SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-27213
POPSTAR COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
NEVADA 88-0385920
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
107 EAST 3RD AVENUE
VANCOUVER, BC CANADA V5T 1C7
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (604) 872-6608
--------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Number of shares of Common Stock of $0.001 par value outstanding of the issuer
as of April 30, 2000: 21,887,500
Transitional Small Business Disclosure Format (Check one); Yes [ ] No [X]
<PAGE>
POPSTAR COMMUNICATIONS, INC.
<TABLE>
Page
<S> <C>
PART I. FINANCIAL INFORMATION ..............................................................3
Item 1. Financial Statements ...............................................................3
Balance Sheets at March 31, 2000 and December 31, 1999 .............................3
Statements of Operations for the Three months ended March 31, 2000
and 1999 ...........................................................................4
Statements of Cash Flows for the Three months ended March 31, 2000
and 1999 ...........................................................................5
Notes to Interim Financial Statements ..............................................6
Item 2. Plan of Operation .................................................................13
PART II. OTHER INFORMATION .................................................................17
Item 1. Legal Proceedings .................................................................17
Item 2. Changes in Securities .............................................................17
Item 3. Defaults Upon Senior Securities ...................................................18
Item 4. Submission of Matters to a Vote of Security Holders ...............................18
Item 5. Other Information .................................................................18
Item 6. Exhibits and Reports on Form 8-K ..................................................18
Signature ...................................................................................19
</TABLE>
2
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ITEM 1. FINANCIAL STATEMENTS
POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)
Consolidated Balance Sheets
(Expressed in U.S. Dollars)
<TABLE>
- -------------------------------------------------------------------------------------------
March 31, December 31,
2000 1999
(unaudited)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,442,070 $ 23,745
Short-term investments 1,300,000 -
Accounts receivable 36,665 -
Note receivable from a common controlled company (note 3) 900,000 1,000,000
Prepaid expenses 22,979 2,739
-----------------------------------------------------------------------------------------
Total current assets 7,701,714 1,026,484
Equipment 62,606 12,124
- -------------------------------------------------------------------------------------------
Total assets $ 7,764,320 $ 1,038,608
- -------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 210,805 $ 195,569
Payable to companies with common
controlled companies (note 4) 108,007 230,227
- -------------------------------------------------------------------------------------------
Total current liabilities 318,812 425,796
Shareholders' equity:
Capital stock (note 5):
Authorized: 50,000,000 common voting shares,
Par value of $0.001 per share
Issued and outstanding: 21,797,500 common
voting shares 10,112,8812 2,654,548
Deficit accumulated in the development stage (2,667,373) (2,041,736)
- -------------------------------------------------------------------------------------------
Total shareholders' equity 7,445,508 612,812
Operations (note 1)
Commitment (note 7)
Total liabilities and shareholders' equity $ 7,764,320 $ 1,038,608
- -------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
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POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)
Consolidated Statements of Operations and Deficit
(Expressed in U.S. Dollars)
<TABLE>
- --------------------------------------------------------------------------------------------------------
Period from
incorporation on
Three months Three months December 17,
ended ended 1998 to
March 31, March 31, March 31,
2000 1999 2000
(unaudited) (unaudited) (unaudited)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Interest income (note 3) $ 59,270 $ - $ 120,978
Expenses:
Accounting and audit fees 8,147 - 28,381
Amortization 3,765 - 3,765
Bank interest and charges 3,463 - 6,038
Commission - 72,916 72,916
Foreign exchange loss/(gain) (1,900) - (814)
Legal and professional fees 11,599 129,620 307,789
License fee - - 25,000
Management fee 6,897 - 8,847
Office 36,382 750 57,734
Rent (note 6(c)) 29,844 1,500 58,420
Salaries and wages 185,634 1,500 279,005
Sales and marketing 459 - 33,722
Travel and entertainment 35,074 3,371 73,766
Related party transactions:
License fee (note 6(a)) 150,000 89,247 541,074
Management fees (note 6(b)) - - 366,578
Administrative and office salaries (note 6(b)) 7,643 - 79,995
Sales and marketing fees (note 6(b)) - - 100,027
Software development (note 6(b)) 207,900 180,807 611,338
Travel and entertainment (note 6(b)) - - 119,744
- --------------------------------------------------------------------------------------------------------
Total expenses 684,907 479,711 2,773,325
- --------------------------------------------------------------------------------------------------------
Net loss before income taxes 625,637 479,711 2,652,347
Income taxes - - 15,026
- --------------------------------------------------------------------------------------------------------
Net loss 625,637 479,711 2,667,373
Deficit accumulated during the development stage,
beginning of period 2,041,736 - -
- --------------------------------------------------------------------------------------------------------
Deficit accumulated during the development stage,
end of period $ 2,667,373 $ 479,711 $ 2,667,373
- --------------------------------------------------------------------------------------------------------
Basic and diluted loss per weighted
share (note 2(g)) $ 0.03 $ 0.06 $ 0.17
- --------------------------------------------------------------------------------------------------------
Weighted average number of common
shares outstanding 19,630,833 8,400,000 15,825,333
- --------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
<TABLE>
- ----------------------------------------------------------------------------------------------------------
Period from
incorporation on
Three months Three months December 17,
ended ended 1998 to
March 31, March 31, March 31,
2000 1999 2000
(unaudited) (unaudited) (unaudited)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (625,637) $ (479,711) $ (2,667,373)
Non-cash items and transactions:
Common shares issued in consideration
for legal services rendered - - 22,500
Net costs deemed to be issued on
recapitalization - - (2,517)
Amortization 3,765 - 3,765
Changes in non-cash operating working capital:
Account receivable (36,665) - (36,665)
Prepaid expenses (20,240) - (22,979)
Accounts payable and accrued liabilities 15,236 208,833 210,805
------------------------------------------------------------------------------------------------------
Total cash flows from operating activities (663,541) (270,878) (2,492,464)
Cash flows from financing activities:
Payable to common controlled companies (122,220) 270,879 108,007
Share subscription receivable - (1,458,333) -
Issuance of capital stock 7,458,333 1,467,899 10,092,898
--------------------------------------------------------------------------------------------------------
Total cash flows from financing activities 7,336,113 280,445 10,200,905
Cash flows from investing activities:
Purchase of short-term deposits (1,300,000) - (1,300,000)
Note receivable from a company with common
controlling shareholders 100,000 - (900,000)
Purchase of equipment (54,247) - (66,371)
--------------------------------------------------------------------------------------------------------
Total cash flows from investing activities (1,254,247) - (2,266,371)
- ----------------------------------------------------------------------------------------------------------
Increase/(decrease) in cash and cash
equivalents 5,418,325 9,567 5,442,070
Cash and cash equivalents, beginning of period 23,745 - -
- ----------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 5,442,070 $ 9,567 $ 5,442,070
- ----------------------------------------------------------------------------------------------------------
Supplementary information:
Income taxes paid $ - $ - $ 15,026
Interest expense paid 2,087 - 4,662
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidate financial statements.
