STRATABASE.COM
800,000 Units
(Each unit consists of 1 share of common stock, 1 Class A redeemable
purchase warrant, 1 Class B redeemable purchase warrant and 1
Class C redeemable purchase warrant.)
We are offering a minimum of 400,000 units and a maximum of 800,000
units.
You may exercise the Class A, B and C warrants for a 6 month,
12 month and 18 month period respectively, commencing on
the date of this prospectus.
You are entitled to purchase: one share of common stock at
$1.00 per share for each Class A warrant exercised, one share
of common stock at $3.00 per share for each Class B warrant
exercised; and one share of common stock at $5.00 per share
for each Class C warrant exercised.
No public Market exists for the units, common stock and
redeemable warrants.
See "Risk Factors" beginning on p. 5 for a Discussion of facts you
should consider before investing.
Neither the United States Securities and Exchange Commission nor
any state securities commission, including the British Columbia
Securities Commission, has approved or disapproved these securities
or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
<TABLE>
<S> <C> <C> <C>
Per unit Total of minimum Total of
maximum
offering offering
Public offering price $.50 $200,000 $400,000
</TABLE>
We will terminate the offering period on February 7, 2000
unless we extend it for an additional 90 days to May 7, 2000.
We may terminate the offering earlier if the 800,000 units are
sold before the end of the offering period or if we decide to
terminate it earlier.
We are offering these units directly to you without the
assistance of an underwriter. We will receive all the proceeds
from the offering, less offering expenses.
We will deposit all funds received from investors in a non-
interest bearing escrow account. The escrow agent will release
the funds to us only if we collect at least $200,000 during the
offering period.
If we do not sell at least 400,000 units before expiration of the
offering period, we will fully refund all funds received from you
without interest.
The date of this Prospectus is November 10, 1999.
TABLE OF CONTENTS
Prospectus Summary . . . . . . . . . .3
Risk Factors . . . . . . . . . . . . .5
How You Can Get More Information About Us15
Use of Proceeds. . . . . . . . . . . 15
Dividend Policy. . . . . . . . . . . 16
Capitalization . . . . . . . . . . . 17
Dilution . . . . . . . . . . . . . . 18
Business . . . . . . . . . . . . . . 19
Management's Discussion And Analysis of Financial
Condition And Results of Operations25
Management . . . . . . . . . . . . . 31
Indemnification. . . . . . . . . . . 34
Certain Transactions 32
Principal Shareholders . . . . . . . 33
Description of Units . . . . . . . . 33
Plan of Distribution . . . . . . . . 36
Legal Proceedings. . . . . . . . . . 38
Legal Opinions . . . . . . . . . . . 38
Experts. . . . . . . . . . . . . . . 38
Financial Statements . . . . . . .40-48
Prospectus Summary
You should carefully read the entire prospectus including the "Risk
Factors" section and the financial statement including the notes.
Stratabase.com
We are a development stage corporation, focusing on providing
direct marketing information and online advertising for corporations
seeking to market their goods and services through the internet. We
are currently compiling a list from internet users for whom we provide
free services such as: internet based news, newsletters and video. In
return for the free services, we will attempt to obtain the consent of
internet users to receive corporate advertisements. Their personal
information (including name and e-mail address) will become part of
our user database. In this connection, we recently engaged a leading
distributor of news to provide some of the news content and began
the creation of a free news web site for internet users. Finally, we
have begun development of our direct marketing web site from which
advertisers will engage in on-line advertising.
We believe that, by providing the free services to internet users in
return for personal information about their interests and
demographics, we can develop large databases of internet users
which will have great value to advertisers interested in conducting
direct marketing campaigns.
Our focus will also be on providing internet related services to small
businesses by designing, maintaining and hosting websites, video
taping and editing information presented at the website. As part of
these services, we have established a mobile production studio
devoted to producing videos for the website which we design and
maintain on behalf of these small businesses.
We intend to translate our activities into revenues by: (1) selling our
video production services to potential clients; (2) securing clients for
our existing web design, maintenance and hosting services; and (3)
selling advertising space to advertisers interested in conducting
direct marketing campaigns using our databases.
Stratabase was incorporated under the laws of the State of Nevada on
November 18, 1998. Our offices are located at 34314 Marshall Road,
Suite 203 Abbotsford, B.C. V2S1L2, Canada. The telephone number is
(604) 504-5811.
The Offering
Units 800,000 units (maximum
offering)
400,000 Units (minimum
offering)
Common Stock to be outstanding
after this Offering 6,343,772 shares
(maximum
offering)
5,943,772 shares
(minimum
offering)
Use of Proceeds
(maximum or minimum offering) working capital and other
general corporate
purposes
including advertising
Each unit contains one share of common stock, one Class A
redeemable common stock purchase warrant which entitles the holder
to purchase one share of Common stock at a price of $1.00 per share,
one Class B redeemable common stock purchase warrant which
entitles the holder to purchase one share of Common stock at a price
of $3.00 per share and one Class C redeemable common stock
purchase warrant which entitles the holder to purchase one share of
common stock at a price of $5.00 per share. See "Description of
Units".
We are offering the units directly to the public without using an
underwriter. The offering is made on a "best efforts all or none" basis
with respect to the first 400,000 units and on a "best efforts only "
basis with respect to the remaining 400,000 units. Investors must
make full payment for their purchases by check made payable to
"Securities Transfer Corporation as escrow agent for
Stratabase.com".
Summary of Financial Data
You should read the following financial data in conjunction with
"Management's Discussion and Analysis of Financial Conditions
and Results of Operations" and the financial statements and notes to
the financial statements found elsewhere in this prospectus. We have
derived the summary of operating data from inception to June 30,
1999 and the summary of balance sheet for the same period from our
audited financial statements found elsewhere in this prospectus. The
pro-forma summary of balance sheet data takes into account the
minimum 400,000 units offered in this offering at an initial offering
price of $.50 per unit, and the application of the net proceeds that we
will receive, less expenses of the offering. To arrive at the net loss per
share of common stock in the summary of operating data, we used the
weighted average of the shares outstanding during the period from
inception to June 30, 1999. To compute the book value per share of
common stock found in the summary of balance sheet data, we used
5,943,772 shares as the amount outstanding.
<TABLE>
<CAPTION>
From Inception
(November 18, 1999) Through June 30, 1999
Summary of Operating Data:
Revenues -0-
Net Loss $67,512
Net Loss per share of common stock $0.012
June 30, 1999 Pro Forma
Summary of Balance Sheet Data: (audited) (Unaudited)
<S> <C> <C>
Working Capital $154,423.00 $314,423.00
Property and Equipment 14,102.00 14,102.00
Other Assets 572.00 572.00
Total Liabilities 6,797.00 6,797.00
Deficit Accumulated During
Development Stage (67,512. 00) (67,512.00)
Shareholders' Equity 169,097.00 329,097.00
Shareholders' Equity Per Share of
common stock .03 .06
</TABLE>
RISK FACTORS
We have limited resources, have sustained losses since our inception
and expect to continue to do so.
As of June 30, 1999, we had working capital of $154,423 and incurred
losses totaling approximately $67,512. We are dependent upon the
proceeds of this offering to implement our business plan. Since we
are in the developmental stage and have no share of the internet
market, we may incur losses for a long time.
We have a short operating history upon which you can judge our
prospects.
We are a recently organized company and have no significant
operating history or operating revenues. In order to be successful, we
must attract a significant number of users to the information and
content delivered through our website and generate significant
advertising and e-commerce revenues.
Specifically, as an early stage entity in the rapidly evolving market for
internet services, we will face numerous risks and uncertainties
including our ability to:
anticipate and adapt to changing internet technologies;
attract a substantial number of internet users to the content
and information delivered through Stratabase;
generate significant advertising and e-commerce revenues;
develop an advertising sales force;
implement sales and marketing initiatives;
offer compelling content;
attract, retain and motivate qualified personnel;
respond and adjust to actions taken by competitors;
build an operations and technical infrastructure to
effectively manage growth; and
integrate new technologies and services.
We have a major task ahead of us and may not be successful in
achieving our goals.
Since we are new and small, we face significant competition from
established internet and telephone service providers and others.
The internet industry is, and you can expect it to remain, highly
competitive for the following reasons, among others:
there are no substantial barriers to entry into this arena;
the number of businesses competing for users;
the spending of internet advertisers and e-commerce
marketers has increased significantly; and
industry consolidation.
We expect that this increased competition will result in:
less usage of our services;
price reductions for advertising inventory; and
reduced margins or loss of market share,
If any of these factors occur, they would obviously have a negative
effect on our business, results of operations and financial condition.
Our competitors include:
internet retrieval companies, such as Nexis
search engines and other internet "portal" companies such
as Excite and Yahoo;
online content websites such as CNet and ZDNet;
online community websites such as iVillage and
Miningco.com;
online personal homepage services such as Geocities and
Theglobe.com;
publishers, distributors of television, radio and print such as
CBS, Disney, NBC and Time-Warner;
general purpose consumer online services such as America
Online and Microsoft Network; and
internet service providers who maintain web services such
as AT&T Worldnet and Earthlink.
Many of our existing competitors, as well as a number of potential
new competitors, have longer operating histories, greater name
recognition, larger customer bases and significantly greater financial,
technical and marketing resources than we do. This may allow them
to devote greater resources than we can to the development and
promotion of their services.
These competitors may also engage in more extensive research and
development, undertake more far-reaching marketing campaigns,
adopt more aggressive pricing policies and make more attractive
offers to existing and potential employees, distribution partners, and
advertisers and e-commerce partners. Our competitors may develop
services that are equal or superior to Stratabase or that achieve
greater market acceptance than ours.
In addition, we will compete with television, radio, cable and print (i.e.
the traditional advertising media) for a share of advertisers' total
advertising budgets. Advertisers may perceive the internet or our
services to be a limited or ineffective advertising medium, and they
may be reluctant to devote a significant portion of their advertising
budgets to internet advertising, in general, or to advertise with us, in
particular.
We need to grow and manage our growth to become profitable.
If we do not grow, we will probably not become profitable. However,
if we grow, develop and increase the size of our business, the
demands on our operational systems will also increase. We will be
required to further develop our operational and financial systems and
managerial controls and procedures. We will also then need to
expand, train and manage a team of staff. We do not currently have
the resources for this type of expansion and may not be successful in
our expansion efforts. Accordingly, we will limit or even entirely
negate our chances to be profitable if we do not grow or if we cannot
manage our growth.
