their areas of expertise for our web site. The
Company currently has no relationship, by agreement or otherwise, with any
partner company(s).
The Company has no new public announcements of services or products planned.
The Company does not rely on raw materials for conducting its business.
The Company will not be dependent on one or a few major customers, but will rely
on the broad-based coin market for developing customers over time.
The Company currently has no patents, trademarks, licenses, franchise, royalty
agreements, or labor contracts in place.
The Company is unaware of need for governmental approval for its proposed
business plan. The Company is not currently subject to direct federal, state or
local regulation, and laws or regulations applicable to access to or commerce on
the Internet, other than regulations applicable to businesses generally.
However, due to the increasing popularity and use of the Internet and other
online services, it is possible that a number of laws and regulations may be
adopted with respect to the Internet or other online services covering issues
such as user privacy, freedom of expression, pricing, content and quality of
products and services, taxation, advertising, intellectual property rights and
information security. Several states have also proposed legislation that would
limit the uses of personal user information gathered online or require online
services to establish privacy policies. Numerous states, including the State of
California in which our headquarters are located, have regulations regarding the
manner in which "auctions" may be conducted and the liability of "auctioneers"
in conducting such auctions. We do not believe that such regulations, which were
adopted prior to the advent of the Internet, govern the operations of our
business and no state has filed a claim asserting that we are subject to such
legislation. Although we have received no communications from the state of
California or any other state, no legal determination has been made with respect
to the applicability of the California regulations to our business to date and
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little precedent exists in this area. Therefore, given the nature of Tugboat's
business, the Company does not anticipate any material costs associated with
compliance with federal, state and local environmental laws and regulations.
The Company does not intend to collect sales tax or other similar taxes on goods
sold by users through our online service. However, one or more states may seek
to impose sales tax collection obligations on out-of-state companies such as
ours which engage in or facilitate online commerce, and a number of proposals
have been made at the state and local level that would impose additional taxes
on the sale of goods and services through the Internet. Since the Internet is
worldwide, other jurisdictions may seek to tax or otherwise burden our business
with regulatory requirements.
The Company is currently not aware of any federal, state or local laws and
regulations regulating the Internet at this time which would materially affect
its business activities.
The Company is unaware of any environmental laws (federal, state, or local) that
will have an effect on its proposed business.
The Company has spent no money over the past two years on research and
development.
Currently, the Company has no employees excluding the current officer and
directors. Christos Papadimos, officer and director of the Company, and J.
Michael Page, director of the Company, are currently employed full time. (SEE
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSON" Potential
Conflicts of Interest). The officer and directors anticipate devoting, at most,
20 hours per month. This is only an estimation and may be increased or decreased
depending on unforeseen factors. Though no commercial conflicts are anticipated
between the current employers of the officers, directors, and the Company no
assurance can be given that this will continue.
RISK FACTORS
The Company is in the development stage and the market it intends to compete
within is new and emerging. There are several competitors within the marketplace
that have significantly greater financial and management resources than the
Company. The following section describes some of the risk factors specific to
the Company. Individuals should carefully consider the following risk factors,
in addition to the other information presented in this registration statement,
when evaluating the Company's business plan. Any of the following risks could
seriously harm the business and/or prevent the furtherance of the business.
RISKS PARTICULAR TO TUGBOAT INTERNATIONAL, INC.
A. NO OPERATING HISTORY TO EVALUATE.
The Company's business strategy was developed in July, 1998 and to date has not
commenced operations or generated revenue. The Company, therefore has no
operating history from which you may evaluate our business and prospects. We are
among the many companies that have entered into the coin and rare currency
markets which sell or plan to sell on the Internet. In addition, many, and
likely all, of our proposed coin partner companies will be in the early stages
of their development. Our business and prospects must be considered in light of
the risk, expense, and difficulties frequently encountered by companies in an
early stage of development, particularly companies in new and rapidly evolving
markets which sell on the Internet.
B. DECLINE IN THE POPULARITY OF HIGH-END COLLECTIBLES COULD IMPACT OUR
BUSINESS
The popularity of certain categories of collectibles may vary over time due to
perceived scarcity, subjective value, general consumer trends, changes in the
prices of precious metals, interest rates and other general economic conditions.
Additionally, a decline in the popularity of collectibles, and coins in
particular, would result in fewer transactions in our proposed auctions and
fewer sales from our proposed inventory, reducing our revenue form auction
sales.
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C. OUR FUTURE OPERATING RESULTS ARE SUBJECT TO FLUCTUATIONS
Our potential operating results are expected to be unpredictable and we expect
them to fluctuate in the future due to a number of factors, many of which are
outside the Company's control. These factors include:
- our ability to significantly increase our customer base;
- our ability to obtain or purchase coin collectibles to offer at our
proposed auctions;
- our ability to re-sell our inventory of coin collectibles in a timely
manner;
- our ability to maintain gross margins;
- our ability to maintain customer satisfaction;
- the general availability and pricing of high-end coin collectibles;
- our ability to establish relationships with partner coin companies
with leading coin experts in high-end coin collectible markets;
- costs relating to the expansion of our operations and the introduction
of new types of services;
- services offered by our competitors and the success of our
competitors;
- technical difficulties with consumers' use of our proposed website or
service interruptions; and
- general economic conditions and economic conditions specific to the
prices of high-end coin collectibles.
Our future operating results are also dependent on the success of our future
Internet website and the amount of resources that we will need to devote to the
development of our website. Our Internet website is currently not set up and the
Company will be in the early stages of development of the website which will
offer proposed auctions for collectibles that may have a lower average selling
price than what we are anticipating. Development and continued development of
our website will require significant resources. There is a risk that the planned
website will not result in any revenues which would have a negative impact on
our business.
