U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1999
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from _______________ to __________________
Commission file number______________________________________________
CyPost Corporation
--------------------------------------------
(Exact name of small business issuer as
specified in its charter)
Delaware 98-0178674
- --------------------------------- ----------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
260 West Esplanade, Suite 101, N. Vancouver, BC, Canada V7M 3G7
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(604) 904-4422
--------------------------------------------
(Issuer's telephone number)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
<PAGE>
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes |_| No|X|
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date: 20,246,512
Transitional Small Business Disclosure Format (check one). Yes |_|; No|X|
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and pursuant to the rules and regulations of the Securities
and Exchange Commission. While these statements reflect all normal recurring
adjustments which are, in the opinion of management, necessary for fair
presentation of the results of the interim period, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. For further information, refer to
the financial statements and footnotes thereto for the period from the Company's
inception through December 31, 1998 which are included in the Company's
registration statement on Form 10-SB previously filed with the Commission.
<PAGE>
CYPOST CORPORATION
CONSOLIDATED BALANCE SHEET - - SEPTEMBER 30, 1999
(Unaudited)
(U.S. Dollars)
ASSETS
CURRENT ASSETS:
Cash $2,414,094
Accounts receivable 121,019
Prepaid expenses 49,144
----------
2,584,257
CAPITAL ASSETS, at cost:
Furniture and equipment $ 13,817
Leasehold improvements 3,237
Computer hardware and software 136,576
----------
153,630
Less- Accumulated amortization (5,474) 148,156
----------
DEPOSITS AND OTHER ASSETS 97,204
GOODWILL 751,208
----------
$3,580,825
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 330,656
Loans 2,670,450
Deferred revenue 75,283
----------
3,076,389
STOCKHOLDERS' EQUITY:
Share capital $ 11,240
Additional paid in capital 1,949,965
Deficit (1,442,303)
Cumulative translation adjustment (14,466) 504,436
---------- ----------
$3,580,825
==========
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
CYPOST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE THREE MONTHS ENDED AND NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
(Unaudited)
(U.S. Dollars)
<TABLE>
<CAPTION>
From Inception
Three Months Ended Nine Months Ended of September 5,
September 30, September 30, 1997 to
-------------------------- -------------------------- September 30,
1999 1998 1999 1998 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
REVENUE $ 185,670 $ -- $ 197,068 $ -- $ 198,991
DIRECT COSTS 49,275 -- 49,275 -- 49,275
----------- ----------- ----------- ----------- -----------
136,395 -- 147,793 -- 149,716
----------- ----------- ----------- ----------- -----------
EXPENSES:
General and administrative 41,848 34,840 500,156 153,004 757,419
Salaries and benefits 381,083 406,193 406,193
Sales and marketing 9,590 -- 261,093 -- 261,093
Development 114,339 142,010 142,010
Amortization 13,040 -- 19,071 2,852 25,304
----------- ----------- ----------- ----------- -----------
559,900 34,840 1,328,523 155,856 1,592,019
----------- ----------- ----------- ----------- -----------
Net loss (423,505) (34,840) (1,180,730) (155,856) (1,442,303)
DEFICIT, beginning of period (1,018,798) (131,033) (261,573) (10,017) --
----------- ----------- ----------- ----------- -----------
DEFICIT, end of period $(1,442,303) $ (165,873) $(1,442,303) $ (165,873) $(1,442,303)
=========== =========== =========== =========== ===========
LOSS PER SHARE $ (0.04) $ (0.01) $ (0.12) $ (0.04)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 9,647,795 4,156,839 9,647,795 4,156,839
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
CYPOST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AND NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
(Unaudited)
(U.S. Dollars)
<TABLE>
<CAPTION>
From Inception
Three Months Ended Nine Months Ended of September 5,
September 30, September 30, 1997 to