We are understaffed and we may not be able to accomplish our goals
unless we get additional help.
We are currently understaffed and have only two employees-our sole
officers, Trevor Newton and Fred Coombes. If we raise the money
from the offering, our plan is to retain the services of independent
contractors and/or outside consultants, for the foreseeable future,
rather than to hire additional employees. We may not be able to
attract qualified individuals to join us. Because Mr. Coombes will
only work part-time for us, Mr. Newton is our only full time employee.
However, Mr. Coombes has assured us that he will give us enough of
his time as he feels is necessary. Obviously, as the only full-time
employee, Mr. Newton will have so many responsibilities that we can
expect that his and our performance may suffer and effect our
chances of success.
There are conflicts between our business and Mr. Coombes.
Since Mr. Coombes is active in other unrelated businesses, he will
not be able to devote his full-time to our affairs. He plans to continue
these activities, which may cause conflicts of interest with our
business in terms of time and business opportunities. These conflicts
may not be resolved in our favor. Our business may be hurt if these
conflicts are not resolved in our favor.
If we lose the services of Mr. Newton and Mr. Coombes our chances
of success will be diminished.
We are heavily dependent on the efforts of our limited staff,
especially our Chairman of the Board, President, CEO Treasurer and
Secretary, Mr. Newton. Except for Mr. Newton, the other officer (Mr.
Coombes) and Director (Mr. John Tarves) do not have any significant
experience in the internet industry. The loss of the services of any of
these individuals, especially Mr. Newton, would be devastating to
our plans and significantly diminish our chances of success.
Currently, we do not have any employment agreements with any of
our officers and other personnel and we do not have key man
insurance coverage on Mr. Newton or the others.
If the growth of the internet slows down, we will not be as profitable
as we currently project.
.
Our future success is substantially dependent on the continued
growth in the use of the internet. The internet is relatively new and is
rapidly changing. Our business would be adversely affected if
internet usage does not continue to grow. This usage may be
inhibited for a number of reasons, such as the internet infrastructure
not being able to support the demands placed on it, or its
performance and reliability may decline as usage grows. Similarly, an
adverse affect may be caused by privacy concerns, or by security
and authentication concerns with respect to transmission over the
internet of confidential information, such as credit card numbers, and
attempts by unauthorized computer users to penetrate online security
systems.
If the internet industry slows down, we will experience a lower than
expected number of internet users using our services. This slow
down would in turn decrease the attractiveness of our direct
marketing of products to potential advertisers and result in a
reduction in revenues derived from advertising. In addition, an
internet industry slow down would result in a reduction in the number
of small businesses requiring internet services and therefore reduce
the revenues we receive by providing internet services to small
businesses.
In order to keep up with technological advances, we may have to
incur additional costs to modify services or infrastructure.
Our market is characterized by rapidly changing technologies,
evolving industry standards, frequent new service introductions and
changing customer demands. To be successful, we must adapt to a
rapidly evolving market by continually enhancing our infrastructure,
content, information and services to fulfill our users' needs. We could
incur additional costs if it becomes necessary to modify services or
infrastructure in order to adapt to these or other changes affecting
providers of internet services. Our business, results of operations
and financial condition could be materially adversely affected if we
incur significant costs to adapt, or if we cannot adapt, to these
changes.
Because the internet is relatively new and is not established as an
advertising medium, actual advertising revenues may be lower than
our projections indicate.
In the future, we expect to generate a significant amount of our
revenues from internet advertising. The internet advertising market is
new and rapidly changing. We are not able to gauge our
effectiveness as compared to traditional advertising media. Most of
our potential advertising and e-commerce partners have little or no
experience using the internet for advertising purposes and they have
allocated only a limited portion of their advertising budgets to
internet advertising. The adoption of internet advertising, particularly
by those entities that have historically relied upon traditional media
for advertising, requires the acceptance of a new way of conducting
business, exchanging information and advertising products and
services.
Advertisers who have traditionally relied upon other advertising
media may be reluctant to advertise on the internet. Such customers
may find internet advertising to be less effective than traditional
advertising media for promoting their products and services. Widely
accepted standards have not been set by the industry to measure the
effectiveness of internet advertising or to measure the demographics
of the our user base. If such standards do not develop, advertisers
may not choose to advertise on the internet. Furthermore, advertisers
and e-commerce marketers may choose not to advertise with us or
only be willing to pay less for our advertising if they do not perceive
our audience(s) to be valuable. This choice by advertisers could have
a material adverse effect on our business, results of operations, and
financial condition. In addition, standards for advertising rates on the
internet have not been determined. It is difficult to predict which, if
any, pricing models for internet advertising will emerge. Accordingly,
it is difficult for us to project future advertising rates and revenues, if
any.
Finally, "filter" software programs that limit or prevent advertising
from being delivered to an internet user's computer are available.
Widespread use of such software could adversely effect the
commercial viability of internet advertising.
The impact of governmental regulation may increase our costs and
impede our growth.
There is an increasing number of laws and regulations pertaining to
the internet. In addition, a number of legislative and regulatory
proposals are under consideration by federal, state, local and foreign
governments and agencies. Laws or regulations may be adopted with
respect to:
the internet relating to liability for information retrieved from
or transmitted over the internet;
online content regulation;
user privacy;
taxation; and
quality of products and services.
Moreover, the applicability to the internet of existing laws governing
issues such as intellectual property ownership and infringement,
copyright, trademark, trade secret, obscenity, libel, employment and
personal privacy is uncertain and developing. Any new legislation or
regulation, or the application or interpretation of existing laws, may
decrease the growth in the use of the internet, which could in turn
decrease the demand for our services, increase our cost of doing
business or otherwise have a material adverse effect on our business,
results of operations and financial condition.
We may be liable for information retrieved from our websites and the
internet.
Users may access contents on our websites or the websites of our
future partners. Those contents may then be downloaded by users
and transmitted to others over the internet. This users transmittal of
contents found on our websites could result in claims against us
based upon a variety of theories, including defamation, obscenity,
negligence, copyright or trademark infringement or other theories
based upon the nature, publication and distribution of this content.
These types of claims have been brought, sometimes successfully,
against providers of internet services in the past. We could also be
exposed to liability with respect to third party content that may be
posted by users in chat rooms or message boards. It is also possible
that if any information, including information deemed to constitute
professional advice such as legal, medical, financial, or investment
advice, provided on Stratabase.com contains errors or false or
misleading information, third parties could make claims against us for
losses incurred in reliance upon such information. In addition, our
websites contains annotated links to other websites. As a result, we
may be subject to claims alleging that, by directly or indirectly
providing links to other websites, we are liable for copyright or
trademark infringement or wrongful actions of third parties through
their respective websites. While we will attempt to reduce our
exposure to potential liability, the enforceability and effectiveness of
such measures are uncertain. Even to the extent that such claims do
not result in liability to us, we could incur significant costs in
investigating and defending against such claims. Potential liability for
information disseminated through us could lead us to implement
measures to reduce our exposure to such liability, which may require
the expenditure of substantial resources and limit the attractiveness
of our service to users.
If we do not develop an effective sales force, we may not generate
significant revenues or become profitable.
We currently have two employees and no sales team. In order to
grow, we must develop an internal advertising sales team. Our ability
to do so successfully involves a number of factors. They include:
the competition in hiring and retaining advertising sales
personnel,
our ability to integrate and motivate advertising sales
personnel and
the length of time, it takes for new advertising sales
personnel to become effective.
Our failure to develop and maintain an effective advertising sales
team would certainly have a negative effect upon our business
prospects.
Our services are susceptible to disruptive problems, failures and
damages to our systems.
The technical performance of our network, software and hardware
systems is critical to our business and reputation, and to our ability
to attract users, advertisers and e-commerce partners. Any network,
software or hardware systems failure, including computer viruses,
electronic break-ins or other similar disruptions and failure, that
causes an interruption in our service or a decrease in our
responsiveness could result in reduced usage and reduced revenue.
These failures could negatively effect our reputation and operations.
We must be able to accommodate a high volume of traffic and may
experience slower response times for a variety of reasons. An
increase in volume of users accessing Stratabase.com could lead to
systems failures or slower response times and ultimately reduce
advertising revenues. Our users may become dissatisfied by any
system failure that interrupts our ability to provide services to them.
In addition, our users will depend on third parties such as internet
service providers, online service providers, and other website
operators for access to Stratabase.com. Each of these providers has
experienced significant outages in the past, and could experience
outages, delays and other difficulties due to system failures unrelated
to our systems in the future. Moreover, the internet infrastructure, in
general, may not be able to support continued growth in its use.
These are factors, events and occurrences over which we have no
control. Yet, they can have a negative impact on our business.
If we or third party vendors are not Year 2000 ready by January 1,
2000, we may have to cease operations to correct the problem.
The Year 2000 issue refers to the potential failures that computer
systems may experience as a result of the date change from 1999 to
2000. Virtually every computer operation will be affected in some way
by the Year 2000 issue. It is uncertain what impact the Year 2000 issue
will have on the internet and the world wide web
We have assessed the Year 2000 readiness of our software. We have
also assessed third party vendors, licensors, and providers of
hardware, software and services for their Year 2000 readiness. We
have now begun our evaluation of the state of readiness, potential
risks and costs, and a determination as to whether a contingency plan
is necessary. If we and/or our third party vendors are not timely
compliant, we may have to cease operations to correct the problems.
The cost of such correction could be very significant.
Any revenues received in Canadian dollars would decrease in value
because of the unfavorable currency exchange rate.
Although we are a Nevada corporation, our operations are located in
Canada. Accordingly, most of our revenues may be in Canadian
dollars. In recent years, the currency exchange rate of the Canadian
dollar into the US dollar has steadily dropped. This trend is likely to
continue. The continued lowering of the value of the Canadian dollar
vis a vis the US dollar, may have a materially adverse effect on our
business, results of operations and financial condition.
Since no one is obligated to purchase the units, we cannot be certain
that even the minimum offering will be sold.