5
<PAGE>
POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Three months ended March 31, 2000
================================================================================
1. Operations:
The Company was incorporated on June 19, 1995 under the laws of the State
of Nevada as Cherokee Leather, Inc. On May 17, 1999, the Company changed
its name to POPstar Communications, Inc. The Company is a provider of
Internet based facsimile transmission technology and is in the process of
field testing its services, as such, it is considered a development stage
company.
On July 20, 1999, the Company acquired all the issued and outstanding
common and preferred shares of POPstar Global Communications Inc.
("POPstar") in exchange for 12,875,000 common shares of the Company with
the management of POPstar continuing to manage operations for the combined
entity. The common shares of the Company issued in exchange for the shares
of POPstar cannot be sold until July 20, 2000 except pursuant to an
effective registration statement under the United States federal or
applicable state securities laws or upon the express written agreement of
the Company. As the Company had no significant operations to the date of
the acquisition, the transaction was accounted for as a capital
transaction, whereby POPstar was considered to have issued common shares
for consideration equal to the net monetary assets of the Company.
Accordingly, these consolidated financial statements reflect the assets,
liabilities, revenues and expenses of POPstar for all periods prior to July
20, 1999 consolidated with those of the Company from the date of the
capital transaction.
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course
of business. At March 31, 2000, the Company did not have an established
source of revenue sufficient to cover its operating costs and to allow it
to generate sufficient cash flows to fund operations and meet its
liabilities as they become due. During the period, the Company issued
shares for cash (note 5(a)) and commenced development of certain licensed
software (note 6(a)). Management anticipates that cash will continue to be
available from its shareholders, a company with common controlling
shareholders (note 3), or from additional security issuances to third
parties to fund operating requirements for the next fiscal year. There is
no guarantee that the licensed software will generate revenues sufficient
to cover its operating costs or that proceeds received from the issuance of
shares or other sources will maintain the Company until that time.
6
<PAGE>
POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements, page 2
(Expressed in U.S. Dollars)
Three months ended March 31, 2000
================================================================================
2. Significant accounting policies:
(a) Basis of presentation:
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, POPstar, POPstar
Communications Asia Pacific Ltd. ("POPstar Asia") and POPstar
Communications Canada Corp. All intercompany balances and transactions
have been eliminated.
As the Company has not commenced commercial operations during the
period, for accounting purposes it is considered to be a development
stage enterprise.
The financial information as at March 31, 2000 and for the three month
periods ended March 31, 2000 and 1999 is unaudited. However, such
financial information reflects all adjustments (consisting solely of
normal recurring adjustments) necessary for a fair presentation of the
results of operations for the periods presented.
(b) Foreign operations:
The functional currency of the Company's wholly-owned subsidiaries
outside of the United States is the United States dollar. Monetary
items of those operations that are originally denominated in foreign
currencies are translated into United States dollars at the rate of
exchange in effect of the balance sheet date and non-monetary items
are translated at historical exchange rates. Revenues and expenses are
translated at the rate of exchange in effect on the dates they occur.
Depreciation or amortization of assets translated at historical
exchange rates are translated at the same exchange rates as the assets
to which they relate.
Exchange gains and losses arising on the translation of monetary items
are included in income for the current period.
(c) Equipment:
Equipment is stated at cost. Depreciation is provided on a
straight-line basis at a rate of 25% per annum.
(d) Software development:
Software development costs are expensed as incurred unless they meet
generally accepted accounting criteria for deferral and amortization.
The Company assesses whether it has met the relevant criteria for
deferral and amortization at each reporting date. No such expenditures
have met these criteria during the period ended March 31, 2000.
(e) Income taxes:
Income taxes are provided for using the asset and liability method of
accounting. A deferred tax asset or liability is recorded for all
temporary differences between the carrying values of assets and
liabilities for financial and tax reporting purposes and of tax loss
carryforwards based on the enacted tax rates in the expected period of
reversal of the difference.
7
<PAGE>
POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements, page 3
(Expressed in U.S. Dollars)
Three months ended March 31, 2000
================================================================================
2. Significant accounting policies (continued):
(e) Income taxes (continued):
A valuation allowance is provided to the extent that it is considered
more likely than not that the deferred tax assets arising due to loss
carryforwards or temporary differences will not be realized.
(f) Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingencies at the date of the
consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period.
Assumptions underlying these estimates are limited by the availability
of reliable data and the uncertainty of predictions concerning future
events. Consequently, the estimates and assumptions made do not
necessarily result in a precise determination of reported amounts.
Actual results could differ from those estimates.