-------------------------- -------------------------- September 30,
1999 1998 1999 1998 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CASH PROVIDED FROM (USED IN) OPERATING ACTIVITIES
Net loss for the period $ (423,505) $ (34,840) $(1,180,730) $ (155,856) $(1,442,303)
Add item not affecting cash-
Amortization 13,040 -- 19,071 2,852 25,304
----------- ----------- ----------- ----------- -----------
(410,465) (34,840) (1,161,659) (153,004) (1,416,999)
Change in non-cash operating accounts (68,978) 2,298 69,000 387 85,772
----------- ----------- ----------- ----------- -----------
(479,443) (32,542) (1,092,659) (152,617) (1,331,227)
----------- ----------- ----------- ----------- -----------
CASH PROVIDED FROM (USED IN) INVESTING ACTIVITIES:
Proceeds (purchase) of capital assets (34,169) 644 (55,194) (18,360) (66,879)
Acquisition of Hermes Net Solutions, Inc. -- -- (445,112) -- (445,112)
Acquisition of Intouch.Internet Inc. -- -- (197,917) -- (197,917)
Purchase of other assets (69,477) -- (54,220) -- (99,755)
----------- ----------- ----------- ----------- -----------
(103,646) 644 (752,443) (18,360) (809,663)
----------- ----------- ----------- ----------- -----------
CASH PROVIDED FROM (USED IN) FINANCING ACTIVITIES:
Loan repayment (66,841) -- -- -- --
Loan proceeds 2,770,450 -- 3,670,450 -- 3,670,450
Issuance of shares -- 44,000 556,000 185,000 899,000
Change in cumulative translation adjustment (14,466) (2,162) (14,466) (2,847) (14,466)
----------- ----------- ----------- ----------- -----------
2,689,143 41,838 4,211,984 182,153 4,554,984
----------- ----------- ----------- ----------- -----------
Increase in cash 2,106,054 9,940 2,366,882 11,176 2,414,094
CASH, beginning of period 308,040 5,103 47,212 3,867 --
----------- ----------- ----------- ----------- -----------
CASH, end of period $ 2,414,094 $ 15,043 $ 2,414,094 $ 15,043 $ 2,414,094
=========== =========== =========== =========== ===========
</TABLE>
SUPPLEMENTAL DISCLOSURE:
(a) For the nine months ended September 30, 1999, the Company converted
$1,000,000 of loans to shares.
<PAGE>
CYPOST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
(U.S. Dollars)
1. BASIS OF PRESENTATION
Going Concern
These financial statements have been prepared on the basis of accounting
principles applicable to a "going concern" which assume that Cypost
Corporation (the "Company") will continue in operation for at least one
year and will be able to realize its assets and discharge its liabilities
in the normal course of operations.
The Company was formerly a development stage company. It commenced
substantial business operations in the first quarter of 1999 with its
offering of various software products, and has incurred net losses of
$1,442,303 for the period from inception of September 5, 1997 to September
30, 1999. The Company's ability to continue as a going concern is
dependent upon its ability to obtain additional financing and attain
profitable operations.
These financial statements do not reflect adjustments that would be
necessary if the Company were unable to continue as a "going concern".
While management believes that the actions already taken or planned will
mitigate the adverse conditions and events which raise doubts about the
"going concern" assumption used in preparing these financial statements,
there can be no assurance that these actions will be successful.
Interim Financial Statements
These financial statements do not include certain information and
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles. These interim
financial statements are prepared pursuant to regulations of the
Securities and Exchange Commission.
In the opinion of management, these financial statements include all
adjustments which are necessary for fair presentation.
2. ACQUISITIONS
Effective June 30, 1999, the Company purchased all the issued and
outstanding shares of Hermes Net Solutions, Inc. for a purchase price of
$510,204 USD. The consideration for this purchase consisted of cash of
$435,374 USD and an assumption of a deferred cash payment of $74,830 USD.
Also effective June 30, 1999, the Company purchased all the issued and
outstanding shares of Intouch.Internet Inc. for a purchase price of
$304,081 USD. The consideration for this purchase consisted of cash of
$275,510 USD and the issuance of 6,750 common shares valued at $28,571
USD.
