SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
CAPSTRA CAPITAL, CORP.
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(Name of Small Business Issuer)
Washington 98-01-16-179
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(State or Other Jurisdiction of I.R.S. Employer Identification
Incorporation or Organization) Number
c/o John Mackay
2160-650 West Georgia Street, Vancouver, B.C. Canada V6B 4N7
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(Address of Principal Executive Offices including Zip Code)
(604) 687-1919
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(Issuer's Telephone Number)
Securities to be Registered Under Section 12(b) of the Act: None
Securities to be Registered Under Section 12(g) of the Act: Common Voting
Stock, NPV
(Title of Class)
Date of earliest event reported: October 16, 2000
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 1. CHANGES IN CONTROL OF REGISTRANT.
(a) Merger Agreement. Pursuant to an Agreement and Plan of Reorganization (the
"Merger Agreement") dated October 12, 2000, Greatestescapes.com Corp. (the
"Company"), a Nevada corporation, acquired all the outstanding shares of common
stock of Capstra Capital, Corp. ("Capstra"), a Washington corporation, from the
shareholders thereof in an exchange of an aggregate of 450,000 shares of common
stock of the Company and other consideration consisting of cash and payments of
certain fees and expenses equal to $30,000 (the "Acquisition"). Immediately
following the Acquisition, Greatestescapes (Washington) Corp. ("Subco"), a
Washington corporation and a wholly-owned subsidiary of the Company, merged with
Capstra (the "Merger").
The Acquisition was approved by the unanimous consent of the Board of Directors
of Capstra and its shareholders on October 12, 2000. The Acquisition was
effective on October 12, 2000. The Merger was approved by unanimous consent of
the respective Boards of Directors of Subco and the Company on October 12, 2000.
The Merger was effective on October 16, 2000. The Acquisition and Merger is
intended to qualify as reorganization within the meaning of Section 368(a)(1)(B)
of the Internal Revenue Code of 1986, as amended.
Upon effectiveness of the Acquisition and Merger pursuant to Rule 12g-3(a) of
the General Rules and Regulations of the Securities and Exchange Commission (the
"Commission"), the Company elected to become the successor issuer to Capstra for
reporting purposes under the Securities Exchange Act of 1934 and elects to
report under the Act effective October 16, 2000.
A copy of the Merger Agreement is filed as an exhibit to this Form 8-K and is
incorporated in its entirety herein. The foregoing description is modified by
such reference.
(b) Control of the Company. As of October 19, 2000, the Company had 6,586,134
shares of common stock issued and outstanding prior to the Acquisition, and
7,036,134 shares issued and outstanding following the Acquisition. Capstra had
5,000,000 shares of common stock issued and outstanding prior to and after the
Acqusition.
The following table sets forth each person known by Capstra to be the beneficial
owner of five percent or more of the Capstra's common stock, prior to the
closing of the Acqusition, all directors individually and all directors and
officers of Capstra as a group. Except as noted, each person has sole voting
and investment power with respect to the shares shown.
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SHARES OF COMMON ATTRIBUTED APPROXIMATE
NAME AND ADDRESS OF STOCK BENFICIALLY BENEFICIAL PERCENTAGE
BENEFICIAL OWNER OWNED OWNERSHIP OWNED
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Unigro U.S.A. Inc. 2,750,000 Frits Jelgersma 55%
1221 Lexington Court
El Dorado hills, CA 95762
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Carrie Nelson 450,000 N/A 9%
639 Thurston Crt.
Port Moody B.C.
Canada V3H 4J4
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Lynne Tam 450,000 N/A 9%
2433 West 47th Ave.
Vancouver, B.C.
Canada V6M 2N3
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John Mackay 450,000 N/A 9%
2280 S.W. Marine Drive
Vancouver B.C.