No person or entity, including us or our officers and directors, has
committed to purchase any of the units. So there is no assurance that
we will be successful in selling the units. The offering period will
terminate on February 7, 2000 unless we extend it for an additional 90
days to May 7, 2000. We can terminate the offering earlier if the
800,000 units are sold before the end of the offering period, as
extended, or if we decide to terminate it earlier. We are making this
offer on a "best efforts, all or none" basis for the first 400,000 units
and on a "best effort" basis only for the remaining 400,000 units. Your
moneys will be deposited in an escrow account. If we do not sell at
least 400,000 units by February 7, 2000 or by the extended date of
May 7, 2000, your moneys will be refunded without interest. In that
case, you may not have use of your moneys for up to 180 days. If we
sell only the minimum offering of 400,000 units, we will receive net
proceeds of approximately $160,000. If we receive only that amount,
or insignificantly more, it is likely that we will need further financing
in the near future. We may not be able to obtain this financing at
reasonable terms or even at all.
Since we are attempting to sell the units without the aid of an
underwriter, our chances of success are reduced and you do not have
an underwriter's expertise to evaluate us.
We are not experienced in the business of selling securities. We may,
therefore, not be able to complete the minimum offering. In addition to
providing selling expertise, an underwriter is also required to conduct
a "due diligence" evaluation of any company whose securities it
underwrites. In this situation, there is no underwriter, and no one is
providing due diligence evaluations on your behalf.
Management and principal shareholders have complete control over
our company and investors may not have an effective voice in the
management of our company.
If we complete the minimum offering, our current management and
principal shareholders will own approximately 93.3% of the
outstanding shares of our common stock. Similarly, if we complete the
maximum offering, they will own approximately 87.4% of the
outstanding shares of our common stock. Accordingly, in either case,
they will be able to control the management policies and conduct of
our business.
Shares eligible for sale after the offering is completed could
negatively affect our stock prices.
The prevailing market price of our units, common stock and warrants
after we complete the offering could be adversely affected by sales of
common stock by the holders of our common stock already
outstanding, or the perception that these sales may occur.
All of the 5,553,772 shares of our outstanding common stock are
"restricted securities", and, after being held for a period of one year,
may be sold in compliance with Rule 144 of the Securities Act. Rule
144 provides, in essence, that a person after holding "restricted
securities" for a period of one (1) year, may sell an amount that does
not exceed:
more than one percent of the Company's shares then
outstanding within any three month period, (i.e. one percent
would equal 55,537 shares as of the date of this Prospectus,
59,537 shares immediately after the successful completion of
the minimum offering, and 63,537 shares immediately after
the successful completion of the maximum offering. (This
one percent calculation does not include any exercise of the
redeemable purchase warrants offered by us); or
the average weekly trading volume during the four (4) weeks
before any sale under Rule 144.
Further, under Rule 144, the amount of "restricted securities" which a
person, who is not an affiliate of our company, may sell is not limited
when his or her shares are held for over two (2) years.
If the sale of our shares under Rule 144 has a depressive effect upon
the market price of our securities, we could have difficulty in raising
additional capital through the issuance of more securities. Finally, the
exercise of the warrants, may also have a depressive effect upon the
market price of the our common stock, should one exist.
You may not be able to sell our securities unless a public market
develops for them.
Prior to this offering, there has been no public market for any of our
securities and we are not certain that an active trading market for the
securities offered will develop or be sustained after this offering. We
anticipate that, after we complete the offering, the units, common
stock and redeemable purchase warrants will be eligible for listing on
the NASD Over-the-Counter Electronic Bulletin Board. If for any
reason, however, our securities are not eligible for continued listing
or a public trading market does not develop, you may have difficulty
selling your securities should you desire to do so. If we are unable to
satisfy the requirements for quotation on the Bulletin Board, trading,
if any, in our securities would be conducted in the over-the-counter
market in what are commonly referred to as "pink sheets". As a result,
you may find it more difficult to dispose of, or to obtain accurate
quotations as to the price of our securities.
We determined our own unit prices and the exercise prices for the
warrants.
On our own, we determined the initial public offering price of the
units, as well as the exercise price of the warrants using a number of
factors. We considered our financial condition and prospects, market
prices of similar securities of comparable publicly traded companies,
certain financial and operating information of companies engaged in
activities similar to ours and the general conditions of the securities
market. They are not predictive of the market price for the units,
common stock or the redeemable purchase warrants in the trading
market after this offering. You should be aware that the market price
of the securities may decline below the initial public offering price.
The stock market has experienced extreme price and volume
fluctuations-- especially the securities of internet related companies.
Our securities are referred to as "penny stocks" which are not
perceived favorably in the market place.
The SEC has adopted regulations which generally define a "penny
stock" to be any equity security that has a market price of less than
$5.00 per share or an exercise price of less than $5.00 per share,
subject to certain exceptions. Our securities may become subject to
rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally those with
a net worth in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 together with their spouse). For transactions
covered by these rules, the broker-dealer must:
make a special suitability determination for the purchase of
such securities;
have received the purchaser's written consent to the
transaction prior to the purchase;
deliver to the purchaser, prior to the transaction, a
disclosure schedule prepared by the Securities and
Exchange Commission relating to the penny stock market;
disclose to the purchaser the commission payable to the
broker-dealer and the registered representative;
provide the purchaser with current quotations for the
securities;
if the broker-dealer is the sole market maker, he must
disclose that fact to the purchaser and his presumed control
over the market; and
provide the purchaser with monthly statements disclosing
recent price information for the penny stock held in the
account and information on the limited market in penny
stocks.
Consequently, the "penny stock" rules may restrict the ability of
broker-dealers to sell our securities in the secondary market, if one is
formed.
Our management has broad discretion over the use of the proceeds
raised in the offering.
We intend to use all of the net proceeds of the offering (either
minimum or maximum) for working capital and general corporate
purposes. Accordingly, our management will have broad discretion
as to the application of such proceeds. In this regard, a portion of the
funds allocated to working capital will be utilized to pay the salaries
of our officers and you do not know if, when or how often their
salaries will be increased. We do not plan to enter into employment
contracts with our officers at this time. Accordingly, their salary
increases, if any, cannot be predicted.
You cannot exercise the warrants if we do not have a current
prospectus.
The warrants are exercisable only if a current prospectus is then in
effect, and only if such shares are qualified for sale under applicable
state securities laws of the states in which the redeemable purchase
warrant holders reside. As of the date of this prospectus, our units,
common stock and warrants have been qualified in the State of New
York only. Accordingly, residents of only New York (or non-U.S.
residents) can currently exercise warrants.
Our redemption of the warrants may force holders to make an
investment decision before they are ready.
Commencing on the date of this Prospectus, the warrants are subject
to redemption. If we decide to redeem the warrants, holders will lose
their rights to purchase shares of common stock issuable upon
exercise unless the warrants are exercised before they are redeemed.
Holders may be forced to make an investment decision regarding their
warrants before they are ready to do so if we send a notice of
redemption. Although it is not our intention to do so, we can send
the notice when our prospectus is not current. Holders would then
not be able to exercise the warrants even if they desired to do so.
HOW YOU CAN GET MORE INFORMATION ABOUT US.
Stratabase does not presently file reports or other information with
the SEC. However, following completion of the minimum offering, we
will distribute to stockholders at fiscal year end on each December
31st, annual reports containing financial statements that have been
audited and reported upon, with an opinion expressed by an
independent public accountant and other information as may be
required by law. In this regard, upon the completion of the minimum
offering herein, we will be subject to the informational requirements of
the Securities Exchange Act and are required to file reports, proxy
statements and other information with the SEC.
The reports, proxy statements and other information that we will file
will be available for inspection and copying (for a specified fee) at the
SEC's public reference room located at Room 1024, 450 Fifth Street,
NW, Washington, D.C. 20549, and the public reference facilities in the
SEC's Northeast Regional Office, 7 World Trade Center, New York,
New York 10048; and its Midwest Regional Office, Citicorp Center,
500 West Madison Street, Suite 2400, Chicago, Illinois 60661. Copies
of such material may also be obtained at prescribed rates by writing
to the SEC's Public Reference Section, 450 Fifth Street, NW,
Washington, D.C. 20549 upon payment of the fees prescribed by the
SEC. Please call the SEC at 1-800-SEC-0330 for more information on
the operation of its Public reference Rooms. The SEC also maintains a
Web site that contains reports, proxy and information statements and
other materials that are filed through the SEC's Electronic Data
Gathering, Analysis, and Retrieval (EDGAR) system. This Web Site
can be accessed at http: /www.sec.gov.
USE OF PROCEEDS
After deduction of the estimated expenses of the issuance and
distribution of the
securities we will receive net proceeds of $160,000 if we are
successful in completing the minimum offering, and $360,000 if we are
successful in completing the maximum offering. If we are successful
in completing either the minimum or maximum offering, we intend to
use the net proceeds thereof for working capital and other general
corporate purposes, including advertising. We may also use a portion
of the proceeds for strategic alliances and acquisitions. We have not
yet determined the amount of net proceeds to be used specifically for
each of these purposes. Therefore, our management will have
significant flexibility in applying the net proceeds of either the
minimum or maximum offering.
We anticipate applying the proceeds of this offering as soon as they
are available (i.e. completion of the minimum offering) and continuing
over the following 12 months. We believe that the proceeds of the
maximum offering will be sufficient to satisfy our requirements over
this period without the necessity of obtaining additional funds.
However, we believe that if only the minimum offering is completed,
additional funds may be required which may not be available to us,
or, if available, not on reasonable terms. In addition, if we experience a
change in circumstances or business conditions we may need
additional financing even if the maximum offering is completed.
Finally, any proceeds which we receive from the exercise of the
warrants shall be applied to working capital.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common
stock nor do we anticipate paying any in the foreseeable future.
Furthermore, we expect to retain any future earnings to finance our
operations and expansion. The payment of cash dividends in the
future will be at the discretion of our Board of Directors and will
depend upon our earnings levels, capital requirements, any restrictive
loan covenants and other factors the Board considers relevant.
