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U.S. SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D.C. 20549
FORM 10-KSB/A-1
[ x ] Annual Report pursuant to Section 13 or 15(d) of the
securities exchange act of 1934
For the fiscal year ended December 31, 1999
OR
[ ] Transition Report pursuant to section 13 or 15(d) of the
securities exchange act of 1934
For the transition period from _________ to _________
Commission File No. 000-25757
VERIDA INTERNET CORP.
(Name of Small Business Issuer in its charter)
STATE OF NEVADA 98-0164651
(State or other jurisdiction (I.R.S. Employer
of incorporation ) Identification No.)
14 East Sir Francis Drake Boulvard
Larkspur, California USA 94939
(Address of and Zip code of Principal Executive Offices)
Issuer's telephone number, including area code: (415) 464-8600
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock (Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
[ x ] YES [ ] NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. __
As of March 24, 2000, the aggregate market value of the voting stock held
by non-affiliates of the registrant was $18,807,928, based upon a $8.8125
per share trading price on that date.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. The
registrant's revenues for its most recent fiscal year were $179,086.
Class A Common Stock 9,510,094 Shares Outstanding
$.00001 par value as of March 24, 2000
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Documents Incorporated By Reference
1. Form 10-SB Registration Statement (SEC File #000-25757) and all
amendments thereto, which was filed with the Securities and Exchange
Commission on April 12, 1999 and all exhibits thereto.
2. All reports filed with the Securities and Exchange Commission after
April 12, 1999.
3. Form S-8 Registration Statement (SEC File #333-95211) and all
amendments thereto, which was filed with the Securities and Exchange
Commission on January 24, 2000 and all exhibits thereto.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS. . . . . . . . . . . . . . . . . .4
A. Business Development . . . . . . . . . . . . . . . . . . .4
B. Business of the Issuer . . . . . . . . . . . . . . . . . .5
Cautionary Note - Forward Looking Information. . . . . . .5
Summary of Business Goals. . . . . . . . . . . . . . . . .5
Industry Background - The Internet . . . . . . . . . . . .5
Traditional Approaches to Supply Procurement . . . . . . .6
AgriPlace. . . . . . . . . . . . . . . . . . . . . . . . .9
PetroPlace . . . . . . . . . . . . . . . . . . . . . . . .9
Related Applications Development . . . . . . . . . . . 10
Business Acquisitions and Co-Development Arrangements
Acquisition of Triad Creative, Inc.. . . . . . . . . . . 11
Acquisition of Software from NetOpus Incorporated. . . . 12
Number of Total Employees and Number of Full Time
Employees. . . . . . . . . . . . . . . . . . . . . . . 13
Risk Factors . . . . . . . . . . . . . . . . . . . . . . 13
1. Early Stage Development . . . . . . . . . . . . . . 13
2. Product Acceptance and Intense Competition. . . . . 13
3. History of Losses . . . . . . . . . . . . . . . . . 14
4. Significant and Immediate Additional Financing
Requirements. . . . . . . . . . . . . . . . . . . . 15
5. No Patent or Proprietary Rights . . . . . . . . . . 15
6. Rapid Technological Change; Need for New Products;
Introduction of Competitive Products. . . . . . . . 15
7. Liquidity and Volatility Risks for Investors in Common
Shares. . . . . . . . . . . . . . . . . . . . . . . 15
8. Governmental Regulation . . . . . . . . . . . . . . 16
9. Potential Equity Dilution . . . . . . . . . . . . . 16
10. Possible Conflicts of Interest. . . . . . . . . . . 17
11. Key Employees . . . . . . . . . . . . . . . . . . . 17
12. Risks Associated With The Year 2000 . . . . . . . . 17
ITEM 2. DESCRIPTION OF PROPERTIES. . . . . . . . . . . . . . . . 17
ITEM 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . 18
PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON VERIDA'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS. . . . . . . . . . . . . . . . 18
ITEM 6. PLAN OF OPERATIONS . . . . . . . . . . . . . . . . . . . 20
Management Discussion and Analysis . . . . . . . . . . . 21
Twelve Months Ended December 31, 1999 - Compared to the
Twelve Months Ended December 31, 1998 . . . . . . . . . 21
Liquidity and Capital Resources. . . . . . . . . . . . . 22
ITEM 7. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . 23
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS. . . . . . 46
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS. . . . . . . . . . . . . . . . . . . . . . . . . 46
ITEM 10. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . 50
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT53
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . 55
ITEM 13. INDEX TO EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . 57
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. Business Development
Our company, "Verida Internet Corp." (sometimes herein "Verida," the
"Issuer" or the "Registrant") was incorporated under the laws of the State
of Nevada on November 1, 1996 under a previous name, Austral Pacific
Energy Corporation. On November 8, 1996, Austral Pacific Energy
Corporation changed its name by shortening it to Austral Pacific Energy
Corp. Our common shares commenced trading in January 1997 on the OTC
Bulletin Board ("OTCBB") under the trading symbol "APCE."
From incorporation through to February 1999, we were engaged in the
business of oil and gas exploration as what is generally referred to as
a "junior resource" company. On February 4, 1999, our Board of Directors
determined it would be in the best interests of our company and its
shareholders to consider an alternative business focus given the
prevailing low oil prices and the difficulties in financing junior
resource companies. On February 23, 1999, we announced that the Board of
Directors had resolved to pursue Internet related opportunities with new
management.
Subsequent to February 23, 1999 we began taking steps to acquire
technology and retain personnel with a view to providing software and
services to enable Internet-based electronic commerce ("e-commerce")
solutions for business-to-business transactions. On March 11, 1999, we
changed our name to Verida Internet Corp. and commenced trading on the
OTCBB under the trading symbol "VERY."
In order to acquire marketing expertise and some existing business
clientele and cash flow, we acquired on October 21, 1999, 100% of the
issued and outstanding shares of Triad Creative, Inc., ("Triad") a
previously private marketing agency owned and controlled by Michael
Hinshaw, Verida's President and Chief Executive Officer. Triad was
acquired through a merger under California law in consideration of the
agreement by Verida to pay $750,000 ($450,000 paid to date) and the
issuance of 150,000 restricted common shares valued at $7.00 each. (See
Item 12 - Certain Relationships and Related Transactions.)
We maintain a downtown corporate presence located at 50 California Street,
Suite 1500, San Francisco, California 94111. Our primary offices are San
Francisco Bay Area suburban business and executive offices at 14 East Sir
Francis Drake Boulevard, Larkspur, California 94939. Our telephone number
is (415) 464-8600 and our facsimile number is (415) 439-8660. Our Internet
website is www.verida.com.
Verida's fiscal year end is December 31. We are required to file periodic
reports with the SEC pursuant to Section 13 of the 1934 Exchange Act and
will continue to file periodic reports voluntarily in the event its
obligation to file such reports is suspended under the 1934 Exchange Act.
The public may read and copy these materials at the SEC's Public Reference
Room, 450 Fifth Street N.W., Washington, D.C., 20549 or see them at the
SEC Internet site (http://www.sec.gov).
All monetary amounts disclosed in this Form 10-KSB are, unless otherwise
indicated, expressed in United States dollars. Refer to Note 2 - Summary
of Significant Accounting Policies of the financial statements under
Item 7.
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B. Business of the Issuer
Cautionary Note - Forward Looking Information
Except for the description of historical facts contained herein, this Form
10-SB contains certain forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995 concerning our efforts to disclose or describe future
activities, of the Registrant and the Registrant's future prospects. Such
forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause our actual results, performance or
achievements, or developments in our industry, to differ materially from
the anticipated results, performance or achievements expressed or implied
by such forward-looking statements. Forward-looking statements in this
document include statements describing growth in the online business-to-
business market; the goals of our business model and the timing of the
introduction of our Internet markets. Factors that could cause actual
results to differ materially from anticipated results include risks and
uncertainties such as: the ability to raise sufficient capital, dependence
on new product development, uncertain demand for our services, risks
involving the management of growth, competition, product development risks
and risks of technological change, dependence on selected vertical
markets, our ability to protect our intellectual property rights and the
other risks and uncertainties detailed in our Form 10SB filed with the
Securities and Exchange Commission.
Summary of Business Goals
The mission of Verida Internet Corp. is to develop and operate business-
to-business, transaction focused e-marketplaces, in industry segments
where inefficient distribution channels can be improved through novel
approaches to problem solving using Internet based technologies.
We believe our value proposition to buyers and sellers within vertical
markets will be to establish website markets which will enable
participants' supply chains to optimize sales volume, reduce transaction
costs and increase participants' profit margins by using the efficient
communication of the Internet to trade goods and services. We believe we
will be able to eventually translate the use by businesses of our websites
into revenue generating activities.
We believe that a transactional focused Internet-based market, built to
solve supply chain inefficiencies, is the key to faster market liquidity.
We believe that both the marketplace buy side and sell side will integrate
their trading activities through a common site if the site has effective
transactional capabilities. We plan to include appropriate technology in
each market place, which may include catalog, exchange and/or auction
models, depending on the needs of each particular market. We believe that
successful implementation can result in repeat trades, brand loyalty and
establishing a viable revenue stream.
Industry Background - The Internet
The Internet is a worldwide medium of interconnected electronic and/or
computer networks. Individuals and companies have primarily since 1995
recognized that the communications capabilities of the Internet to provide
a medium for not only the promotion and communication of ideas and
concepts, but also for the presentation and sale of information, goods and
services.
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Electronic commerce generally refers to the utilization of electronic
networks to facilitate buying and selling of products, information and
services between parties communicating through the Internet. In electronic
commerce, computers and telecommunications take the place of paper
documents, mail and faxes. Businesses now use computers to electronically
send and receive a wide variety of business documents. These include, for
example, product catalogs, price lists, purchase orders and invoices.
For example, Forrester Research has predicted the domestic business-to-
business, e-commerce market may generate approximately $1.5 trillion in
volume by the year 2003. The buying of goods may generate as much as $1.3
trillion; services will generate the remainder. BancBoston Robertson
Stephens estimates the global market may double the U.S., exceeding $3.5
trillion by 2003.
Business-to-business e-commerce can take place through a business's
proprietary web site or through third party hosted sites, known as net
market makers or "metamediaries." A net market maker creates a neutral
trading ground that multiple buyers and sellers access to gather
information and conduct transactions. A metamediary typically provides
additional functionality by aggregating a buyer/seller critical mass to:
- achieve market liquidity
- facilitate a multi-vendor and products marketplace
- conduct transactions
- aggregate market data and providing content relevant to the
buyer/seller community
- provide third party services, including but not limited to,
quality assurance, procurement management and back office
functions such as order fulfillment and payment settlement.
Bear Stearns Equity Research Division currently estimates metamediaries
provide more than 200 active business-to-business e-commerce markets,
growing to as many as 100,000 in 2001.
Traditional Approaches to Supply Procurement
Until recently, most organizations have purchased their required operating
inputs through paper based or semi-automated processes. These processes
are typically costly, time consuming and involve significant involvement
of administrative personnel. AMR Research, Inc., estimates the cost per
procurement transaction in a range of $75 - 200, often exceeding the cost
of items purchased.
Beyond the time and expense associated with manual processing costs,
organizations suffer even greater costs when they cannot fully exploit
procurement economies of scale. Most organizations lack the systems that
enable them to monitor purchases and compile data necessary to negotiate
better volume discounts with preferred suppliers.
Traditional procurement processes also result in missed revenue
opportunities and additional costs to suppliers. When buyers are unable
to channel purchases to preferred suppliers, these suppliers lose revenue.
Suppliers also suffer from inefficient order fulfillment processes.
Suppliers also spend significant resources on customer acquisition and
sales costs, including integrated electronic commerce technologies, where
both buyers and suppliers incur substantial extraneous costs in conducting
commerce.
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Savings through metamediaries will likely be accomplished by:
- - Reduced transaction costs - An electronic order may cost $10 to
generate while phone and fax transmissions cost an average $100
- - Lower search costs - Product and supplier searches are time-
consuming and information intensive. Aggregating data on a market
site helps both buyers and sellers find matches faster and more
economically.
- - Lower workflow costs - Procurement management solutions can be
offered by a metamediary to reduce internal organizational costs
associated with product selection, approval and purchasing.
- - More efficient fulfillment tracking - Online logistics tracking
service eliminates multiple phone calls to track orders and delivery
status, and allows corporations to more closely match safety stock
requirements.
- - Process automation - Procurement, ordering and fulfillment processes
can be standardized via the web site, creating efficiencies for
buyers and sellers and speeding up the entire transaction process.
The value proposition to buyers in a particular market will be to join
forces in a virtual community, amassing the buying power of much larger
organizations. The resulting benefit is the ability to more thoroughly
compare availability, quality, costs and features of products and services
from within a region or around the globe. Virtual buying will put
competitive pressures on the supply side and may lower product prices as
a result.
The value proposition to sellers includes access to new regional markets
and distribution channels, with the potential to increase sales revenue
and market reach. Sellers can use e-commerce to react quickly to
competition, and in a matter of hours, implement new product or pricing
strategies accordingly. More efficient online ordering and fulfillment
processes will generate increased customer satisfaction and retention.
What the e-commerce analysts call "customer switching costs" is a major
benefit to metamediaries as well as sellers. Once buyers combine their
procurement organization with a vertical e-commerce site it is difficult
and expensive for them to switch. As long as the metamediary does its job,
and provides consistent, high-quality service, there should be reasonable
customer retention.
We believe the success of the metamediary model is dependent on market
participants being able to quickly realize positive revenue and related
benefits from business-to-business e-commerce. For that reason, we will
focus our business model on transactions. While other metamediaries appear
to be relying more on content-centric sites to establish market
participation, we believe the proof point for metamediaries will be
increased sales and/or lower costs for market participants.
Our own success will depend on our ability to create market liquidity -
a critical mass of buyers and sellers - in each market place. It will also
depend on the sellers' ability to realize benefits such as lower
transaction processing costs, new additional customers, markets and
partner opportunities. On the buy side, suppliers will provide value by
giving buyers more choices, lower search costs and better prices.
Planned Products and Services
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We are in the early implementation phase of developing and acquiring
technology and customer bases to enable the deployment of secure and
comprehensive Internet-based e-marketplaces for business customers through
transaction facilitation, information delivery and related product sales,
and solutions for improving inefficiencies in existing supply chains. Our
first marketplace, "AgriPlace" is being designed to facilitate the buying
and selling of products and services in the North American agribusiness
market. This includes the ability to buy and sell grain, fertilizer, and
other farm-related products and services.
Most markets are potential business-to-business e-commerce candidates, but
some will clearly be better candidates than others. We have established
the following criteria to identify our initial selection of markets to
target:
- Markets that conduct at least $5 billion annually of
transactions
- A fragmented or inefficient traditional supply chain.
- Costly vendor and vendor information search costs
- The existence of vendor and product differentiation independent
of price
- The ability to potentially be the first to offer comprehensive
and targeted metamediary services to a given market segment
where there is no dominant Internet based competition
We believe that we must enter each market competitively with industry
expertise in place. In the metamediary e-commerce business, it is
essential that each e-marketplace have the benefit of in-depth industry
knowledge in order to deliver high quality information and transactional
services that closely meet the needs of each vertical marketplace. We may
obtain this knowledge through partnerships or acquisitions. We believe
this approach will enable us to develop markets with the necessary market
depth and reach, from the standpoint of industry knowledge and linkage to
the existing supply chain.