<PAGE>
2. ACQUISITIONS (Cont'd)
Both acquisitions have been accounted for by the purchase method of
accounting. In both acquisitions, the net assets acquired consisted
primarily of goodwill which will be amortized over five years on the
straight line basis. These financial statements include the results of
operations of the two acquired businesses for the period from July 1, 1999
to September 30, 1999.
3. SUBSEQUENT EVENTS
Acquisition of NetRover Inc. and NetRover Office Inc.
On October 4, 1999, the Company purchased all the issued and outstanding
shares of NetRover Inc. and NetRover Office Inc. for a purchase price of
$2,717,826 USD. The purchase price of $2,717,826 USD was satisfied by a
cash payment of $2,000,000 USD, the issue of 146,000 common shares valued
at $4.46 USD per share, and an assumption of a deferred cash payment of
$68,027 USD which, subject to certain adjustments, is due on December 4,
1999. These purchases will be accounted for under the purchase method of
accounting.
Acquisition of Connect Northwest Internet Services, LLC and Internet
Arena, Inc.
On October 26, 1999, the Company purchased all the issued and outstanding
shares of Connect Northwest Internet Services, LLC for a net purchase
price of $1,320,000 USD. The purchase price was satisfied by a cash
payment of $660,000 USD and the issuance of 98,655 of the Company's common
shares valued at $6.69 USD per share.
On November 9, 1999, the Company purchased all the issued and outstanding
shares of Internet Arena, Inc. for a purchase price of $600,000 USD. The
purchase price was satisfied by a cash payment of $172,500 USD, the
issuance of 67,132 of the Company's common shares valued at $4.50 USD per
share, and a deferred cash payment of $57,500 USD due in January, 2000.
These purchases will be accounted for under the purchase method of
accounting.
4. LOANS
The loans are unsecured, bear interest at 8% per annum and are payable on
demand in the form of cash or convertible into the Company's common shares
at $1.50 per share.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-Looking Statements
The statements contained in this Report on Form 10-QSB that are not
historical facts are forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995) that involve risks and
uncertainties. Such forward-looking statements may be identified by, among other
things, the use of forward-looking terminology such as "believes," "expects,"
"may," "will," "should" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy that
involve risks and uncertainties. From time to time, the Company or its
representatives have made or may make forward-looking statements, orally or in
writing. Such forward-looking statements may be
2
<PAGE>
included in various filings made by the Company with the Securities and Exchange
Commission (the "SEC"), or press releases or oral statements made by or with the
approval of an authorized executive officer of the Company. These
forward-looking statements, such as statements regarding anticipated future
revenues, capital expenditures, Year 2000 compliance and other statements
regarding matters that are not historical facts, involve predictions. The
Company's actual results, performance or achievements could differ materially
from the results expressed in, or implied by, these forward-looking statements.
General: End of development stage activities and commencement of business
operations
Cypost produces and markets computer privacy protection technologies and
provides Internet conductivity to business and residential customers. From the
Company's inception date until approximately mid-March of 1999, the Company was
considered a development stage enterprise. Since that time, the Company has (i)
publicly marketed 4 software encryption products under its "Navajo" trademark,
(ii) acquired two Internet service providers during the nine-month period ending
September 30, 1999, and (iii) acquired two additional ISPs since September 30,
1999.
Because the Company is an early stage in its business operations its
revenues are subject to wide variation from quarter to quarter. In addition, the
Company is electing to pursue a strategy of growing through acquisition. The
size and timing of acquisitions, both past acquisitions and possible future
acquisitions has been and will be affected by a number of factors which are hard
to predict and many of which are beyond the Company's control. Because of these
factors, the results of operations discussed below are unlikely to be an
accurate indication of future performance and should be viewed with considerable
caution.
Results of operations for the nine months ended September 30, 1999 and for the
three months ended September 30, 1999
Substantially all of the Company's revenue to date is accounted for by the
operations during the three months ended September 30, 1999. These revenues are
attributable virtually entirely to the operations of the two Internet service
providers which the Company acquired during the quarter ended June 30, 1999. The
Company generated net sales of approximately $185,670 for the three months ended
September 30 and approximately $197,068 for the nine months ended on that date.
