FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended Commission File Number ______
December 31, 1999
STRATABASE.COM
(Exact name of registrant as specified in its charter)
Nevada 88-0414964
---------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
34314 Marshall Road, Suite 203, Abbotsford BC, V2S 1L2, Canada
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(Address of principal executive offices)
Registrant's telephone number, including area code: (604) 504-5811
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Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.0025 per share
(Title of Class)
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation SB is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The issuer's revenue for the fiscal year ending December 31, 1999, was $41,813.
As of March 7, 2000, 6,353,772 shares of the registrant's Common Stock were
outstanding. The registrant's Common Stock is not currently listed or admitted
for trading on any exchange or over-the-counter market.
<PAGE>
STRATABASE.COM
TABLE OF CONTENTS
Page
PART I....................................................................... 4
Item 1. Business........................................................... 4
Item 2. Properties......................................................... 7
Item 3. Legal Proceedings.................................................. 7
Item 4. Submission of Matters to a Vote of Security Holders................ 7
PART II...................................................................... 7
Item 5. Market for Registrant's Common Equity and Related Security Holder
Matters............................................................... 7
Item 6. Management's Discussion and Analysis of Plan of Operations......... 8
Item 7. Financial Statements and Supplementary Data....................... 11
Item 8. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure................................................. 11
Item 9. Directors, Executive Officers and Control Persons; Compliance with
Section
16(6) of the Exchange Act............................................ 11
Item 10. Executive Compensation............................................ 12
Item 11. Security Ownership of Certain Beneficial Owners and Management.... 14
Item 12. Certain Relationships and Related Transactions.................... 15
Item 13. Exhibits, Financial Statements, Schedules and Reports on Form 8-K. 17
SIGNATURES.................................................................. 18
<PAGE>
PART I
Item 1......Business.
We are a development stage corporation that incorporated on November 18, 1998,
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. 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.
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 Usenet and delivered to users through the web. 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 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 present 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 which are independently
owned and operated and which are not dominant in their field of operation.
Services to small businesses include:
designing website,
updating and maintaining their website;
producing and editing informational or advertising video tapes; and
hosting their website on our servers for accessing by internet users.
<PAGE>
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.
Our Industry
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.
<PAGE>
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.
Regulation
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. We intend to do everything that we reasonably can to ensure such an
event does not transpire.
Employees
As of December 31, 1999, we had two employees. Mr. Trevor Newton, Chairman of
the Board, President, Secretary, Treasurer and CEO and Mr. Fred Coombes, Vice
President of Corporate Development and a Director. Only Mr. Newton has a
management agreement and is devoting his full-time efforts to the company.
Currently, the Company retains the services, on an as needed basis, of
independent contractors and/or outside consultants. We will retain additional
full-time employees when considered cost effective to do so.
<PAGE>
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.
Item 2......Properties.
We do not own any real property. 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 which commences on March 1, 2000. The monthly rent
is approximately $660. We believe that the facilities will be adequate for the
foreseeable future.
Item 3......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.
Item 4......Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the quarter ended
December 31, 1999.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Security Holder
Matters.
On November 18, 1999, we commenced a public offering of 800,000 units at a
purchase price of $.50 per unit. Each unit consisted of one share of Common
Stock, one Class A Warrant, one Class B Warrant and one Class C Warrant. Each
Class A Warrant is exercisable for one share of Common Stock at $1, each Class B
Warrant is exercisable for one share of Common Stock at $3 and each Class C
Warrant is exercisable for one share of Common Stock at $5, for periods of six
months, 12 months and 18 months respectively, commencing with the date of the
prospectus related thereto. All 800,000 units were sold, and the offering was
closed on February 7, 2000.
There is currently no public market for the Company's Common Stock. We are in
the process of applying for listing on the Nasdaq Stock Market, Inc., Over the
Counter Bulletin Board. There were approximately 87 shareholders of record as of
March 7, 2000.
Item 6. Management's Discussion and Analysis of Plan of Operations.
We are in the development stage and have generated insignificant revenues
related primarily to website development projects since our inception to
December 31, 1999, and have incurred primarily only startup and organizational
expenses. Accordingly, our financial results, from inception to December 31,
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 Usenet. 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 cover. 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 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 website.