Canada V6P 6C2
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Officers and Directors as
a Group (2 persons) 450,000 N/A 9%
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The following table sets forth certain information regarding the beneficial
ownership of the common stock of the Company as of October 19, 2000, after
taking into effect the Acquisition, of (1) each person who is known to the
Company to own beneficially more than 5% of the Company's outstanding common
stock, (2) each of the Company's directors and officers, and (3) all directors
and officers of the Company as a group:
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TITLE NAME AND ADDRESS OF AMOUNT AND NATURE OF PRECENT
OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
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$0.001 Par Value Guy Brooks President and Director 10.2%
Common Stock 5255 Gulf Place 646,068 common shares
West Vancouver, B.C.
Canada V7W 2V9
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$0.001 Par Value Victoria Brooks Chief Operating Officer 16.2%
Common Stock 5255 Gulf Place and Director
1,027,000 common shares
West Vancouver, B.C.
Canada V7W 2V9
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$0.001 Par Value Brian Buchanan Vice-President Corporate 4.7%
Common Stock 2876 - 139A Street Development and Director
White Rock, B.C. 300,000 common shares
Canada V4P 2N1
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$0.001 Par Value Shiraz Hussein Treasurer and Director 0.39%
Common Stock 4911 Wintergreeen Ave. 25,000 common shares
Richmond, B.C.
Canada V7C 1L4
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$0.001 Par Value James Henshall Director 0.39%
Common Stock 602-1040 W. Georgia St. 25,000 common shares
Vancouver, B.C.
Canada V7C 1L4
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$0.001 Par Value Duncan Merrin 350,000 common shares 5.5%
Common Stock 111 North Bridge Road
#18-01 Peninsula Plaza
Singapore 179098
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$0.001 Par Value Mervyn Zabensky 375,000 common shares 5.9%
Common Stock 23 Woodwards Road
Richmond, B.C.
Canada V7E 6G7
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All Directors and Officers as a Group 2,023,068 common shares 31.9%
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All Directors and Management as a Group 3,748,068 43.4%
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) Criteria for Merger. The consideration exchanged pursuant to the
Acquisition Agreement was negotiated between Capstra and the Company.
In evaluating the Acquisition, Capstra used criteria such as the value of assets
of the Company, the Company's anticipated operations and acquisitions, material
contracts, business name and reputation, quality of management, and current and
anticipated operations. Capstra determined that the consideration for the merger
was reasonable. In evaluating Capstra, the Company placed a primary emphasis on
Capstra's status as a reporting company under the Section 12(g) of the
Securities Exchange Act of 1934 (the "Act"),as amended, and Capstra's
facilitation of the Company becoming a reporting company under the Act.
(b) Corporate History of the Company. The Company is an Internet multi-media
publishing corporation. Its main focus is publishing a monthly travel magazine
known as WebZine on the Internet over the website known as
www.greatestescapes.com and developing its book publishing division known as
GreatestEscapes.com Publishing. The Company has also developed an on-line
department store. Since 1997, the founders of the Company have been in the
process of researching the technology, design and development of an
Internet-based multi-media publishing business. With Victoria Brooks' unique
and interesting writing style combined with 21st century technology and
marketing, the Company believes it can become an Internet multi-media success.
Offices. The Company has an office at 730 - 800 West Pender Street, Vancouver,
British Columbia that consists of 1,200 square feet costing $1,500 a month. The
rent is paid on a monthly basis to an non-affiliated landlord.
Employees. As of October 19, 2000, the Company had no employees. From
time-to-time, the Company uses the services of independent contractors and
consultants to support product research and development, marketing, sales and
business development. The Company currently utilizes the services of
approximately 25 part-time and full-time consultants depending on need.
Internet Business. The Company anticipates that its WebZine will generate
revenues through advertising to be sold by a commission sales force and/or
marketing agents. The Company also anticipates generating revenues from its
on-line virtual department store, which offers an extensive range of essential
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travel products as well as unique and unusual travel-related items and travel
accessories. Further, the Company anticipates receiving sales commissions on
travel services sold by external travel providers through its Internet
publications. The Company has also developed a range of travel books to be
distributed both through traditional bookstores and over the Internet. The
Company does not foresee any seasonable impact on its current or proposed
businesses.