We plan on focusing on niche segments of larger markets, under our
previously mentioned market criteria. We have initially chosen five
industry sectors in which to seek niches: agribusiness, energy, building
and construction, environment and finance. Our initial focus is on
agribusiness and energy through our "Agriplace" and "PetroPlace" sites
described below. We intend to offer our services to prospective clients
through a combination of proprietary and licensed or purchased technology,
and allow the participants to utilize standard Internet browsers and
software.
VeriPlace is the umbrella brand name for our planned online e-marketplaces
for business-to-business transactions in targeted industry or market
segments. We are currently developing or buying technology for online
markets that will facilitate commercial transactions over the Internet in
the setting of an exchange, a catalog, an auction or some combination of
these. All VeriPlace online markets will be based on a central technology
infrastructure developed (or co-developed) by ourselves, and each
VeriPlace online market will have to be extensively customized to meet the
transactional needs of the particular industry segment it serves.
In addition to its commercial transaction functionality, we are developing
VeriPlace offerings to include other elements, such as the distribution
of news and information targeted to the specific industry or market
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segment served by a particular VeriPlace online market. We are working
with Factiva, (formerly Dow Jones Reuters Interactive), a worldwide
distributor of news and information, for relevant content incorporation
into VeriPlace e-markets. Verida is also developing extensive systems for
the service and support of future VeriPlace customers. We continue to
investigate, research and identify vertical segments for potential
VeriPlace e-markets in the five industries already identified. We have
also begun the process of targeting, designing and building specific
VeriPlace e-markets that, in our opinion, will serve specific industry
segments not adequately addressed by existing Internet commerce
competitors.
AgriPlace
"AgriPlace" is the name we use for the website we are co-developing as an
agribusiness e-commerce hub with AgriPlace Inc. (formerly AG-Direct.Com
Inc.), a private Alberta, Canada corporation. AgriPlace will initially
support "GrainPlace," a real time grain trading exchange, and
"InputPlace," a catalog of fertilizer and other farm inputs. In a Beta (or
"live") test of the site which began in early September of 1999, and
continued through to mid-November of 1999, in excess of 2.5 million
bushels of grain were traded on the AgriPlace exchange.
Through the integration of licensed "exchange" software from an unrelated
company, Agralink Exchange Ltd., we believe AgriPlace can combine our
current systems and communications technology with the structure and
discipline of formal commodity exchanges. We are working to provide a
cost-effective, secure and open trading arena for agricultural products,
with an initial emphasis on the grain trade initially in Western Canada.
AgriPlace is being designed to facilitate trade activity in the feed
grains and freight markets, and links grain companies, brokers and
producers with their trading counterparts including feed mills, feedlots
and international buyers.
The intention of AgriPlace is to effect the transactional process through
to completion, starting with price discovery and including, order
placement, trade completion, delivery instructions, delivery confirmation,
invoicing and payment. AgriPlace is being designed to provide both open
and transparent price discovery, and post-trade clearing through delivery
and payment. As AgriPlace matures, we hope to introduce other products and
services for sale through the market.
Currently, AgriPlace is being beta tested in the trading of Feed Barley,
Canola, Feed Wheat, Milling and Feed Oats, Feed Peas, Hulless Barley and
Freight. In its current "beta" format, AgriPlace has no ability to
generate revenue. We are continuing the development of the AgriPlace's
transactional functionality and expect to begin marketing our services
through a public site launch in early 2000.
PetroPlace
PetroPlace is being designed to be an energy e-commerce hub, focused on
the oil and gas exploration industry. It will initially support businesses
seeking to buy and sell oilfield equipment, including excess inventory and
idle assets with a focus on exploration companies in Southeast Asia.
PetroPlace would facilitate a market by intermediating buyers and sellers
and provide them with an easy-to-use, flexible on-line transactional
capability, as well as other related products and services. Sellers would
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be able to list wares on the exchange and buyers will be able to source
search and bid on needed materials. PetroPlace intends to represent an
advance over existing regional distribution channels. PetroPlace perceives
an opportunity to reduce inefficiency and provide 24/7 (or continuous)
capability.
We believe that considerations such as ease of use, connectivity,
reliability, relationship building capabilities, entrant qualification
services and industry information will be as significant as price in
causing a gravitation towards our online marketplace.
To establish an auction/exchange in the target market, we are researching
the requirements of buyers, with a focus on transactional functionality
including, but not limited to, real time bidding, notification on bid
status, searching key words, tracking and scouting capability,
personalizing viewing and similar system attributes.
Seller specific functionality requires the ability to easily post small
or large numbers of listings of diverse quality, quantity and description,
the ability to instantly review, modify, delete and re-post listings as
well as to provide flexible text descriptions, reserve prices, bid period
limitations, notifications, uploads, pre-clearance and hot-sheet services.
Databases must provide for variable identifiers including serial numbers,
descriptions, model numbers, categories, sizes, subtypes and countries of
origin. We also plan on making markets for hydrocarbon inventories as well
as professional/employment bulletin board opportunities and investment
joint venturing availability.
As of late November 1999, we have "beta launched" our PetroPlace market.
In its current "beta" format, PetroPlace is functioning solely as a
petroleum information center and has no auction or exchange capability and
therefore no ability to generate revenue. We are continuing the
development of PetroPlace's transactional functionality and expect to
offer a transactional market in 2000.
Related Applications Development
Verida also intends to develop and market an e-commerce applications suite
called "Verisuite," to benefit certain VeriPlace participants who are not
interested in building an e-commerce infrastructure for their own
business. Only for use in those industry segments and vertical niches
where deemed approporiate for the supply chain, the suite will be provided
as a web service that resides on Verida's servers and can be accessed by
clients as needed, over the Internet. "VeriStore" is the primary
component, an e-commerce storefront platform to enable sellers to sell
ancillary products of use in a particular vertical market. VeriStore is
supported by two programs - VeriMark and VeriBase. VeriSuite will be
offered as a menu. Sellers can choose one or all of the programs,
depending on their needs.
In some VeriPlace markets, Verida expects to attract merchandisers of
auxiliary goods which are intrinsic to that particular market. We are
developing VeriStore to provide e-commerce transactional capabilities to
manage and process transactions between suppliers and their customers. In
addition to providing a supplier with the capability to create and
maintain an e-Store on the Web, VeriStore will also provide a virtual back
office infrastructure to enable clients to handle all aspects of online
transactions conducted through VeriStore. The virtual back office services
will provide clients with the necessary tools to manage and process online
transactions that occur when the client's customer purchases goods from
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their e-Store. The back office services will likely include processing of
the client's customer orders and sending confirmations, online payment
processing in real time, calculating applicable shipping costs and taxes,
running multiple reports detailing online sales statistics for any given
period, and, managing customer queries.
We are developing VeriMark as an online marketing solution which will
allow VeriStore marketers to track and measure the cost effectiveness of
online marketing efforts. Near real-time analysis has the potential to
eliminate much of the time, cost and guess work of evaluating and refining
ongoing Internet-based marketing campaigns. We are also developing our
"VeriBase" service to provide data warehousing services. This should allow
VeriStore clients to electronically store their customer contact and
demographic information, track customer and prospect activity from online
sales and marketing activities, and perform demographic profiling
analysis. The VeriMark and VeriBase services are intended to operate in
an integrated manner where a client may use one or more of the services
in tandem, or as stand-alone services.
Verida is continuing to develop, acquire (by purchase or license), test,
and use technology for our product and service offerings. We are
developing our technology with a view to flexibility, scalability and
optimal transferability among our offerings, as well as ease-of-use by
clients. We intend to customize our applications based on existing
business processes and the needs of the various industries and clients to
be served. We have also undertaken steps to develop branding for our
company and our offerings.
Business Acquisitions and Co-Development Arrangements
Acquisition of Triad Creative, Inc.
On October 21, 1999, we completed the acquisition of Triad Creative, Inc.
("Triad") through a merger under California law, under terms which
provided an effective cost to our company of $1.8 million. This was
comprised of $750,000 cash and the issuance of 150,000 shares of Verida
valued at $7.00 each. By March 10, 2000, we have paid $450,000 of the
required cash component with the $300,000 balance payable on demand. We
purchased Triad from the President of Verida, Mr. Michael Hinshaw, who was
the sole owner, director and officer of Triad. (See Item 12 - Certain
Relationships and Related Transactions.)
Triad (www.triadinc.com) is a strategic marketing and communications
company, founded in 1982, providing positioning, branding and integrated
marketing services. Since its incorporation, Triad has focused on serving
the financial and high-technology market and providing integrated
marketing and communications services. Triad's clients are located in
California for the most part, primarily in the San Francisco, Silicon
Valley and Los Angeles areas. We believe the market for Triad's services
has grown as the number of technology and financial service companies in
these areas has increased. Triad's clients have included companies such
as CBS MarketWatch, Novell, Apple Computer, PointConnect, Wells Fargo,
Bank of America and Imperial Bank. Triad continues to carry on its
previous business as a wholly owned subsidiary of our company. Triad
employs approximately ten persons and operates out of Verida's Larkspur
offices.
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Acquisition of Software from NetOpus Incorporated
On June 11, 1999, we entered into a software purchase agreement with
NetOpus Incorporated ("NetOpus") to acquire core technology to support the
services we intend to offer. NetOpus is a private company owned by Mr.
Steve Zimmerman, our Chief Technology Officer, and Mr. David Zimmerman,
our Vice-President of Engineering. NetOpus held the rights to certain pre-
existing computer software marketed by NetOpus as the "Sales Associate
Store Creator" commerce system ("Store Creator"). Under the terms of the
agreement, we purchased the right to use, modify, customize, brand, sell
and market the Store Creator, to provide online transaction processing
functionality and features within the sites that we develop.
The Store Creator was sold by NetOpus in consideration of a one-time fee
paid by our company to NetOpus. The one-time fee was $50,000 plus the
issuance to NetOpus of 25,000 common shares of Verida at an agreed price
of $5.25 per share. The 25,000 shares of Verida will be restricted from
resale for a period until June 11, 2000 and thereafter have affiliate
restrictions on resale.
We may upgrade and modify the Store Creator to support our proposed
services. We may acquire or license additional software through a
licensing or purchase agreement to ensure that our other services are
delivered in a timely and useable manner during the plan of operation for
the next 12 months. We have the right to use, brand, sell and market this
software including the right to modify and customize it.
AgriPlace Agreement
On November 22, 1999, Verida entered into an interim shareholder's
Agreement (the "AgriPlace Agreement") with two unrelated individuals, Mr.
Terry Booth and Mr. Greg Lore who are Alberta, Canada residents, and Mr.
Lore's company, AG-Direct.Com Inc. later renamed AgriPlace Inc.
("AgriPlace"). AgriPlace is the corporate vehicle through which Verida
intends to launch its online market to serve the trading needs of the
agricultural industry. Pursuant to the terms of the AgriPlace Agreement,
we have the right to earn up to a 66.67% equity interest in AgriPlace in
exchange for paying scheduled milestone payments, aggregating US$800,000.
Upon satisfying our funding commitments, Mr. Booth and Mr. Lore will each
retain a 16.67% interest in AgriPlace subject to dilution for all existing
shareholders of Agriplace if additional investors purchase shares in
AgriPlace. The purpose of the payments is to provide capital to AgriPlace
to allow for further development, marketing and deployment of AgriPlace.
The timing and amounts of the milestone payments are required over 14-15
months and currently at the rate of $50,000 per month. As at March 10,
2000 Verida has paid $260,000 under the milestone payments schedule and
has thereby earned approximately 39% of AgriPlace's equity. We may elect,
upon 90 days notice to discontinue funding and retain our pro rata share,
however we will lose the right to further fund AgriPlace. Under the terms
of the AgriPlace Agreement, AgriPlace and Verida shall enter into an
agreement pursuant to which Verida shall supply our expertise and services
at commercially standard rates to a maximum of US$400,000, over a period
of 18 months. We also have the option to acquire a further one half
interest in Mr. Booth's and Mr. Lore's shares of AgriPlace from each of
them upon a total payment of US$50,000. The option may only be exercised
in the event that AgriPlace has failed to achieve certain development
milestones within the first anniversary of signing the Agreement.
<PAGE> 13
The Board of Directors of AgriPlace is eventually to be under the control
of Verida but it was not as of December 31, 1999, the date of the
accompanying audited financial statements. The terms of the Agreement also
provide that Mr. Booth and Mr. Lore will enter into employment agreements
with AgriPlace for an initial term of 24 months. As of March 28, 2000, the
formal agreements contemplated to supersede the AgriPlace Agreement with
Mr. Lore, Mr. Booth and AgriPlace remain to be negotiated.
Number of Total Employees and Number of Full Time Employees
At December 31, 1999 we had a total of 17 full time employees, which
include the President and three officers. This personnel figure includes
the Triad division but not any persons working for AgriPlace. Subsequent
to December 31, 1999 we hired a Chief Information Officer. Of the 17
employees, 10 concentrate their efforts on work relating to Triad Creative
Inc. We also currently contract the services of 2 consultants who provide
marketing and financial management services. Mr. Mark Katsumata, our
interim chief financial officer and corporate secretary provides his
services on a part-time basis whereby he dedicates approximately 30% of
his time to Verida. We are in the process of securing a full-time chief
financial officer.
Risk Factors
In any business venture, there are substantial risks specific to the
particular enterprise. At a minimum, our present and proposed business
operations will be highly speculative and subject to the same types of
risks inherent in any new or unproven venture, and will include those
types of risk factors outlined below. Readers should carefully consider
the risks described below before deciding whether to invest in shares of
Verida's common stock. If we do not successfully address any of the risks
described below, there could be a material adverse effect on our business,
financial condition or results of operations, and the trading price of
Verida's common stock may decline and investors may lose all or part of
their investment. We cannot assure any investor that we will successfully
address these risks.
1. Early Stage Development
We are at an early stage of business and product development, and
accordingly, have not begun to market or generate any revenues from the
commercialization of our e-commerce products and services. Our potential
products and services will require significant additional investment in
research and development before they can be effectively marketed and
commercialized. There can be no assurance that any of our products and
services will be successfully marketed, or that the investment made in
such potential products will be recouped through planned sources of
revenues such as trading commissions, direct or indirect sales, licensing
or usage agreements or related royalties.
2. Product Acceptance and Intense Competition
The long-term success of our products hinge upon market acceptance by
business-to-business customers. The online markets, products, services and
software produced by and/or offered by our company must exhibit certain
characteristics to garner a commercially significant market share in the
industries that are targeted in an intensely competitive environment with
few barriers to entry. There can be no assurance that our offerings will
meet the specific needs of any identified industry. Even though our
products and service offerings may be found to be functionally acceptable
<PAGE> 14
in identified business applications, there is no assurance that they will
obtain market acceptance, or that they will do so within any anticipated
timeframe. There are many large companies in the e-commerce software
marketplace that produce mature and well-known software products that have
been used for several years. These companies also possess far greater
financial, marketing and human resources than us.
The business of facilitating business-to-business e-commerce is intensely
competitive and fragmented, and is characterized by rapidly evolving
technologies and service offerings. In addition, numerous companies,
substantially all of which have significantly greater financial and other
resources than us, are currently engaged in business-to-business
e-commerce. These companies provide a range of e-commerce functionality
and applications including, but not limited to, Internet store-fronts;
Internet catalogs; secure Internet payment processing; Internet
transaction processing including ordering, fulfillment, shipping, and
confirmation elements; Internet database generation and analysis;
automated Internet marketing; and vertical Internet business communities
or exchanges.
Within each individual industry we are focusing on, there is considerable
potential competition for our planned e-marketplaces. There are also e
- -market makers who, not unlike Verida, are focusing on building multiple
vertical markets across a wide range of industries and industry segments.