<PAGE>
For the period from our incorporation on November 18, 1998 through December 31,
1999, our activities related primarily to the recruitment of independent
contractors and suppliers, and the establishment of 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 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 December 31, 1999, we received $236,609 in net proceeds
from an investor and our founders. As of December 31, 1999, we had approximately
$5,000 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.
As the result of a public offering of the Company's Common Stock and Purchase
Warrants, the Company realized proceeds of $400,000 subsequent to December 31,
1999. Such proceeds were released from escrow to the Company upon closing of the
offering on February 7, 2000. We may need to raise additional capital 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.
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 warrants, then existing
stockholders will experience dilution of their ownership interest. If additional
funds are raised by our issuance of debt or other equity instruments, we may be
subject to certain limitations on our operations, and issuance of such
securities may have rights senior to those of the then existing holders of
common stock.. 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 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.
Item 7......Financial Statements and Supplementary Data.
The financial statements listed in the accompanying Index at Item 13(a) are
filed as a part of this report.
Item 8......Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 9......Directors, Executive Officers and Control Persons; Compliance
with Section 16(6) of the Exchange Act.
The following sets forth the names and ages of our directors and executive
officers.
Name ............ Age Position
Trevor Newton..... 30 President, Secretary, Treasurer,
Chairman of the Board of
Directors, Chief Operating and
Operating and Executive
Officer
Fred Coombes...... 46 Vice President of
Corporate
Development and Director
John Tarves....... 45 Director
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. 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.
Item 10.....Executive Compensation.
The following table sets forth information with respect to compensation we paid
for the period ended December 31, 1999, 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, 1999.
Summary of Annual Compensation
Name and
Principal Position Year Salary
Trevor Newton, Chairman of
the Board, President, Secretary,
Treasurer and Chief Operating and
Executive Officer. 1998, $0
............ 1999 $55,000
Fred Coombes,
Vice President of Corporate
Development and Director 1998, $0
............ 1999 $0
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Messrs. Newton and Coombes, as founders of Stratabase, were issued 2,422,400 and
732,300 shares of the common stock, respectively, for nominal consideration
(i.e. $.0025 per share). With the exception of Mr. Newton, we have not, nor do
we intend to, in the foreseeable future, enter into any additional employment or
management 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.
For the year 2000, we will pay salaries to Messrs. Newton and Coombes at an
annual rate of $60,000 and $ 36,000, respectively. From February 1999 through
December 1999, Mr. Newton was paid $5,000 per month in as a management fee.
Mr. Coombes has not been paid any compensation in 1999, nor has he accrued
any compensation.
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.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's executive officers,
directors and persons who beneficially own more than 10% of a registered class
of the Company's equity securities to file with the Commission initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Such persons are required by Commission
regulations to furnish the Company with copies of all Section 16(a) forms they
filed.
To the Company's knowledge, based solely on the Company's review of Forms 3
(Initial Statement of Beneficial Ownership of Securities), Forms 4 (Statement of
Changes in Beneficial Ownership) and Forms 5 (Annual Statement of Changes in
Beneficial Ownership) furnished to the Company with respect to the fiscal year
ended December 31, 1999, no persons failed to file any such form in a timely
manner.
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
- -------- ---------------------------------------------------------------
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.
As of March 7, 2000, there were 6,353,772 shares of Common Stock outstanding and
approximately 87 shareholders.
Officers, Directors, Beneficial Beneficial
5% Shareholder No. of Shares Owenrship Ownership
Prior to the after the
Offering Offering
Trevor Newton 2,422,400 43.6% 38.1%
Mary Martin 1,464,072 26.4% 23.0%
Fred Coombes 732,300 13.2% 11.5%
John Tarves 25,000 0.5% 0.4%
New Horizons LP* 900,000 16.2% 14.2%
All Directors and
executive officers
as a Group (3 3,179,700 57.3% 50.0%
persons)**
- ------------------------------------------------------------------------------
* The general partner and a minority limited partner of New Horizons LP is Joe
MacDonald, who is married to Mary Martin.
** These shares are attributed to Trevor Newton, Fred Coombs and John Tarves.
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.