History of Victoria Brooks' Greatest Escapes Travel WebZine. First appearing on
the Internet on February 1, 1998, www.greatestescapes.com is updated every month
with new feature stories from professional travel writers from around the world.
There are currently regular contributors from Mexico City, San Francisco,
Ottawa, Washington, and Southern California. These professional writers are
currently paid $100 for each feature story used by the Company.
Regular monthly "Trips and Tales" include Victoria Brooks' feature stories with
color photos, (i.e., The Havana Camera Caper or Baja Desert Dream); Suzie
Rodriguez's stories from around the world (i.e., 21 Offbeat Things to Do in San
Francisco or The Back Country of the Cote D' Azur); and adventure travel stories
(Open Cockpit over Ottawa - A Capital Adventure). Famous restaurants from
around the world are reviewed with their signature recipes provided, and travel
related book and videos are reviewed. Visitors have access to an extensive
range of travel links broken down geographically and in numerous general
categories, including lists of bed and breakfasts, pet friendly hotels, discount
hotel reservation systems and other information relevant to tourists and
business travelers.
The Company's website gets about 200,000 hits every month. Advertisers may want
to be included in the WebZine's Destinations section and the Company anticipates
generating additional revenues through such advertising.
WebZines, which are magazines transmitted over the Internet, offer advertising
benefits to travel service providers. Forrester Research projects that by 2004
there will be approximately 50 million households in the United States spending
$184 billion on the Internet, with global Internet sales growing to $3.2
trillion by 2004.
The Company's WebZine offers travel service providers with the opportunity to
establish an Internet address or to increase public awareness of those travel
service providers' existing Internet websites. Advertisers can feature a one,
two or three-page brochure with a reservation system reference.
Competition. The Company faces competition from other WebZines, such as Salon
Magazine and adventuretravel.com, which have been on the Internet for a few
years and enjoy a substantial following. Although the Internet industry is
relatively young there is great competition for the Internet users' business and
there is intense competition for visitors to a site. Electronic commerce,
commonly called "e-commerce", is a new and expanding method of buying and
selling products and services, and its competitors which have been on the
Internet longer than the Company may enjoy customer loyalty. The Company's
competitors may have an advantage over the Company because they have been in
business longer than the Company has. Many of its competitors have greater
research and development, marketing, financial and other resources than the
Company has. As a result of their size and the breadth of their product
offerings, certain of these companies have been and will be able to gain a
disproportionate share of the virtual community market.
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The Company believes its approach of combining the traditional medium of book
publishing with its Internet publication will set the Company apart from its
competition. The Company is attempting to build a loyal readership base by
notifying its readership when a new issue is released, by offering regular sales
and discounts to readers in the store, and by offering Literary Trips to readers
at a special discount, and other such ongoing revolving promotions. The Company
also intends to update its WebZine regularly to keep it new and useful to
readers when researching and planning their trips.
Internet Service Provider. The Company's Internet service provider is CSP
Internet, one of Canada's leading Internet services providers. CSP Internet
provides a complete range of Internet services, including dial-up connections,
business connections, consulting services, web serving options, web site
production and web advertising. The Company has no contract with CSP Internet.
Reports to Security Holders. On or about June 26, 2000, the Company was cleared
to be listed on the Pink Sheets maintained by the National Association of
Securities Dealers, Inc ("NASD"). The Company has concluded the Merger with
Capstra in order to become a reporting company with the Securities and Exchange
Commission (the "SEC") to enable it to apply for listing on the Over-the-Counter
Bulletin Board also maintained by the NASD. As a result of the Merger, the
Company will become a reporting company with the SEC and will thereafter provide
an annual report to its security holders, which will include audited financial
statements. The public may read and copy any materials filed with the SEC at
the SEC's Public Reference Room at 450 Fifth Street N.W., Washington, D.C.