(g) Loss per share:
Basic loss per share is computed by dividing losses attributable to
the common shareholders by the weighted average number of common
shares outstanding during the period. Under the capitalization
accounting described in note 1, the shares issued to the former
shareholders of POPstar are considered to have been outstanding for
all periods presented proportionate to their date of issuance. Diluted
loss per share reflects per share amounts that would have resulted if
dilutive securities, such as the common share options, had been
converted to common stock at the later of the beginning of the period
or their date of issuance.
The losses attributable to the common shareholders for the period is
represented by the net loss of $625,637. The weighted average number
of common shares outstanding during the period is calculated as
follows:
<TABLE>
------------------------------------------------------------------------------------
Weighted
Number number of
of common of shares
shares issued outstanding
------------------------------------------------------------------------------------
<S> <C> <C>
Shares outstanding, December 31, 1999 19,447,500 19,447,500
Shares cancelled during the period (2,400,000) (2,400,000)
Shares issued during the period 4,750,000 2,583,333
------------------------------------------------------------------------------------
21,797,500 19,630,833
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</TABLE>
8
<PAGE>
POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements, page 4
(Expressed in U.S. Dollars)
Three months ended March 31, 2000
================================================================================
2. Significant accounting policies (continued):
(g) Loss per share (continued):
As at March 31, 2000, there were outstanding options to acquire
3,757,500 common shares of the Company (note 5(b)). These are not
included in the computation of diluted loss per share because to do so
would have been anti-dilutive for the periods presented.
(h) Stock based compensation:
Stock options granted in exchange for employee services rendered have
been accounted for using the intrinsic value based method whereby the
excess, if any, of the quoted market price of the stock at the grant
date over the exercise price is recognized in the period of granting.
The Company has elected to adopt the disclosure only provision of
Statement of Financial Accounting Standards No. 123 ("FAS 123") with
respect to option grants to employees.
Stock based compensation awarded as a result of stock options granted
to non-employees are accounted for using the fair value based method
of accounting. The fair value is determined using the option-pricing
model that takes into account the stock price at the grant date, the
exercise price, the expected life of the option, the volatility of the
underlying stock and the expected dividends on it, and the risk-free
interest rate over the expected life of the option. Any compensation
is recognized over the service period of the stock options being
granted, represented by the vesting period.
Stock issued in exchange for services rendered have been accounted for
based on the estimated fair value of the equity instruments at the
date of issuance.
3. Note receivable from a company with common controlling shareholders:
The note receivable from TGI Technologies Ltd. ("TGI") is unsecured and
bears interest at 8% per annum. Both TGI and the Company have greater than
50% of their respective voting shares owned by the same group of
shareholders. The funds were loaned to TGI on March 30, 1999 from monies
received on the issuance of shares of the Company. The principal and any
outstanding accrued interest are due on the earlier of demand by the
Company or March 30, 2001. During the period, the Company received interest
income of $17,860 from TGI.
4. Payable to companies with common controlling shareholders:
The payables to companies with common controlling shareholders are
non-interest bearing, unsecured and have no specific terms of repayment.
9
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POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements, page 5
(Expressed in U.S. Dollars)
Three months ended March 31, 2000
================================================================================
5. Capital stock:
(a) Common shares:
<TABLE>
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Shares Amount
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, December 31, 1999 19,447,500 $ 2,654,548
Common shares cancelled (2,400,000) -
Common shares issued for cash at $2.00 per share 3,000,000 6,000,000
Common shares issued for cash at $0.833333 per share 1,750,000 1,458,333
------------------------------------------------------------------------------------------------------
Balance, March 31, 2000 21,797,500 $ 10,112,881
------------------------------------------------------------------------------------------------------
</TABLE>
(b) Options:
(i) Stock-based compensation:
In 1999, the Company adopted a stock option plan (the "Plan") pursuant
to which the Company may grant stock options to management, employees
and contractors. The Plan authorizes grants of options to purchase up
to 757,500 shares of authorized but unissued common stock. During the
period, the Company authorized an additional 1,247,250 common shares
under the Plan to be eligible to be granted as options. Stock options
are granted with an exercise price equal to the stock's market value
at the date of the grant. The stock options have various periods to
expiry as noted in the tables below.
<TABLE>
----------------------------------------------------------------------------------------
options Exercise
outstanding price
----------------------------------------------------------------------------------------
<S> <C> <C>
Beginning balance, December 31, 1999 757,500 $ 0.39
Granted, during the period - -
----------------------------------------------------------------------------------------
Outstanding and exercisable, March 31, 2000 757,500 $ 0.39
----------------------------------------------------------------------------------------
</TABLE>
Subsequent to March 31, 2000, the Company granted to management,
employees and contractors options to purchase up to 412,000 shares of
common stock, all at an exercise price of $2.00 per share.
10
<PAGE>
POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements, page 6
(Expressed in U.S. Dollars)
Three months ended March 31, 2000
================================================================================
5. Capital stock (continued):
(b) Options (continued):
The following table summarizes options outstanding and exercisable at
March 31, 2000:
<TABLE>
Outstanding
------------------------------------
Weighted Number of
Exercise average period shares
prices Number remaining to expiry exercisable
-------------------------------------------------------------------------------------------------------
(months)
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$0.01 467,500 18.4 127,500
$1.00 290,000 25.3 40,000
-------------------------------------------------------------------------------------------------------
757,500 167,500
-------------------------------------------------------------------------------------------------------
</TABLE>
Subsequent to March 31, 2000, the Company issued 90,000 common shares
of the Company at a price of $0.01 per common share as a result of the
exercise of options under the Company's stock option plan.
(ii) Other:
During the period, the Company granted options to three investors to
purchase up to an aggregate of 3,000,000 shares of common stock at an
exercise price of $2.00 per share.