As an example, in the Agribusiness sector, we have identified 31 web
businesses who offer agricultural products and services in the North
American marketplace. These include companies such as xsAG,
agriculture.com, DirectAg and farms.com. In the energy market, we have
identified over 20 companies who offer products and services which may
compete with Verida's planned offerings including companies such as
petrocosm.com, petrisX, and IndigoPool. In the building and construction
sector, direct and indirect competitors may include BricsNet, BuzzSaw,
RedLadder, Ironmax and BuildPoint.
Firms who are concentrating on building multiple vertical markets, some
of which may compete either directly or indirectly with Verida's planned
e-marketplaces include VerticalNet, Ventro (formerly Chemdex), i2i, and
TechTrader.
We anticipate that existing competitors are likely to expand the range and
scope of their e-commerce offerings, and that new competitors, which may
include technology companies, media companies, and industrial companies,
are likely to increasingly offer business-to-business e-commerce solutions
that may function similarly and may compete with those proposed by us.
3. History of Losses
As of December 31, 1999, we have not recorded any revenues from the sales
of services either through, or related to, Verida's core market focus of
industry-specific online markets. Since its date of incorporation, we have
accumulated net losses and expect such losses to increase as we continue
development of our planned potential products, and its research into the
development of additional potential products. We expect to continue to
incur substantial losses unless and until such time as product sales
generate sufficient revenues to fund its continuing operations.
<PAGE> 15
4. Significant and Immediate Additional Financing Requirements
Since our incorporation, we have relied on the contribution of time and
effort by our management and capital contributions from investors to fund
our operations. Currently, we do not have sufficient funds to carry out
our proposed plan of operations. (See Item 6 - Plan of Operations.) We
will require substantial additional funds for further research and
development and the marketing of our products, some of which funds are
immediately required. We will seek to obtain additional funds for these
purposes through public and/or private equity or debt financing and/or
from other sources. Without further funding we will not be able to
continue with our proposed operations and products, the result of which
would most likely cause a detrimental effect on the market price of our
common shares. There can be no assurance that additional funding will be
available at all or on acceptable terms to permit successful
commercialization of our products.
5. No Patent or Proprietary Rights
At the date hereof we hold no patents for our planned products and
services. Our success may depend, in part, on our ability to obtain
patents, maintain trade secret protection and operate without infringing
on the proprietary rights of third parties or having third parties
circumvent any acquired rights. The patent positions of software
developers are uncertain and involve complex legal and factual questions.
There can be no assurance that any future patent applications will result
in the issuance of patents, that we will develop additional proprietary
products that are patentable, that any patents issued to us will provide
us with any competitive advantages, that such patents will not be
challenged by any third parties, that the patents of others will not
impede the ability of Verida to do business, or that third parties will
not be able to circumvent our patents.
6. Rapid Technological Change; Need for New Products; Introduction of
Competitive Products
The market for our proposed services is characterized by rapidly changing
technology and frequent new product introductions. Even if our proposed
services gain initial acceptance, our success will depend on, among other
things, our ability to enhance our products and to develop and introduce
new products and services that keep pace with technological developments,
respond to evolving customer requirements and achieve continued market
acceptance. There can be no assurance that we will be able to identify,
develop, market, support or acquire new products or deploy new services
successfully, that such new products or services will gain market
acceptance, or that we will be able to respond effectively to
technological changes or product announcements by competitors. Any failure
by us to anticipate or respond adequately to technological developments
and customer requirements or any significant delays in product development
or introductions could result in a loss of market share or possible
revenues.
7. Liquidity and Volatility Risks for Investors in Common Shares
Our common shares are traded on the OTCBB. Only a limited number of
securities brokers have become market makers in our shares. There can be
no assurance that a stable market for our common shares will ever develop
or, if it should develop, be sustained. It should be assumed that the
market for our common shares will continue to be illiquid, sporadic and
volatile. These securities should not be purchased by anyone who cannot
<PAGE> 16
afford the loss of the entire investment. As of August 1999 we became a
"reporting" issuer under the Securities Exchange Act of 1934, in order to
be traded by broker-dealers regulated by the National Association of
Securities Dealers. If we fail to continue to be a reporting issuer,
management may encounter difficulty in maintaining or expanding a trading
market in the near term, if at all, and shareholders may not be able to
sell their shares in the public market. There is no assurance that the
public market for our common shares will be maintained or that the holder
of common shares will be able to sell such shares in the quantity and at
the price desired by such holder.
8. Governmental Regulation
Our proposed services would be transmitted to customers in part over
dedicated and public telephone lines. These transmissions are governed by
regulatory policies establishing charges and terms for communications.
Changes in legislation or in the Internet access industry, including
regulatory or legislative changes which directly or indirectly affect
telecommunication costs or increase the likelihood of competition from
regional telephone companies or others, could have an adverse effect on
our business; as could potential governmental actions outside of the
United States. Other governmental factors in the United States and
elsewhere, including Internet commerce regulation and taxation are
uncertain and may have future adverse effects on Verida.
9. Potential Equity Dilution
Our Articles of Incorporation authorize the issuance of 100,000,000 shares
of common stock. Our Board of Directors has the power to issue any or all
of such shares that are not yet issued without stockholder approval. The
Board of Directors will issue some or all of such shares to acquire
further capital in order to carry out its intended operations or expand
its current operations, or to provide additional financing in the future.
The issuance of any such shares may result in a reduction of the average
book value or current market price of the outstanding shares of our common
shares. If we do issue any such additional shares, such issuance also will
cause a reduction in the proportionate ownership and voting power of all
other shareholders. Further, any such issuance may result in a change of
control of Verida.
We have also adopted a stock option plan authorizing up to 3,000,000
options of which at December 31, 1999 approximately 1,208,073 have been
issued to directors, officers and employees. We have additional warrants
issued to purchase 102,380 shares of our common stock from our treasury.
The exercise of the options or warrants and the resale of those shares
could adversely affect the market price of our common shares and could
impair our ability to raise additional capital through the sale of its
equity securities or debt financing.
In addition to the common shares issuable under the exercise of options
and warrants, approximately 1,580,237 shares of restricted common shares
will become eligible for unrestricted resale under Rule 144 during 2000.
There is no assurance or agreement that all these holders will not sell
any of their shares. If a substantial number of these shares were to be
offered for sale or sold in the market, the market price of our common
shares likely would be affected adversely
<PAGE> 17
10. Possible Conflicts of Interest
Some of the directors and officers also serve other companies and
therefore may be engaged in the search for additional business
opportunities on behalf of other corporations. Therefore, situations may
arise where these directors and officers may be seen to be in competition
with Verida.
11. Key Employees
The success of our company and its ability to continue to carry on
operations is dependent upon its ability to retain the services of certain
key employees and members of its board of directors. Employment agreements
generally do not have provisions which prevent a person from leaving an
employer and the loss of services to our company may have a material
adverse effect on our business. Other than Michael Hinshaw, no other
director has an employment agreement with our company although generally
other senior employees do.
12. Risks Associated With The Year 2000
We did not experience any material problems as a result of the of the Year
2000 nor did we incur any material costs in preparation for the passing
of the Year 2000. We will continue to monitor our computer systems to
identify the systems that could be affected by the Year 2000 issue. Based
upon the our lack of problems after December 31, 1999 and our current
review of its systems, we do not believe that the Year 2000 problem will
pose a material operations problem for us.
ITEM 2. DESCRIPTION OF PROPERTIES
We do not currently own any real property. Our downtown presence is
located at 50 California Street, Suite 1500, San Francisco, California
94111. The rental space is provided by a corporate support services firm
under a month to month rental agreement at a rate of $400 per month. The
rental agreement may be terminated by us on 30 days notice.
We lease Bay Area suburban business offices from which our operations are
conducted at 14 East Sir Francis Drake Boulevard, Larkspur, California
94939. Suite "B" is comprised of 3170 square feet, and houses MIS staff,
design, account, planning and productions staff, as well executive support
staff, and management. Additionally, due to its expanding operations, we
have recently secured an additional 850 square feet in Suite E at the same
address, which houses development and technical staff, as well as research
and strategic planning. The cost of leasing this space is $3,036 per month
and the lease expires on April 15, 2001. We are currently exploring
alternatives to consolidate operations in one location, and anticipate
deciding upon a space comprising between 7,500 and 15,000 square feet in
2000.
ITEM 3. LEGAL PROCEEDINGS
To the best of our knowledge, there are no material legal proceedings to
which we are subject to or which are anticipated or threatened.
<PAGE> 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter no matters were submitted to a vote of our
shareholders.
PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON VERIDA'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
Our common shares were traded on the OTCBB under the trading symbol "APCE"
until March 10, 1999. On March 11, 1999 our common shares began trading
on the OTCBB under the symbol "VERY". Summary trading by quarter for the
1999 and 1998 fiscal years are as follows:
Fiscal Quarter High Bid(1) Low Bid(1)
1999
First Quarter 4.50 0.25
Second Quarter 7.50 0.125
Third Quarter 14.75 6.875
Fourth Quarter 34.9375 6.00
1998
First Quarter .562 .033
Second Quarter .875 .033
Third Quarter .875 .1
Fourth Quarter .6875 .1
Notes:
(1) These quotations reflect inter-dealer prices, without retail mark-
up, mark-down or commission and may not represent actual
transactions.
At March 24, 2000, there were 9,510,094 common shares issued and
outstanding.
At March 15, 2000, there were 41 holders of record including common shares
held by brokerage clearing houses, depositories or otherwise in
unregistered form. Of the 9,367,237 shares issued as of March 15, 2000,
3,640,237 were subject to legended restrictions. Other than those owners
described in Item 11 - Security Ownership of Certain Beneficial Owners and
Management - we cannot determine the beneficial owners of such shares.
No cash dividends have been declared by us nor are any intended to be
declared. We are not subject to any legal restrictions respecting the
payment of dividends, except that they may not be paid where they would
render Verida insolvent. Dividend policy will be based on our cash
resources and needs and it is anticipated that all available cash will be
needed for the development of our business for the foreseeable future,
therefore, we do not anticipate that we will be paying any dividends in
the foreseeable future.
During the 1999 fiscal year we issued the following unregistered
securities at the following prices. There were no underwriters engaged and
no underwriting discounts or commissions paid. All issues were made
pursuant to exemptions from registration contained in Regulation D, Rule
504, Regulation S, Rules 901-905 and Section 4(2) of the 1933 Securities
Act.
<PAGE> 19
<TABLE>
<CAPTION>
Type of
Date Security Number Proceeds Exemption
<S> <C> <C> <C> <C>
1999
02/01/99 Common Shares 800,000 $ 24,000 Reg. D (504)
02/08/99 Common Shares 1,000,000 $ 1,000 Section 4(2) [1]
02/08/99 Common Shares 1,120,000 $ 33,600 Reg. D (504)[1]
02/08/99 Common Shares 100,000 $ 100 Reg. S (901-905)
02/17/99 Common Shares 300,000 $ 75,000 Reg. D (504)
05/13/99 Common Shares 60,000 $ 300,000 Reg. S (901-905)
06/11/99 Common Shares 25,000 [2] Section 4(2) [2]
09/02/99 Units 178,571 $1,249,997 Reg. S (901-905)[3]
10/21/99 Common Shares 150,000 [4] Reg. D. (506)[4]
12/21/99 Units 66,666 $999,990 Reg. S (901-905)[5]
</TABLE>
(1) Mr. Michael Hinshaw, the President of Verida and an affiliate of the
company, was issued 1,000,000 shares at a price of $.001 per share
under section 4(2). Mr. Michael Hinshaw, was also issued 1,000,000
shares at a price of $.03 per share under Reg. D (504).
(2) NetOpus Incorporated, a private company owned and controlled by
Messrs. Steve Zimmerman and David Zimmerman, was issued 25,000
shares at an agreed upon price of $5.25 per share under section 4(2)
as partial payment for the sale of its technology assets. Mr. Steve
Zimmerman is also an Executive Officer of the company and as such,
an affiliate of Verida. Mr. David Zimmerman is the Vice President of
Engineering and as such, an affiliate of Verida. (See Item 7. Item
12 - Certain Relationships and Related Transactions.)
(3) Each Unit acquired was acquired at a price of $7.00 per unit and is
comprised of one common share and one warrant. Each warrant entitles
the holder to purchase an additional common share at a price of $10
per share within a three year period. On March 17, 2000 the Board of
Directors of Verida agreed to re-price the exercise price of the
warrants to $7.00 on the basis that the holder, Trans-Orient
Petroleum Ltd., would exercise a majority of them. On March 20, 2000
Trans-Orient notified Verida that it would exercise a portion of the
warrant to acquire 142,857 common shares for total proceeds of
$1,000,000. (See Item 12 - Certain Relationships and Related
Transactions.)
(4) No cash proceeds were received by Verida for this issuance as the
150,000 common shares were issued as part consideration for our
purchase of Triad Creative Inc. at an agreed price of $7.00 per
share. (See Item 12 - Certain Relationships and Related
Transactions.)
(5) Each Unit is comprised of one common share and one share purchase
warrant. Each warrant entitles holder to acquire one common share
and may be exercised at $16.00 until December 13, 2000 and at $18.00
until December 13, 2001.
1999 Stock Option Plan
On June 14, 1999, we approved the implementation of a Non-Qualified Stock
Option Plan which authorizes the granting of options to acquire up to a
maximum of 3,000,000 common shares of the company to persons employed or
associated with our company, including, without limitation, any employee,
director, general partner, officer, attorney, accountant, consultant or
advisor. The Stock Option Plan is intended to advance the best interests
<PAGE> 20
of the company by providing additional incentive to those persons who have
a substantial responsibility for its management, affairs, and growth, by
increasing their proprietary interest in and commitment to the success of
our company. We have registered this Stock Option Plan under the 1933
Securities Act through the filing of a Form S-8, and the common shares of
our company, issued upon the exercise of an option may, subject to various
vesting schedules on exercise, be freely traded without restriction or
statutory hold periods.
As of December 31, 1999, a total of 1,208,073 outstanding stock options
have been issued to directors, officers, key employees and consultants.
Of the 1,208,073 options issued, 1,050,000 were issued to directors and
officers of our company. (See Item 11 - Security Ownership of Certain
Beneficial Owners and Management.) The remaining 158,073 were issued to
employees and one consultant. As to 680,000 options, their exercise price
is $5.25 while 350,000 options are exercisable at $4.00 per share. A
further 100,000 options are exercisable at a price of $7.00 per share. The
remaining 78,073 options are exercisable at prices ranging from $5.70 to
$12.87 cents. The term of each option is five years and, other than
300,000 options exercisable at $5.25, all options are subject to vesting
provisions.
ITEM 6. PLAN OF OPERATIONS
The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
which follows below the table of selected data. The data is derived from
our audited consolidated financial statements.