CAPITALIZATION
We are currently authorized to issue 25,000,000 shares of common
stock. As of today, we have issued, 5,543,772, shares of common
stock, for a total capital contribution of $236,609. The following table
shows the number of issued and outstanding shares of common
stock as of the date of this prospectus and which will be outstanding
in the event of the successful completion of both the minimum and
maximum offerings:
<TABLE>
<S> <C>
Shares Outstanding 5,543,772
Shares to be outstanding
in the event of the successful
completion of the minimum
offering- 5,943,772
Shares to be outstanding
in the event of the successful
completion of the maximum
offering 6,343,772
</TABLE>
This table does not reflect the effect that the possible exercise of the
warrants will have. Each share of our common stock has equal,
noncumulative voting rights and participates equally in dividends, if
any. The common stock has no sinking fund provisions applicable to
it. The shares are fully paid for and nonassessable when issued.
Except for the warrants offered herein, there are no outstanding
options, warrants, or rights to purchase any of the securities of the
Company and we do not plan to issue any.
The following table sets forth our capitalization at June 30, 1999, on
an actual (audited) basis and on a pro forma basis (unaudited) after
giving effect to the minimum offering herein (assuming no exercise of
the warrants). This table should be read in conjunction with our
financial statements and notes, as well as "Summary Financial Data",
appearing elsewhere in this Prospectus:
<TABLE>
<CAPTION>
June 30, 1999
Actual Pro Forma
(audited) (unaudited)
<S> <C> <C>
Debt:
Short-term debt $3,828 $3,828
Long-term debt -0- -0-
Stockholders's Equity:
common stock $5,544 $5,944
Additional Paid-in Capital 231,065 390,665
Deficit Accumulated During
Development Stage (67,512) (67,512)
Total Stockholders' Equity $169,097 $329,097
Total Capitalization $172,925 $332,925
</TABLE>
DILUTION
Our net tangible book value as of June 30, 1999 (based upon the
5,543,772 shares outstanding) was approximately $.03 per share of
common stock. Net tangible book value per share is equal to our total
tangible assets less our total liabilities, divided by the total number of
outstanding shares of common stock at June 30, 1999. If we assume
the sale of the minimum number of units offered, 400,000, the pro
forma net tangible book value per share as of June 30, 1999 would be
approximately $.06. This would result in an immediate dilution to new
shareholders (i.e. the difference between the purchase price of the
units, assuming no value assigned to the warrants, and the net
tangible book value per share after the minimum offering) of $.44 per
share, or approximately 88% of the purchase price, and an increase in
the net tangible book value to the present shareholders, at no
additional cost to them, of approximately $.03 per share.
Alternatively, if we assume the sale of the maximum number of units
being offered, 800,000, the pro forma net tangible book value per
share as of June 30, 1999 would be approximately $529,097 This would
result in an immediate dilution to new shareholders of $.42 per share,
or approximately 84% of the purchase price, and an increase in the net
tangible book value to the present shareholders, at no additional cost
to them, of approximately $.05 per share. The following table
illustrates this per share dilution under both the minimum and
maximum offerings, assuming receipt of the net proceeds of both and
no value being assigned to the warrants:
<TABLE>
<CAPTION>
Minimum Maximum
Offering Offering
<S> <C> <C>
Public offering price per share $.50 $.50
Net tangible book value per
share as of June 30, 1999 $.03 $.03
Increase per share attributable
to new shareholders $.03 $.05
Pro forma net tangible book value
per share as of June 30, 1999
after offering $.06 $.08
Dilution per share to
new shareholders $.44 $.42
</TABLE>
The following tables summarize, as of June 30, 1999, the number of
our shares previously purchased, the total consideration and the
average price per share paid by existing stockholders and to be paid
by purchasers in the minimum and maximum offering, assuming that
no value is attributed to the warrants:
<TABLE>
<CAPTION>
Minimum Offering (400,000 Units)
% of Total
Avg.
Total % of Capital Effective Price
Shares Total Cash Cash Per
Purchased Shares Contrib. Contrib. Share
<S> <C> <C> <C> <C> <C>
New Share-
holders(l) 400,000 06.7% $200,000 45.8% $.50
Old Share
holders 5,543,772 93.3% 236,609 54.2% $.04
Total 5,943,772 100.0% $436,609 100.0% $.07
Maximum Offering (800,000 Units)
New Share
holders 800,000 12.6% $400,000 62.8% $.50
Old Share
holders 5,543,772 87.4% 236,609 37.2% .04
Total 6,343,772 100.0% $636,609 100.0% $.10
</TABLE>
BUSINESS
Incorporated on November 18, 1998, we are a development stage
corporation. Our objective is to become one of the internet's leading
direct marketers and providers of internet services to small
businesses. The key element of our strategy is the compiling of
databases of marketing information about internet users. To compile
the database, we will provide free information and free services, such
as internet-based news, newsletters and videos, to internet users in
return for their personal information such as names and e-mail
addresses. The free news will be supplied by COMTEX under a
contract with us and delivered to the users by email at no extra
charge. The free newsletters ,the free videos and the free
informational items such as special reports on various topics of
interest to users will be supplied by advertisers and paid for out of a
portion of the proceeds from our direct marketing campaigns.
The users receiving the free services will be asked to consent to the
use of their personal information for direct marketing purposes. We
believe we can develop large databases of information about internet
users including their interests and various demographic information
which would be of great value to advertisers. Using our compiled
database, we then intend to conduct internet-based direct marketing
programs on behalf of advertisers. The direct marketing will consist of
presenting online advertisements to users in our database who have
consented to receive specific information about products and
services. If the users are interested in the advertisements presented
to them, they will be asked to respond to the advertisers by e-mail.
Our primary source of revenues will be the fees charged to
advertisers for providing these direct marketing services.
As an additional source of revenue, we are also developing our
capability to provide internet-related services to small businesses or
businesses which are independently owned and operated and which
are not dominant in their field of operation. Services to small
businesses include:
designing websites,
updating and maintaining their websites;
producing and editing informational or advertising video
tapes; and
hosting their websites on our servers for accessing by
internet users.
For the period from November 18, 1998 through the present, our
activities related primarily to the recruitment of independent
contractors and suppliers, and the establishment of our
organizational and technical infrastructure. As our business
develops, we expect revenues to come partly from sales of
advertising and direct marketing opportunities on our websites and
partly from the sale of internet services to small businesses.
Industry overview.
The internet is a rapidly growing global computer network for
collecting and exchanging information, communicating, and
conducting business. The growth of this computer network is driven
by inexpensive web access, inexpensive website production costs,
and businesses wishing to capitalize on the potential revenues which
may result from effective advertising.
Effective internet advertising requires the targeting of specific
audiences who consent to be the recipients of specific information
about products.
We intend to conduct direct marketing to only those users in our
databases who have expressly consented to receive specific
information about products from advertisers. The internet allows
advertisers to target specific audiences, based on their personal
information and interests. The effectiveness of internet advertising
efforts can be monitored by the number of times an ad is viewed and
counting the number of people who respond to the ad. We believe
that internet advertising will become more effective as more personal
information about internet users is gathered. We also believe that the
problem to date with internet advertising is that there are very few
companies who understand how to conduct effective online direct
marketing programs for advertisers. We believe that our strategy of
first compiling a database of internet users who consent to the receipt
of specific information from advertisers is essential to the
development of an effective direct marketing programs for
advertisers. By marketing to users who have requested specific
marketing information, we will deliver quality marketing information
and programs to our advertisers targeted at specific audiences. In this
way, we enhance the effectiveness of our direct marketing programs.
Internet users demand quality information and service.
A vast amount of information is being added to the internet every
day and the quality of this information is often low. We believe that
high quality information will have a high perceived value to internet
users. By providing this information free of charge, we believe
internet users will have an incentive to access it, and voluntarily
provide their personal information such as names and email
addresses. This information, in turn, can then be added to our
databases ultimately to be used to conduct direct marketing
programs. We also believe that we can provide free services to
internet users, such as information delivery via e-mail, in return for
users' personal information.
Small businesses demand quality web services.
Our management believes that as the web expands and develops,
there will be an increasing number of small businesses who require
web services - be they video production for the web, website design,
or website hosting. We believe that there is substantial demand for
these services, and that such demand will continue to grow in the
coming years as more and more small businesses seek to develop a
presence on the web for themselves.
We are taking the following specific actions necessary to achieve
our business goals.
Our objective is to become one of the internet's leading direct
marketers. We also intend to deliver internet services to small
businesses. We believe we can develop large databases of
information about internet users including their interests and various
demographic information which is of use to advertisers.
In the fourth quarter of 1999, we intend to launch a website
focused solely on providing news. We expect that internet
users will find the site highly useful, and will provide us with
their personal information in order to have full access to the
website. We intend to market and advertise the website
heavily during the next twelve months through both online
and offline advertising programs. We believe this website
will add thousands of users to our databases during the next
year.
In the fourth quarter of 1999, we also intend to launch a
website which provides internet users with incentives to
receive advertisements via e-mail. Users will receive free
enrollment, and receive various free products and services in
return for viewing advertisements from corporate sponsors.
We intend to market this website through online and offline
advertising programs during the next twelve months. We
expect to sign up thousands of users during that time.
We believe that the development our databases of information
regarding our users, will be a valuable direct marketing product to
offer advertisers.
When will our development stage be completed?
We believe that by mid-year 2000 we will have developed a useful
database of information on our users. We will then have a product of
high perceived value to advertisers interested in conducting direct
marketing campaigns. We believe we can sell direct marketing
programs to advertisers who are interested in reaching the internet
users in our databases who have provided us with their permission to
be marketed to.
Users seek well organized websites.
We believe that internet users seek well organized online
communities (websites) specific to given products, information or
services. We believe that, when structured around proprietary and
nonproprietary databases which encourage continued usage, a
significant core of frequent users can result. Our management feels
that users are seeking:
indexing that enables users to efficiently locate quality and
relevant website information (content),
proprietary content and data developed by knowledgeable
contributors, and
associated services which enhance the value of the
community.
In addition, we believe that internet advertisers and e-commerce
marketers are seeking highly targeted audiences with interest in
purchasing goods and services online.
The demand for services offered by us will grow.
Management believes that as the world wide web expands and
develops, an increasing number of individuals, businesses and
organizations will require the sophisticated web services that we offer
including:
direct marketing programs
online video production;
video editing;
distribution of useful information (news, newsletters);
web design;
hosting and maintenance of websites for small businesses.
We believe that there is substantial demand for these services, and
that the demand will continue to grow in the coming years as more
and more companies seek to develop a sophisticated web presence.