D. WE HAVE HAD NO HISTORY OF OPERATIONS AND EXPECT OPERATING LOSSES IN THE
FORESEEABLE FUTURE.
The Company expects to incur operating losses for the foreseeable future and if
we ever have operating profits, we may not be able to sustain them. Expenses
will increase as we build an infrastructure to implement our business model. For
example, we expect to hire additional employees, expand information technology
systems, and lease more space for our corporate offices. In addition, we plan to
significantly increase our operating expenses to:
- purchasing auction software;
- purchasing and maintaining inventory of coin collectibles;
- developing a website to keep buyers and sellers updated on the status
of auctions and coin collectibles submitted for auction;
- development of a computer-assisted telephone and Internet information
system, through which the Company can track the status of the coins
the Company will receive.
- Seeking contractual relationships with selected coin dealers and
experts in the coin collectible markets to supply coin collectibles
for auction.
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Expenses may also increase due to the potential effect of goodwill amortization
and other charges resulting from future partnerships and/or alliances, if any.
If any of these and other expenses are not accompanied by increased revenue, our
operating losses will be even greater than we anticipate.
E. WE MAY INCUR LOSSES AS A RESULT OF ACCUMULATING INVENTORY
In addition to auctioning collectibles for other partner coin companies, we
anticipate that approximately 10% of the aggregate sales prices of coin
collectibles sold at our proposed auctions be from our own inventory. The
Company intends to purchase these collectibles from dealers and collectors and
will assume the inventory and price risks of these items until they are sold. If
we are unable to resell our purchased coin collectibles when we want or need to,
or at prices sufficient to generate a profit on their resale, or if the market
value of our inventory of purchased coin collectibles were to decline, the
company's proposed operating results would be negatively affected.
F. THERE ARE LIMITED SUPPLIES OF COIN COLLECTIBLES
Our business will be substantially dependent upon obtaining collectible coins
for reselling. We will depend on dealers, coin collectors and other coin partner
companies for submitting coin collectibles to the company and there is no
guarantee that coin collectible submissions will occur. Any change in proposed
relationships with these dealers, coin collectors and other coin partner
companies could negatively impact our ability to obtain or auction high-end coin
collectibles in the quantities and at the times we desire. This could impair our
ability to attract a sufficient number of people interested in high-end coin
collectibles to our proposed auctions, which could harm our business.
G. WE FACE COMPETITION IN ATTRACTING COIN COLLECTORS TO OUR PROPOSED INTERNET
WEBSITE
The market for Internet auctions is highly competitive and most major Internet
websites of such companies as Yahoo!, eBay Inc., Onsale, Inc. and Excite, Inc.,
a subsidiary of At Home Corporation, host Internet auctions where coin
collectibles are traded. Barriers to entry to the Internet auction market are
relatively low, and current and new competitors can launch new websites at a
relatively low cost using commercially available software. We potentially face
competition from a number of large Internet communities and services that have
expertise in developing Internet commerce, such as Amazon.com, Inc., America
Online, Inc. and Microsoft Corporation. Other large companies with strong brand
name recognition, substantial resources and experience in Internet commerce,
such as Cedant Corporation, QVC, Inc. and other large media companies may also
seek to compete in the Internet auction market. In addition to currently or
potentially competing for auction services with major Internet commerce
companies, we also compete with a number of other small service providers
including those that specifically serve the coin collectible markets.
Competitive pressures created by any one of these companies, or by our
competitors collectively, could harm our business.
Some of our competitors have longer operating histories in Internet commerce,
large customer bases, greater brand name recognition and significantly greater
financial, marketing, technical and other resources. In addition, other Internet
trading services may be acquired by or enter into commercial relationships with
large, well-established and well-financed companies as use of the Internet
increases. Further, there is a risk that someone could create a website that
draws auction information from numerous auction websites to create a
consolidated auction. Such an "auction supermarket: could reduce the amount of
traffic we receive on our potential website and have a negative effect on our
Internet business.
H. TRADITIONAL AUCTION BUSINESS IS HIGHLY COMPETITIVE
The traditional auction business is also highly competitive. We will compete
directly with other companies that specialize in coin collectibles and have an
industry reputation for hosting premium coin collectibles auctions, including
Heritage Numismatic Auctions, Inc., Collectors Universe, Inc. as well as other
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companies such as Sotheby's, Inc., Christie's, Inc. and Greg Manning Auctions,
Inc., which do not specialize in but do conduct coin auctions. These competitors
each have the ability to attract buyers to their auctions as a result of their
reputation and the quality collectibles they obtain through their industry
connections. In addition, other reputable auction companies that do not
presently engage in auctions for coins or other collectibles that are the focus
of our business may decide to enter our markets to compete with us. These
companies have greater name recognition and have greater financial and marketing
resources than we do. If these auction companies are successful in entering the
specialized high-end coin collectibles markets in which we plan to participate
or dealers participate less in our auctions, we may attract fewer buyers and our
business could be harmed.
I. GROWTH AND ACQUISITION MAY STRAIN OUR MANAGEMENT, OPERATIONAL AND FINANCIAL
RESOURCES
There can be no assurances that our planned facilities, proposed computer
systems, personnel and inventory controls will be adequate to support any future
operations. In addition, there is a risk that we may not be able to expand our
coin collectibles operations to allow for additional capacity at the same rate
as market demand may be created.