Selected Consolidated Financial Data
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1999 1998 1997 1996[1]
<S> <C> <C> <C> <C>
Gross Revenues $ 179,806 $ 3,491 $ 1,986
Operating Loss (1,359,768) (19,150) (19,561) (6,769)
Other Income (loss) (177,958) - - -
Net Loss (1,537,726) (19,150) (19,561) (6,769)
Loss per Common Share $ (.17) $ (.00)
Weighted Average Shares
Outstanding 9,028,289 8,294,205 2,061,370 N/A
AS AT DECEMBER 31
Current Assets 1,857,628 235,234 153,670 104,149
Fixed Assets Net of
Depreciation 191,057
Capitalized Software
Development 146,005
Goodwill 1,724,045
Total Assets 3,918,735 235,234 153,670 104,149
Current Liabilities 1,116,603 34,578 32,000 10,918
Long Term Debt 2,827
Total Liabilities 1,119,430 34,578 32,000 10,918
Share Capital 4,382,511 340,710 148,000 100,000
Deficit (1,583,206) (45,480) (26,330) (6,769)
Cumulative comprehensive
adjustments - (94,574) - -
</TABLE>
[1] from incorporation
<PAGE> 21
MANAGEMENT DISCUSSION AND ANALYSIS
The following discussion and analysis of the financial condition and
results of operations should be read in conjunction with "Selected
Consolidated Financial Data" above and our consolidated financial
statements and related notes appearing in Item 7. This discussion and
analysis contains forward- looking statements that involve risks,
uncertainties and assumptions. The actual results may differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, underlying but not limited to those set out under "Risk
Factors" and the risks discussed in our past filings.
Twelve Months Ended December 31, 1999
Compared to the Twelve Months Ended December 31, 1998
During the twelve months ended December 31, 1999, we implemented the
initial strategies of our Internet business plan (after abandoning
resource exploration) and launched AgriPlace, intended to be one of the
"VeriPlace" metamediaries or e-marketplaces focusing on specific market
niches. In 1998, we had no material active business operations, material
transactions or operating results. As a result, we believe that a
comparison of our results for the twelve months ended December 31, 1999
to December 31, 1998 is not meaningful.
Total consolidated revenues from operations were $152,679, which were
derived primarily from Triads' existing customer base during the period
from the acquisition, October 21, 1999 to December 31, 1999. These
revenues were generated through marketing services and branding services
as well as website design. Job costs of $46,875 represent the necessary
direct inputs such as materials, copywriting, illustration, service
bureaus and delivery costs associated with the completion of the client's
product. The gross margin on operating revenues was $105,804, or 69% of
gross operating revenues. We believe that the Triad division will likely
continue to generate gross revenues, exclusive of related company
transactions such as work completed for Verida, AgriPlace, or other
similar companies, in the $1 million annually range with a net financial
contribution in the 10% of revenues range.
We had total expenses of $1,492,699 for the twelve months ended December
31, 1999. General and administrative expenses of $873,371 includes
$441,996 for salaries and benefits for our executive staff, accounting and
administrative personnel and $66,704 for technical consultants. The
balance of general and administrative expenses, $364,671, consists of
premises lease expenses, professional fees, insurance, promotion and other
general corporate and office expenses.
During 1999, we incurred $214,069 for product development expenses
associated with the development of our website and our product suite. None
of this "R&D" expense is or will be borne by customers. We recorded
$35,245 for amortization of software development costs and $59,450 for
amortization of goodwill resulting from the purchase of Triad. The Triad
acquisition generated "goodwill" of $1.78 million which will be amortized
and represents an expense of approximately $375,000 annually for the next
five years. An amortization expense of $310,564 was recorded for stock
based compensation associated with the granting of stock options to our
staff.
<PAGE> 22
The operating loss for the twelve months ended December 31, 1999 was
$1,359,768, net of $27,127 of interest income earned on our surplus cash
balances. We realized a loss of $92,958 on the sale of 59,800 shares of
Trans-Orient Petroleum Ltd., which were purchased prior to our change of
business. (See Item 12 - Certain Relationships and Related Transactions.)
$85,000 was expensed for the AgriPlace startup which was 100% of the
amount funded by December 31, 1999, as per the terms of the AgriPlace
Agreement.
Our comprehensive loss for the twelve months ended December 31, 1999 was
$1,443,152, or $0.17 per share. We anticipate greater losses into the
foreseeable future as we continue to expend all available funds to develop
our business strategy and the technologies necessary to implement those
strategies. Development of e-commerce revenue generation and operating
income will be dependent upon the successful development of our website
markets.
Liquidity and Capital Resources
During the twelve months ended December 31, 1999, we raised an aggregate
of $2,549,987 through the issuance of our common stock, pursuant to two
private placements. As at December 31, 1999, we had outstanding bank loans
of $70,000, long term debt of $12,904, a note payable of $206,006 due in
August 2000 and owed Mr. Hinshaw $600,000 for the purchase of Triad
($150,000 was paid down after year-end leaving $450,000 now owing). As at
December 31, 1999, we had $1,777,758 in cash and cash equivalents and net
of current liabilities, $741,025 in working capital.
We used $877,112 of cash for operating activities for the twelve months
ended December 31, 1999 and $908,905 for investing activities. Cash used
in investing activities reflects the purchase $207,382 of fixed assets and
$50,000 for the cash portion of the purchase of technology from NetOpus.
Cash used in investing activities also reflects $89,061 net cash for the
purchase of Triad. The Triad purchase consisted of current assets net of
the existing cash balance of $174,365, fixed assets (net of accumulated
depreciation) of $67,649 and the assumption of $286,448 in current
liabilities.
Other than cash and cash equivalents, we have no other sources of
liquidity and we do not anticipate generating cash from our operations in
the foreseeable future. We expect to experience significant growth in our
operating expenses for the foreseeable future in order to execute our
business plan. We currently project that available cash balances will be
sufficient to fund our operations for the next 3 to 4 months. Verida is
currently seeking additional equity financing to implement planned
investments in advertising, software development, VeriPlace site
development and personnel and to provide working capital. We have not made
a final determination regarding the terms and conditions of an equity
placement, nor can we provide any assurance that such financing will be
available on acceptable terms, if at all. Any inability to raise
additional financing would have a material adverse effect on our business
and our operations.
Our plan of operation for the next 12 months has several identifiable
phases to support the development of our proposed products and services.
We are continuing to develop our human resources and staffing plan to
achieve our business goals in a cost effective manner. We also plan on
securing appropriate hardware and either securing or developing the
software necessary to conduct our operations. For fiscal 2000, we plan on
<PAGE> 23
focusing our efforts on the build-out of our AgriPlace and PetroPlace
e-commerce hubs. We anticipate launching four or five new AgriPlace
e-markets by expanding metamediary activities into areas complementary to
our existing site, including but necessarily limited to; grains not
currently traded, livestock, agricultural equipment and agricultural input
products such as fertilizers and pesticides. We also plan on a PetroPlace
beta launch and a full launch of our auction and exchange model later in
the year. Our current plan includes several major development phases for
our proprietary software and implementation of our business model. Each
phase may require varying amounts of time and resources, based on resource
and manpower availability.
Verida estimates that its current e-commerce operations (excluding the
Triad Division) have a monthly cash burn rate of approximately $225,000.
The majority of this burn rate is made up of executive and site
development staff costs and the balance being general overhead comprised
of premises cost, professional fees, investor relations and outreach
programs and the like. Verida is also committed to maintaining its
minimum expenditure requirements under the Agriplace Agreement of $50,000
per month. If Verida were unable to raise additional funding it would
curtail some development efforts but would still require additional
funding within four to six months. Verida's business plan contemplates
additional funding in at least the $5 million range to achieve its year
2000 goals.
ITEM 7. FINANCIAL STATEMENTS
FINANCIAL STATEMENTS BEGIN ON FOLLOWING PAGE.
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Verida Internet Corp.
(Formerly Austral Pacific Energy Corp.)
We have audited the accompanying consolidated balance sheets of Verida
Internet Corp. (formerly Austral Pacific Energy Corp.) (a development
stage enterprise) and its subsidiary as of December 31, 1999 and 1998 and
the related consolidated statements of operations and comprehensive loss,
changes in stockholders' equity and cash flows for each of the years in
the three year period ended December 31, 1999 and for the period from
inception on November 1, 1996 to December 31, 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 audits.
We conducted our audits 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. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Verida
Internet Corp. (formerly Austral Pacific Energy Corp.) (a development
stage enterprise) and its subsidiary as of December 31, 1999 and 1998 and
the results of its operations and its cash flows for each of the years in
the three year period ended December 31, 1999 and for the period from
inception on November 1, 1996 to December 31, 1999 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 1 to the
financial statements, the Company is a development stage enterprise and
as a result, there is substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
/s/ TELFORD SADOVNICK, P.L.L.C
CERTIFIED PUBLIC ACCOUNTANTS
Bellingham, Washington
February 29, 2000
F-1
<PAGE> 25
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
As of December 31, 1999 1998
<S> <C> <C>
Assets
Cent
Cash and short-term deposits $ 1,777,758 $ 21,178
Marketable securities (Note 6) - 80,356
Accounts receivable 48,439 -
Subscriptions receivable (Note 11) - 133,700
Due from related party (Note 6) 408 -
Prepaid expenses 31,023 -
----------- ---------
1,857,628 235,234
Property and equipment, net (Note 2) 191,057 -
Capitalized software development costs,
net (Note 5) 146,005 -
Goodwill, net of accumulated amortization
of $59,450 (Note 3) 1,724,045 -
----------- ---------
Total Assets $ 3,918,735 $ 235,234
=========== =========
Liabilities
Current
Bank loan (Note 7) $ 70,000 $ -
Accounts payable and accrued liabilities 76,520 4,578
Loan payable to related party (Note 6) 600,000 30,000
Note payable (Note 8) 206,006 -
Current portion of long-term debt (Note 10) 10,077 -
Income taxes payable (Note 9) 154,000 -
----------- ---------
1,116,603 34,578
Long-term debt (Note 10) 2,827 -
----------- ---------
Total Liabilities 1,119,430 34,578
----------- ---------
Commitments and Contingencies (Notes 1 and 10)
Stockholders' Equity
Common stock, $0.00001 par value;
100,000,000 shares authorized
(December 31, 1999: 9,367,237
shares issued and outstanding)
(December 31, 1998: 8,887,000
shares issued and outstanding) 94 89
Additional paid-in capital (Note 11) 4,867,540 340,621
Deferred compensation (Note 11) (485,123) -
Deficit accumulated during
the development stage (1,583,206) (45,480)
Cumulative comprehensive adjustment - (94,574)
----------- ---------
Total Stockholders' Equity 2,799,305 200,656
----------- ---------
Total Liabilities and Stockholders' Equity $ 3,918,735 $ 235,234
=========== =========
</TABLE>
Approved by the Board of Directors:
/s/ Michael Hinshaw /s/ Bernhard Zinkhofer
Director Director
See accompanying notes to the consolidated financial statements
F-2
<PAGE> 26
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Consolidated Statements of Operations and Comprehensive Loss
<TABLE>
<CAPTION>
For the Period
For the For the For the From Inception on
Year Ended Year Ended Year Ended November 1, 1996
December 31, December December to December 31,
1999 31, 1998 31, 1997 1999
<S> <C> <C> <C> <C>
Revenues
Net revenues $ 152,679 $ - $ - $ 152,679
Interest income 27,127 3,491 1,986 32,604
------------ ---------- --------- ------------
179,806 3,491 1,986 185,283
Job costs 46,875 - - 46,875
------------ ---------- --------- ------------
Gross margin 132,931 3,491 1,986 138,408
------------ ---------- --------- ------------
Expenses
Amortization of software
development costs 35,245 - - 35,245
Amortization of goodwill 59,450 - - 59,450
Amortization of deferred
compensation 310,564 - - 310,564
General and
administrative
(Schedule) 873,371 22,641 21,547 924,328
Product development 214,069 - - 214,069
------------ ---------- --------- ------------
Total operating
expenses 1,492,699 22,641 21,547 1,543,656
------------ ---------- --------- ------------
Operating loss for
the period (1,359,768) (19,150) (19,561) (1,405,248)
Loss on sale of
marketable securities (92,958) - - (92,958)
Write-down of investment
in AgriPlace Inc. (85,000) - - (85,000)
------------ ---------- --------- ------------
Net loss for
the period (1,537,726) (19,150) (19,561) (1,583,206)
Other comprehensive income
(loss):
Unrealized loss on
marketable securities - (94,574) - (94,574)
Reclassification
adjustment 94,574 - - 94,574
------------ ---------- --------- ------------
Comprehensive loss for
the period $ (1,443,152) $ (113,724) $ (19,561) $ (1,583,206)
============ ========== ========= ============
Basic and diluted
loss per share
(Note 12) $ (0.17) $ (0.00) $ (0.01) $ (0.26)
============ ========== ========= ============
</TABLE>
See accompanying notes to the consolidated financial statements
F-3
<PAGE> 27
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Consolidated Statements of Changes in Stockholders' Equity
For the Period From Inception on November 1, 1996 to December 31, 1999
<TABLE>
<CAPTION>
Additional
Common Paid-in Deferred
Share Amount Capital Compensation
<S> <C> <C> <C> <C>
Balance at inception on
November 1, 1996 - $ - $ - $ -
Common stock issued for
cash at $0.01 and $0.10
per share 2,000,000 20 109,980
Cost of common stock offering - (10,000)
Net loss during the period
--------- ----- ----------- ----------
Balance at
December 31, 1996 2,000,000 20 99,980
Common stock issued for
cash at $0.03 per share 1,600,000 16 47,984
Net loss during
the year
--------- ----- ----------- ----------
Balance at
December 3l, 1997 3,600,000 $ 36 $ 147,964 $ -
Common stock issued for
cash at $0.03 per share 1,967,000 20 58,990
Common stock issued for
cash at $0.001, $0.03
and $0.25 per share
(Note 11) 3,320,000 33 133,667
Net loss during the year
Unrealized loss on
marketable securities
--------- ----- ----------- ----------
Balance at
December 31, 1998 8,887,000 $ 89 $ 340,621 $ -
Common stock issued for cash
at $5.00, $7.00 and $15.00
per share 305,237 3 2,549,984
Common stock issued to
purchase Triad Creative,
Inc. (Note 3) 150,000 2 1,049,998
Common stock issued to Net
Opus Incorporated at $5.25
per share (Note 5) 25,000 - 131,250
Deferred compensation related
to stock options 795,687 (485,123)
Net loss during the year
Reclassification adjustment
--------- ----- ----------- ----------
Balance at
December 31, 1999 9,367,237 $ 94 $ 4,867,540 $ (485,123)
========= ===== =========== ==========
See accompanying notes to the consolidated financial statements
F-4a
<PAGE> 28
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Consolidated Statements of Changes in Stockholders' Equity
For the Period From Inception on November 1, 1996 to December 31, 1999
</TABLE>
<TABLE>
<CAPTION>
Deficit
Accumulated
During the Cumulative Total
Development Comprehensive Stockholders'
Stage Adjustment Equity
<S> <C> <C> <C>
Balance at inception on
November 1, 1996 $ - $ - $ -
Common stock issued for
cash at $0.01 and $0.10
per share 110,000
Cost of common stock offering (10,000)
Net loss during the period (6,769) (6,769)
------------- --------- ------------
Balance at
December 31, 1996 (6,769) - 93,231
Common stock issued for
cash at $0.03 per share 48,000
Net loss during
the year (19,561) (19,561)
------------- --------- ------------
Balance at
December 3l, 1997 $ (26,330) $ - $ 121,670
Common stock issued for
cash at $0.03 per share 59,010
Common stock issued for
cash at $0.001, $0.03
and $0.25 per share
(Note 11) 133,700
Net loss during the year (19,150) (19,150)
Unrealized loss on
marketable securities (94,574) (94,574)
------------- --------- ------------
Balance at
December 31, 1998 $ (45,480) $ (94,574) $ 200,656
Common stock issued for cash
at $5.00, $7.00 and $15.00
per share 2,549,987
Common stock issued to
purchase Triad Creative,
Inc. (Note 3) 1,050,000
Common stock issued to Net
Opus Incorporated at $5.25
per share (Note 5) 131,250
Deferred compensation related
to stock options 310,564
Net loss during the year (1,537,726) (1,537,726)
Reclassification adjustment 94,574 94,574
------------- --------- ------------
Balance at
December 31, 1999 $ (1,583,206) $ - $ 2,799,305
============= ========= ============
</TABLE>
See accompanying notes to the consolidated financial statements
F-4b
<PAGE> 29
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the
For the For the For the Period From
Year Year Year Inception on
Ended Ended Ended 11/01/96
12/31/99 12/31/98 12/31/97 to 12/31/99
<S> <C> <C> <C> <C>
Operating Activities
Net loss for the period $ (1,537,726) $ (19,150) $ (19,561) $ (1,583,206)
Adjustments to reconcile
net loss to cash applied
to operating activities:
Amortization of software
development costs 35,245 - - 35,245
Amortization of goodwill 59,450 - - 59,450
Amortization of
deferred compensation 310,564 - - 310,564
Depreciation 16,325 - - 16,325
Loss on sale of
marketable securities 92,958 - - 92,958
Changes in non-cash working
capital:
Accounts receivable 121,658 - - 121,658
Due from related party (500) - - (500)
Prepaid expenses (26,755) - - (26,755)
Accounts payable and accrued
liabilities (11,630) 2,578 1,082 (7,052)
------------ --------- --------- -----------
Net cash used in
operating activities (940,411) (16,572) (18,479) (981,313)
------------ --------- --------- -----------
Financing Activities
Loan from related party, net (30,000) - 20,000 -
Increase in bank loan 30,000 - - 30,000
Increase in note payable 206,006 - - 206,006
Increase in long-term debt 4,120 - - 4,120
Common shares issued
for cash 2,683,687 59,010 48,000 2,900,697
Cost of common stock
offering - - - (10,000)
------------ ---------- --------- -----------
Net cash provided by
financing activities 2,893,813 59,010 68,000 3,130,823
------------ ---------- --------- -----------
See accompanying notes to the consolidated financial statements
F-5a
<PAGE> 30
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
</TABLE>
<TABLE>
<CAPTION>
For the
For the For the For the Period From
Year Year Year Inception on
Ended Ended Ended 11/01/96
12/31/99 12/31/98 12/31/97 to 12/31/99
<S> <C> <C> <C> <C>
Investing Activities
Sale (purchase) of
marketable securities 81,972 (174,930) - (92,958)
Purchase of fixed assets (139,733) - - (139,733)
Purchase of software from
NetOpus Incorporated
(Note 5) (50,000) - - (50,000)
Acquisition of Triad
Creative, Inc.