6. Related party transactions:
Related party transactions not disclosed elsewhere in these consolidated
financial statements are as follows:
(a) On January 11, 1999, the Company entered into a Licensing Agreement
with TGI, a company with common controlling shareholders, whereby the
Company has been granted the exclusive commercial exploitation rights
to certain Internet fax server software (the "Software"). Under this
license, the Company has agreed to pay a percentage of the net
revenues resulting from the commercial activities of the Software,
subject to a specified annual minimum, as follows:
11
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POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements, page 7
(Expressed in U.S. Dollars)
Three months ended March 31, 2000
================================================================================
6. Related party transactions (continued):
------------------------------------------------------------------------
Calendar Percentage Annual
year of net sales minimum
------------------------------------------------------------------------
2000 6% $ 600,000
2001 4% 500,000
2002 2% 500,000
------------------------------------------------------------------------
The agreement provides that the Company can offset any amounts owing
to TGI against the note receivable disclosed in note 4. During the
period, the offset amount was $100,000. During the period, the Company
recorded expenditures of $150,000 in license fees to TGI, being the
annual minimum prorated for the three-month period ended March 31,
2000.
(b) The Company has also entered into an agreement with TGI, a company
under common control, whereby TGI will provide technical assistance,
software development, marketing, management and other services, as
required. The charge is based on TGI's direct and indirect costs of
the services provided plus 15%.
During the period, the Company incurred service fees, including the
15%, under this agreement totalling $215,543.
(c) During the period, POPstar Asia leased office space for its office in
Hong Kong on a month to month basis for $2,000 per month from Easewell
Management Ltd. pursuant to a leasing arrangement. A director of
Easewell Management Ltd. is a director of the Company.
During the period, POPstar Asia also leased office space for its
office in Beijing, The People's Republic of China, on a month to month
basis for $2,200 per month pursuant to a leasing arrangement from a
director of the Company.
During the period, POPstar Communications Canada Corp. leased office
space for its office in Vancouver, Canada on a month to month basis
for CDN$4,489 per month from Tradeglobe Consulting Ltd. pursuant to a
leasing arrangement. Two directors of Tradeglobe Consulting Ltd. are
directors of the Company.
7. Commitment:
On August 10, 1999, the Company entered into a non-exclusive, royalty free
Service Agreement with TransNexus, LLC, a company incorporated under the
laws of the State of Georgia. Under the terms of the Agreement, TransNexus,
LLC will provide financial transaction settlement services and billing
information to Internet Service Providers using the Company's technology in
exchange for a percentage of the billings. The charging rates for these
arrangement have been established through negotiation.
12
<PAGE>
ITEM 2. PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS:
This Quarterly Report on Form 10-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Statements in this filing about our future
results, level of activity, performance, goals or achievements or other future
events constitute forward-looking statements. These statements involve known and
unkown risks, uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in our forward-looking
statements.
In some cases, you can identify forward-looking statements by our use of words
such as "may," "will," "should," "could," "expect," "plan," "intend,"
"anticipate," "believe," "estimate," "predict," "potential," " or "continue" or
the negative or other variations of these words, or other comparable words or
phrases. The Company intends that such forward-looking statements be subject to
the safe harbors created by these statutes. The forward-looking statements
included herein are based on current beliefs and expectations that involve a
number of risks and uncertainties. Accordingly, to the extent that this
Quarterly Report contains forward-looking statements regarding the financial
condition, operating results, business prospects or any other aspect of the
Company, please be advised that the Company's actual financial condition,
operating results and business performance may differ materially from that
projected or estimated by the Company in forward-looking statements. The
differences may be caused by a variety of factors, including but not limited to
adverse economic conditions, intense competition, including intensification of
price competition and entry of new competitors and products, adverse federal,
state and local government regulation, inadequate capital, unexpected costs and
operating deficits, increases in general and administrative costs, lower sales
and revenues than forecast, loss of customers, customer returns of products sold
to them by the Company, termination of contracts, loss of supplies,
technological obsolescence of the Company's products, technical problems with
the Company's products, price increases for supplies and components, inability
to raise prices, failure to obtain new customers, litigation and administrative
proceedings involving the Company, the possible acquisition of new businesses
that result in operating losses or that do not perform as anticipated, resulting
in unanticipated losses, the possible fluctuation and volatility of the
Company's operating results, financial condition and stock price, inability of
the Company to continue as a going concern, losses incurred in litigating and
settling cases, adverse publicity and news coverage, inability to carry out
marketing and sales plans, loss or retirement of key executives, changes in
interest rates, inflationary factors and other specific risks that may be
alluded to in this Quarterly Report or in other reports issued by the Company.
In addition, the business and operations of the Company are subject to
substantial risks that increase the uncertainty inherent in the forward-looking
statements. The inclusion of forward-looking statements in this Quarterly Report
should not be regarded as a representation by the Company or any other person
that the objectives or plans of the Company will be achieved. Forward-looking
statements are based on management's beliefs, expectations and projections on
the date they are made. The Company assumes no obligation to update
forward-looking statements if management's beliefs, expectations or projections
or other circumstances should change. Investors should not place undue reliance
on forward-looking statements.
GENERAL OVERVIEW
POPstar Communications, Inc. (the "Company" or "POPstar"), is a development
stage Internet technology company currently in the process of developing
Internet based facsimile transmission technology. The Company is currently in
the process of field testing its technology and intends to market its service to
Internet Service Providers ("ISPs") around the world. POPstar's technology will
equip ISPs with the ability to provide Internet based facsimile transmission
services to their end-users. POPstar's software is provided free of charge to
ISPs in return for a share of all revenue generated from the use of its
software.