If appropriate opportunities present themselves, we also intend to acquire
businesses, technologies, services or products that we believe will help us
develop and expand our business. The process of integrating and acquired
business, technology, service, or product may result in operating difficulties
and expenditures which we cannot anticipate and may absorb significant
management attention that would otherwise be available for further development
of our existing business. Moreover, the anticipated benefits of any acquisition
may not be realized. Any future acquisitions of other businesses, technologies,
services or products might require us to obtain additional equity or debt
financing, which might not be available to us on favorable terms or at all, and
might be dilutive. Additionally, we may not be able to successfully identify,
negotiate or finance future acquisitions or to integrate acquisitions with our
current proposed business.
J. WE RUN A RISK OF PROPOSED SYSTEM CAPACITY CONSTRAINTS AND SYSTEM FAILURE
We will seek to generate a high volume of traffic and transactions on our
proposed website. If we generate too much traffic to our proposed website, our
website will exceed its capacity, load slowly and be less responsive. This may
potentially drive away customers. Our inability to integrate software and
hardware or to develop and further upgrade our technology to accommodate
increased traffic on our proposed websites or increased transaction volume
through our proposed processing systems may cause unanticipated system
disruptions, slower response times, degradation in levels of customer service,
impaired quality of the user's experience on our proposed websites, and delays
in reporting accurate financial information.
K. WE FACE THE LOSS OF KEY PERSONNEL WHICH COULD ADVERSELY AFFECT PROPOSED
OPERATIONS
Our performance is greatly dependent on the performance of our management and
directors. The loss of the services of our executive officer or directors could
harm our business. Our key management people have some expertise in purchasing
coin collectibles and preparing auctions that will be attractive to buyers of
high-end coin collectibles. The loss of these management people could have a
negative impact on our reputation for expertise in the coin collectibles
markets. Additionally as the company operations get underway, we must identify,
attract, hire, train, retain and motivate other highly skilled technical,
managerial, marketing and customer service personnel, including programmers.
Competition for highly skilled technical, managerial, marketing and customer
service personnel is intense. We may not be able to successfully attract,
integrate or retain sufficiently qualified personnel, which failure could harm
our business.
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L. WE ARE DEPENDENT ON THE CONTINUED GROWTH OF INTERNET COMMERCE
Our business could be harmed if any of the following situations occur:
- the use of the Internet does not continue to grow or grows more slowly
than expected;
- the Internet's infrastructure does not effectively support the growth
that may occur; and
- the Internet does not become a viable commercial marketplace.
The market for the sale of goods over the Internet is a new and emerging market.
Rapid growth in the use of, and interest in, the Internet is a recent phenomenon
and may not continue to develop.
M. INSECURE TRANSMISSION OF CONFIDENTIAL INFORMATION AND THIRD PARTY
MISCONDUCT COULD HURT CUSTOMER CONFIDENCE IN INTERNET COMMERCE
Many consumers are concerned about transmitting confidential information, such
as credit card numbers, over the Internet. Public confidence in secure
transmissions is a significant barrier to Internet commerce and communications.
We will seek out encryption technology licensed from third parties to transmit
confidential information, including customer credit card numbers. In addition,
our servers will be vulnerable to computer viruses, physical or electronic
break-ins, deliberate attempts by third parties to exceed the capacity of our
systems and similar disruptive problems. Computer viruses, break-ins or other
problems caused by third parties could lead to any interruptions, delays, loss
of data or cessation in service to users of our services and products. The law
relating to the liability of Internet service companies for information carried
on or disseminated through their services is currently unsettled. It is possible
that claims could be made against Internet service companies under both US and
foreign law for defamation, libel, invasion of privacy, negligence, copyright or
trademark infringement, or other theories based on the nature and content of the
materials disseminated through their services. Concerns regarding liability for
information disseminated over the Internet and the adoption of any additional
laws or regulations may decrease the growth of the Internet, which could
decrease the demand for our Internet auctions and other services.
N. ADDITIONAL REGULATIONS COULD BE IMPOSED ON OUR INDUSTRY
AUTHORITIES COULD IMPOSE ADDITIONAL REGULATIONS ON COLLECTIBLES AND AUCTION
MARKETS. The collectible coin and other high-end collectibles markets are not
currently subject to direct federal, state or local regulation, although
auctions in general and the sale of certain artwork and autographed sports
memorabilia are regulated in some states. However, from time to time authorities
discuss additional regulations which could impose restrictions on the
collectibles industry, such as regulating collectibles as securities or
requiring collectibles dealers to meet certain registration or reporting
requirements, and impose restrictions on the conduct of auction businesses.
Adoption of laws or regulations of this nature could increase the complexity and
costs of conducting auctions, which might decrease our ability to attract
sellers and buyers. In addition, due to the increasing popularity and use of the
Internet, laws and regulations may be adopted with respect to the Internet that
could significantly limit our Internet auction business or otherwise harm our
business.
O. STATES COULD IMPOSE OBLIGATIONS TO COLLECT SALES TAXES.
It is the Company's intention not to collect sales or other similar taxes on
goods sold by users through our proposed Internet auction service. However, one
or more states may seek to impose sales tax collection obligations on
out-of-state companies such as ours, which engage in or facilitate Internet
commerce, and a number of proposals have been made at the state and local level
that would impose additional taxes on the sale of goods and services through the
Internet. If adopted, these proposals could substantially impair the growth of
Internet commerce, and could adversely affect our ability to profit from
Internet commerce. Moreover, a successful assertion by one or more states or any
foreign country that we should collect sales or other taxes on the exchange of
merchandise on our proposed auctions could harm our business.
11
<PAGE>
P. WE ARE LARGELY CONTROLLED BY MANAGEMENT
Our officer and directors currently own or control a substantial majority of our
outstanding common stock. If they act in concert, they will continue to be able
to exercise voting control over the Company for the foreseeable future and will
be able to elect the entire Board of Directors, set dividend policy and
otherwise generally determine our management. This management control could
prevent, or make more difficult, on-going business.