<PAGE>
Item 12. Certain Relationships and Related 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.
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, $.0025 per share.
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,
the majority 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.
In addition to the above, in January 2000, we issued to our previous legal
counsel, Thomas Boccieri, 10,000 shares of common stock in lieu of receiving an
additional $2,500 towards his legal fee.
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.
Director's Indemnification Agreements
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), judgments, 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), judgments, 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 registered
securities, 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.
<PAGE>
Item 13. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements and Independent Auditors' Report
Page
F-1
2. Exhibits
Incorporated herein by reference is a list of the Exhibits contained
in the Exhibit Index included in Item 13(c) below, numbered in
accordance with Item 601 of Regulation S-B.
(b) Reports on Form 8-K
None during the fourth calendar quarter ended December 31, 1999.
(c) INDEX TO EXHIBITS
Exhibit No. Description
3.1 Articles of Incorporation*
3.2 Amended Articles of Incorporation*
3.3 By-laws*
4.1 Class A Warrant Certificate*
4.2 Class B Warrant Certificate*
4.3 Class C Warrant Certificate*
10.1 Lease with SGS Enterprises*
27 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
<PAGE>
STRATABASE.COM
By: _____________________
Trevor Newton,
President, Secretary, Treasurer,
Chief Operating and Executive
Officer
<PAGE>
Date: March __, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
/S/Trevor Newton March __, 2000
- --------------------------------
Trevor Newton, Chairman of
the Board, President, Secretary,
Treasurer and Chief Operating
and Executive Officer; Director
/S/Fred Coombs March __, 2000
- ------------------------------
Fred Coombs, Vice President of
Corporate Development and Director
/S/John Tarves March __, 2000
- -------------------------------
John Tarves, Director
<PAGE>
MOSS ADAMS LLP
CERTIFIED PUBLIC ACCOUNTANTS
--------------
222 SW COLUMBIA CIRCLE, SUITE 400
PORTLAND, OR 97201
Phone (503) 242-1447
Fax (503) 274-2789
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 December 31, 1999, and the related statements of operations
and comprehensive loss, changes in shareholders' equity, and cash flows for the
year ended December 31, 1999, the period from inception (November 18, 1998) to
December 31, 1998, and the period from inception (November 18, 1998) to December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our 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 December 31, 1999, and the changes in its operations and
its cash flows for the year ended December 31, 1999, the period from inception
(November 18, 1998) to December 31, 1998, and the period from inception
(November 18, 1998) to December 31, 1999, in conformity with generally accepted
accounting principles.
/s/Moss Adams LLP
Portland, Oregon
March 14, 2000
F-1
<PAGE>
STRATABASE.COM
(a development stage company)
- ------------------------------------------------------------------------------
BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 4,696
Accounts receivable 32,965
GST receivable 2,172
-----------
Total current assets 39,833
-----------
OFFICE EQUIPMENT, at cost
Computer hardware 21,228
Computer software 2,634
Office equipment 1,950
Office furniture 2,077
Video production equipment 5,212
-----------
33,101
Accumulated depreciation and amortization (5,425)
-----------
-----------
27,676
-----------
Total assets $ 67,509
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 16,336
Accrued liabilities 33,201
-----------
Total current liabilities 49,537
-----------
COMMITMENTS AND CONTINGENCIES (Note 5)
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 (218,108)
Foreign currency translation adjustments (529)
-----------
Total shareholders' equity 17,972
-----------
Total liabilities and shareholders' equity $ 67,509
===========
</TABLE>
F-2
<PAGE>
STRATABASE.COM
(a development stage company)
------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 18, 1998) TO DECEMBER 31, 1999
<TABLE>
YEAR ENDED INCEPTION
DECEMBER 31, (NOVEMBER 18, 1998)
1999 1998 TO DECEMBER 31, 1999
<S> <C> <C> <C>
REVENUE $ 41,813 $ - $ 41,813
OPERATING EXPENSES
Community site development 57,073 - 57,073
Internet connectivity 10,085 - 10,085
Web related services 5,578 - 5,578
Video production and encoding 4,946 - 4,946
Network administration 2,133 - 2,133
------------ ------------- ------------------------
Total operating expenses 79,815 - 79,815
------------ ------------- ------------------------
Excess of operating expenses over revenues (38,002) - (38,002)