(Note 3) (89,061) - - (89,061)
----------- ---------- --------- -----------
Net cash used in
investing activities (196,822) (174,930) - (371,752)
----------- ---------- --------- -----------
Net increase (decrease)
in cash 1,756,580 (132,492) 49,521 1,777,758
Cash and short-term deposits
- Beginning of period 21,178 153,670 104,149 -
----------- ---------- --------- -----------
Cash and short-term deposits
- End of period $ 1,777,758 $ 21,178 $ 153,670 $ 1,777,758
=========== ========== ========= ===========
</TABLE>
Refer to Note 13
See accompanying notes to the consolidated financial statements
F-5b
<PAGE> 31
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Consolidated Schedules of General and Administrative Expenses
<TABLE>
<CAPTION>
For the
For the For the For the Period From
Year Year Year Inception on
Ended Ended Ended 11/01/96
12/31/99 12/31/98 12/31/97 to 12/31/99
<S> <C> <C> <C> <C>
General and Administrative
Expenses
Bank charges
and interest $ 11,268 $ 201 $ 237 $ 11,706
Bad debts 2,467 - - 2,467
Consulting 66,704 18,000 - 84,704
Depreciation 16,325 - - 16,325
Insurance 49,074 - - 49,074
Interest on long-term
debt 717 - - 717
Maintenance and repairs 4,019 - - 4,019
Meals and entertainment 8,255 - - 8,255
Office and miscellaneous 102,381 1,940 1,255 112,345
Professional fees 62,909 2,500 20,055 85,464
Promotion and marketing 79,880 - - 79,880
Rent 9,940 - - 9,940
Salaries and benefits 441,996 - - 441,996
Subscriptions and dues 1,160 - - 1,160
Trademark fees 17,760 - - 17,760
Gain on foreign exchange (1,484) - - (1,484)
--------- -------- -------- ---------
$ 873,371 $ 22,641 $ 21,547 $ 924,328
========= ======== ======== =========
</TABLE>
See accompanying notes to the consolidated financial statements
F-6
<PAGE> 32
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1999 and 1998
NOTE 1 - NATURE OF OPERATIONS AND CONTINGENCIES
The Company was incorporated under the laws of the State of Nevada on
November 1, 1996 and is a development stage enterprise. The Company is
currently developing business-to-business electronic commerce solutions
for use on the Internet.
These financial statements have been prepared on the basis that the Company
will continue as a going concern. The Company has incurred operating losses
since its incorporation intends to raise additional equity financing to
finance its operations and any acquisitions. However, there can be no
assurance that such acquisitions will occur, or whether additional funds
required, if any, would be available to the Company when required or on
terms acceptable to the Company. Such limitations could have a material
adverse effect on the Company's business, financial condition or operations
and these financial statements do not include any adjustment that could
result therefrom.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Consolidation
These consolidated financial statements include the accounts of Verida
Internet Corp. and its wholly-owned subsidiary, Triad Creative, Inc. All
significant intercompany balances and transactions have been eliminated.
Refer to Note 3
b) Accounting Principles and Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the fiscal year. Actual results may differ from those estimates.
c) Translation of Foreign Currencies
Revenues and expenses arising from foreign currency transactions are
translated into United States dollars at the average rate for the period.
Monetary assets and liabilities are translated into United States dollars
at the rates prevailing at the balance sheet date. Other assets and
liabilities are translated into United States dollars at the rates
prevailing on the transaction dates. Exchange gains and losses are recorded
as income or expense in the period in which they occur.
d) Financial Instruments and Financial Risk
The Company's financial instruments consist of current assets and current
liabilities. The fair values of the current assets and liabilities
approximate the carrying amounts due to the short-term nature of these
instruments.
F-7
<PAGE> 33
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
e) Accounting Pronouncements Recently Issued
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 128: Earnings per Share ("SFAS 128"),
effective for fiscal periods ending after December 15, 1997 and requiring
restatement of all prior period earnings per share data. SFAS 128 replaces
the presentation of primary earnings per share ("EPS") with a presentation
of both basic and diluted EPS for all entities with complex capital
structures.
Basic EPS excludes dilutive securities and is computed by dividing income
available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if dilutive securities were converted into common
shares and is computed similarly to fully diluted EPS pursuant to previous
accounting pronouncements. SFAS 128 applies equally to loss per share
presentations.
The FASB issued Statement of Financial Accounting Standards No. 130:
Reporting Comprehensive Income ("SFAS 130"), effective for fiscal periods
beginning after December 15, 1997 and requiring restatement of all
comparative financial statements disclosed. SFAS 130 requires that all
items required to be recognized under accounting standards as components of
comprehensive income be reported as part of the basic financial statements.
The Company does not expect adoption of this new standard to have a material
effect on its financial reporting.
The FASB issued Statement of Financial Accounting Standards No. 131:
Disclosures about Segments of an Enterprise and Related Information ("SFAS
131"), effective for fiscal periods beginning after December 15, 1997 and
requiring restatement of all comparative financial statements disclosed.
SFAS 131 establishes standards for reporting information about operating
segments in annual financial statements and requires selected information
about operating segments in interim financial reports. The Company does not
expect adoption of this new standard to have a material effect on its
financial reporting.
The FASB issued Statement of Financial Accounting Standards No. 133:
Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"),
effective for fiscal periods beginning after June 15, 1999. SFAS 133
requires that the fair-market value of derivatives be reported on the
balance sheet and any changes in the fair value of the derivative be
reported in income or other comprehensive income, as appropriate. The
Company does not expect adoption of this new standard to have a material
effect on its financial reporting.
f) Cash and Short-Term Deposits
Cash and short-term deposits include government treasury bills and bankers'
acceptances with original maturities no longer than 90 days, together with
accrued interest.
<PAGE> 34
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
g) Property and Equipment
Property and equipment are stated at cost and are depreciated on a
declining-balance basis. Leasehold improvements are amortized on a
straight-line basis over the shorter of the lease term or the estimated
useful life of the improvements.
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
<S> <C> <C>
Computer equipment and software $ 161,638 $ -
Leasehold improvements 36,571 -
Automobile 9,173 -
---------- ------
207,382 -
Accumulated depreciation and amortization (16,325) -
---------- ------
$ 191,057 $ -
========== ======
</TABLE>
Refer to Note 15
h) Capitalized Software Development Costs
Capitalized software development costs are amortized on a straight-line
basis over the expected benefit period, estimated at three years from the
date of acquisition.
i) Goodwill
Goodwill is amortized on a straight-line basis over the expected benefit
period, estimated at five years from the date of acquisition. The Company
examines the carrying value of its excess of cost over net assets acquired
to determine whether there are any impairment losses. If indicators of
impairment were present in intangible assets used in operations and future
cash flows were not expected to be sufficient to recover the assets'
carrying amount, an impairment loss would be charged to expense in the
period identified. No event has been identified that would indicate an
impairment of the value of material intangible assets recorded in the
accompanying consolidated financial statements.
j) Stock Options
In accordance with Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation, the Company elected to apply
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees to account for stock options and provide pro forma disclosures of
net loss as if the fair value method had been applied.
F-9
<PAGE> 35
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
k) Development Costs
Development costs are expensed as incurred and include costs to develop,
monitor and operate the Company's website.
l) Income Taxes
The Company accounts for income taxes under an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, all expected future events other than enactment of changes in
the tax laws or rates are considered.
NOTE 3 - ACQUISITION OF TRIAD CREATIVE, INC.
On October 21, 1999, the Company acquired all of the outstanding capital
stock of Triad Creative, Inc. ("Triad") for $1,800,000 comprised of $750,000
in cash and the issuance of 150,000 shares of the Company valued at
$1,050,000. Triad is a marketing and communications company providing
positioning, branding and integrated marketing services catering to the
financial and high-technology markets. The acquisition was accounted for
using the purchase method of accounting. The excess of the purchase price
over the estimated fair value of the assets and liabilities acquired of
$1,783,495 was recorded as goodwill and is being amortized over five years.
The following is a summary of the acquisition of Triad by the Company
effective October 21, 1999:
Current assets including cash balance of $60,939 $ 235,304
Fixed assets 67,649
Current Liabilities (286,448)
-----------
Net assets of Triad acquired by the Company 16,505
Goodwill 1,783,495
-----------
$ 1,800,000
===========
Consideration given:
Cash $ 150,000
Debt 600,000
Common stock of the Company 1,050,000
-----------
Purchase price $ 1,800,000
===========
At December 31, 1999, the Company owed $600,000 payable in cash relating to
the purchase of Triad.
Refer to Note 6
F-10
<PAGE> 36
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1999 and 1998
NOTE 3 - ACQUISITION OF TRIAD CREATIVE, INC. (continued)
The following unaudited pro forma financial information presents the
consolidated results of operations as if the Company had purchased Triad
effective January 1, 1998, after giving effect to certain adjustments
including amortization of goodwill. The unaudited pro forma financial
information does not necessarily reflect the results of operations that
would have occurred had Triad and the Company constituted a single entity
during the year.
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
December 31, December 31,
1999 1998
<S> <C> <C>
Revenues $ 1,094,924 $ 1,303,872
------------ -----------
Net Loss for the Year $ (1,740,894) $ (462,010)
============ ==========
Net Loss per Share $ (0.19) $ (0.06)
============ ==========
</TABLE>
NOTE 4 - INVESTMENT IN AGRIPLACE INC.
On November 22, 1999, the Company entered into a letter of agreement (the
"Agreement") with two individuals (the "Individuals") and AgriPlace Inc.
(formerly "AG-Direct.Com Inc.") ("AgriPlace"). The purpose of AgriPlace is
to facilitate trade activity in the feed grains and freight markets, and
link grain companies, brokers and producers with their trading counterparts
including feed mills, feedlots and international buyers. Under the terms of
the Agreement, the Company has the right to earn from the Individuals up to
a 66.67% equity interest in AgriPlace in exchange for providing certain
services and for paying an aggregate amount of $800,000, payable over 16
months. Additionally, the Company has the option to acquire a further 8.33%
equity interest in AgriPlace upon payment of $50,000 to each of the
Individuals which may only be exercised where the Individuals have failed
to achieve certain development milestones by November 22, 2000.
The Company and AgriPlace are required to enter into an agreement in which
the Company will provide services and expertise at commercially standard and
reasonable rates to a maximum of $400,000, over a period of 18 months. The
Individuals are entitled to enter into employment agreements with AgriPlace
for approximately $10,000 per month in aggregate over an initial term of 24
months.
The Company may discontinue funding upon 90 days notice and retain a pro
rata share but will forfeit the right to further fund AgriPlace. At
December 31, 1999, the Company paid a total of $85,000 in cash pursuant to
the Agreement entitling a 17.53% equity interest in AgriPlace.
F-11
<PAGE> 37
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1999 and 1998
NOTE 5 - PURCHASE OF SOFTWARE
On June 11, 1999, the Company entered into a software purchase agreement
(the "Agreement") with NetOpus Incorporated ("NetOpus") to acquire certain
core technology for $181,250 comprised of $50,000 in cash and the issuance
of 25,000 shares of the Company valued at $131,250. Under the terms of the
Agreement, the Company has the right to use, brand, sell and market this
computer software including the right to modify and customize at the
Company's expense as required. Additionally, the Company has the right to
share equally in any revenue generated from any future sale or licensing of
the modified computer software by NetOpus.
Refer to Note 6
NOTE 6 - RELATED PARTY TRANSACTIONS
a) Purchase of Triad Creative, Inc.
During the 1999 fiscal year, the Company acquired all of the outstanding
capital stock of Triad Creative, Inc. ("Triad"), a private company owned by
the President of the Company, for $1,800,000.
During the period from January 1, 1999 to the date of acquisition of Triad
on October 21, 1999, the Company entered into various agreements with Triad
to design and produce the Company's internet sites and other corporate
materials at a cost of $268,379 (1998 and 1997 fiscal years: Nil).
During the 1999 fiscal year, Triad entered into various agreements for
services totaling $198,625 (1998 fiscal year: $617,099) with public and
private companies in which certain directors and/or officers of the Company
held direct or indirect interests and/or served as directors or officers of
these companies. These companies include Trans-Orient Petroleum Ltd., Indo-
Pacific Energy Ltd., AMG Oil Ltd. and Explore Publishing Corp.
Refer to Note 3
b) Purchase of Software
During the 1999 fiscal year, the Company entered into a software purchase
agreement with NetOpus Incorporated ("NetOpus"), a private company owned by
the Company's Chief Technology Officer and Vice-President of Engineering,
to acquire certain core technology for $181,250.
During the 1999 fiscal year, the Company paid $2,367 (1998 fiscal year: Nil)
to NetOpus for web-hosting services.
Refer to Note 5
F-12
<PAGE> 38
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1999 and 1998
NOTE 6 - RELATED PARTY TRANSACTIONS (continued)
c) Marketable Securities
During the 1999 fiscal year, the Company sold 59,800 shares of Trans-
Orient Petroleum Ltd. ("Trans-Orient") for cash proceeds of $81,972, net
of commissions, resulting in a loss of $92,958. These shares were
acquired at a cost of $174,930 during the 1998 fiscal year.