Q. WE WILL RELY ON THIRD PARTIES FOR VARIOUS INTERNET AND PROCESSING SERVICES
In addition to our merchandise suppliers, our proposed operations will depend on
a number of third parties for Internet access, delivery services and credit card
processing. We will have limited control over these third parties and no
long-term relationships with any of them. For example, we will not own a gateway
onto the Internet, but instead, rely on Internet service providers to connect
our website tot he Internet. Should the third parties that we will rely on for
Internet access, delivery services or credit card processing services be unable
to serve our needs for a sustained time period as a result of a strike, natural
disaster or other reason, our business could be harmed.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following Management's Discussion and Analysis of Operations contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth under "Risk
Factors" and elsewhere in this prospectus. The following should be read in
conjunction with our audited financial statements included within this
registration statements.
PLAN OF OPERATION
The Business Plan for the Company over the next twelve months is to design and
implement a web-site to initially conduct monthly auctions then later expand to
premium auctions. The Company is seeking to establish relationships with
selected coin dealers and experts in the coin collectible markets who possess
the expertise, integrity and capacity to provide the Company with high-end coin
collectibles for auction on a regular basis. The Company is currently seeking
contractual arrangements with these suppliers that require them to supply the
Company a minimum dollar value of collectible coins during each contract period.
The Company is also seeking coin collectibles that it can acquire for resale in
the monthly auctions. By acquiring inventories of collectible coins will provide
greater control over the quality and value of the coin collectibles the Company
can make available for sale on the web-site. The Company anticipates that 90% of
its initial business will be contracted through coin dealers and 10% will be in
maintaining inventories for resale. During the initial 12-month period of
business, the Company intends to publicize and attract people to its proposed
web-site through Internet advertising and print advertisements placed in weekly
and monthly trade publications targeted at coin collectors.
In order to proceed with the proposed business plan, the Company will need to
raise capital. Management's plan, "for the next several months" is to raise
capital and begin making contact with potential coin dealers and experts to seek
contractual arrangements to supply the Company a minimum dollar value of
collectible coins. There can be no assurance or guarantee that there will be any
interest by investors to invest in the Company or that any proceeds can be
raised by the Company. If capital cannot be raised by the Company, it will have
a material adverse impact on the progress of its strategic business plan.
The Company may experience significant volatility in our quarterly results. If,
and when, the Company begins operations, there can be no assurance that we will
ever report a net income in any period, and we expect that we will report
operating losses for the foreseeable future.
12
<PAGE>
Excluding its current officer, the Company has no employees. While the Company
plans to hire additional employees and train them, it may be unable to find and
hire additional qualified management and professional personnel to help lead us.
The addition of employees will depend on the ability of the company to raise
additional capital, which cannot be assured.
The Company's officer and directors make up its entire management team. These
two individuals are employed at other companies and plans to initially devote
minimal time to promoting the Company's strategic business plan. If other
obligations take priority for the Company's officer and directors, it will have
a material adverse impact on the progress of the Company. In addition, there has
been and are no plans for compensating the officer or directors until sufficient
revenue flow can be generated, of which, there is no guarantee. Since the
officer and directors are being compensated by their employment elsewhere, they
may be less motivated to spend adequate time promoting the Company.
Management does not anticipate any product research and development, or the
purchase or sale of any significant equipment.
ANALYSIS OF FINANCIAL CONDITION
The Company has not yet generated positive cash from operating activities. The
Company does not expect to generate positive cash from operations for the year
ending December 31, 2000. From July 20, 1998 to September 30, 2000, the Company
has a net loss of $11,418. The losses were a result of organization and other
start-up related costs. As of September 30, 2000 the Company has $6,706 in
cash. (See "Financial Statements" within this registration statement).
The Company does not foresee a material increase in operating expenses until
such time sufficient capital can be raised and the Company proceeds with its
business plan. Management believes that the Company must be successful in
raising equity or debt financing sufficient to meet its current working capital
requirements and to support the expenses associated with developing the website
on the Internet, purchasing auction software and developing contractual
arrangement with coin partner companies to supply the Company with collectibles,
price guides and authoritative information in their areas of expertise. There
can be no assurances that any contractual arrangements can even be made, and if
favorable agreements cannot be made, it would have a material adverse impact on
the Company. Management has not negotiated or entered into any agreements with
any potential coin partner companies. In addition, management has not developed
any development plans or negotiation standards for dealing with potential coin
partner companies.
Management's immediate plan is to focus its efforts on raising capital and
contacting potential coin partner companies. Management hopes to raise
sufficient capital within the next twelve months to initiate operations that
include positioning itself with coin partner companies and meeting both its
short-term and long-term operating requirements. The Company's officer and
directors makes up the current management team. These two individuals have other
obligations and plan to initially devote minimal time to promoting the company's
strategic business plan. If other obligations take priority for the officer and
directors over that of the company's, it will have a material adverse impact on
the progress of the Company. In addition, excluding the shares that were issued
to the officer at ($0.0002 per share), there has been, and are no plans for
compensation to be paid to the officer or directors until sufficient revenue
flow can be generated.
Currently management has not determined the dollar amount required to adequately
initiate its operations and has not determined a minimum or maximum amount it
plans to raise. The Company may encounter business initiatives that require
significant cash commitments or unanticipated problems or expenses that could
result in a requirement for additional cash before that time. If the Company
rises additional funds through the issuance of equity or convertible debt
securities, the percentage ownership of its shareholders would be reduced, and
such securities might have rights, preferences or privileges senior to its
common stock. Additional financing may not be available upon acceptable terms,
or at all. If adequate funds are not available or are not available on
13
<PAGE>
acceptable terms, the Company's ability to fund its expansion, take advantage of
business opportunities, develop, or enhance its business plan or otherwise
respond to competitive pressures would be significantly limited, and it may
significantly restrict the Company's operations.