It had no revenues for the corresponding periods of the prior year.
Direct costs of approximately $49,275 were incurred in the quarter ending
September 30, resulting in a gross margin of $136,395 (73%) for the three months
and $147,793 (75%) for the nine months. Losses of $423,505 for the three months
and $1,180,730 for the nine months reflect primarily the effect of a small
revenue base which was insufficient to cover administrative expenses, salaries
and benefits and development expenses. The Company hopes to achieve profitable
operations through a combination of adding additional ISPs through acquisition
and through the addition of value added services in its ISPs, as well as through
the addition of new products in its encryption-related operations.
The Company is in the process of completing evaluation of the assets
acquired from Hermes Net Solutions, and anticipates that during the fourth
quarter there will be a write-down of certain of
3
<PAGE>
those assets. It is unable to determine the amount of the write-down at the
present time, but anticipates that it will not exceed 5% of fourth quarter
revenues.
Liquidity and capital resources
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred net losses
of $423,505 for the three month period ending September 30, 1999 and net losses
of $1,180,730 for the nine month period ending September 30, 1999. These factors
indicate that the Company's continuation as a going concern is dependent upon
its ability to obtain adequate financing.
Although the Company's cash position as of September 30, 1999 had improved
to $2,414,094, as compared to $47,212 as of December 31, 1999 and $308,040 as of
June 30, 1999, the entire improvement in cash position was attributable to loans
made to the Company by Blue Heron Venture Fund, Ltd. These loans were made under
agreements with that lender under which the Company may draw up to $16 million
in unsecured loans. These loans bear interest at 8% per annum and are payable on
demand. They are convertible into Common Stock of the Company at prices ranging,
at present, from $1.00 to $4.00 per share. If all loans outstanding as of
September 30, 1999 were converted, the lender would be entitled to an aggregate
of 5 million shares of such Common Stock. The lender is free to withdraw this
line of credit at any time, and since the loans are payable on demand the
Company's ability to continue operations is dependent upon the willingness of
its lender to forebear from demanding payment. The Company believes that its
lender will continue to refrain from demanding payment for the immediately
foreseeable future, but it is under no obligation to do so. Should the Company's
lender demand payment the Company would be required to seek financing from other
sources. It does not believe that bank borrowing would be available to it under
present circumstances, and there can be no assurance that the necessary
financing could be obtained from other sources. Even if the necessary funding
were available, it might be available only on terms which management would not
find acceptable.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On June 11, 1999 the Canadian Postal Service filed a civil proceeding in
the Federal Court of Canada in which it sought injunctive relief against alleged
unlawful use of certain proprietary trademarks and tradenames which contain the
word "POST" belonging to the Canadian Postal Service. A summary judgement motion
filed on behalf was rejected on September 14, 1999, and on Octpber 18, 1999 the
Company filed its Statement of Defense and Counterclaim. Pretrial discovery is
currently being conducted at this time and no date for trial has been scheduled.
The Company is unable to predict at this time the outcome of this suit but does
not believe that the litigation would have a material impact on it, even if an
adverse decision were to be issued.
Item 2. Changes in Securities
4
<PAGE>
On June 30, 1999, the Company issued 6,750 shares of its common stock to
the former owners of InTouch.Internet, Inc. as partial payment for the Company's
acquisition of that company.
These shares were issued under the Section 4(2) exemption for transactions
by an issuer not involving a public offering under the Securities Act of 1933,
as amended (the "Securities Act").
On August 13, 1999, the Company issued 1,000,000 shares of its common
stock to Blue Heron Venture Fund Ltd ("Blue Heron"), as discussed in Item 3.,
pursuant to Regulation S under the Securities Act.