Trans-Orient is a public company with directors, officers and/or
principal shareholders in common with the Company.
d) Due from Related Party
At December 31, 1999, the President of the Company owed $408 (1998 fiscal
year: Nil) to the Company. This amount is unsecured, non-interest
bearing and has no fixed terms for repayment.
e) Loan Payable to Related Party
At December 31, 1999, the Company owed $600,000 to the President of the
Company payable in cash relating to the purchase of Triad. This amount
is unsecured and non-interest bearing.
During the 1999 fiscal year, the Company repaid a $30,000 loan from a
private company wholly-owned by a former President of the Company. This
amount relates to the cancellation during the 1999 fiscal year of
3,000,000 shares issued during the 1997 fiscal year for total cash
proceeds of $30,000.
Refer to Notes 3 and 11
f) Note Payable
At December 31, 1999, the Company owed $206,006 including interest to a
shareholder of the Company.
Refer to Note 8
g) Common Stock
During the 1999 fiscal year, the Company issued 178,571 units at a price of
$7.00 per share to Trans-Orient Petroleum Ltd. ("Trans-Orient") for cash
proceeds of $1,249,997 pursuant to a private placement. Each unit consists
of one common share and one share purchase warrant to purchase one
additional share at a price of $10.00 per share expiring on August 27, 2002.
Trans-Orient is a public company with directors, officers and/or principal
shareholders in common with the Company.
F-13
<PAGE> 39
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1999 and 1998
NOTE 6 - RELATED PARTY TRANSACTIONS (continued)
During the 1997 fiscal year, the Company issued 3,000,000 shares for total
cash proceeds of $30,000 to a private company wholly-owned by a former
president of the Company. This private placement was rescinded by mutual
agreement during the 1999 fiscal year.
Refer to Notes 11 and 15
h) Employment Agreements and Stock Options
During the 1999 fiscal year, the Company entered into employment agreements
with certain officers of the Company at an aggregate rate of $40,834 per
month. During the 1999 fiscal year, the Company paid a total of $209,003
relating to these employment agreements.
During the 1999 fiscal year, the Company granted stock options to directors
and officers of the Company to purchase a total of 1,050,000 shares at
prices ranging from $4.00 to $7.00 per share exercisable over a five year
period.
Refer to Note 11
i) Consulting Agreements
During the 1998 fiscal year, the Company paid $18,000 (1997 - $ Nil) in
consulting fees to a private company wholly-owned by a former president of
the Company.
NOTE 7 - BANK LOAN
Pursuant to a commercial security agreement dated November 26, 1997, the
Company has a $70,000 promissory note with a financial institution due on
April 30, 2000 and bearing interest at a rate of 1.75% over the bank index
rate. During the 1999 fiscal year, the Company paid $1,452 in interest
relating to the bank loan.
NOTE 8 - NOTE PAYABLE
During the 1999 fiscal year, the Company obtained a loan from a shareholder
of the Company and issued a promissory note for $200,000. The promissory
note accrues interest at a rate of 8% per annum and is due in full on or
before August 16, 2000. At December 31, 1999, the Company owed $206,006
including interest to the shareholder of the Company.
Refer to Note 6
F-14
<PAGE> 40
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1999 and 1998
NOTE 9 - INCOME TAXES
At December 31, 1999, the Company has certain loss carryforwards for tax
purposes which are available to offset taxable income for future years.
The tax benefit of the cumulative loss carryforwards has been offset by a
valuation allowance of the same amount.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
During the 1999 fiscal year, the Company entered into capital leases to
purchase certain equipment for $6,169 and paid $2,765 towards lease
obligations. At December 31, 1999, future minimum lease payments under
these leases are as follows:
Fiscal 2000 $ 10,348
Fiscal 2001 2,827
---------
Total minimum lease payments 13,175
Less interest (271)
---------
Present value of lease minimum payments 12,904
Less current portion of capital
lease obligation (10,077)
---------
Long-term portion of capital
lease obligation $ 2,827
=========
During the 1999 fiscal year, the Company entered into employment agreements
with various employees. Certain employment agreements require severance
upon termination without cause ranging from 30 days notice to a minimum
employment period of three years. At December 31, 1999, the Company would
be required to pay approximately $550,834 in severance in the event these
employment agreements are terminated without cause.
Refer to Note 6
NOTE 11 - COMMON STOCK
a) Authorized and Issued
The authorized number of shares of the Company is 100,000,000 shares of
common stock with a par value of $0.00001 per share. At December 31, 1999,
there were 9,367,237 shares (December 31, 1998: 8,887,000 shares) of common
stock issued and outstanding.
b) Stock Options
In June 1999, the Company adopted the 1999 Non-Qualifying Stock Option Plan
(the "Option Plan"). Under the Option Plan, stock options to purchase a
total of 3,000,000 shares of common stock are reserved for issuance for a
maximum term of ten years to persons employed or associated with the
Company, including directors and officers.
F-15
<PAGE> 41
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1999 and 1998
NOTE 11 - COMMON STOCK (continued)
The exercise price and term of the stock options, including vesting and
resale restrictions if any, are determined by the Board of Directors. Stock
options granted during the 1999 fiscal year have a term of five years and
vest over a three to four and a half year period.
The Company applies Accounting Principles Board Opinion No. 25: Accounting
for Stock Issued to Employees ("APB 25") to account for all stock options
granted. Further, Statement of Financial Accounting Standards No. 123:
Accounting for Stock-Based Compensation ("SFAS 123") requires additional
disclosure to reflect the results of the Company had it elected to follow
SFAS 123. SFAS 123 requires a fair value based method of accounting for
stock options using the Black-Scholes option pricing model. This model was
developed for use in estimating the fair value of traded options and require
the input of and are highly sensitive to subjective assumptions including
the expected stock price volatility. Stock options granted by the Company
have characteristics significantly different from those of traded options.
In the opinion of management, the existing model does not provide a reliable
single measure of the fair value of stock options granted by the Company.
In accordance with SFAS 123, the following is a summary of the changes in
the Company's stock options for the 1999, 1998 and 1997 fiscal years:
<TABLE>
<CAPTION>
1999 1998 1997
Weighted Weighted Weighted
Number Average Number Average Number Average
of Exercise of Exercise of Exercise
Fixed options Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Balance at
beginning of
year - $ - - $ - - $ -
Granted 1,208,073 5.13 - - - -
Exercised - - - - - -
Expired/cancelled - - - - - -
--------- ------ ---- ---- ---- -----
Outstanding
at end of year 1,208,073 $ 5.13 - $ - - $ -
========= ====== ==== ==== ==== =====
Exercisable
at end of year 463,750 $ 5.01 - $ - - $ -
========= ====== ==== ==== ==== =====
Weighted-average
fair value of
options granted
during the year $ 4.70 $ - $ -
====== ==== =====
</TABLE>
F-16
<PAGE> 42
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1999 and 1998
NOTE 11 - COMMON STOCK (continued)
For the 1999 fiscal year, the weighted-average fair value for stock
options granted was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions:
risk-free interest rate of 5.78%; volatility factors of the expected
market price of the Company's common stock of 1.64; option lives of 3.24
years; and no expected dividends. There were no stock options granted
during the 1998 and 1997 fiscal years thus no weighted-average fair values
have been assigned.
The following is a summary of the Company's net loss and basic and diluted
loss per share as reported and pro forma as if the fair value based method
of accounting defined in SFAS 123 had been applied for the 1999, 1998, and
1997 fiscal years:
<TABLE>
<CAPTION>
1999 1998 1997
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
<S> <C> <C> <C> <C> <C> <C>
Net loss
for the
year $(1,537,726) $(4,107,597) $(19,150) $(19,150) $(19,561) $(19,561)
============ ============ ========= ========= ========= =========
Basic and
diluted
loss per
share $ (0.17) $ (0.45) $ (0.00) $ (0.00) $ (0.01) $ (0.01)
=========== =========== ======== ======== ======== ========
</TABLE>
The following table summarizes information about stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Weighted-
Average Weighted- Weighted
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prises at 12/31/99 Life Price at 12/31/99 Price
<S> <C> <C> <C> <C> <C>
$4.00 to $5.25 1,030,000 4.45 years $ 4.83 463,750 $ 5.01
$7.00 to $7.20 106,667 4.59 years $ 7.01 - -
$9.10 to $9.12 10,067 4.72 years $ 9.11 - -
$5.70 51,943 4.81 years $ 5.70 - -
$6.00 to $12.87 9,396 4.88 years $ 9.45 - -
--------- ---- ------ ------- ------
$4.00 to $12.87 1,208,073 4.45 years $ 5.13 463,750 $ 5.01
========= ==== ====== ======= ======
</TABLE>
F-17
<PAGE> 43
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1999 and 1998
NOTE 11 - COMMON STOCK (continued)
c) Share Purchase Warrants
The following share purchase warrants to purchase shares of the Company
are outstanding at December 31, 1999:
Number Price Expiry
of Shares per Share Date
178,571 $10.00 August 27, 2002
66,666 $16.00/$18.00 December 13, 2000/2001
-------
245,237
=======
Refer to Note 15
d) Deferred Compensation
During the 1999 fiscal year, the Company recorded aggregate deferred
compensation cost of $795,687 as a result of granting stock options. This
amount represents the difference between the exercise price and the quoted
market price of the Company's common stock at the date of grant.
The amortization of deferred compensation is charged to operations over
the vesting period of the stock options ranging from three to four and a
half years
e) Private Placements
During the 1999 fiscal year, the Company issued 60,000 shares pursuant to
a private placement for total cash proceeds of $300,000. Additionally,
the Company issued 245,237 units pursuant to private placements for total
cash proceeds of $2,249,987. Each unit consists of one common share and
one share purchase warrant to purchase one additional share at various
prices for a period of two to three years.
In February 1999, the Company issued 3,320,000 shares pursuant to private
placements for total cash proceeds of $133,700 and cancelled 3,000,000
shares previously issued pursuant to a private placement for total cash
proceeds of $30,000. Since these transactions affect the Company's
permanent capital, the financial statements for the year ended December
31, 1998 were prepared giving retroactive effect to these transactions.
Accordingly, the comparative figures for the 1998 fiscal year have also
been prepared giving retroactive effect to these transactions. The
3,320,000 shares issued during the 1999 fiscal year are shown as if they
had been outstanding at the beginning of the 1998 fiscal year. The
3,000,000 shares issued during the 1997 fiscal year and cancelled during
the 1999 fiscal year are not shown as being issued.
F-18
<PAGE> 44
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1999 and 1998
NOTE 12 - LOSS PER SHARE
Net loss per common share is computed based on the weighted-average number
of common shares and common share equivalents outstanding.
Stock options outstanding have not been included in the computation of
diluted loss per share as the inclusion of these securities would be
antidilutive. Consequently, no differences exist between basic and
diluted loss per share for the periods presented. The weighted-average
number of shares outstanding are 9,028,289 for the 1999 fiscal year,
8,294,205 for the 1998 fiscal year and 2,061,370 for the 1997 fiscal year.
Refer to Note 11
NOTE 13 - SUPPLEMENTAL DISCLOSURE TO THE CONSOLIDATED STATEMENTS OF
CASH FLOWS
<TABLE>
<CAPTION>
For the
For the For the For the Period From
Year Year Year Inception
Ended Ended Ended 11/01/96
12/31/99 12/31/98 12/31/97 to 12/31/99
<S> <C> <C> <C> <C>
Supplemental disclosure on
cash flow information:
Interest paid $ 2,240 $ - $ - $ 2,240
============ ==== ==== ===========
Supplemental disclosure
of non-cash financing
and investing activities:
Common stock issued as
consideration for the
purchase of software from
NetOpus Incorporated $ 131,250 $ - $ - $ 131,250
============ ==== ==== ===========
Common stock issued as
consideration for the
acquisition of Triad
Creative, Inc. $ 1,050,000 $ - $ - $ 1,050,000
=========== ==== ==== ===========
</TABLE>
NOTE 14 - NAME CHANGE
On March 11, 1999, the name of the Company was changed from Austral
Pacific Energy Corp. to Verida Internet Corp.
F-19
<PAGE> 45
VERIDA INTERNET CORP. (Formerly Austral Pacific Energy Corp.)
(A Development Stage Enterprise)
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 1999 and 1998
NOTE 15 - SUBSEQUENT EVENTS
The following material events have occurred subsequent to the year-end:
a) Investment in AgriPlace Inc.
The Company paid a further $175,000 to fund AgriPlace Inc. for a total
investment of $260,000 entitling the Company to a 39.39% equity
interest in AgriPlace.
b) Commitments
By a letter of agreement effective February 1, 2000, the Company
retained PRx Inc. to provide public relation services for a three-month
period at a cost of $37,500 per month plus expenses.
The Company entered into two lease agreements relating to computer
equipment and software requiring an aggregate lease payment of
approximately $146,000 payable over periods of three and six years. In
accordance with the terms of one lease agreement, the Company received
$60,000 for assigning title of certain computer equipment and software
to the lessor.
c) Common Stock
The Company amended previously issued share purchase warrants to
purchase 178,571 shares of the Company from an exercise price of $10.00
per share until August 27, 2002 to an exercise price of $7.00 per share
until August 27, 2002. Additionally, these warrants were exercised in
part by Trans-Orient Petroleum Ltd. to purchase 142,857 shares of the
Company at a price of $7.00 per share for total cash proceeds to the
Company of $999,999.
NOTE 16 - UNCERTAINTY DUE TO THE 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. Although the change in
date has occurred, it is not possible to conclude that all aspects of
the year 2000 issue that may affect the entity, including those related
to customers, suppliers, or other third parties, have been fully
resolved.
F-20
<PAGE> 46
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Our former independent auditor, Terrence J. Dunne, Certified Public
Accountant, of Spokane, Washington was dismissed by us on February 9,
1999. The former auditor expressed an unqualified opinion on the financial
statements of Verida for the period from November 1, 1996 (inception) to
ended December 31, 1996. The decision to change auditors was approved by
our board of directors.
The board of directors decided to dismiss Mr. Dunne due to the belief that
Mr. Dunne would not be able to consistently meet the time requirements for
the preparation of Verida's financial statements. There were no
disagreements with the former auditor on any audit or accounting issues.
We engaged the firm of Jorgensen Telford Sadovnick, PLLC, Certified Public
Accountants, as our new auditor, on February 9, 1999.
Jorgensen Telford Sadovnick, PLLC received a letter dated February 11,
1999 from Mr. Dunne confirming that he was not aware of any circumstances
which would cause concern over the acceptance as auditors of our company
and that there were no disagreements between us and Mr. Dunne in regard
to any accounting principles or audit procedures. We were required to
obtain a Letter on Change in Certifying Accountant for filing as Exhibit
16 of Item 601 of Regulation S-B. Accordingly, we contacted Mr. Dunne and
provided a copy of the disclosures made under this item pursuant to
Item 304(a)(3) of Regulation S-B. However, Mr. Dunne notified us that he
is under an order pursuant to Rule 102(e) of the Commission's Rules of
Practice for a period of three years in accordance with an Administrative
Proceeding No. 3-9610 dated May 27, 1998. In lieu of filing Exhibit 16:
Letter on Change in Certifying Accountant in its initial Form 10-SB, the
Commission requested that we provide details of our attempts to comply
with this requirement, as described in the foregoing paragraph.