------------ ------------- ------------------------
GENERAL AND ADMINISTRATIVE EXPENSES
Management fees 55,000 - 55,000
Legal fees 29,342 - 29,342
Accounting 16,294 - 16,294
Advertising 12,855 - 12,855
Office 11,837 - 11,837
Consulting fees 11,456 - 11,456
Rent 10,242 - 10,242
Wages and benefits 7,057 - 7,057
Program and site design 5,865 - 5,865
Depreciation and amortization 5,425 - 5,425
Licenses and dues 4,980 - 4,980
Travel 3,483 - 3,483
Telecommunications 2,643 - 2,643
Professional development 2,224 - 2,224
Insurance expense 1,923 - 1,923
Other expenses 1,966 - 1,966
------------ ------------- ------------------------
Total general and administrative expenses 182,592 - 182,592
------------ ------------- ------------------------
============ ============= ========================
</TABLE>
F-3
<PAGE>
STRATABASE.COM
(a development stage company)
------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 18, 1998) TO DECEMBER 31, 1999
<TABLE>
YEAR ENDED INCEPTION
DECEMBER 31, (NOVEMBER 18, 1998)
1999 1998 TO DECEMBER 31, 1999
<S> <C> <C> <C>
INTEREST INCOME $ 2,486 $ - $ 2,486
------------ ------------- ------------------------
NET LOSS IN THE DEVELOPMENT STAGE (218,108) - (218,108)
OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustments (529) - (529)
------------ ------------- ------------------------
COMPREHENSIVE LOSS $ (218,637) $ - $ (218,637)
============ ============= ========================
BASIC AND DILUTED LOSS PER SHARE OF
COMMON STOCK $ 0.04 $ - $ 0.04
</TABLE>
F-4
<PAGE>
STRATABASE.COM
(a development stage company)
- ------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 18, 1998) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED ACCUMULATED
ADDITIONAL IN THE OTHER TOTAL
COMMON STOCK PAID-IN DEVELOPMENT COMPREHENSIVE SHAREHOLDERS'
-----------------------------
SHARES AMOUNT CAPITAL STAGE LOSS EQUITY
--------------- ---------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
December 31, 1998 - $ - $ - $ - $ - $ -
Issuance of common
stock at $.0025 per
share (February 1999) 4,643,772 4,644 6,965 - - 11,609
Issuance of common
stock at $.25 per
share (March 1999) 900,000 900 224,100 - - 225,000
Net loss and comprehen-
sive loss in the deve-
lopment stage - - - (218,108) (529) (218,637)
--------------- ---------- -------------- -------------- --------------- --------------
BALANCE,
December 31, 1999 5,543,772 $ 5,544 $ 231,065 $ (218,108) $ (529) $ 17,972
=============== ========== ============== ================ =============== ==============
</TABLE>
F-5
<PAGE>
STRATABASE.COM
(a development stage company)
- ------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (NOVEMBER 18, 1998) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED INCEPTION
DECEMBER 31, (NOVEMBER 18, 1998)
----------- -----------
1999 1998 TO DECEMBER 31, 1999
----------- ----------- ----------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss in the development stage $ (218,108) $ - $ (218,108)
Depreciation and amortization 5,425 - 5,425
Adjustments to reconcile net loss to net cash from
operating activities:
Increase in assets and liabilities:
Accounts receivable (32,965) - (32,965)
GST receivable (2,172) - (2,172)
Accounts payable 16,336 - 16,336
Accrued liabilities 33,201 - 33,201
----------- ----------- ----------------------
Net cash from operating activities (198,283) - (198,283)
----------- ----------- ----------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of office equipment (33,101) - (33,101)
----------- ----------- ----------------------
Net cash from investing activities (33,101) - (33,101)
----------- ----------- ----------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 236,609 - 236,609
----------- ----------- ----------------------
Net cash from financing activities 236,609 - 236,609
----------- ----------- ----------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (529) - (529)
----------- ----------- ----------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,696 - 4,696
CASH AND CASH EQUIVALENTS, beginning of period - - -
----------- ----------- ----------------------
CASH AND CASH EQUIVALENTS, end of period $ 4,696 $ - $ 4,696
=========== =========== ======================
</TABLE>
<PAGE>
STRATABASE.COM
- ------------------------------------------------------------------------------
(a development stage company)
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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, 1998) to December 31, 1999,
the Company has been in the development stage. Substantially, all
activity during this period was conducted in 1999 and has been devoted
to the raising of equity capital and development of a long-term
business plan. The Company has adopted December 31st as the closing
date 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 are 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 exists.