ITEM 3. DESCRIPTION OF PROPERTY
The Company owns no real property. The Company is provided sufficient space to
do its present business by a director of the Company. Going forward, the Company
plans to use the offices of the director, at no cost to the Company. Both
parties have agreed to continue this arrangement until the Company begins
operations and/or generates revenue.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the Common Stock
ownership as of September 30, 2000 of each officer, director and who is known to
the Company as management or to be the beneficial owner of more than five
percent of the Company's Common Stock. As of September 30, 2000, there were
5,169,000 common shares outstanding.
Beneficial Ownership of Shares
Name Number Percent* Security
---- ------ -------- --------
Christos Papadimas (1)
President and Director 5,000,000 96.7% Common
Officers and Directors
as a Group (2) 5,000,000 96.7% Common
----------
* Rounded up to the nearest whole number.
(1) Christos Papadimas' address is 744 W Hastings St., Suite 316, Vancouver,
BC, Canada V6C 1A6 is the direct owner and is described above. Unless
otherwise indicated, the named party is believed to be the sole investor
and have voting control of the shares set forth in the above table. Based
on 5,419,000 outstanding shares on September 30, 2000.
(2) On November 15, 2000 (subsequent to the audit of September 30, 2000), the
Company issued 250,000 shares of restricted (Rule 144) common stock to J.
Michael Page, a director of the Company, at a price of $0.0002 per share.
Mr. Page's address is 1445 Marpole Ave., Suite 409, Vancouver, BC, Canada,
V6H 1S8. This is based on 5,419,000 outstanding shares at the time of this
filing.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following information sets forth certain information concerning the
Executive Officers and Directors of the Company as of September 30, 2000.
Name Age Position Term of Office
---- --- -------- --------------
Christos Papadimas (1) 25 Director, President, Until annual meeting
Secretary of stockholders
J. Michael Page (2) 56 Director Until annual meeting
of stockholders
----------
(1) Christos Papadimas' address is 744 W Hastings St., Suite 316, Vancouver,
BC, Canada V6C 1A6.
(2) J. Michael Page's address is 1445 Marpole Ave., Suite 409, Vancouver,
British Columbia, Canada.
There are no other persons nominated or chosen to become Directors or Executive
Officers, nor do we have any employees other than the above. There is no
arrangement or understanding between any of our Directors or Officers pursuant
to which they were elected to his office. The removal of a Director from the
Board can be succeeded only by the following actions: (1) majority vote of the
existing Directors; or (2) majority vote of the shareholders of record.
14
<PAGE>
RESUMES:
Christos Papadimas - Director, President and Secretary. Since 1998, Mr.
Papadimas has served as President, Secretary and Director of Tugboat
International, Inc. Mr. Papadimas is currently Business Consultant and
Representative of Argiaki Brewery Enterprises, Vancouver, British Columbia since
June, 2000, and Consultant to Present Colliers International Ltd., Vancouver,
British Columbia since September, 1999. He is also currently enrolled at
University of Simon Fraser, Burnaby, British Columbia in the economics
undergraduate program. From 1997 through 1999, Mr. Papadimas worked as Business
Manager of Autoplus Services, Vancouver, British Columbia. From 1996 to 1998,
Mr. Papadimas worked as Assistant Manager of Knight and Day Restaurant in
Richmond, British Columbia Canada.
J. Michael Page - Director. Mr. Page has vast experience in managing and
developing business and business activities in a wide array of industries. Mr.
Page has experience in Management, Marketing and Product/Business Development in
emerging developing companies. Mr. Page, a business management consultant,
currently serves as a Director of the Company since 2000. From 1998 to 2000, he
served as a Director of Cortez Development. From 1996 to 1999, he served as
President and Director of Galveston Oil & Gas, Inc. From 1987 to 1996, Mr. Page
served as an executive with Equus Technologies, Ltd., a computer software
company which trades on the CDNX Exchange.
The Company presently expects to conduct its annual meeting of shareholders and
directors in April, 2001, at which time directors will again be elected. All
directors serve for a period of one year, unless removed in accordance with our
By-Laws.
POTENTIAL CONFLICTS OF INTEREST
The Company's officer and directors are currently engaged in other employment.
Consequently, there are potential inherent conflicts of interest in acting as an
officer and director of the Company. Insofar as the officer and directors are
engaged in other business activities, management anticipates that it will devote
only a minor amount of time to the Company's affairs. The Company does not have
a right of first refusal pertaining to opportunities that come to management's
attention insofar as such opportunities may relate to the Company's proposed
business operations.
A conflict may arise in the event that another company with which management is
affiliated is formed and actively seeks business similar to that of the
Company's business plan. Initially Mr. Papadimas and Mr. Page will be
responsible for seeking, evaluating, negotiating and consummating business
partnerships with companies which may result in terms providing benefits to Mr.
Papadimas and Mr. Page.
As both Mr. Papadimas and Mr. Page are engaged in other business activities,
demands may be placed on the time of Mr. Papadimas and Mr. Page which will
detract from the amount of time they are able to devote to the Company. Mr.
Papadimas and Mr. Page intends to devote as much time to the activities of the
Company as required. However, should such a conflict arise, there is no
assurance that Mr. Papadimas or Mr. Page would not attend to other matters prior
to those of the Company. Both Mr. Papadimas and Mr. Page projects that initially
approximately twenty hours per month of their time may be spent on the related
business activities of the Company. However, there are no assurances that twenty
hours per month will be spent.