Our objective and strategy
Our objective is to become a leading source for video production,
video content, video editing, website designing, hosting and
maintaining websites, and online direct marketing. In this regard, we
plan to provide an engaging experience for those who use our
websites. Additionally, we will attempt to provide effective marketing
solutions for our advertisers by creating databases of users who
have consented to be targeted for the receipt of advertisements for
narrowly defined topics and products. The key elements of our
strategy are:
Build databases of users who have expressed an interest in
the products of advertisers .
We believe that developing and delivering to advertisers, proprietary
and nonproprietary databases containing information about users
who have expressed an interest in the products which are specific to
each website is critical to attracting and retaining users, advertisers
and e-commerce partners. We believe that combining narrowly
defined information resources and making it easily searchable and
accessible is the most effective way of generating information
targeted for specific advertisers.
Focus on creating e-commerce.
We believe that successful websites need to focus on creating
opportunities for their advertisers to sell goods and services to users
of the websites. By having this as our focus from the start, we believe
this factor will differentiate our websites from others which have
tended to focus less on the e-commerce aspect.
Dealing with internet regulations.
Several federal and state statutes prohibit the transmission of certain
types of indecent, obscene or offensive content over the internet to
certain persons. In addition, pending legislation seeks to ban internet
gambling and federal and state officials have taken action against
businesses that operate internet gambling activities. An overly broad
interpretation and enforcement of these statutes and initiatives, may
result in limitations on the type of content and advertisements
available on Stratabase.com. Present or future legislation regulating
online content could dampen the growth in the use of the internet
generally and decrease the acceptance of the internet as an
advertising and e-commerce medium. This could have a material
adverse effect on our business, results of operations and financial
condition.
We have no intention of running pornography or gambling sites.
The relevance of this disclosure is that we run computer servers
which internet users can use to conduct realtime chat or to post
messages in order to communicate with each other. On occasion,
internet users have been known to abuse these services and post
messages of an adult or obscene nature (this happens on AOL quite
frequently). These users could leave us in a potentially damaging
position because the objectionable content would be physically
residing on our computer servers, and if the content were of a
regulated nature, we could be deemed responsible. While we intend
to do everything that we reasonably can to ensure such an event
does not transpire, this is a possibility you should be aware of.
Stratabase.com will meet the competition.
During the last four years, the amount of advertising dollars spent by
internet companies to attract new clients and users has increased
significantly. This increase is due to the rising number of businesses
competing for users, internet advertisers' and e-commerce marketers'.
We expect that the competition will continue to increase because
there are no substantial barriers to entry into the market.
We intend to meet the competition by focusing on the following
factors:
the quality of information (content) displayed at our
websites,
information and services we provide compared to our
competitors,
the ease of the use of the services we develop as compared
to those of our competitors,
the timing and market acceptance of new and enhanced
services we or our competitors develop, and
sales and marketing efforts.
Mr. Newton will devote his full time to our business.
As of the date of the prospectus, we have two employees --Mr.
Newton, Chairman of the Board, President, Secretary, Treasurer and
CEO and Mr. Coombes, Vice President of Corporate Development and
a Director. Only Mr. Newton is devoting his full-time efforts to the
company. Neither has a collective bargaining agreement with the
Company.
Currently, the Company retains the services, on an as needed basis,
of independent contractors and/or outside consultants. If at least the
minimum offering is successfully completed, we intend to continue to
retain independent contractors and/or outside consultants as service
providers for the foreseeable future. We will also retain additional
full-time employees when considered cost-effective to do so.
Mr. Newton oversees the technical and marketing sides of the
business, and the tasks themselves are generally carried out by
independent contractors and outside consultants as much as
possible. However, we understand that in some instances it will be
more cost-effective to hire full-time employees should suitable
candidates be found. We will hire full-time employees when
appropriate. In all instances, Mr. Newton will continue to oversee any
and all of our contractors, consultants, and employees. Additionally,
he will oversee all aspects of operations including technical
development and marketing.
Our properties, equipment and primary agreements
We do not own any real property. All costs described in this section
are stated in U.S. dollars as converted from Canadian dollars.
Accordingly, the costs may vary to some degree with the currency
exchange rate. Our offices are approximately 750 square feet located
at 34314 Marshall Road, Suite 203, Abbotsford, B.C., V2S1L2, Canada.
The office is leased for one year lease commencing on March 1, 1999.
The monthly rent is $634.50. We believe that the facilities will be
adequate for the foreseeable future.
We lease a Bandwidth/Connectivity (-fiber optic line) from BCTEL.. It
is the subject of a three year agreement which commenced on May 1,
1999, and calls for a monthly fee of $1,000.
In addition, we have entered a two year contract for a Newsfeed with
COMTEX which commenced on June 1, 1999. The contract requires
monthly payments of $3,400 plus royalties. The royalties will equal
25% of all advertising revenues resulting from users accessing the
COMTEX's online newsfeed to our websites.
Finally, we pay an annual premium of $1,354 for a one year term
comprehensive general liability insurance policy with the following
coverages:
general liability for $1,354,200;
Software for $15,000;
Hardware for $34,000;
Flood/Earthquake for $185,000; and
Replacement Costs of contents for $68,000.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto appearing elsewhere
in this prospectus. This discussion contains forward-looking
statements that involve risks and uncertainties.
Operations
We are in the development stage and have not generate revenues
from our inception to June 30, 1999 having incurred primarily only
start-up and organizational expenses. Accordingly, our financial
results, from inception to June 30, 1999, are not meaningful as an
indication of future operations.
We are presently engaged in the development of free services for
internet users(such as internet based news, newsletters, and videos)
in return for users' personal information. We will then compile lists of
users from which we will conduct internet based direct marketing
programs on behalf of advertisers. Concerning the free services for
internet users:
The news we provide will be supplied by COMTEX under
our existing contract. The newsfeed consists of business
news, financial news, current events, and various other
topics of interest to users.
The newsletters we intend to provide have not yet been
developed, nor do we know precisely what topics the
newsletters will over. We intend to determine these topics
during the first quarter of 2000.
The newsletters will be written by outside contractors. A
portion of the proceeds from our direct marketing
campaigns for advertisers will be used to pay the fees of
these outside consultants.
The subject matter of the videos has not been determined
but will cover the same topics as the newsletters and will be
determined in the first quarter of 2000.
The videos will be produced using our own the video facility
which is currently in place. The information contained in the
videos will be presented interview style by outside
contractors and script writers.
The proceeds of the advertising campaigns we carry out for
advertisers will be used to pay the fees of the outside
contractors and script writers.
We are also developing our capabilities to provide internet related
services to small businesses. These services include video taping
and editing and designing, maintaining and hosting those websites.
For the period from our incorporation on November 18, 1998 through
June 30, 1999, our activities related primarily to the recruitment of
independent contractors and suppliers, and the establishment of its
organizational and technical infrastructure. As our business
develops, we anticipate that revenues will be derived partly from the
sale of advertising and direct marketing opportunities on our website
and partly from the sale of our online video production services and
web services. Further into our development, it is anticipated that
e-commerce will play an increasing revenue role. E-commerce
revenues will likely come from revenue sharing agreements with
merchants whose sites are affiliated with our websites that are now
being developed. Any revenues that we derive from revenue sharing
arrangements will be recognized by us upon notification from our
e-commerce merchant partners of sales attributable to our websites.
The expected significant costs related to our operation will be the
purchase of:
hardware;
software;
a bandwidth fiber optic line;
data acquisition costs;
human resource costs; and
advertising and market costs.
Our liquidity and capital resources
From inception through June 30, 1999, we received $236,609 in net
proceeds from an investor and our founders.. As of June 30, 1999, we
had approximately $152,500 in cash and cash equivalents. To date, we
show negative cash flows. We expect losses from operations and
negative cash flow to continue for the foreseeable future. If our
revenues, and our spending levels are not adjusted accordingly, we
may not generate sufficient revenues to achieve profitability. Even if
we achieve profitability, we may not sustain or increase such
profitability on a quarterly or annual basis in the future. We currently
anticipate the net proceeds from the maximum offering, together with
available funds, will be sufficient to meet our anticipated needs for at
least 12 months. We may need to raise additional funds in the future
in order to fund more rapid expansion, to develop new or enhanced
services, to respond to competitive pressures or to acquire
complementary businesses, technologies or services. The need to
raise additional funds may arise especially if we only complete the
minimum offering or if significantly less than the maximum offering is
completed. We cannot be certain that any required additional
financing will be available on terms favorable to us. If additional
funds are raised by the issuance of our equity securities, such as
through the exercise of the redeemable warrants, then existing
stockholders may experience dilution of their ownership interest and
such securities may have rights senior to those of the then existing
holders of common stock. If additional funds are raised by our
issuance of debt instruments, we may be subject to certain limitations
on our operations. If adequate funds are not available or not available
on acceptable terms, we may be unable to fund our expansion, take
advantage of acquisition opportunities, develop or enhance services
or respond to competitive pressures.
Impact of the Year 2000 issues
Many currently installed computer systems and software products
are coded to accept or recognize only two digit entries in the date
code field. These systems may recognize a date using "00" as the
year 1900 rather than the year 2000. As a result, computer systems
and/or software used by many companies and governmental agencies
may need to be upgraded to comply with such Year 2000
requirements or may risk system failure or miscalculations causing
disruptions of normal business activities.
We are assessing Year 2000 issues.
The Company has begun to assess the Year 2000 readiness of its
information technology ("IT") systems, including the hardware and
software that enable us to provide and deliver our services. Our
assessment plan consists of:
quality assurance testing of our internally developed
software incorporated in our websites;
contacting third- party vendors and licensors of material
hardware, software and services that are both directly and
indirectly related to the delivery of our services;
contacting vendors of material non-IT systems;
assessment and repair or replacement requirements;
repair or replacement;
implementation; and
creation of contingency plans in the event of Year 2000
failures.
Our Year 2000 assessment plan will be completed by November
1999.
We are now in the "assessment and repair or replacement" stage of
our assessment plan. The last stage of our assessment plan, "the
creation of contingency plans in the event of Year 2000 failure" will
be completed by November , 1999.
We do not possess the information necessary to estimate the
potential costs of addressing year 2000 issues.