The Company was originally incorporated under the laws of the State of Nevada on
June 19, 1995 as Cherokee Leather, Inc. Between 1995 to 1999, the Company was
inactive. The Company acquired all of the outstanding common stock of POPstar
Global Communications, Inc., a British Virgin Island Company ("POPstar-BVI") on
July 20, 1999. In conjunction with the acquisition, the Company adopted the
business plan of POPstar-Global and changed its name to POPstar Communications,
Inc. POPstar is a developer
13
<PAGE>
of Internet-based facsimile transmission technology which will allow ISPs in
various parts of the world to cooperate in the transport and delivery of
documents, using the Internet instead of conventional long distance telephone
networks ("LD"). POPstar's technology will allow ISPs to offer to their
end-users, the ability to transmit and receive documents from a personal
computer to or from any conventional facsimile ("Fax") machine located
throughout the world using the Internet as opposed to LD networks. Management
believes that the Company's technology will offer end-users several significant
advantages over conventional Fax machine and computer Fax modem transmission of
Faxes over LD networks, in that POPstar's technology allows end-users to
transmit Faxes through the use of a simple browser interface (such as Microsoft
Explorer or Netscape Navigator) without the need or costs for conventional
telephone lines or additional hardware. The Company believes that these features
will offer competitive advantages for businesses which use personal computers
connected to the Internet via local area networks ("LANs"), as well as the
growing number of small office /home office users connected to the Internet via
cable or digital subscriber line access (known as "Broadband" connections) and
for business travelers desiring to transmit Fax documents while traveling
throughout the world.
PLAN OF OPERATION
The Company is at the implementation phase of its business plan. The market
launch of the POPstar Global Partnership Program is currently in process. The
Company plans to introduce services beginning with fax over the Internet, into
the North American, Asia Pacific and Western Europe markets initially. Other
services planned to be introduced include fax-to-email and email-to-fax services
in the second quarter of 2000, voice over IP integration and unified messaging
services in the third quarter of 2000. The Company's current initial partners
are located in North America, Europe and Asia and provide the Company with an
early global presence. The Company aims to provide a full range of IP products
and services to the global, business-to-business, sector of the market.
Throughout the fiscal period ended December 31, 1999, the Company focused its
efforts on the development of its Enroute Version 2.3 software product. The
development of the Company's Enroute Version 2.3 software product was completed
at the end of January 2000. The Company's Enroute Version 2.3 product takes
advantage of POPstar's distributed fax server technology to deliver fax traffic
across the public Internet to users around the globe. The server runs on Solaris
UNIX platform, the clients are Web based and the file conversion utilities that
convert documents to image (TIFF) format runs on NT operating systems. The
Enroute Version 2.3 product development supports both single and double byte
characters, making it suitable for use also in the Asian language markets. Other
Enroute Version 2.3 developments provide secure compatibility with the IP Open
Settlement Protocol standards. The Open Settlement Protocol allows for call
clearing and settlement between independent partners. To March 31, 2000, the
Company has earned no revenue from its Enroute Version 3.2 software product.
Management anticipates that research and development expenditures for the fiscal
period ending December 31, 2000 will be approximately $1,000,000, of which
$207,900 was incurred in the quarter ended March 31, 2000.
The current research and development focus will be as follows:
- - Version 2.4 of Enroute in the short term.
- - Version 3.0 of Enroute in the long term.
The Enroute Version 2.4 development will focus on needed enhancements to Version
2.3, which will include the development of a new gatekeeper to replace the least
cost routing daemon used in Version 2.3, the implementation of a secure socket
(SSL) program throughout the server to provide security features, a change in
user authorization procedures, a real-time call record reporting gateway to
established Internet billing systems and a secure e-mail to fax service.
Management anticipates that the Enroute Version 2.4 product will be released
before the end of the second quarter of 2000 and add e-commerce functionality to
the Company's product.
The development of the Enroute Version 3.0 Internet Protocol unified messaging
product will continue throughout 2000. Management anticipates that the first
prototype of Version 3.0 of Enroute will be built and tested at the end of the
first quarter in 2000. Management expects the prototype to support the
14
<PAGE>
storage and retrieval of voice, fax and e-mail messages in and from one mailbox,
access to and from the mailbox via the telephone network and the Internet.
POPstar products are Web based so that all messages are accessible to authorized
users from any place in the world with Internet access.
The Version 3.0 Internet Protocol unified messaging product is being developed
to run across all platforms and operating systems. Management anticipates this
development to include a series of applications to run on UNIX, NT, Linux and
other operating systems and platforms without having to make operating system
specific changes to the applications. The development targets the carrier and
backbone markets: the product will be designed to scale to meet the needs of the
target carriers. The cross-platform development is supported by an in-house
developed library of universal messaging objects (UMO) written in C++ computing
language. The UMO is being developed to allow the Company to adapt quickly to
the rapid changes taking place in the exploding Internet market. The UMO is
designed to allow all applications to be written just once for UNIX, NT and
Linux compatibility.
The first major release of the new series will be Version 3.1, which is
scheduled for the end of the third quarter in 2000. The Company anticipates this
release to provide commercial grade unified messaging services to PSTN and
desktop users. The Version 3.1 product will take advantage of the outgoing
services provided through the Version 2.4 product.
The capital purchases scheduled for the fiscal period ending December 31, 2000
are expected to be in the order of $1,000,000, split between hardware and
software at $750,000 and office furniture and equipment at $250,000. The
hardware is needed to support primarily POPstar's own global gateways in Los
Angeles and Vancouver and on a lower scale to help seed the market in other
countries.
The number of employees is expected to grow rapidly over the course of the
fiscal period ending December 31, 2000 from the current 22 to a projected number
of 45. Global offices are to be staffed in the UK, Canada and the US, also in
Hong Kong, China and Singapore. Major growth is expected in customer sales and
support services on a 7 days a week, 24 hours a day basis.