ITEM 6. EXECUTIVE COMPENSATION
The Officer of the Company has received no compensation, including no bonus or
incentive plans - stock, cash, or otherwise. The Company plans to begin
compensating the officer only at such time the Company is generating sufficient
revenues. Presently, the Company has not established any dates or other
requirements for the officers to begin receiving compensation. If, and when, the
time is deemed appropriate for the officers to receive compensation, the matter
will be brought before the Board of Directors to vote.
15
<PAGE>
COMPENSATION OF DIRECTORS
During the most recently completed financial year ended December 31, 1999 and
the interim audited period of September 30, 2000, there was no compensation
paid, by the Company to its director(s), for services as a director(s). There
are no standard arrangements for any such compensation to be paid other than
reimbursement for expenses incurred in connection with their services as
directors, although the Company from item to time may grant options to acquire
Common Shares for directors. As at the date hereof the Company has no
outstanding options to Directors that have been granted for their service.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACITONS
On July 20, 1998 the Company issued 5,000,000 common shares at ($.0002) per
share to its president and director, Christos Papadimas in consideration for
$1,000.
ITEM 8. DESCRIPTION OF SECURITIEES.
CURRENT CAPITAL STRUCTURE
As of September 30, 2000 the Company has 80,000,000 Shares of Common Stock with
a par value of $0.0001, authorized, with 5,169,000 Shares outstanding and
20,000,000 Shares of Preferred Stock with a par value of $0.0001, authorized,
with zero Shares outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by the shareholders. There is no cumulative
voting with respect tot he election of directors, with the result that the
holders of more than 50 percent of the Shares voted for the election of
directors can elect all of the directors. 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. In the event of liquidation,
dissolution, or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining available for distribution to
them after payment of liabilities and after provision has been made for each
class of stock, if any, having preference over the commons stock. All of the
outstanding Shares of Common Stock are, and the Shares of Common Stock Offered
hereby, when issued for the consideration set forth in this Prospectus, will be
fully paid and non-assessable.
PREFERRED STOCK
The Company has 20,000,000 Shares of Preferred Stock, par value $0.0001,
authorized with zero Shares outstanding.
OPTIONS AND WARRANTS
The Company has no outstanding options or warrants to purchase common stock.
DEBT SECURITIES
The Company has no debt securities.
16
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The Company is authorized to issue 80,000,000 shares of Common stock, par value
$0.0001 per share. As of September 30, 2000, the Company had outstanding
5,169,000 shares of Common stock. All Common Shares are equal to each other with
respect to voting, and dividend rights, and subjects tot he rights of the
preferred shareholders. There are 20,000,000 shares of preferred par
value$0.0001, none of which are outstanding.
Special meetings of the Shareholders may be called by the officers, directors,
or upon the request of holders of at least ten percent of the outstanding voting
shares. Holders of Common Shares are entitled to one vote at any meeting of the
Shareholders for each Common Share they own as of the record date. At any
meeting of Shareholders, a majority of the outstanding Common shares of the
Company entitled to vote, represented in person or by proxy, constitutes a
quorum. A vote of the majority of the Common Shares represented at a meeting
will govern, even if theirs is substantially less than a majority of the Common
Shares outstanding.
Subject to the rights of the preferred shareholders described below, holders of
shares are entitled to receive such dividends as may be declared by the Board of
Directors out of funds legally available therefore, and upon liquidation are
entitled to participate pro rata in a distribution of assets available for such
a distribution to Shareholders. There are no conversion, pre-emptive or other
subscription rights or privileges with respect to any share. Reference is made
of the Certificate of Incorporation and Bylaws of the Company as well as to the
applicable statutes of the State of Delaware for a more complete description of
the rights an liabilities of holders of shares. It should be noted that the
Bylaws may be amended by the Board of Directors without notice to the
Shareholders.
NON-CUMULATIVE VOTING
The shares of the Company do not have cumulative voting rights, which means that
the holders of more than fifty percent of the Common Shares voting for election
of directors may elect all the directors if they choose to do so. In such event,
the holders of the remaining shares aggregating less than fifty percent will not
be able to elect directors.
MARKET PRICE
There is no trading market for the Company's Common stock at present and there
has been no trading market to date. There is no assurance that a trading market
will ever develop or, if such a market, does develop, that it will continue.
If and when the Company's securities are traded, the securities may likely be
deemed a "penny stock." The Securities and Exchange Commission has adopted Rule
15g-9 which established the definition of a "penny stock," for purposes relevant
to the Company, as any equity security that has a market price of less than
$5.00 per share or with an exercise price of less than $5.00 per share, subject
to certain exceptions. For any transaction involving a penny stock, unless
exempt, the rules require: that a broker or dealer approve a person's account
for transactions in penny stocks; and (ii) the broker or dealer receive from the
investor a written agreement to the transaction, setting forth the identity and
quantity of the penny stock to be purchased. In order to approve a person's
account for transactions in penny stocks, the broker or dealer must (i) obtain
financial information and investment experience objectives of the person; and
(ii) make a reasonable determination that the transactions in penny stocks are
suitable for that person and the person has sufficient knowledge and experience
in financial matters to be capable of evaluating the risks of transactions in
penny stocks. The broker or dealer must also deliver, prior to any transaction
in a penny stock, a disclosure schedule prepared by the Commission relating to
the penny stock market, which, in highlight form, (i) sets forth the basis on
which the broker or dealer made the suitability determination; and (ii) that the
broker or dealer received a signed, written agreement from the investor prior to
17
<PAGE>
the transaction. Disclosure also has to be made about the risks of investing in
penny stocks both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
The Company plans to have its securities traded in the over-the-counter ("OTC")
market. The OTC market differs from national and regional stock exchanges in
that it (1) is not cited in a single location but operates through communication
of bids, offers and confirmations between broker-dealers and (2) securities
admitted to quotation are offered by one or more broker-dealers rather than the
"specialist" common to stock exchanges. The Company may apply for listing on the
NASD OTC Bulletin Board or may offer its securities in what are commonly
referred to as the "pink sheets" of the National Quotation Bureau. No assurance
can be given by the Company that any of the above events will occur.