To date, we have not incurred any material costs in identifying or
evaluating Year 2000 compliance issues. At this time, we do not
possess the information necessary to estimate the potential costs of
unanticipated revisions to our software should such revisions be
required or the replacement of third-party software, hardware or
services that are determined not to be Year 2000 compliant. Although
we do not anticipate that such expenses will be material, such
expenses, if higher than anticipated, could have a material adverse
effect on our business, results of operations and financial condition.
We are not aware of any year 2000 compliance problems relating to
our own software or systems.
We are not currently aware of any Year 2000 compliance problems
relating to our software or systems that would have a material
adverse effect on our business, results of operations and financial
condition, without taking into account our efforts to avoid or fix any
problems. There can be no assurance that we will not discover Year
2000 compliance problems in our software that will require substantial
revisions or replacements. In addition, there can be no assurance that
third- party software, hardware, or services incorporated into our
systems will not need to be revised or replaced, which could be time
consuming and expensive. Our failure to fix our software or to fix or
replace third-party software, hardware or services on a timely basis
could result in lost revenues, increased operating costs and other
business interruptions, any of which could have a material adverse
effect on our business, results of operations and financial condition.
Moreover, failure to adequately address Year 2000 compliance issues
in our software and systems could result in claims of mismanagement,
misrepresentation or breach of contract and related litigation, which
could be costly and time-consuming to defend. In addition, there can
be no assurance that governmental agencies, utility companies,
internet access companies, third-party service providers and others
outside our control will be Year 2000 compliant. The failure by such
entities to be Year 2000 compliant could result in a systematic failure
beyond our control, such as prolonged internet, telecommunications
or electrical failure. That type of failure could prevent us from
delivering our services, decrease the use of the internet or prevent
users from accessing our websites any of which would have a
material adverse effect on our business, results of operations and
financial condition.
MANAGEMENT
Our Directors and Executive Officers
The following sets forth the names and ages of our directors and
executive officers.
<TABLE>
<S> <C> <C>
Name Age Position
Trevor Newton 30 President, Secretary,
Treasurer, Chairman of
the Board of
Directors, Chief
Operating and
Executive Officer
Fred Coombes 46 Vice President of
Corporate
Development
and
Director
John Tarves 45 Director
</TABLE>
TREVOR NEWTON, since our incorporation to the present has been
our President , secretary, treasurer, Chairman of the Board of
Directors, Chief Operating and Executive Officer. From June, 1993
through August 1994, Mr. Newton was employed as a Statistical
Analyst with the British Columbia Gas Co. Thereafter, from August
1994 until December 1995, Mr. Newton taught Economics and
Statistics at the University College of Fraser Valley. From February
1996 until October 1996, Mr. Newton was a registered representative
with Global Resource Investment, a broker-dealer located in Southern
California. From October 1996 until September 1999, Mr. Newton was
employed in various capacities at Stockscape.com, a publicly traded
producer of a financial website which has published dozens of
financial newsletters and delivered financial information, such as
stock quotes and news, to its users 24 hours a day. His
responsibilities at Stockscape included the overseeing of all aspects
of operations such as programming, content development, technical
infrastructure and marketing.
FRED COOMBES, since our inception to the present, has been one of
our Directors and since January 20, 1999 to the present our Vice-
President of Corporate Development. Since 1987 to the present, Mr.
Coombes has also acted as the President of Co-ab Marketing, Ltd., an
investor and corporate relations firm and since October 1995 as
President and Director of Yuma Copper Corp., a mineral exploration
firm. In addition, Mr. Coombes has been retained as an outside
investor relations consultant to the NBG Radio Network. Presently,
he devotes minimal time to our affairs. Upon the successful
completion of the minimum offering, Mr. Coombes, who plans on
continuing with his other outside responsibilities, will devote as
much time to our affairs as he deems necessary for it to achieve its
goals. There can be no assurance that any conflicts of interest that
may arise from these outside activities will be resolved in our favor.
JOHN TARVES has been one of our Directors since our
incorporation. Since 1979, Mr. Tarves has been a secondary school
teacher in the Chichester School District in Boothwyn, Pennsylvania.
He is a member of the school district's Technology Leadership Team
and has initiated an internet usage program in the classroom. Mr.
Tarves has a B.A. degree from St. Francis College (Loretto, PA) and
an M.A. degree from Fairfield University (Fairfield, CT.).
Our Directors have been elected to serve until the next annual
meeting of stockholders and until their successor(s) have been
elected and qualified, or until death, resignation or removal.
Executive Compensation
The following table sets forth information with respect to
compensation paid we paid for the period ended December 31, 1998
for services of the executive officers. We have not paid any executive
officer in excess of $100,000 (including salaries and benefits) during
the period ending December 31, 1998. We do not expect to pay
compensation to any person in excess of $100,000 for the twelve
months ending December 31, 1999. A portion of the net proceeds of
the offering herein will be used to pay at least a portion of officers'
salaries.
<TABLE>
<CAPTION>
Summary of Annual Compensation
Name and
Principal Position Year Salary
<S> <C> <C>
Trevor Newton, Chairman of
the Board, President, Secretary,
Treasurer and Chief Operating and
Executive Officer 1998 $0
Fred Coombes,
Vice President of Corporate
Development and Director 1998 $0
</TABLE>
Messrs. Newton and Coombes, as founders or promoters of
Stratabase were issued 2,422,400 and 732,300 shares of the common
stock, respectively, for nominal consideration (i.e $.0025 per share).
We have not, nor do we intend to, in the foreseeable future, enter into
any employment agreements with executive officers. We have no
other compensation plans for our executive officers. However, we
plan to institute an executive employee stock option plan in the
future, the terms of which have not been determined or agreed upon.
In addition, in the future, we may consider an executive bonus plan.
Upon the successful completion of the minimum offering, we will pay
salaries to Messrs. Newton and Coombes at an annual rate of $60,000
and $ 36,000, respectively. From February 1999 to the present , Mr.
Newton has been paid $5,000 per month in salary. Mr. Coombes has
not been paid any compensation in 1999, nor has he accrued any
compensation. We intend to pay salaries from the net proceeds of the
offering allocated to working capital and revenues from operations.
We do not compensate Directors.
We do not pay our directors any remuneration for their service.
However, they are reimbursed for their out-of-pocket expenses
associated with meetings of the Board of Directors. Mr. John Tarves,
a Stratabase director, was issued 25,000 shares of the common stock,
for nominal consideration (i.e. $.0025 per share). We do not maintain a
stock option plan for Directors.
INDEMNIFICATION
Our by-laws provide for the indemnification of officers and directors
to the fullest extent possible under Nevada law against expenses
(including attorney's fees), judgements, fines, settlements, and other
amounts actually and reasonably incurred in connection with any
proceeding, arising by reason of the fact that such person is or was
an agent of Stratabase. We are also granted the power, to the
maximum extent and in the manner permitted by Nevada Revised
Statutes, to indemnify each of our employees and agents (other than
directors and officers) against expenses (including attorneys' fees),
judgements, fines, settlements and other amounts actually and
reasonably incurred in connection with any lawsuits arising by
reason of the fact that such person is or was an agent of Stratabase.
Our Certificate of Incorporation limits or eliminates the personal
liability of officers and directors for damages resulting from breaches
of their fiduciary duty for acts or omissions except for damages
resulting from acts or omissions which involve intentional
misconduct, fraud, a knowing violation of law, or the inappropriate
payment of dividends in violation of Nevada Revised Statutes.
Concerning whether indemnification for liabilities arising under the
Securities Act may be permitted to our officers, directors and
controlling persons, we were advised by legal counsel that in the
opinion of the SEC such indemnification of officers, directors and
controlling persons is against public policy, and is, therefore,
unenforceable. If a claim for indemnification against such liabilities
(other than expenses actually incurred or paid by an officer, director
or controlling person in successful defense the lawsuit) is asserted
by any officer, director or controlling person in connection with these
securities being registered, we will, then, submit to a court of
appropriate jurisdiction the question of whether such indemnification
is against public policy as expressed in the Securities Act of 1933,
and will be governed by the final adjudication of that issue.
CERTAIN TRANSACTIONS
At the time of incorporation, we authorized the issuance of 25,000
shares of common stock, no par value. To facilitate a public offering
of our securities, we authorized on January 20, 1999, the amendment
of our certificate of incorporation to effect certain changes, which
were:
a change in the par value of the common stock to $.001 par
value; and
an increase in the number of shares of common stock
authorized to 25,000,000 shares.
Unless stated otherwise, all stock transactions in this prospectus are
stated as if these changes had already occurred.
In February, 1999, we issued shares of common stock, at $.001 par
value, to our founders as follow:
2,422,400 to Trevor Newton;
1,464,072 to Mary Martin;
732,300 to Fred Coombes; and
25,000 to John Tarves.
In each case, the consideration was nominal, i.e. $.0025 per share.
In addition to the above, we have agreed to issue to our previous
counsel, Thomas Boccieri, 10,000 shares of common stock in lieu of
receiving an additional $2,500 towards his legal fee.
In March, 1999, we privately sold 900,000 shares of our common
stock, at a price of $.25 per share, to one affiliated investor for a total
of $225,000. To date, $75,000 of the proceeds have been utilized for
hardware, software, programming and computing fees, content
acquisition, general operations, salaries, connectivity and costs
associated with this offering. The balance was retained for operating
funds. The investor, New Horizons LP, is affiliated with one of our
founders, Ms. Mary Martin in that its general partner and a minority
limited partner is Ms. Martin's husband, Joe MacDonald.
We have not adopted any provisions, resolutions or bylaws
regarding related party transactions nor do we intend to do so in the
future.
In connection with each of these stock issuances, we relied upon the
exemption from registration provided under Section 4(2) of the
Securities Act.
PRINCIPAL SHAREHOLDERS
The following table contains information concerning:
those persons whom we know beneficially own more than
5% of our outstanding shares of common stock;
each of our officers and directors; and
all of our officers and directors as a group.
<TABLE>
<CAPTION>
Beneficial % of
Ownership
Ownership Prior After an Offering
to Offering of
<S> <C> <C> <C> <C>
Officers,
Directors, 5% No. of 400,000 800,000
Shareholders Shares % Units Units
Trevor Newton 2,422,400 43.6% 40.7% 38.1%
Mary Martin 1,464,072 26.4% 24.6% 23.0%
Fred Coombes 732,300 13.2% 12.3% 11.5%
John Tarves 25,000 .5% .4% .4%
New Horizons LP 900,000 16.2% 15.1% 14.2%
All directors and
executive officers
as a Group
(3 persons) 3,179,700 57.3%. 53.4% 50.0%
</TABLE>
The persons or entities named in this table, based upon the
information they have provided to us, have sole voting and
investment power with respect to all shares of common stock
beneficially owned by them. The shares beneficially owned and
percentage of ownership are based on the total shares outstanding
before this offering and the total shares to be outstanding after both
the minimum and maximum offerings assuming no exercise of any of
the warrants contained in the units.