On September 29, 1999, the Company agreed to issue 146,000 shares of its
common stock to the former owners of NetRover, Inc. The shares issued in the Net
Rover transaction were disclosed in the 8-K Report filed by the Company on
October 2, 1999. The shares issued in the Net Rover acquisition were issued
pursuant to the Section 4(2) Securities Act statutory exception for transactions
which do not involve any public offering.
On November 4, the Company issued 3,000,000 shares of its common stock to
Blue Heron in consideration of which Blue Heron cancelled indebtedness owing
from the Company in the aggregate principal amount of $3,000,000 together with
interest accrued. These shares were issued directly to Blue Heron pursuant to
Regulation S under the Securities Act and no underwriting commissions, fees or
discounts were paid in connection therewith.
Item 3. Defaults Upon Senior Securities
On August 13, 1999 the Company issued One Million shares of its common
stock to Blue Heron Venture Fund Ltd. in exchange for Blue Heron's cancellation
of $1,000,000 of indebtedness (together with interest accrued thereon) owed by
the Company which had been evidenced by one or more demand promissory notes
bearing interest at 8% per annum. Such issuance of stock and the cancellation of
the indebtedness was preceded by a demand for payment in full from Blue Heron
which the Company was not able to meet. The shares were issued directly to Blue
Heron pursuant to the exemption afforded by Regulation S of the Securities Act
and no underwriting commissions, fees or discounts were paid in connection
therewith.
Item 4. Submission of Matters to a Vote of Security Holders.
On September 24, 1999 the Company increased its common share authorization
from 20 Million to 30 Million upon the filing of an Amended and Restated
Certificate of Incorporation with the Delaware Secretary of State. Shareholder
authorization for this was effected through the delivery of written consents on
September 14, 1999 in accordance with the Delaware General Corporation Law. The
Company had previously filed its Form 10-SB to register its common stock with
the Commission on July 16, 1999 and the registration became effective on
September 16, 1999 upon the expiration of the 60 day statutory period for
effectiveness provided for in Section 12(g) of the Securities and Exchange Act
of 1934, as amended. Prior to September 16, 1999, the Company was not a
reporting company within the meaning of the 1934 Act, and thus was not required
to deliver
5
<PAGE>
a proxy or information statement under the term of that Act and associated rules
and regulations.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
The Company filed a report on Form 8-K on September 17, 1999 regarding its
3:2 forward stock split.
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CyPost Corporation
(Registrant)
Date: December 9, 1999 By: /s/ Steven Berry
----------------------------
President and Treasurer
By: /s/ Carl Whitehead
----------------------------
Vice President and Secretary
Blue Heron Venture Fund, Ltd. Exhibit 10.1
Nassau, New Providence, The Bahamas
February 9th, 1999
Attention: Mr. Steve Berry
CyPost Corporation
Suite #101
260 West Esplanade
North Vancouver, B.C.
Re: Debt Financing for CyPost Corp.
Dear Steve,
Thank you so very much for the information and overview of CyPost. I am quite
sure that the results of your efforts will be of great benefit to all the
shareholders, including the fund.
Further to our discussions this week I wish to offer the following terms with
regards to the one million dollar U.S. funding:
1) CyPost will provide the lender with a promissory demand note
2) the note will bear interest at 8% payable on demand
3) CyPost will agree to the lender's demands to waive presentment of payment
4) the debt may be converted into equity, (at $1.00 U.S.) to 1,000,000 common
shares of CyPost Corporation upon demand of the lender. In doing so the
lender waives any interest owed on said notes
5) CyPost will provide a copy of a board resolution acknowledging the
promissory note and the conditions set forth
If these terms are agreeable to you then please sign below and return the
original to me. Upon receipt of this signed letter you may at any time, in
writing or by verbal request draw up to U.S. $1,000,000.00 from the Blue Heron
Venture Fund.
Signed,
Kelly Shane Montalban
Monet Management
Blue Heron Venture Fund
Steve Berry
CEO
CyPost Corporation
Blue Heron Venture Fund, Ltd. Exhibit 10.2
Nassau, New Providence, The Bahamas
March 17th, 1999
Attention: Mr. Steve Berry
CyPost Corporation
Suite #101
260 West Esplanade
North Vancouver, B.C.