20549. The public may also obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC. The
address of that site is http://www.sec.gov. The Company currently maintains its
own Internet address at www.greatestescapes.com.
(c) Risk Factors Associated with the Company and its Business. The following
risks relate specifically to the Company's business and should be considered
carefully. The Company's business, financial condition and results of
operations could be materially and adversely affected by any of the following
risks.
The Company's limited operating history makes the evaluation of the Company's
current business and the forecasting of the Company's future results difficult.
The Company has only a limited operating history upon which an evaluation of the
Company's current business and prospects can be based, each of which must be
considered in light of the risks, expenses and problems frequently encountered
by all companies in the early stages of development, and particularly by such
companies entering new and rapidly developing markets like the Internet.
Risks related to the Internet may affect the Company's success.
There are many risks associated with operations on the Internet that may
adversely affect the Company's success. Such risks include, without limitation,
the following:
* the possibility that the Internet will fail to achieve broad acceptance;
* the Company's inability to attract or retain clients;
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* a new and relatively unproven business model;
* the Company's ability to anticipate and adapt to a developing market;
* failure of the Company's network infrastructure (including its servers,
hardware and software) to efficiently handle its Internet traffic;
* changes in laws that may adversely affect the Company's business;
* the Company's ability to manage effectively rapidly expanding operations,
including the amount and timing of capital expenditures and other costs
relating to the expansion of the Company's operations;
* the introduction and development of different or more extensive solutions
by the Company's direct and indirect competitors (including those with
greater financial, technical and marketing resources) which may cause loss
of market share;
* the Company's inability to maintain and support increased levels of
traffic on the Company's installed sites;
* the Company's inability to attract, retain and motivate qualified
personnel.
Future growth predictions may be inaccurate.
The Company's limited operating history makes the prediction of future results
difficult or impossible. Furthermore, the Company's limited operating history
leads the Company to believe that period-to-period comparisons of the Company's
operating results may not be meaningful and that the results for any particular
period should not be relied upon as an indication of future performance. To the
extent that revenues do not grow at anticipated rates, the Company's business,
results of operations and financial condition would be materially and adversely
affected.
The Company anticipates that losses may continue.
The Company anticipates incurring losses for the forseeable future. The extent
of future losses will depend, in part, on the amount of growth in revenues from
the Company's services and products. The Company expects that operating costs
will increase during the next several years, especially in the areas of sales
and marketing, product development and general and administrative expenses as it
pursues its business strategy. Thus, the Company will need to generate
increased revenues faster than the rate of growth in costs to achieve
profitability. To the extent that increases in its operating expenses precede
or are not subsequently followed by corresponding increases in revenues, or if
it is unable to adjust operating expense levels accordingly, the Company's
business, results of operations and financial condition would be materially and
adversely affected. There can be no assurance that the Company will sustain
profitability or that its operating losses will not increase in the future.
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The Company's future success is dependent on the continued growth in use of and
the commercial viability of the Internet.
The Company's future success is substantially dependent upon the continued
growth in the use of the Internet. To support product and service revenues, the
Internet's recent and rapid growth must continue, and use of the Internet must
become widespread. None of these can be assured. The Internet may prove not to
be a viable information communications medium and information marketplace. If
use of the Internet does not continue to grow, the Company's business, results
of operations and financial condition would be materially and adversely
affected.
Additionally, there are several issues that could lead to resistance against the
acceptance of the Internet as a viable commercial marketplace. To the extent
that the Internet continues to experience significant growth in the number of
users and the level of use, there can be no assurance that its technical
infrastructure will continue to be able to support the demands placed upon it.
The necessary technical infrastructure for significant increases in electronic
news dissemination and e-commerce related to it, such as a reliable network
backbone, may not be timely and adequately developed. In addition, performance
improvements, such as high-speed modems, may not be introduced in a timely
fashion. Furthermore, security and authentication concerns with respect to
transmission over the Internet of confidential information, such as credit card
numbers, may remain. lso, the Internet could lose its viability due to delays in
the development or adoption of new standards and protocols required to handle
increased levels of activity, or due to increased governmental regulation.