DESCRIPTION OF UNITS
The Units
We are offering a minimum of 400,000 units and a maximum of 800,000
units directly to the public under this Prospectus. Each unit consists
of one share of common stock, $.001 par value, and one Class A
redeemable purchase warrant to purchase one share of common stock
at $1.00, one Class B redeemable purchase warrant to purchase one
share of common stock at $3.00 and one Class C redeemable purchase
warrant to purchase one share of common stock at $5.00. The
warrants will be immediately detachable and transferable if we
successfully complete the minimum offering.
Common stock
We are authorized to issue 25,000,000 shares of common stock, $.001
par value. After being sold under this offering, our shares of common
stock are not subject to further assessment or call. If there are
differences between the following summary description of our
common stock and our amended certificate of incorporation and by-
laws, the information contained in our amended certificate of
incorporation and by-laws is controlling.
Our shareholders are not given cumulative voting rights in electing
board members. So minority shareholders may not have any
representation. Holders of common stock:
have equal rights to dividends from funds legally available
for that purpose, when and if declared by our board of
directors;
are entitled to share ratably in all of our assets available for
distribution to holders of common stock upon liquidation,
dissolution or winding up of our affairs; and
do not have preemptive rights, conversion rights, or
redemption of sinking funds rights.
We have not paid dividends since inception and do not intend to do
so in the future.
The Redeemable Purchase Warrants
There are no Class A, Class B and Class C warrants presently
outstanding. After we issue them, the warrants will be exercisable at:
a price of $1.00 per share of common stock for Class A for 6
months from the effective date of this offering ,
a price of $3.00 per share of common stock for Class B for 12
months from the effective date of this offering and
a price of $5.00 per share of common stock for Class C for 18
months from the effective date of this offering,
We may extend each warrant exercise period at any time, and/or
reduce the exercise price(s) by up to 50%. If the exercise period is
extended, you will be given a written notice 30 days before the
beginning of the extension period . One warrant entitles the holder to
purchase one share of common stock. The following discussion of
the warrants may not be complete. You should read the warrant
agreement for a complete discussion. The essential provisions of the
warrants are as follows:
The warrants, which will be issued under the warrant
agreement between us and our warrant agent, Security
Transfer Corp., will be in registered form. After successful
completion of the minimum offering, the warrants may be
sold, assigned or conveyed separately and apart from the
common stock included in the units.
Upon the successful completion of the offering and during
the remainder of the term of the warrants, we may, at our
option and on 30 days' prior written notice mailed to the
warrant holders, call and/or redeem the warrants, in whole or
in part, at a price of $0.01 per A, B or C warrant if the average
bid price of the common stock for any seven trading days
during a 10 consecutive trading day period is greater than
20% above the respective exercise price.
The holders of the warrants are protected against dilution of
their interests represented by the number of shares of
common stock underlying the warrants upon the occurrence
of certain events, including stock dividends, splits, mergers,
reclassifications, and if we sell shares of common stock
below the then book value, other than sale to employee
benefit and stock option plans.
The holders of the warrants have no right to vote on matters
submitted to our shareholders and have no right to receive
dividends. The holders of the warrants are not entitled to
share in our assets in the event of liquidation, dissolution, or
the winding up of our affairs.
We do not have an exemption from registration with the SEC
for the issuance of the common stock upon the exercise of
the warrants. So, in order for the holder to exercise the
warrant, we are required to have a current, effective
registration statement on file with the Commission and have
satisfied the "Blue Sky" registration requirements of the
applicable regulatory authority of the state in which the
holder of a warrant resides. We are required to file
post-effective amendments to our registration statement
when subsequent events require such amendments in order
to continue the registration of the shares of common stock
underlying the warrants. Although it is our intention to both
maintain a current prospectus and meet the requirements of
the regulatory authorities of the State of New York during
the term of the warrants, there can be no assurance that the
Company will be in a position to keep its registration
statement current and effective or to meet the requirements
of any state regulatory authority. It is not our intention to
call and/or redeem the outstanding warrants, if our
prospectus is not current or if we are not in compliance with
the requirements of an appropriate state regulatory
authority.
After our offering is successfully completed
Before this offering, there has been no public market for our units,
shares of common stock and Class A, Class B and Class C warrants.
We cannot assure you that a public trading market for any of our
securities will ever develop or, if one develops, that it will be
maintained.
If we complete our minimum offering, but before the exercise of any of
the warrants, we will have outstanding 5,943,772 shares of common
stock. Similarly, if our maximum offering is completed, we will have
6,343,772 shares of common stock outstanding. Of the shares
outstanding, if our minimum offering is completed, 400,000 shares
(and if the maximum offering is completed, 800,000 shares) will be
freely tradeable without restriction under the Securities Act, if those
shares are not later acquired by our "affiliates" (i.e., a person is an
affiliate if he or she directly, or indirectly through one or more
intermediaries controls or is controlled by us, or is under common
control with us).
All of the 5,543,772 shares of common stock presently outstanding
are "restricted securities" as that term is defined in Rule 144 of the
Securities Act. In general, under Rule 144, a person (or persons
whose shares must be aggregated) who has satisfied a one- year
holding period may, under certain circumstances, publicly sell within
any three (3) month period, a number of shares which does not
exceed the greater of one percent (1%) of the then outstanding shares
of our common stock or the average weekly trading volume of our
common stock during the four calendar weeks before such sale.
Rule 144 also permits, under certain circumstances, the sale of shares
of common stock by a person without any quantity limitation. Future
sales under Rule 144 or even the perception of such sales, may have a
depressive effect on the market price of our common stock, should a
public market develop for our shares. None of our current
shareholders have already satisfied the one-year holding period. We
are unable to predict the effect that sales, or even the threat of sales
under Rule 144 or otherwise, may have on the then prevailing market
price of our shares of common stock.
Our Transfer and Warrant Agent
We have appointed Securities Transfer Corp., with offices at 1690
Dallas Parkway, Suite 100 Dallas, TX 75248, (972) 447-9890, as transfer
agent for our shares of common stock and warrant. We have already
paid the escrow agent's fees. The transfer agent will be responsible
for all record-keeping and administrative functions in connection with
the warrants. A copy of the executed escrow agreement, and the
executed warrant agreement with exhibits attached are filed as a
exhibit to our registration statement on file with the SEC.
Reports to Shareholders
We intend to forward annual reports to our shareholders including
audited financial statement to our investors. We will also forward
such interim reports we deems appropriate.
PLAN OF DISTRIBUTION
We are offering, directly to the public, up to 800,000 units. The first
400,000 units are offered on a "best efforts all or none" basis. We are
offering the remaining 400,000 units on a "best efforts" basis only.
There can be no assurance that any of the units will be sold. If we sell
at least 400,000 of the offered units within the offering period (90 days
from the effective date of this prospectus, i.e. February 7, 2000 unless
we extend it for an additional 90 days to May 7, 2000), then the
offering will be terminated and the subscription payments, if
collected, will be promptly refunded in full to subscribers within 7
days of the termination without payment of interest or deducting
expenses , subject to the collection of funds. If we sell the minimum
number of units within the specified period, the offering will continue
until the earlier of:
when we sell all 800,000 units or
the expiration of the offering period and any extension,
unless we terminate the offering earlier.
All subscription payments must be sent to us along with a separate
sheet indicating the name, address and social security number of the
subscriber(s), and the number of shares for which subscription is
being made. Payments must be by check made payable to "Securities
Transfer Corporation, as escrow agent for Stratabase.com". We will
then send the subscription payments, no later than noon of the next
business day following receipt, to an escrow account maintained by
Securities Transfer Corporation, 16910 Dallas Parkway, Suite 100,
Dallas, Texas 75248. Securities Transfer is only acting as escrow,
transfer and warrant agent in connection with this offering and has
made no investigation of us or this offering nor makes any
recommendation concerning this offering. The escrow agent will hold
all subscriptions payments pending the sale of the minimum number
of units within the specified period. Subscription payments will only
be withdrawn from the escrow account for the purpose of paying us
for the units sold, if we sell at least 400,000 of the units, or for the
purpose of refunding subscription payments to subscribers.
Subscribers will not earn interest on the funds held in escrow and will
not have use or right to return of such funds during the escrow
period, which may last as long as 180 days. If we sell the minimum
number of units within the escrow period, as extended, payments
from subscribers will be deposited into the escrow account for
collection and all funds will be periodically disbursed to us.
We have arbitrarily determined the public offering price of the units
and the exercise prices of the warrants based upon various
considerations including market conditions and the perceived
reception of the offering price and exercise prices by potential
investors. The public offering price and the exercise prices do not
bear any relationship to assets, book value or any other traditionally
recognized indications of value.
We have not engaged a market maker of securities and do not
propose to engage any entity to make a market in our securities
following completion of the offering. The development of a trading
market following the completion of this offering will be particularly
dependent on broker-dealers initiating quotations in inter-dealer
quotation mediums, in maintaining trading positions and in otherwise
engaging in market making activities in our securities. We have not
retained a broker-dealer who has agreed to engage in such activities,
and there is no assurance that any trading market for our securities
will develop following the offering.
LEGAL PROCEEDINGS
We are not involved in any material pending litigation, nor are we
aware of any material pending or contemplated proceedings against
us. We know of no material legal proceedings pending or threatened,
or judgments entered against any of our Directors or Officers in his
capacity as such.
LEGAL OPINIONS
The legality of the issuance of the securities offered pursuant to this
Prospectus will be passed upon for us by James C. Jones, Esq., 65
West 96th Street, Suite 20H, New York, New York 10025.
EXPERTS
Our financial statements included in the Prospectus, to the extent and
for the period indicated in their report with respect thereto, have been
audited by Moss Adams LLP, independent certified public
accountants, as stated in their report appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of
that firm as experts in accounting and auditing.