In October 1999, Jorgensen Telford Sadovnick, PLLC changed its name to
Telford Sadovnick, PLLC.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
As at March 10, 2000, the name, age and position held by each of the
directors and officers of our company are as follows:
Name Age Position Held
Michael Hinshaw 38 President, Chief Executive Officer &
Director
Bernhard Zinkhofer 44 Director
Peter Rantucci 30 Director
Richard Cohn 47 Executive Vice-President
Steve Zimmerman 35 Chief Technology Officer
David Zimmerman 27 Vice President of Engineering
Jason Fuchs 28 Chief Information Officer
Mark Katsumata 34 Secretary, Treasurer and Chief Financial
Officer
All directors have a term of office expiring at the next annual general
meeting to be held in June 2000, unless re-elected or earlier vacated in
accordance with our bylaws. All officers have a term of office lasting
until their removal or replacement by the board of directors.
<PAGE> 47
Michael Hinshaw - President, Chief Executive Officer and Director
Mr. Michael Hinshaw was appointed to the position of President, Chief
Executive Officer and member of the Board of Directors on February 4,
1999. Mr. Hinshaw attended the University of San Francisco and the Academy
of Art College in San Francisco, receiving a Bachelor of Arts in 1985 and
a Masters of Fine Arts in Graphic Design from the Academy in 1988. As
President and CEO of Verida Internet Corp., Mr. Hinshaw has 15 years of
strategic marketing, creative, and management experience.
In 1985 Mr. Hinshaw co-founded advertising and corporate design firm
Hinshaw, Young & Partners in San Francisco. While there he developed
advertising, direct mail, marketing and branding programs for several
high-technology and financial service corporations including Apple
Computer, Wells Fargo Bank, GTE and Hitachi Data Systems. In 1989, Mr.
Hinshaw co-founded Resource Net, a San Francisco based company which was
founded to enable ad agencies and design firms to share management and
marketing knowledge and resources using the technology of the Internet
through an extensive corporate intranet and extranet. In 1994, Mr. Hinshaw
joined the San Francisco bay-area based Triad Inc., a strategic marketing
and communications company, to pursue the hands-on creation of effective
branding, advertising and design. As Co-Creative Director and Vice
President of the firm, he was responsible for both traditional and
Internet based marketing and business programs for clients including Wells
Fargo, Novell, Apple Computer and Household Credit Services. Mr. Hinshaw
became President of Triad Inc. in 1997 and as described herein, sold Triad
to Verida in October 1999.
Bernhard Zinkhofer - Director
Mr. Bernhard Zinkhofer has been a member of the Board of Directors since
February 4, 1999. Mr. Zinkhofer obtained a Bachelor of Commerce Degree
from the University of Calgary, Canada in 1977, became a member of the
Canadian Institute of Chartered Accountants in 1980 after articling with
a predecessor of KPMG and obtained a Bachelor of Law Degree from the
University of Victoria in 1983. From 1983 to 1990, Mr. Zinkhofer practiced
law with a smaller law firm in Vancouver, British Columbia, in the
corporate and securities areas. In 1991 Mr. Zinkhofer became an associate
of, and in 1992 a partner of, the firm of Lang Michener Lawrence & Shaw
of Vancouver, B.C. where he continues to practice law. Mr. Zinkhofer is
also a director of the following Canadian public companies of which only
Trans-Orient reports under the Exchange Act of 1934 on Form 20F: Trans-
Orient Petroleum Ltd., Durum Cons. Energy Corp., Helijet Airways
International Inc., Strategic Technologies Inc. and Foran Mining
Corporation.
Peter Rantucci - Director
Mr. Peter Rantucci has been a member of the board of directors since
January 28, 1999. Mr. Rantucci received a Bachelor of Commerce Degree
(Honors) from the University of British Columbia in 1992 and a Bachelor
of Law Degree from the University of Manitoba in 1996. Mr. Rantucci began
his articles in July 1996 with a large law firm situated in Calgary,
Alberta called Milner Fenerty where he continued to practice commercial
and tax law until his departure in January 1998. Since January 1998 until
present Mr. Rantucci has been acting as executive for DLJ Management Ltd.,
a private company providing administrative services to public and private
companies including Verida.
<PAGE> 48
Richard G. Cohn - Executive Vice President
Mr. Richard G. Cohn serves as Executive Vice President for our company.
Mr. Cohn holds a Bachelor of Arts from the University of Pennsylvania and
a J.D. from Emory University. Mr. Cohn brings more than twenty years of
diverse communications experience to our company. From 1995 to 1998 Mr.
Cohn was Vice President, Communications Technology/Employee
Communications, with Charles Schwab & Co. in San Francisco, California.
At Charles Schwab & Co., Mr. Cohn spearheaded efforts to align a
geographically dispersed work force through Web technology. He also
directed a national series of town hall meetings featuring CEO Charles
Schwab launching the company's new strategic direction. From 1992 to 1995,
Mr. Cohn was the Manager of Employee Communications with Sun Microsystems,
at their Mountain View California office. While at Sun Microsystems Inc.,
Mr. Cohn helped pioneer online communications tools such as desktop video-
on-demand and Web-based audio programming. He also directed global sensing
efforts and managed communications campaigns around the world for Sun
Microsystems Inc. Prior to his technology experience, Mr. Cohn served as
a Senior Attorney for the Department of Energy in both Washington and San
Francisco from 1980 to 1984 and has worked as a Legislative Assistant to
the U.S. House of Representatives in Washington, D.C. from 1977 to 1978.
Steven Zimmerman - Chief Technology Officer
Mr. Steven Zimmerman serves as Chief Technology Officer for our company.
He holds a Bachelor of Arts in economics from the University of Virginia
and a Masters of Business Administration from San Francisco State
University. Mr. Zimmerman brings over 13 years of technology leadership
experience to Verida. From 1986 to 1994 Mr. Zimmerman served as Vice
President and MIS director for Barclay & Company, Inc. In 1996 Mr.
Zimmerman co-founded NetOpus Incorporated, an Internet hosting and
development company. As President of NetOpus Incorporated, Mr. Zimmerman
oversaw the design, development and implementation of Internet-based
e-commerce solutions, with an emphasis on transaction processing,
security, and database integration. While there, he also developed the
Sales Associate System, a line of web based applications that enable
companies to sell their products and services securely over the Internet.
David Zimmerman - Vice President of Engineering
Mr. David Zimmerman serves as Vice President of Engineering for our
company. He holds a Bachelor of Arts in Economics from Wesleyan
University. As co-founder and Chief Technology Officer of NetOpus
Incorporated, creators of Web applications enabling online catalog display
and order processing, David Zimmerman enjoyed an early introduction to the
emerging world of Internet commerce. While building and maintaining one
of the earliest and still one of the more established Internet malls,
Choice Mall, Mr. Zimmerman led the development of NetOpus' e-commerce
Store Creator Software. Having since worked independently and with
numerous development companies, most recently as a Senior Engineer with
USWeb/CKS, Mr. Zimmerman brings diverse e-commerce project architecture
and implementation skills needed to lead Verida's engineering group in the
creation of high-availability, flexible, and transactional e-commerce
solutions across a wide array of industries.
<PAGE> 49
Jason Fuchs - Chief Information Officer
Mr. Jason Fuchs was recently hired as our Chief Information Officer. He
holds a Bachelor of Arts in Molecular Biology from the University of
Colorado. From 1984 to 1996, Mr. Fuchs acted as an independent computer
consultant, building database applications and maintaining computer
systems. From 1996 to 1998, he acted as the systems administrator for two
multi-media and Internet technology firms. From 1998 to 1999, Mr. Fuchs
was a senior manager for Langtech Systems, a systems integrator and web-
application development company. His primary client responsibilities
included acting as an outsourced CTO/CIO for traditional firms as well as
venture capital backed Internet start-ups. He designed, implemented,
maintained and supported the local and wide area networks for these
companies, spanning from the desktop to the server and network backbone.
Mark Katsumata - Corporate Secretary, Treasurer and Interim Chief
Financial Officer
Mr. Mark Katsumata has been the Corporate Secretary, Treasurer and Chief
Financial Officer of the company since June 1998. Mr. Katsumata is a
certified general accountant who was in public practice from 1990 to 1994
with De Visser & Company in Vancouver, B.C. On October 1994 Mr. Katsumata
joined Indo-Pacific Energy Ltd., a reporting company listed on the OTCBB,
and presently continues to occupy the position of Secretary and Treasurer
and Interim Chief Financial Officer. Mr. Katsumata is also the Secretary,
Treasurer and Chief Financial Officer of Trans-Orient Petroleum Ltd.
Verida is in the process of negotiating terms of employment with a new
Chief Financial Officer designate as of the date of filing of this
Form 10-KSB. To the best of our knowledge, none of the individuals listed
above nor any person who can be considered the promoter or a "control
person" are subject to any anticipated or threatened legal proceedings of
a material nature. Messrs. Steven and David Zimmerman are brothers and
other than this relationship, there are no family relationships among the
directors and executive officers.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities and Exchange Act of 1934 requires
officers, directors and persons who own more than ten percent of a
registered class of a company's equity securities to file initial reports
of beneficial ownership and to report changes in ownership of those
securities with the Securities and Exchange Commission. They are also
required to furnish the Company with copies of all Section 16(a) forms
they file. To the Company's knowledge, based solely on review of the
copies of Forms 3, 4 and 5 furnished to the Company we have determined the
following:
(1) Mr. Michael Hinshaw was late in the filing of two Form 4's, one of
which was required to report the initial granting of his options while the
second related to the issuance of shares to him on account of the Triad
Creative Inc. purchase. (2) Mr. Richard Cohen was late in the filing of
one Form 4, which was required to report the initial granting of his
option, (3) Mr. Steven Zimmerman was late in the filing of one Form 4,
which was required to report the initial granting of his option. (4) Mr.
Mark Katsumata was late in the filing of one Form 4, which was required
to report the initial granting of his option. (5) Mr. Peter Rantucci was
late in the filing of one Form 4, which was required to report the initial
granting of his option.
<PAGE> 50
ITEM 10. EXECUTIVE COMPENSATION
Directors and Officers of our company have received the following
compensation for the fiscal year ending December 31, 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities All
Annual Restricted Under Other
Name and Compen- Stock Options/ LTIP Compen-
Principal Salary Bonus sation Award(s) SARs Payouts sation
Position Year ($) ($) ($) (#) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael
Hinshaw 1999 45,000 - - [1] 500,000 - 700,000[1]
President 1998 - - - - - - -
& CEO 1997 - - - - - - -
Richard Cohn 1999 71,250 - - - 200,000 - -
Executive 1998 - - - - - - -
Vice 1997 - - - - - - -
President
Steven
Zimmerman 1999 51,501 - - [2] 150,000 - 50,000[2]
Chief 1998 - - - - - - -
Tehcnology 1997 - - - - - - -
Officer
David
Zimmerman 1999 41,251 - - [2] 100,000 - 50,000[2]
Vice 1998 - - - - - - -
President of 1997 - - - - - - -
Engineering
Mark
Katsumata 1999 - - - - 25,000 - -
Secretary, 1998 - - - - - - -
Treasurer 1997 - - - - - - -
& CFO
</TABLE>
Notes:
[1] On February 8, 1999 Mr. Michael Hinshaw, the President of Verida and
an affiliate, was issued from treasury 1,000,000 shares at a price
of $.001 per share under section 4(2), the total proceeds paid by
him for this issuance was $1000. On February 8, 1999 Verida's price
closed at $.25 per share. The difference between the price paid and
the market value of the issuance is $249,000. Also on February 8,
1999 Mr. Hinshaw was also issued 1,000,000 shares at a price of $.03
per share under Reg. D (504), the total proceeds paid by him for
this issuance was $30,000. On February 8, 1999 our share price
closed at $.25 per share. The difference between the price paid and
the market value of the issuance is $220,000. Additionally, on
October 21, 1999, Verida acquired 100% of the issued and outstanding
shares of Triad Creative, Inc., ("Triad") a private marketing
company owned and controlled by Michael Hinshaw. Triad was acquired
through a merger under California law in consideration of the
agreement by Verida to pay $1, 800,000 the payment of which
consisted of $750,000 ($450,000 paid to March 15, 2000) and the
balance owing through the issuance of 150,000 restricted common
shares. The shares were issued at an agreed price of $7.00 per share
while the closing market price on October 21, 1999 of our common
shares was $6.13. (See Item 12 - Certain Relationships and Related
Transactions.)
<PAGE> 51
[2] On June 11, 1999 NetOpus Incorporated, a private company owned and
controlled by Messrs. Steve Zimmerman and David Zimmerman, was paid
$50,000 in cash and was issued 25,000 restricted common shares at an
agreed price of $5.25 per share as payment for the sale of its
technology assets. On June 11, 1999 our common share's closing price
on the market was $5.25. Mr. Steve Zimmerman is also an Executive
Officer of the company and as such, an affiliate of Verida. Mr.
David Zimmerman is the Vice President of Engineering and as such, an
affiliate of Verida. (See Item 12 - Certain Relationships and
Related Transactions.)
All the named executive officers, with the exception of Mr. Mark
Katsumata, are subject to employment agreements with Verida. Generally,
the employment agreements contain provisions such as salary and stock
option awards, confidentiality and non-disclosure clauses and notice
periods for the termination of employment. Under their respective
employment agreements, the named executive officers are entitled to
receive the following salaries:
Salary
Name (Annual Basis)
1. Mr. Michael Hinshaw, President and CEO $ 180,000
2. Richard Cohn, Executive Vice-President $ 90,000
3. Steven Zimmerman, Chief Technology Officer $ 110,004
4. David Zimmerman, Vice-President of Engineering $ 110,004
With respect to compensation agreement for employment termination for the
fiscal period ending December 31, 1999, the following executive officers
have provisions within their respective employment agreements that
generally provide for ongoing salary payments in certain circumstances:
1. Michael Hinshaw-President & CEO - In the event that Verida
terminates Mr. Hinshaw without cause within the first thirty-six (36)
months from the date of entering into the employment agreement, then
Verida shall continue to pay him his salary ($15,000 per month) for the
remainder of such thirty-six (36) month period.
2. Steven Zimmerman-Chief Technology Officer - In the event Verida
terminates Mr. Zimmerman without cause within the first six (6) months
from April 1, 1999 (the date of entering into the employment agreement)
then Verida shall continue to pay Mr. Zimmerman's salary pursuant to
Paragraph 2(a) above for the remainder of such six (6)-month period.
3. David Zimmerman-Vice President of Engineering - In the event Verida
terminates Mr. Zimmerman without cause within the first six (6) months
from August 1999 (the date of entering into the employment agreement) then
Verida shall continue to pay Mr. Zimmerman's salary pursuant to Paragraph
2(a) above for the remainder of such six (6)-month period.
Subsequent to December 31, 1999, Mr. Jason Fuchs was hired by Verida as
the Chief Information Officer. Under the terms of his employment agreement
he is paid a salary of $97,200 per year and was granted an option to
acquire 50,000 shares of Verida at a price of $10.00 per share. The shares
are subject to certain vesting provisions over a 48 month period.
<PAGE> 52
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
Percentage
Number of of Options
Securities granted to Market
Underlying Employees Exercise or Price on
Options in the Base Price Date of Expiration
Name Granted (#) Fiscal Year ($/Sh) Grant Date
<S> <C> <C> <C> <C> <C>
Michael Hinshaw 500,000[1] 41% 5.25 5.25 06/14/04
Richard Cohn 200,000[2] 17% 4.00 5.25 06/14/04
Steven Zimmerman 150,000[2] 12% 4.00 5.25 06/14/04
David Zimmerman 100,000[3] 8% 7.00 9.56 08/15/04
Mark Katsumata 25,000[2] 2% 5.25 5.25 06/14/04
</TABLE>
Notes:
(1) Of the 500,000 options granted to Mr. Hinshaw, 200,000 are subject
to the following vesting schedule: 25% at six months from granting,
25% at 12 months from granting, 25% at 24 months from granting and
25% at 36 months from granting. An option to acquire 300,000 vested
immediately upon granting.