Changes in or insufficient availability of telecommunications services could
result in slower response times and adversely affect usage of the Internet. To
the extent the Internet's technical infrastructure does not effectively support
the growth that may occur, the Company's business, results of operations and
financial condition would be materially and adversely affected.
The Company's business model and acceptance of the Company's products is
unproven in the developing market in which the Company operates.
The Company's business model is new and relatively unproven. The model depends
upon the Company's ability to generate multiple revenue streams by diversifying
the Company's product and service offerings. To be successful, the Company
must, among other things, develop and market products and services that achieve
broad market acceptance by its client companies. No assurance can be given that
the Company's business model will be successful or that it can sustain revenue
growth or be profitable. The market for the Company's products and services is
new, rapidly developing and characterized by an increasing number of market
entrants. As is typical of any new and rapidly evolving market, demand and
market acceptance for recently introduced products and services are subject to a
high level of uncertainty and risk. Moreover, because this market is new and
rapidly evolving, it is difficult to predict its future growth rate, if any, and
its ultimate size. If the market fails to develop, develops more slowly than
expected or becomes saturated with competitors, or if the Company's products and
services do not achieve or sustain market acceptance, the Company's business,
results of operations and financial condition would be materially and adversely
affected.
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Potential fluctuations in the Company's operating results and quarterly
fluctuations may adversely affect the Company's trading price.
The Company's operating results may fluctuate significantly in the future as a
result of a variety of factors, many of which are outside of the Company's
control. As a strategic response to changes in the competitive environment, the
Company may from time to time make certain pricing, service or marketing
decisions or acquisitions that could have a material short-term or long-term
adverse effect on the Company's business, results of operations and financial
condition.
Its officers and directors, and entities affiliated with them, control the
Company.
In the aggregate, ownership of the Company shares by management represents a
large proportion of the Company's issued and outstanding shares of common stock.
These stockholders, if acting together, will be able to significantly influence
all matters requiring approval by the Company's stockholders, including the
election of directors and the approval of mergers or other business combination
transactions.
The Company's future performance is dependent on key personnel.
The Company's performance is substantially dependent on the performance of the
Company's senior management and key technical personnel. In particular, the
Company's success depends on the continued efforts of the Company's senior
management team, especially its Chief Executive Officer, Guy Brooks, and its
Chief Operating Officer, Victoria Brooks. The loss of the services of any of
the Company's executive officers or other key employees could have a material
adverse effect on the Company's business, results of operations and financial
condition.
A majority of the Company's senior management is inexperienced in managing an
Internet public company.
To manage its potential growth, the Company must continue to implement and
improve its operational and financial systems, and must expand, train and manage
its employee base. Moreover the existing senior management has not had any
previous experience managing a growing Internet public company. There can be no
assurance that the Company will be able to effectively manage the expansion of
its operations, that the Company's systems, procedures or controls will be
adequate to support its operations or that its management will be able to
achieve the rapid execution necessary to fully exploit the market opportunity
for its products and services. Any inability to manage growth effectively could
have a material adverse effect on the Company's business, results of operations
and financial condition.
The Company may suffer system failures on its web server system which could
result in negative publicity, and adversely affect the Company's market
acceptance.
There is a reliance on third parties for both services and equipment by the
Company and its suppliers, all of which are a vital element to the operation of
the Company's business.
In the past, users have occasionally experienced difficulties with Internet and
online services due to system failures, including failures unrelated to the
Company systems. Any disruption in Internet access provided by third parties
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could have a material adverse effect on the Company's business, results of
operations and financial condition.