FINANCIAL STATEMENTS
Page
Independent Auditor's Report
dated August 10, 1999 40
Balance Sheet dated June 30, 1999 41-42
Statement of Operations for the period from inception
(11/18/98) to 6/30/99 43
Statement of Stockholders' Equity for the period from
inception (11/18/98) to 6/30/99 44
Statement of Cash Flows for the period from
inception (11/18/98) to 6/30/98 45
Notes to Financial Statements (6/30/99) 46-48
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Stratabase.com
We have audited the accompanying balance sheet of
Stratabase.com (a development stage company) as of June
30, 1999, and the related statements of operations,
stockholders' equity, and cash flows for the period
from inception (November 18, 1998) to June 30, 1999.
These financial statements are the responsibility of
the Company's management. Our responsibility is to
express an opinion on these financial statements
based on our audit
We conducted the audit in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Stratabase.com (a development stage company) as of June
30, 1999, and the changes in its operations and its cash
flows for the period from inception (November 18, 1998)
to June 30, 1999, in conformity with generally accepted
accounting principles.
/s/ Moss Adams LLP
Portland, OR
August 10, 1999
<TABLE>
<CAPTION>
STRATABASE.COM
(a development stage company)
BALANCE SHEET JUNE 30, 1999
ASSETS
<S> <C>
CURRENT ASSETS
Cash $152,410
Accounts receivable 7,179
GST receivable 1,631
Total current assets 161,220
OFFICE EQUIPMENT, at cost computer hardware $8,177
computer software 499
office equipment 205
office furniture 2,077
video production equipment 4,884
$15,842
accumulated depreciation and amortization (1,740)
14,102
DEPOSITS 572
Total assets $ 175,894
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liability $ 2,969
Shareholder loans 3,828
Total current liabilities 6,797
COMMITMENTS (Note 3)
SHAREHOLDERS' EQUITY
common stock, $.001 par value;
25,000,000 shares
authorized, 5,543,772 shares
issued and outstanding 5,544
Additional paid-in capital 231,065
Deficit accumulated in the development stage (67,512)
Total Shareholders' equity 169,097
Total liabilities and shareholders' equity $ 175,894
</TABLE>
<TABLE>
<CAPTION>
STRATABASE.COM
(a development stage company)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM
INCEPTION (NOVEMBER 18, 1998) TO June 30, 1999
<S> <C>
REVENUE $ 6,709
OPERATING EXPENSES
Web related services 3,730
Video production and encoding 2,324
Internet connectivity 1,889
Network administration 598
Total operating expenses 8,541
Excess of operating
expenses over revenue (1,832)
Management fees 25,000
Community site development 12,590
Legal fees 10,576
Accounting 3,675
Office 3,205
Rent 2,290
Depreciation an amortization 1,740
Licenses and dues 1,705
Insurance expense 1,517
Program and site design 1,357
Telecommunications 744
Organizational costs 695
Travel 677
Other expenses 558
Total general and administrative expenses 66,329
INTEREST INCOME 649
Net loss in the development stage $ (67,512)
BASIC LOSS PER SHARE OF COMMON STOCK$ 0.01
DILUTED LOSS PER SHARE OF COMMON STOCK 0.01
</TABLE>
<TABLE>
<CAPTION>
STRATABASE.COM
(a development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (NOVEMBER 18,
1998) TO June 30, 1999
Deficit
Accumulated
Add't'n'l in the Total
Common Stock Paid in Development Stkhld'rs'
Shares Amount Capital Stage Equity
<S> <C> <C> <C> <C> <C>
Issuance of
common stock
at $.0025
per share 4,643,772 4,664 $6,965 - $11,609
Issuance of
common stock
at $.25 per
share 900,000 900 $224,100 - 225,000
Net loss in
the development
stage - - - (67,512) (67,512)
5,543,77 $5,544 $231,065 (67,512) $169,097
</TABLE>
See accompanying notes.
<TABLE>
<CAPTION>
STRATABASE.COM
(a development stage company)
STATEMENT OF CASH FLOWS FOR THE PERIOD FROM
INCEPTION (NOVEMBER 18, 1998) TO June 30, 1999
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss in the development stage $ (67,512)
Depreciation and amortization 1,740
Adjustments to reconcile net loss
to net cash from
operating activities:
Increase in assets:
Accounts receivable (7,179)
GST receivable (1,631)
Accounts payable 2,969
Deposits (572)
Net cash from operating activities (72,185)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of office equipment (15,842)
Net cash from investing activities (15,842)
CASH FLOWS FROM FINANCING ACTIVITIES
Shareholder loan 3,828
Sale of common stock 236,609
Net cash from financing activities 240,437
NET INCREASE IN CASH AND CASH
EQUIVALENTS 152,410
CASH AND CASH EQUIVALENTS,
at date of inception -
CASH AND CASH EQUIVALENTS, end of period $152,410
</TABLE>
See accompanying notes.
STRATABASE.COM
(a development stage company)
NOTES TO FINANCIAL STATEMENTS August 10, 1999
NOTE 1 - NATURE OF OPERATIONS AND ORGANIZATION
Stratabase.com (the Company) is a Nevada company specializing in
the provision of online content, information, and services in specific
topic
areas, with an emphasis on relationship (name) development and
corresponding database management. The Company operates from
its headquarters in Abbotsford, British Columbia, Canada.
For the period from inception (November 18, 1999) to June 30, 1999,
the Company has been in the development stage. Substantially, all
activity
during this period has been devoted to the raising of equity capital
and development of a long-term business plan. The Company has
adopted December 31 as the closing of its fiscal year.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents - The Company considers all highly liquid
investments purchased with a maturity of three months or less to be
cash equivalents.
Revenue recognition - Revenues will be recognized as website related
services, video production and encoding services, or direct e-mail
marketing services are realized or realizable and when there are no
further performance obligations and no right of refund exist.
Software development costs - The Company capitalizes certain
software development and implementation costs. To date, such costs
are not significant. Development and implementation costs are
expensed
until the Company has determined that the software will result in
probable future economic benefits and management has committed
to funding the project. Thereafter, all direct external implementation
costs and purchase software costs are capitalized and amortized
using the straight-line method over the remaining estimated useful
lives, generally not exceeding five years. The company does not
develop software for sale to its customers.
Office equipment - Office equipment is recorded at cost and
depreciated over its useful life which ranges from three to five years.
Depreciation expense in the amount of $1,740 was recognized
for the period from inception to June 30, 1999.
Advertising - Advertising costs are expensed as incurred.
Income taxes - The Company follows the asset and liability
method of accounting for income taxes whereby deferred tax
assets and liabilities are recognized for the future tax
consequences of differences the financial statement carrying
amounts of existing assets and liabilities and their respective
tax bases.
Foreign Exchange Accounting- The Company's Canadian
transactions are measured in local currency and then translated
into U.S. dollars. All balance sheet accounts have been translated
using the current rate of exchange at the balance sheet date.
Results of operations have been translated using the average
rates prevailing throughout the year. Translations gains or
losses resulting from the changes in the exchange rates are
accumulated in a separate component of shareholders' equity
. All amounts in the accompanying financial statement and
footnotes are denominated in U.S. dollars unless otherwise
indicated.
Earnings (loss) per share of common stock -basic earnings
(loss) per share of common stock is computed by dividing net
income (loss) available to common stockholders by the
weighed average number of common shares outstanding
for the period (5,290,647). Diluted earnings per share reflects
the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted
into common stock that then shared in the earnings of the
company.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
NOTE 3 - SHAREHOLDER TRANSACTIONS
For the period from inception (November 18, 1998) through
June 30, 1999, the company has been involved in raising
equity capital. On November 18, 1998, the company issued
4,643,772 shares of common stock at $.0025 per share to its
founding group of shareholders. In January 1999, the
Company's Board of Directors consented to the sale of
900,000 additional shares of common stock at $.25 per share
to New Horizons LLP, a New York venture capital firm. New
Horizons, is affiliated with one of the company's founders,
Ms. Mary Martin in that its general partner and a minority
limited partner is Ms. Martin's husband, Joe MacDonald.
New Horizon is considered to be a related party.
NOTE 4 - COMMITMENTS
Lease obligations - The Company leases its office space
and certain equipment under operating lease agreements.
The agreements provide for monthly office rents of $937
(Canadian dollars) for a term of one year and equipment
rentals of $1,100 for a term of three years. For the period
from inception to June 30, 1999, rent expense was $2,290.
Management fees - The Company has agreed to pay its
President a salary of $5,000 a month commencing February
1999. Compensation of $25,000 through June 30, 1999, has
been recorded as management fees in the accompanying
financial statements.
Distribution Agreement- The Company has entered into a
Disbursement Agreement to receive and transmit certain
electronic information services and content among its customer
base. The Agreement extends for a two year period with
provisions for additional two year renewal periods. Under
the terms of the Agreement, the Company will pay fees of
$750.00 in July 1999, $1,500.00 in August 1999, $2,250.00
in September 1999 and $3,000.00 each month thereafter for
the entire term of the Agreement. Further, the Company will
pay the Distributor a royalty equivalent to 25% of net
advertising revenues it realizes from distribution of information
and content under the Agreement.
We have not authorized any dealer, salesperson or other person to
give any information or represent anything not contained in this
prospectus. You must not rely on any unauthorized information. This
prospectus does not offer to sell or buy any shares in any jurisdiction
where it is unlawful. The information in this prospectus is current
only as of the date of this prospectus.
STRATABASE.COM
800,000 Units
(Each unit consists of 1 share of common stock,
1 Class A redeemable purchase warrant,
1 Class B redeemable purchase warrant and
1 Class C redeemable purchase warrant.)
Stratabase.com
Trevor Newton, President
34314 Marshall Road, Suite 203
Abbotsford, B.C. V2S1L2, Canada
(604) 504-5811
November 10, 1999
Until December 5, 1999 (25 days after the date of this Prospectus) all
dealers that buy or sell or trade these securities, whether or not
participating in this offering, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a prospectus
when acting as underwriters and with respect to their unsold
allotments or subscriptions.
The warrants contained in the units may not be redeemed if a current
prospectus is not in effect. In such event, warrant holders will not be
able to exercise their warrants and, if the warrants are redeemed, will
receive only the nominal redemption price at a time when the market
value of the warrants may be significantly higher.