DIVIDENDS
The Company has not paid any dividends to date, and has no plans to do so in the
immediate future.
ITEM 2. LEGAL PROCEEDINGS
The party is not a party to, and none of the company's property are subject to,
any material pending or threatened legal proceeding.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On July 20, 1998, the Company was incorporated under the laws of the State of
Delaware.
The date, title and amount of unregistered securities sold/issued by Tugboat
International, Inc. are as follows:
On July 20, 1998 the Company issued 5,000,000 shares of its $0.0002 per share
common stock to its president, Christos Papadimas in consideration of $1,000.
The stock was issued in reliance on an exemption from registration for non
public offerings contained in section 4 (2) of the United States Securities Act
of 1933, as amended.
Between February 11, 1999 through March 20, 1999, the Company sold 169,000
common shares to 45 persons at $0.10 per share for a total of $16,900. The
shares were sold in reliance on an exemption from registration contained in
Regulation D, Rule 504 of the United States Securities Act of 1933, as amended.
On November 15, 2000 (subsequent to the audit dated September 30, 2000, Tugboat
issued 250,000 shares of restricted (Rule 144) common stock to J. Michael Page,
a director of the Company, at a price of $0.0002 per share, making the total
issued and outstanding 5,419,000 common shares. The stock was issued in reliance
on an exemption from registration for non public offerings contained in Section
4(2) of the United States Securities Act of 1933 as amended.
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the General Corporation Law of the State of Delaware provides
that a Delaware corporation has the power, under specified circumstances, to
indemnify its directors, officers, employees, and agents, against expenses
incurred in any action, suit, or proceeding. There are no specific provisions in
either the articles or the bylaws.
18
<PAGE>
PART F/S
The following audited financial statements of the company were prepared by
DeVisser & Company, Chartered Accountants, located at 401-905 West Pender
street, Vancouver, B.C. Canada V6C 1L6. The statements include an Accountant's
Audit Report, Balance Sheet as of September 30, 2000, Statement of Operations
for the period of Incorporation on July 20, 1998 to December 31, 1998, for the
year ended December, 1999, for the period ended September 30, 2000, and for the
period from July 20, 1998 (inception) to September 30, 2000, Statement of Cash
Flows for the period of Incorporation on July 20, 1998 to December 31, 1998 for
the year ended December, 1999, for the period ended September 30, 2000, and for
the period from July 20, 1998 (inception) to September 30, 2000, Shareholders'
Equity period from July 20, 1998 (inception) to September 30, 2000, as well as
Notes to the Financial statements.
INDEX TO FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT ..................................... 20
BALANCE SHEET .................................................... 21
STATEMENTS OF OPERATIONS AND DEFICIT ............................. 22
CONSOLIDATED STATEMENT OF CASH FLOWS ............................. 23
STATEMENT OF STOCKHOLDER'S EQUITY ................................ 24
NOTES TO FINANCIAL STATEMENTS .................................... 25
19
<PAGE>
[LETTERHEAD OF DE VISSER & COMPANY]
AUDITORS' REPORT
To the Shareholders of Tugboat International Inc.
We have audited the consolidated balance sheets of Tugboat International Inc. as
at September 30, 2000, December 31, 1999 and December 31, 1998, and the
statements of operations and cash flows for the period and the years then ended
and for the period from the date of incorporation on July 20, 1998 to December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express and opinion on these consolidated
financial statements based on our audits.