The Company's operations are dependent in part upon the Company's ability to
protect its operating systems against damage from human error, fire, floods,
power loss, telecommunication failures, break-ins and similar events. The
Company does not presently have redundant, multiple-site capacity in the event
of any such occurrence. The Company's servers are also vulnerable to computer
viruses, break-ins and similar disruptions from unauthorized tampering with the
Company's computer systems. The occurrence of any of these events could result
in the interruption, delay or cessation of service, which could have a material
adverse effect on the Company's business, results of operations and financial
condition.
There are security risks to the Company's network.
Experienced programmers ("hackers") may attempt on occasion to penetrate the
Company's network security. Since a hacker who is able to penetrate the
Company's network security could misappropriate proprietary information or cause
interruptions in the Company's products and services or do other damage, the
Company may be required to expend significant capital and resources to protect
against or to alleviate problems caused by such parties. Additionally, the
Company may not have a timely remedy against a hacker who is able to penetrate
the Company's network security. Such purposeful security breaches could have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition to purposeful security breaches, the
inadvertent transmission of computer viruses could expose the Company to a
material risk of loss or litigation and possible liability.
In offering certain payment services for some products and services, the Company
could become increasingly reliant on encryption and authentication technology
licensed from third parties to provide the security and authentication necessary
to effect secure transmission of confidential information, such as customer
credit card numbers. Advances in computer capabilities, discoveries in the
field of cryptography and other discoveries, events, or developments could lead
to a compromise or breach of the algorithms that the Company licensed encryption
and authentication technology used to protect such confidential information. If
such a compromise or breach of the Company licensed encryption authentication
technology occurs, it could have a material adverse effect on the Company's
business, results of operations and financial condition. The Company may be
required to expend significant capital and resources to protect against the
threat of such security, encryption and authentication technology breaches or to
alleviate problems caused by such breaches. Concerns over the security of
Internet transactions and the privacy of users may also inhibit the growth of
the Internet generally, particularly as a means of conducting commercial
transactions.
The Company's ability to attract additional financing as needed may affect its
future success.
Additional financing will be required by the Company as it expects negative
operating cash flow for the coming months until the routine income from its
operations has grown to cover the cost of their support and development. Such
financing, if obtained by the Company, may result in the issuance of additional
securities and may not be available on terms favorable to it.
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The Company expects that it will continue to experience negative operating cash
flow on occasion for the foreseeable future as a result of significant spending
on product development and infrastructure. Accordingly, the Company will need
to raise additional funds in a timely manner in order to fund the Company's
anticipated expansion and new enhanced services or products, respond to
competitive pressures or acquire complementary products, businesses or
technologies. Additional funds will have to be raised through the issuance of
equity or convertible debt securities causing the percentage of ownership of the
Company's current stockholders to be reduced, stockholders to experience
additional dilution and such securities may have rights, preferences or
privileges senior to those of the holders of the common stock.
The Company does not have any contractual restrictions on its ability to incur
debt and, accordingly, the Company could incur significant amounts of
indebtedness to finance its operations. Any such indebtedness could contain
covenants, which would restrict the Company's operations. There can be no
assurance that additional financing if and when needed will be available on
terms favorable to the Company, or at all. If adequate funds are not available
or are not available on acceptable terms, it would have a material adverse
effect on the Company's ability to fund its expansion, take advantage of
acquisition opportunities, develop or enhance services or products or respond to
competitive pressures.
Future acquisitions of other business entities by the Company would entail
numerous risks and uncertainties which could have an adverse affect on its
operations and financial condition.
As part of the Company's business strategy, it expects to review acquisition
prospects that would complement its existing business, augment the distribution
of its products or enhance its technological capabilities. Future acquisitions
by the Company could result in potentially dilutive issuances of equity
securities, large and immediate write-offs, the incurrence of debt and
contingent liabilities or amortization expenses related to goodwill and other
intangible assets, any of which could materially and adversely affect the
Company's business, results of operations and financial condition.
Furthermore, acquisitions entail numerous risks and uncertainties, including
difficulties in the assimilation of operations, personnel, technologies,
products and information systems of the acquired companies, the diversion of
management's attention from other business concerns, the risks of entering
geographic and business markets in which the Company has no or limited prior
experience and the potential loss of key employees of acquired organizations.