Software development costs - The Company capitalizes certain software
development and implementation costs. Development and implementation
costs are expensed until the Company determines 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 remaining estimated
useful lives, generally not exceeding five years. To date, such costs
are not significant. 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 one to five years. Depreciation
expense in the amount of $5,425 was recognized for the period from
inception to December 31, 1999.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)
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 between
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.
Translation gains or losses resulting from the changes in the exchange
rates are accumulated in a separate component of shareholders' equity.
All amounts included in the accompanying financial statements 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 shareholders by the weighted-average number of
common shares outstanding for the period (5,404,801). 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 or resulted in the issuance of 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.
<PAGE>
NOTE 3 - SHAREHOLDER TRANSACTIONS
For the period from inception (November 18, 1998) through December 31,
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 $.0025 per share to New Horizons
LLP, a New York venture capital firm.
NOTE 4 - INCOME TAXES
As of December 31, 1999, the Company had available to offset future
taxable income, net operating loss carryforwards of approximately
$207,000. The carryforwards will expire in 2016 unless utilized in
earlier years.
Deferred income taxes represent the tax effect of differences in timing
between financial income and taxable income. The net deferred tax
benefits in the accompanying balance sheet include the following
components:
Deferred tax assets (liabilities):
Net operating loss carryforward $ 70,261
Accumulated depreciation (1,000)
Accrual to cash adjustment 4,896
-------------
74,157
-------------
Valuation allowance (74,157)
-------------
Net deferred tax asset $ -
=============
The valuation allowance is provided since it is uncertain if the
Company will be able to utilize existing net operating loss
carryfowards in future periods.
<PAGE>
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Lease commitments - As of December 31, 1999, the Company leased office
space in Abbotsford and Vancouver, British Columbia, Canada.
Future minimum lease payments associated with office space are as
follows:
YEARS ENDING DECEMBER 31,
-------------------------------------
2000 $ 8,563
2001 1,185
-------------
$ 9,748
=============
For the period ending December 31, 1999, rent expense, net of sublease
income, was $10,242.
Management fees - The Company has agreed to pay its President a
management fee of $5,000 a month commencing February 1999. Compensation
of $55,000 through December 31, 1999, has been recorded as management
fees in the accompanying financial statements.
Legal contingencies - The Company may become involved in certain claims
and legal actions arising in the ordinary course of business. In the
opinion of management, after consultation with legal counsel, there are
no current matters expected to have a material adverse effect on the
financial condition of the Company
Year 2000 matter - Because of the unprecedented nature of the Year 2000
issue, its effects, if any, may not be identified until a future date.
Management cannot assure that the Company has identified all Year 2000
issues, that the Company's remediation efforts have been successful in
whole or in part, or that parties with whom the Company does business
will not be significantly impacted by Year 2000 issues.
<PAGE>
NOTE 6 - SUBSEQUENT EVENT
On February 7, 2000, the Company closed offering for 800,000 investment
units. Each unit had a public offering price of $.50, and consisted of
one share of common stock and one each of Class A, B, and C purchase
warrants. The warrants, Classes A, B, and C, may be exercised at $1,
$3, and $5, respectively, at six-month, 12-month, and 18-month periods,
respectively, commencing on the date of the prospectus (February 7,
2000). Total proceeds from the public offering of $400,000, were
released to the Company by the escrow agent subsequent to the closing
of the offering. Potential additional proceeds from the exercise of
warrants, if any, could be as much as $7,200,000.
* Incorporated by reference to the Issuer's Registration Statement on Form SB-2
dated August 12, 1999