Liquidity
As at March 31, 2000, the Company's cash and short-term deposits amounted to
$6,742,070. During the period from January 1, 2000 to March 31, 2000, the
Company raised $7,458,333 from the issuance of capital stock, incurred an
additional deficit of $625,637 in developing its services, made $1,300,000 of
short-term deposits and purchased $54,247 of capital assets.
The Company's cash position less known commitments and contingencies as of March
31, 2000 is expected to be adequate to fund the Company's on-going operations
during the 2000 fiscal year. Accordingly, the Company does not anticipate the
need to raise additional funds during the next 12 months.
The Company's liquidity will be reduced as amounts are expended for continuing
research and development, expansion of sales and marketing activities and
development of its administrative functions. Additionally, the Company's
liquidity will also be reduced as amounts are used for purchases of capital
assets. In addition, the Company continues to incur operating losses and will
continue to need additional working capital to fund its operations, research and
development, and marketing efforts for the 2001 fiscal year. As a result, the
Company will be required to raise additional capital to finance its operations
for the 2001 fiscal year and beyond. The Company intends to raise such
additional funding through the sale of equity or convertible debt securities.
However, there can be no assurance that the Company will be able to raise such
additional capital when needed, or on terms commercially favorable to the
Company, if at all. The sale of equity or convertible debt securities may result
in additional material dilution to the Company's stockholders.
If the company chooses to speed up its current growth by acquiring additional
unified messaging companies, then significant additional capital in addition to
the amounts detailed above will be required to meet these objectives. In that
case, the Company will be required to raise additional funding though the sale
of equity or convertible debt securities. There can be no assurance the Company
will be able to
15
<PAGE>
raise sufficient capital necessary for the continuation of its acquisition
strategy when needed, or on terms commercially favorable to the Company, if at
all.
Capital Expenditures
On January 11, 1999, POPstar-BVI entered into the Licensing Agreement with TGI
under which POPstar-BVI is obliged to pay TGI, until the fourth quarter, 2002, a
portion of all net sales generated from the use of TGI's software. For the year
2000, POPstar-BVI is obliged to pay TGI 6% of net sales, or a minimum of
$600,000. For the year 2001, POPstar-BVI is obliged to pay TGI 4% of net sales
of a minimum of $500,000. For the year 2002, POPstar-BVI is obliged to pay TGI
2% of net sales or a minimum of $500,000. POPstar-BVI is not obliged to pay any
additional licensing fees following the end of the year 2002. The Agreement
provides that any amounts outstanding for more than 30 days shall be subject to
interest at the rate of 1% per month (or an aggregate of 12% per annum). At
present, the Company expects to make its minimum royalty payment of $600,000 to
TGI for the year 2000.
In addition to the Licensing Agreement with TGI, POPstar-BVI also entered into a
Services Agreement on January 11, 1999 with TGI under which TGI has agreed to
provide POPstar-BVI with technical assistance, software development, marketing,
management, and other services related to the enhancements and use of TGI's
Internet Fax technology. All fees for services provided by TGI to POPstar-BVI
under the Services Agreement are to be billed to POPstar-BVI on the basis of
TGI's direct and indirect costs of the services provided plus 15%.
As describe in "Plan of Operation" above, the Company also expects to purchase
approximately $1,000,000 of additional equipment in connection with the
expansion of its business.
Year 2000 Issue Disclosure
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. Although the change in date has occurred, it is not possible to conclude
that all aspects of the Year 2000 Issue that may affect the Company, including
those related to customers, suppliers, contractors or other third parties, have
been fully resolved.
16
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company may from time to time be involved in various claims, lawsuits,
disputes with third parties, actions involving allegations of discrimination, or
breach of contract actions incidental to the operation of its business. The
Company is not currently involved in any such litigation which it believes could
have a materially adverse effect on its financial condition or results of
operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On January 14, 2000, 2,400,000 shares of the Company's common stock were
cancelled pursuant to the terms of the acquisition agreement under which the
Company acquired all of the outstanding common stock of POPstar-BVI on July 20,
1999.
Pursuant to a Share Subscription Agreement dated February 2, 2000, the Company
issued 1,500,000 shares of common stock to Innovestor.com Limited, resulting in
net cash proceeds of $3,000,000 to the Company. The issuance was conducted under
an exemption from registration provided by Rule 506 of Regulation D promulgated
under Securities Act of 1933 and Section 4(2) of the Securities Act of 1933.
Pursuant to a Share Subscription Agreement dated February 11, 2000, the Company
issued 750,000 shares of common stock to Prime Star Asia Limited, resulting in
net cash proceeds of $1,500,000 to the Company. The issuance was conducted under
an exemption from registration provided by Rule 506 of Regulation D promulgated
under Securities Act of 1933 and Section 4(2) of the Securities Act of 1933.
Pursuant to a Share Subscription Agreement dated February 11, 2000, the Company
issued 750,000 shares of common stock to iTELEWAY Inc., resulting in net cash
proceeds of $1,500,000 to the Company. The issuance was conducted under an
exemption from registration provided by Rule 506 of Regulation D promulgated
under Securities Act of 1933 and Section 4(2) of the Securities Act of 1933.
On March 31, 2000, the Company issued 250,000 shares of common stock to Kemayan
E.C. Hybrid Ltd. pursuant to a Share Subscription Agreement dated January 12,
1999, as amended, resulting in net cash proceeds of $208,333 to the Company. The
issuance was conducted under an exemption from registration provided by Rule 506
of Regulation D promulgated under Securities Act of 1933 and Section 4(2) of the
Securities Act of 1933.
On March 31, 2000, the Company issued 1,500,000 shares of common stock to Golden
Harvest Overseas Ltd. pursuant to a Share Subscription Agreement dated January
12, 1999, as amended, resulting in net cash proceeds of $1,250,000 to the
Company. The issuance was conducted under an exemption from registration
provided by Rule 506 of Regulation D promulgated under Securities Act of 1933
and Section 4(2) of the Securities Act of 1933.