We conducted our audits 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 and shareholder's equity of the Company as at
September 30, 2000, December 31, 1999 and December 31, 1998 and the results of
its operations and its cash flows for the period and years then ended and for
the period from the date of its incorporation on July 20, 1998 to December 31,
1998, in accordance with generally accepted accounting principles in the United
States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in note 1 to the financial
statements, the Company has no established source of revenue and is dependent on
its ability to raise substantial amounts of equity funds. This raises
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ De Visser & Company
CHARTERED ACCOUNTANTS
Vancouver, British Columbia
November 6, 2000
20
<PAGE>
TUGBOAT INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
December 31
September 30, --------------------
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
ASSETS
CURRENT
Cash $ 6,706 $12,291 $ 0
Accounts receivable 0 3,100 1,000
------- ------- -------
6,706 15,391 1,000
Incorporation Costs 476 476 476
------- ------- -------
$ 7,182 $15,867 $ 1,476
======= ======= =======
LIABILITIES
CURRENT
Accounts Payable $ 700 $ 600 $ 476
------- ------- -------
STOCKHOLDERS' EQUITY
SHARE CAPITAL (note 4)
Authorized:
80,000,000 common shares, par value $0.0001 per share
20,000,000 preferred shares, par value $0.0001 per share
Shares Issued 17,900 1,000 1,000
Share Subscriptions 0 16,900 0
Deficit accumulated during the
Development Stage (11,418) (2,633) 0
------- ------- -------
6,482 15,267 1,000
------- ------- -------
$ 7,182 $15,867 $ 1,476
======= ======= =======
</TABLE>
Continuance of Operations (note 3)
See notes to the financial statements
21
<PAGE>
TUGBOAT INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS AND DEFICIT
<TABLE>
<CAPTION>
Incorporation
Cumulative on
amounts For the For the July 20, 1998
July 20, 1998 period ended year ended to
to September 30, September 30, December December 31,
2000 2000 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
GENERAL AND ADMINISTRATIVE EXPENSES
Bank charges $ 17 $ 0 $ 17 $ 0
Office expenses 6,208 4,317 1,891 0
Legal and accounting 1,500 900 600 0
Trust and filing 3,693 3,568 125 0
---------- ---------- ---------- ----------
Loss for the period (11,418) (8,785) (2,633) 0
Deficit - beginning of period 0 (2,633) -- 0
---------- ---------- ---------- ----------
Deficit - end of period $ (11,418) $ (11,418) $ (2,633) $ 0
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES
Outstanding 5,169,000 5,000,000 0
========== ========== ==========
Loss per share $ (0.00) $ (0.00) $ (0.00)
========== ========== ==========
</TABLE>
See notes to the finacial statements
22
<PAGE>
TUGBOAT INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Incorporation
Cumulative on
amounts For the For the July 20, 1998
July 20, 1998 period ended year ended to
to September 30, September 30, December December 31,
2000 2000 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net Loss for the period $ (11,418) $ (8,785) $ (2,633) $ 0
Adjustments to reconcile net loss
to cash provided by operations:
Decrease (Increase) in accounts receivable 0 3,100 (2,100) (1,000)
Increase in accounts payable 700 100 124 476
---------- ---------- ---------- ----------
(5,585) (4,609) (524)
FINANCING ACTIVITY
Incorporation costs (476) 0 0 (476)
Proceeds from the issuance of shares 17,900 0 16,900 1,000
---------- ---------- ---------- ----------
17,424 0 16,900 524
---------- ---------- ---------- ----------
Net cash provided during the period 6,706 (5,585) 12,291 0
Cash - beginning of period 0 12,291 0 0
---------- ---------- ---------- ----------
Cash - end of period $ 6,706 $ 6,706 $ 12,291 $ 0
========== ========== ========== ==========
</TABLE>
See notes to the financial statements
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<PAGE>
TUGBOAT INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Additional Total
Common Common Paid-in Accumulated Stockholders'
Stock Stock Capital Deficit Equity
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Shares issued 5,000,000 $ 500 $ 500 $ 1,000
Net loss $ 0 0
---------- ------ -------- --------- --------
Balance December 31, 1998 5,000,000 500 500 0 1,000
Share subscriptions 169,000 17 16,883 16,900
Net loss (2,633) (2,633)
---------- ------ -------- --------- --------
Balance December 31, 1999 5,169,000 517 17,383 (2,633) 15,267
Net Loss (8,785) (8,785)
---------- ------ -------- --------- --------
Balance September 30, 2000 5,169,000 $ 517 $ 17,383 $ (11,418) $ 6,482
========== ====== ======== ========= ========
</TABLE>
See notes to the financial statements
24
<PAGE>
TUGBOAT INTERNATIONAL INC.
(A Development Stage Company)
Notes to the Financial Statements
(For the Period Ended September 30, 2000, the year ended December 31, 1999
and the Period from Incorporation on July 20, 1998 to December 31, 1998
1. THE CORPORATION AND ITS BUSINESS
Tugboat International Inc. was incorporated in the state of Delaware, United
States of America on July 20, 1998 under the Delaware Revised Statutes,
Chapter 78, Private Companies.
The Company has an office in British Columbia, Canada and is in its
development stage. Its activities to date have been limited to capital
formation, organization, acquisition of goods on consignment and web site
construction
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
These financial statements have been prepared in United States of America
dollars using United States of America Generally accepted Accounting
Principles.
The Company has not yet determined and established its accounting policies
and procedures, except as follows:
1. The Company uses the accrual method of accounting.
2. Net loss per share is provided in accordance with Financial Accounting
Standards No. 128 (FAS No. 128) "Earnings Per Share". Basic loss per
share is computed by dividing losses available to common stockholders
by the weighted average number of common shares outstanding during the
period. Diluted loss per share reflects the per share amounts that
would have resulted if dilutive common stock equivalents had been
converted to common stock. No stock options were available or granted
during the periods presented. Accordingly, basic and diluted loss per
share are the same for all periods presented.
3. The Company has not yet adopted any policy regarding the payment of
dividends. No dividends have been paid since inception.
3. CONTINUANCE OF OPERATIONS
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and the liquidation of liabilities in the normal
course of business. However, the Company currently has no source of revenue
and without the realization of additional capital, it would be unlikely for
the Company to continue is a going concern. It is management's plan to seek
additional capital through sale of its securities through private
placements.
4. SHARE CAPITAL
AUTHORIZED
The authorized share capital consists of 80,000,000 shares of commons stock
with a par value of $0.0001 and 20,000,000 shares of preferred stock with a
par value of $0.0001.
ISSUED
5,169,000 shares of common stock have been issued for $17,900
5,000,000 shares were issued at $0.0002 per share ($1,000); and the balance
of 169,000 share were issued at $0.10 per share ($16,900).
25
<PAGE>
PART III
b) Exhibits
Exhibit
Number Description
------ -----------
3.i Articles of Incorporation of the Registrant*
3.ii Bylaws of the Registrant
23 Consent of De Visser & Company
----------
* Previously filed.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Company has duly caused this Registration statement to be singed on
its behalf by the undersigned, thereunto duly authorized.
TUGBOAT INTERNATIONAL, INC.
Date: January 9, 2001 By /s/ Christos Papadimas
-------------------------------------
Christos Papadimas
President, Director
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