Canada V7M3G7
Re: Debt Financing for CyPost Corp.
Dear Steve,
Having reviewed the material you provided and considering the direction you wish
to pursue, I have decided to agree to your request. I realize that this is
important to the company and that you needed an answer immediately. Therefore I
will agree to increase your funding for CyPost Corporation to a total of
$6,000,000.00.
Under the following terms the Blue Heron Venture Fund will offer an additional
five million dollars U.S. in funding:
1) CyPost will provide the lender with a promissory demand note
2) the note will bear interest at 8% payable on demand
3) CyPost will agree to the lender's demands to waive presentment of payment
4) the debt may be converted into equity at the following prices:
A) U.S. $3,000,000.00 @ $1.50 to 2,000,000 CyPost Common shares
B) U.S. $2,000,000.00 @ $2.00 to 1,000,000 CyPost Common shares for a
total of 5,000,000 common shares of CyPost Corporation upon demand
of the lender. In doing so the lender waives any interest owed on
said notes
5) CyPost will provide a copy of a board resolution acknowledging the
promissory note and the conditions set forth
If these terms are agreeable to you then please sign below and return the
original to me. Upon receipt of this signed letter you may at any time, in
writing or by verbal request draw upon an additional U.S. $5,000,000.00 from the
Blue Heron Venture Fund in amounts you deem necessary.
Signed,
Kelly Shane Montalban
Monet Management
Blue Heron Venture Fund
Steve Berry
CEO
CyPost Corporation
<PAGE>
Blue Heron Venture Fund, Ltd.
Nassau, New Providence, The Bahamas
July 12th, 1999
Attention: Mr. Steve Berry
CyPost Corporation
Suite #101
260 West Esplanade
North Vancouver, B.C.
Canada V7M3G7
Re: Debt Financing for CyPost Corp.
Dear Steve,
I realize that this is an important period of development for the company. I'm
sure you would agree that the risks are even greater for the fund at this stage.
Yet I am pleased to see that you continue to move forward in a timely an
aggressive manner. I believe we would be wrong not to proceed with additional
funding for CyPost Corporation. Your corporate developments are on track and you
have shown me new view to the companies future
Under the following terms the Blue Heron Venture Fund will offer an additional
ten million dollars U.S. in funding for a total of 16 million dollars:
1) CyPost will provide the lender with a promissory demand note
2) the note will bear interest at 8% payable on demand
3) CyPost will agree to the lender's demands to waive presentment of payment
4) the debt may be converted into equity at the following prices: U.S.
$10,000,000.00@ $4.00 to 2,500,000 CyPost Common shares upon demand of the
lender. In doing so the lender waives any interest owed on said notes
5) CyPost will provide a copy of a board resolution acknowledging the
promissory note and the conditions set forth
6) the Blue Heron Venture Fund may withdraw from this commitment at any time,
having loan some or none of the ten million U.S. dollars
If these terms are agreeable to you then please sign below and return the
original to me. Upon receipt of this signed letter you may at any time, in
writing or by verbal request draw upon an additional U.S. $10,000,000.00 from
the Blue Heron Venture Fund in amounts you deem necessary.
Signed,
Kelly Shane Montalban
Monet Management
Blue Heron Venture Fund
Steve Berry
CEO
CyPost Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,414,094
<SECURITIES> 0
<RECEIVABLES> 121,019
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,584,257
<PP&E> 153,630
<DEPRECIATION> 5,474
<TOTAL-ASSETS> 3,580,825
<CURRENT-LIABILITIES> 3,076,389
<BONDS> 0
0
0
<COMMON> (11,240)
<OTHER-SE> (493,196)
<TOTAL-LIABILITY-AND-EQUITY> 3,580,825
<SALES> 0
<TOTAL-REVENUES> 185,670
<CGS> 49,275
<TOTAL-COSTS> 49,275
<OTHER-EXPENSES> 559,900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (423,505)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (423,505)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