In relying upon the exemption provided by Rule 506 of Regulation D promulgated
under the Securities Act of 1933 and section 4(2) of the Securities Act of 1933
in connection with the above issuances of securities, (i) the Company did not
engage in any "general solicitation," (ii) the purchaser represented and the
Company reasonably believed that the purchaser was an accredited investor and
had such knowledge and experience in financial and business matters such that
the purchaser was capable of evaluating the merits and risks of the prospective
investment and was able to bear the economic risk of such investment, (iii) the
purchaser was provided access to all necessary and adequate information to
enable the purchaser to evaluate the financial risk inherent in making an
investment, and (iv) the purchaser represented that it was acquiring the shares
for itself and not for distribution.
On April 19, 2000, the Company received subscriptions and issued 90,000 shares
of common stock of the Company at a price of $0.01 per share as a result of the
exercise of options under the Company's stock option plan.
17
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the security holders for a vote during the period
covered by this report.
ITEM 5. OTHER INFORMATION
On February 15, 2000, Dr. William Wing Yan Lo, Chairman and Chief Executive
Officer of Netalone.com Limited, joined the Board of Directors of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit
Number Description
------ -----------
10.1 Lease agreement dated April 1, 2000 between the
registrant and Tradeglobe Consulting Ltd.
27.1 Financial Data Schedule
(B) REPORTS ON FROM 8-K
None
18
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
POPSTAR COMMUNICATIONS, INC.
By /s/ John McDermott
------------------------------------------
John McDermott
President
Dated: May 12, 2000
19
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
10.1 Lease agreement dated April 1, 2000 between the
registrant and Tradeglobe Consulting Ltd.
27.1 Financial Data Schedule
EXHIBIT 10.1
COMMERCIAL LEASE
This lease is made in duplicate between:
(A) Tradeglobe Consulting Ltd. ( the "Landlord")
-----------------------------------
(landlord's name)
and
(B) POPstar Communications Canada Corp. ( the "Tenant")
-----------------------------------
(tenant's name)
The Landlord and the Tenant hereby agree as follows:
1. The Landlord hereby grants the Tenant a lease of the premises outlined in
red (for dedicated area) and yellow (for common area) on the floor plan
attached as Schedule A located on the Ground & 2nd floors of 107 East 3rd
Avenue, Vancouver, BC Canada (the "Premises"). The parties agree that the
Premises have a rented area of 5,130 square feet, excluding the exterior
walls.
2. The term of this lease commences on April 1, 2000 and ends on March 31,
2001. If the Tenant continues in occupation of the Premises with the
consent of the Landlord after expiry of the term of this lease, the Tenant
shall be deemed to be leasing the Premises on a month-to-month basis but
otherwise on the terms as set out in this lease.
3. The Tenant may use the Premises for Office Use and for no other purpose.
-------------
(business purpose)
4. The commencement date of this lease shall be April 1, 2000.
5. The Landlord shall also be solely responsible for repairs or improvements
to the structure and to the exterior of the building.
6. Rent, Security Deposit, Rental Operating and Other Charges
(a) The Tenant shall pay the Landlord a "base rent" based on the following
schedule which shall become effective automatically and without
further notice as of the first day of the specified lease month:
Lease Months Monthly Rental
------------ --------------
Months 1-12 C$4,488.55
Months 13-24 (if applicable) C$4,713.00
<PAGE>
The Tenant shall pay the base rent to the Landlord in advance on or
before the first of each month commencing on April 1, 2000 with the
base rent for any broken portion of a calendar month in which this
lease terminates being prorated.
(b) The Tenant shall pay the Landlord a security deposit of C$4,488.55
immediately upon the commencement date of this lease. The Tenant
acknowledges that the security deposit shall be held by Landlord
without interest as security for the performance by the Tenant of the
Tenant's covenants and obligations under this lease. The Tenant agrees
that such deposit may be commingled with the Landlord's other funds
and that such security deposit is not an advance payment of rental or
a measure of the Landlord's damages in case of default by the Tenant.
Upon the occurrence of any event of default by the Tenant, the
Landlord may, from time to time, without prejudice to any other remedy
provided herein or provided by law, use such funds to the extent
necessary to make good any arrears of rentals and any other damage,
injury, expense or liability caused to the Landlord by such event of
default, and the Tenant shall pay to the Landlord on demand the amount
so applied in order to restore the security deposit to its original
amount. If the Tenant is not then in default hereunder, any remaining
balance of such security deposit shall be returned by the Landlord to
the Tenant within thirty (30) days of termination of this lease and
the Tenant's vacating of the Premises.
(c) The Tenant shall be responsible for the Tenant's share (being 58%) of
the following services and expenses (referred to as "the Tenant's
Share of Rental Operating Charges"):
- utilities including but not limited to electricity, gas, water;
- property taxes;
- cleaning, garbage disposal;
- landscaping and gardening;
- property insurance; and
- security alarm and monitoring.
The Landlord shall invoice the Tenant monthly for the Tenant's Share
of Rental Operating Charges incurred during the preceding calendar
month. Each invoice is payable in full within thirty days after
delivery. The Tenant is deemed to have admitted the accuracy of the
amount charged in any invoice for the Tenant's Share of Rental
Operating Charges that he or she has not challenged in writing within
the applicable thirty-day period.
(d) The Tenant shall also pay the Landlord as "other charges", on demand,
100% of the total costs reasonably incurred by the Landlord, including
but not limited to legal fees in connection with the curing of any
default by the Tenant
<PAGE>
under this lease, the collection of payment of rent and the regaining
of lawful possession of the Premises.
7. Any services and expenses relevant to the use by the Tenant of the Premises
and not specified in this lease shall be the responsibility and for the
expense of the Tenant.