(2) Subject to the following vesting schedule: 25% at six months from
granting, 25% at 12 months from granting, 25% at 24 months from
granting and 25% at 36 months from granting.
(3) Subject to the following vesting schedule: 12.5% every 6 months from
granting until February 15, 2003 when a final 25% will vest.
Aggregate Option Exercises in the Last Fiscal Year and Fiscal Year -
End Option Values
No stock options were exercised by any named executive officer during
the 1999 fiscal year
<TABLE>
<CAPTION>
Number of
securities Value of
underlying unexercised
unexercised in-the-money
options options
Shares 12/31/99 (#) 12/31/99 ($)
acquired on Value Exerciable/ Exercisable/
Name exercise (#) Realized ($) unexercisable unexercisable
<S> <C> <C> <C> <C>
Michael Hinshaw,
President 350,000/ 4,243,750/
150,000 1,818,750
Richard Cohn,
Vice-President 50,000/ 668,750/
150,000 2,006,250
Steven Zimmerman,
Chief Technology Officer 37,500/ 501,750/
112,500 1,505,250
David Zimmerman,
Vice-President 0/ 0/
of Engineering 100,000 1,037,500
Mark Katsumata, 6,250/ 75,812/
Chief Financial Officer 18,750 227,437.50
</TABLE>
<PAGE> 53
(1) Based on a December 31, 1999 closing price of $17.375 per share.
Except for options, Verida does not have any long-term incentive plans to
its officers and directors during the 1999 fiscal year.
During the fiscal 1999 period, Verida did not have a formal compensation
committee. Determinations as to compensation levels for the named
executive officers were determined by the Board of Directors. There is no
formal equation or plan under which the compensation paid to teach of the
named executive officers was determined. Among the factors considered are
levels of experience and comparative salaries within the industry.
There are no standard or other arrangements pursuant to which our
company's directors were compensated in their capacity as such during the
1999 fiscal year. However, Mr. Peter Rantucci-Director, was granted an
option to acquire up to 75,000 common shares of Verida's stock exercisable
at $5.25 per share which was the closing market price of our common shares
on the date of grant (June 14, 1999). The options are subject to the
following vesting schedule: 25% at six months from granting, 25% at 12
months from granting, 25% at 24 months from granting and 25% at 36 months
from granting. Mr. Zinkhofer, a director, purchased on February 8, 1999
a total of 200,000 common shares for total proceeds of $3,100.00. The
closing market price of our common shares on February 8, 1999 was $.25 per
share.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Our securities are recorded on the books of our transfer agent in
registered form. However, a majority of such shares are registered in the
name of intermediaries such as brokerage houses and clearing houses on
behalf of their respective clients and we do not have knowledge of the
beneficial owners thereof. We are not directly or indirectly owned or
controlled by a corporation or foreign government.
As of March 24, 2000, Verida had an authorized share capital of
100,000,000 common shares with a par value of $0.00001 per share of which
9,510,094 shares were issued and outstanding after taking into account the
March 20, 2000 exercise of 142,857 warrants by Trans-Orient Petroleum Ltd.
The following table sets forth, as of March 24, 2000, the beneficial
shareholdings of persons or entities holding five per cent or more of our
common stock, each director individually, each named executive officer and
all directors and officers of Verida as a group. To the knowledge of
Verida, each person has sole voting and investment power with respect to
the shares of common shares shown.
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Owner Position Class
Michael Hinshaw 2,150,000[1] President, 22.6%
c/o 50 California Street common shares Chief Executive
Suite 1500 Officer and a
San Francisco, CA member of the Board
of Directors
Richard Cohn 0[1] Executive 0.0%
c/o 50 California Street Vice President
Suite 1500
San Francisco, CA
<PAGE> 54
Steve Zimmerman 25,000[1][2] Chief 0.3%
c/o 50 California Street Technology
Suite 1500 Officer
San Francisco, CA
David Zimmerman 25,000[1][2] Vice President 0.3%
c/o 50 California Street
Suite 1500
San Francisco, CA
Jason Fuchs 0[1] Chief 0.0%
c/o 50 California Street Information
Suite 1500 Officer
San Francisco, CA
Mark Katsumata 0[1] Secretary- 0.0%
c/o 1090 West Pender Street Treasurer
Suite 1200 Chief Financial
Vancouver, B.C. Officer
Bernhard Zinkhofer 210,000 Director 2.2%
c/o 1055 W. Georgia St. common shares
Suite 1500
Vancouver, B.C.
Peter Rantucci 0[1] Director 0.0%
c/o 1090 West Pender Street
Suite 1200
Vancouver, B.C.
All officers 2,410,000 25.3%
and directors common shares
as a group
Alex Guidi 3,026,000 31.8%
c/o 1090 W. Pender St. common shares
Suite 1200
Vancouver, B.C.
Brad Holland 793,533[3] 8.3%
P.O. Box 2314 common shares
Dhahran, Saudi Arabia
Peter Loretto 524,900 5.5%
c/o 350 - 6165 Hwy. 17 common shares
Delta, B.C.
Trans-Orient 621,428[4] 6.5%
Petroleum Ltd. common shares
1200-1090 W. Pender St.
Vacouver, BC
<PAGE> 55
[1] These directors and officers hold options to acquire common shares
of Verida:
Amount of Common
Shares which may be
Option to Acquire acquired within the
the following next 60 days as of
Name Number of Shares 03/10/2000 on
Exercise
Michael Hinshaw 500,000 350,000
Richard Cohn 200,000 50,000
Steven Zimmerman 150,000 37,500
David Zimmerman 100,000 12,500
Peter Rantucci 75,000 18,750
Jason Fuchs 50,000 0
Mark Katsumata 25,000 6,250
[2] NetOpus Incorporated, a private company owned and controlled by
Messrs. Steve Zimmerman and David Zimmerman, was issued 25,000
restricted common shares as partial payment for the sale of its
technology assets. Mr. Steve Zimmerman is also an Executive Officer
of the company and as such, an affiliate of Verida. Mr. David
Zimmerman is the Vice President of Engineering and as such, an
affiliate of Verida.
[3] Brad Holland holds a warrant to acquire 33,333 common shares of
Verida at $16-$18 per share which is exercisable at any time up to
December 13, 2001.
[4] Trans-Orient Petroleum Ltd. holds warrants to acquire 178,571 common
at a price of $10 per share within on or before September 2, 2002.
On March 17, 2000 the Board of Directors of the company repriced the
exercise price of the warrants to $7.00 on the basis that Trans-
Orient Petroleum Ltd. would exercise a portion of the warrant
acquire 142,857 common shares for total proceeds of $1,000,000.
No arrangements exist which may result in a change in control of our
company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the twelve months ended December 31, 1999, no insider, officer, or
director of our company had any interest in any material transaction, or
has any interest in any pending material transaction, except as follows:
(a) Mr. Michael Hinshaw, our President and Director, purchased 1,000,000
common shares at a price of $0.001 per share and a further 1,000,000
common shares at a price of $0.03 per share. Mr. Bernhard Zinkhofer, a
Director, acquired 100,000 common shares at $0.03 per share and a further
100,000 common shares at $0.001 per share.
(b) Verida sold 59,800 shares of Trans-Orient Petroleum Ltd. for cash
proceeds of $81,972, net of commissions, resulting in a loss of $92,958.
These available-for-sale securities were originally acquired in 1998 at
a cost of $174,930 while the company was still engaged in its oil & gas
business. Verida also issued 178,571 units, at a price of $7.00 per share,
to Trans-Orient Petroleum Ltd. for cash proceeds of $1,249,997, pursuant
to a private placement. Each unit consists of one common share and one
share purchase warrant to purchase one additional share at a price of
<PAGE> 56
$10.00 per share, expiring on August 27, 2002. On March 17, 2000 the Board
of Directors of the company repriced the exercise price of the warrants
to $7.00. On March 20, 2000 Trans-Orient Petroleum Ltd. notified us that
they wished to exercise a portion of the warrant to acquire 142,857 of the
Registrant's common shares for total proceeds of $1,000,000. The shares
acquired under this private placement are subject to a one year hold
period. Alex Guidi is the former President and a former member of the
board of directors of Verida. Mr. Guidi is a substantial shareholder in
our company and also a director and Chairman of the Board of Trans-Orient
Petroleum Ltd.. Mr. Bernhard Zinkhofer is a member of our board of
directors and is also a member of the board of directors of Trans-Orient
Petroleum Ltd.. Mark Katsumata is the Secretary and Interim Chief
Financial Officer of Verida. Mr. Katsumata is also the corporate secretary
of Trans-Orient Petroleum Ltd.
(c) Verida acquired the rights to pre-existing computer software, known
as the "Sales Associate Store Creator" from NetOpus Incorporated. NetOpus
is a private company owned and controlled by Messrs. Steve Zimmerman and
David Zimmerman. Mr. Steven Zimmerman is also Chief Technology Officer of
the Company. Mr. David Zimmerman is also an executive officer of our
company fulfilling the role of Vice- President of Engineering. NetOpus
sold to Verida the rights to certain preexisting computer software
marketed by NetOpus as the "Sales Associate Store Creator" commerce
system.
The Store Creator Software was sold by NetOpus in consideration of a one-
time fee paid by us to NetOpus. The one-time fee consisted of $50,000 plus
the issuance to NetOpus of 25,000 common shares at a deemed price of $5.25
per share. The 25,000 shares were restricted from resale for a period of
12 months from the date of issuance. At the end of the twelve month
period, the shares may be re-sold at a rate that cannot exceed 2,083
shares per month maximum. (See also Previous Acquisitions and AgriPlace
Agreement.) We also paid $2,367 to NetOpus for web-hosting services in
1999 (1998 - $ nil).
(d) On October 21, 1999 Verida purchased 100% of Triad Creative, Inc.
("Triad"), a private company owned by Mr. Hinshaw, through a merger under
California Law. Verida agreed to pay $750,000 in cash, payable over
several months ($450,000 paid to date) and 150,000 common shares of our
company, subject to resale restrictions. The total purchase price paid,
including both shares and cash was $1,800,000. Prior to determining the
price to be paid, our Board of Directors received an independent
evaluation of the value of Triad Creative, Inc. The evaluation determined
that the fair value was between $1,700,000 and $2,100,000. As of December
31, 1999, $150,000 in cash was paid towards the purchase price. (See also
Item 1 - Previous Acquisitions and Co-Development Arrangements.) As part
of the Merger Agreement the parties were to enter into an Employment
Agreement between our company and Mr. Michael Hinshaw. Among other things
the Employment Agreement provided for a salary of $180,000 per year and
confirmation of the earlier granting of options to acquire 500,000 of our
common shares at $5.25 per share. Additionally the agreement provided for
36 months of severance should Mr. Hinshaw be released by the Company
"without cause." Subsequent to the year end Verida reached agreement in
principle for the Valuator referred to above, Mr. Henry Corona, to assume
the position of Verida's Chief Financial Officer subject to negotiation
of a satisfactory employment agreement.
(e) Up to the date of acquisition of Triad, Triad had designed and
developed our websites and certain other corporate materials, at a cost
of $313,396 to our company.
<PAGE> 57
(f) During our 1999 fiscal year , Triad entered into various agreements
for design services under which it generated revenues with companies in
which our directors and/or officers held either direct or indirect
interests, or served as directors or officers. These companies are Trans-
Orient Petroleum Ltd. ($10,775) and Indo Pacific Energy Ltd. ($21,410).
Additionally, Triad provided design services to a private company owned
by Mr. Alex Guidi (see subparagraph "b" above for Mr. Guidi's relationship
to the company). The total work done during the 1999 fiscal year for
affiliated entities was $166,440.
ITEM 13. INDEX TO EXHIBITS AND REPORTS ON FORM 8-K
During the fiscal year ending December 31, 1999 we filed the following
material change reports on Form 8-K:
Date Description
October 22, 1999 Merger Agreement dated as of October 21, 1999, by
and among Verida Internet Corp., Verida Acquisition
Corp., Triad Creative, Inc. and Michael Hinshaw.
November 8, 1999 Interim Shareholder's Agreement (the "Agreement")
with the Individuals Terry Booth, Greg Lore and AG-
Direct.Com Inc. (since renamed AgriPlace Inc.)
The following exhibits required by Item 601 of Regulation S-B are
filed herewith:
Exhibit
Number Description
The following documents are herein incorporated by reference as
previously included in our Registration Statement on Form 10-SB filed on
April 12, 1999 and amendments filed July 6, 1999, July 28, 1999 and August
2, 1999:
3.1 Initial Articles of Incorporation, as filed November 1, 1996
3.2 Bylaws
3.3 Articles of Amendment to the Articles of Incorporation, as
filed on November 8, 1996
3.4 Articles of Amendment to the Articles of Incorporation, as
filed on March 11, 1999
99.1 Cohn Employment Agreement
99.2 Steven Zimmerman Employment Agreement
99.3 Triad, Inc. Agreement
99.4 Software Purchase Agreement
The following documents are herein incorporated by reference as
previously included in our Quarterly Report on Form 10-QSB filed on June
30, 1999:
99.5 Share Option Plan.
<PAGE> 57
The following documents are herein incorporated by reference from
our Form 10-QBS for the period ending September 30, 1999:
99.6 Employment Agreement for Vice President - Engineering
99.7 Promissory Note
The following documents are herein incorporated by reference as
previously included in our Form 8-K filed on November 9, 1999.
2.1 Merger Agreement dated as of October 21, 1999, by and among
Verida Internet Corp., Verida Acquisition Corp., Triad
Creative, Inc. and Michael Hinshaw.
The following documents are incorporated herein by reference from
our Form 8-K dated November 22, 1999:
10.1 Shareholders Agreement by and among Verida Internet Corp., AG-
Direct.com Inc., Terry Booth and Grey Lore.
The following documents are incorporated herein by reference from
our Form S-8, as filed with the Securities and Exchange Commission on
January 24, 1999, SEC file #333-95211:
10.2 Nonqualified Stock Option Plan.
The following documents
23.3 Consent of Telford Sadovnick, P.L.L.C., CPA.
27 * Financial Data Schedule
99.8 * Hinshaw Employment Agreement
99.9 * Steven Zimmerman Employment Agreement amendment.
99.10 * David Zimmerman Employment Agreement
* Previously filed.
<PAGE> 58
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant has caused this signature page to be signed on its behalf by
the undersigned, thereunto duly authorized.
VERIDA INTERNET CORP.
Name Title Date
/s/ Michael Hinshaw
Michael Hinshaw President & Director April 6, 2000
/s/ Bernhard Zinkhofer
Bernhard Zinkhofer Director April 6, 2000
/s/ Peter Rantucci
Peter Rantucci Director April 6, 2000
/s/ Mark Katsumata
Mark Katsumata Corporate Secretary, Chief April 6, 2000
Financial Officer & Treasurer
<PAGE> 60
EXHIBIT 23.3
TELFORD SADOVNICK, P.L.L.C.
CERTIFIED PUBLIC ACCOUNTANTS
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 10-KSB, into
Verida Internet Corp.'s previously filed Registration Statement
File No. 333-95211 on Form S-8.
/s/ Telford Sadovnick, P.L.L.C
Certified Public Accountants
Bellingham, Washington
April 6, 2000
114 West Magnolia Street, Suite 423,
Bellingham, Washington 98225
Telephone: (360) 392-2886 Facsimile: (360) 392-2887