8. The Landlord covenants with the Tenant that so long as the Tenant complies
with the terms of this lease, the Tenant may occupy and enjoy the Premises
without any interruption, subject to the terms herein, from the Landlord.
9. The Landlord is not liable for any damage to the Tenant's property or for
any injury to any person in or coming to or from the Premises, however
caused, and the Tenant agrees to indemnify the Landlord against the
financial consequences of any such liability. In this regard, the Tenant
shall purchase and maintain public liability insurance in the amount of no
less than two million dollars (C$2,000,000.00) and shall provide proof of
this insurance to the Landlord on request.
10. The Landlord may terminate this lease for any one of the following or any
other causes permitted by law:
(a) thirty days' arrears of rent, other charges and the Tenant's Share of
Rental Operating Charges;
(b) the bankruptcy or insolvency of the Tenant;
(c) a material change in the use of the Premises by the Tenant, and in
particular (without limiting the generality of this provision) any
change which affects the Landlord's building insurance or which
constitutes a nuisance.
(d) any unauthorized assignment or subletting of this lease by the Tenant;
(e) substantial damage to or destruction of the Premises;
(f) any sale or material change in use of the building in which the
Premises are located by the Landlord; and
(g) any significant willful or negligent damage to the Premises caused by
the Tenant or by persons permitted on the Premises by the Tenant.
11. The Tenant shall not assign or in any manner transfer this lease or any
estate or interest therein, or sublet the Premises or any part thereof, or
grant any license, concession or other right of occupancy of any portion of
the Premises without the prior written consent of the Landlord. The
Landlord agrees that it will not withhold consent in a wholly unreasonable
and arbitrary manner; however, in determining whether or not to grant its
consent, the Landlord shall be entitled to take into
<PAGE>
consideration factors including but not limited to the nature of business,
reputation and net worth of the proposed transferee, and the then current
market conditions (including market rentals). In addition, the Landlord
shall also be entitled to charge the Tenant a reasonable fee for processing
the Tenant's request.
12. The Tenant shall keep the Premises in a reasonable state of repair and
cleanliness and shall not make improvements or alterations to the Premises
without the written consent of the Landlord, which consent may not be
unreasonably withheld.
13. The Landlord and the Landlord's agents and representatives shall have the
right to enter the Premises at any time in case of an emergency, and
otherwise at all reasonable times upon reasonable advance oral or written
notice for any purpose permitted pursuant to the terms of this lease,
including, but not limited to, examining the Premises; making such repairs
or alterations therein as may be necessary or appropriate in the Landlord's
sole judgment for the safety and preservation thereof; erecting,
installing, maintaining, repairing or replacing wires, cables, conduits,
vents, ducts, risers, pipes, HVAC equipment or plumbing equipment running
in, to, or through the Premises; showing the Premises to prospective
purchasers or mortgagees and during the last year of this lease,
prospective tenants; and posting notices of nonresponsibility. Except in
the event of an emergency, the Landlord's agents and representatives shall
be accompanied by a representative of the Tenant whenever they enter the
Premises. The Tenant shall use reasonable efforts to accommodate the
Landlord's requests for accompanied entry of the Premises.
14. At the end of the lease, the Tenant shall deliver vacant possession to the
Landlord of the Premises in the same condition as at the commencement of
the lease, reasonable wear and tear excepted and except that the Landlord
may, in the Landlord's sole discretion, elect to keep any of the Tenant's
improvements, alterations, or fixtures.
15. Any written notice required or permitted to be given by this lease is
sufficiently given if sent in proper form by ordinary mail to the last
known address of the party for whom the notice is intended. Any written
notice sent by ordinary mail in accordance with this paragraph is deemed,
for the purposes of this lease, received by the addressee on the seventh
day after mailing unless actually received before. Nothing in this
paragraph prevents giving written notice in any other manner recognized by
law.
16. In this lease, words importing the singular include the plural, and vice
versa, and importing the masculine gender include the feminine, and
importing an individual include a corporation and vice versa. This lease
binds and benefits the parties and their respective heirs, successors, and
permitted assigns.
17. If not in default under this lease, the Tenant has the right to renew this
lease for a further term of ONE years exercisable by giving written notice
of renewal to
<PAGE>
the Landlord in the three-month period immediately before the expiry of the
original fixed term of this lease. The renewed lease is granted on the same
terms as set out in this lease except as to base rent and without any
further right of renewal. The base rent payable by the Tenant in the
renewed term may be agreed between the Landlord and Tenant but, failing
such agreement before commencement of the renewed term of the lease, the
amount of the base rent shall be referred to and settled by a single
arbitrator agreed upon by the parties or, in default of such agreement, to
a single arbitrator appointed pursuant to the legislation governing
submissions to arbitration in the jurisdiction whose laws govern this
agreement. The decision of the arbitrator is final and binding on the
parties with no right of appeal.
Executed under seal on April 1, 2000.
---------------
(date)
Signed, sealed, and delivered )
in the presence of: )
)
107 E. 3rd Ave. )
/s/ Don Lau Vancouver, B.C. ) /s/ Thompson Chu
- -------------------------------------- ) Thompson Chu, Director
Witness (Don Lau) ) The Landlord
)
107 E. 3rd Ave. )
/s/ Don Lau Vancouver, B.C. ) /s/ John McDermott
- -------------------------------------- ) John McDermott, President
Witness (Don Lau) ) The Tenant
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 5,442,070
<SECURITIES> 0
<RECEIVABLES> 936,665
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,701,714
<PP&E> 62,606
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,764,320
<CURRENT-LIABILITIES> 318,812
<BONDS> 0
0
0
<COMMON> 10,112,881
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,764,320
<SALES> 0
<TOTAL-REVENUES> 59,270
<CGS> 0
<TOTAL-COSTS> 684,907
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,087
<INCOME-PRETAX> (625,637)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (625,637)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
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