No assurance can be given as to the Company's ability to successfully integrate
any businesses, products, technologies or personnel that might be acquired in
the future, and the Company's failure to do so could have a material adverse
effect on its business, results of operations and financial condition.
It is unclear how any existing and future laws enacted will be applied to the
Internet industry and what affect such laws will have on the Company.
A number of legislative and regulatory proposals under consideration in the US
and Canada may lead to laws or regulations concerning various aspects of the
Internet, including, but not limited to, online content, user privacy, taxation,
access charges, liability for third-party activities and jurisdiction.
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Additionally, it is uncertain how the judiciary to the Internet will apply
existing laws. The adoption of new laws or the application of existing laws may
decrease the growth in the use of the Internet, which could in turn decrease the
demand for the Company's products and services, increase the Company's cost of
doing business or otherwise have a material adverse effect on the Company's
business, results of operations and financial condition.
Internet user privacy has become an issue both in the US and abroad. The
Company cannot predict the exact form of the regulations that the US government
may adopt to protect such privacy. Any such action could affect the way in
which the Company is allowed to conduct its business, especially those aspects
that involve clients being restricted in the collection or use of personal
information, and could have a material adverse effect on the Company's business,
results of operations and financial condition.
The tax treatment of the Internet and e-commerce is currently unsettled.
Canadian and US government departments have made by working groups a number of
proposals. Governments could impose taxes on the sale of goods and services and
certain other Internet activities. Recently, the Internet Tax Freedom Act was
signed into law in the US, placing a three-year moratorium on new state and
local taxes on certain aspects of Internet commerce in the US. However, there
can be no assurance that future laws imposing taxes or other regulations on
commerce over the Internet would not substantially impair the growth of
e-commerce and as a result have a material adverse effect on the Company's
business, results of operations and financial condition.
Although the Company's servers are located in Canada, the governments of other
foreign countries might attempt to take action against the Company for
violations of their laws. There can be no assurance that violations of such
laws will not be alleged or charged by provincial, state or foreign governments
and that such laws will be modified, or new laws enacted, in the future. Any of
the foregoing could have a material adverse effect on the Company's business,
results of operations and financial condition.
Any significant deterioration in the general economic conditions would have an
adverse effect on the Company's business, result of operations or financial
condition.
Time spent on the Internet by individuals, purchases of new computers and
purchases of membership subscriptions to Internet sites are typically
discretionary for consumers and may be particularly affected by adverse trends
in the general economy. The success of the Company's operations depends to a
significant extent upon a number of factors relating to discretionary consumer
spending, including economic conditions (and perceptions of such conditions by
consumers) affecting disposable consumer income such as employment, wages and
salaries, business conditions, interest rates, availability of credit, and
taxation for the economy as a whole and in regional and local markets where the
Company operates. There can be no assurance that consumer spending will not be
adversely affected by general economic conditions, which could negatively impact
the Company's results of operations or financial condition. Any significant
deterioration in general economic conditions or increases in interest rates may
inhibit consumers' use of credit and cause a material adverse effect on the
Company's revenues and profitability. In addition, the Company's business
strategy relies on advertising by and agreements with other Internet companies.
Any significant deterioration in general economic conditions that adversely
affect these companies could also have a material adverse effect on the
Company's business, results of operations and financial condition.
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The value and transferability of the Company shares may be adversely impacted by
the limited trading market for the Company's common stock, the penny stock rules
and futures share issuance. There is a limited market for the Company's common
stock in the US.
No assurance can be given that a market for the Company's common stock will be
quoted on the NASD's Over the Counter Bulletin Board.
The sale or transfer of the Company common stock by shareholders in US may be
subject to the so-called "penny stock rules."
Under Rule 15g-9 of the Exchange Act, a broker or dealer may not sell a "penny
stock" (as defined in Rule 3a51-1) to or effect the purchase of a penny stock by
any person unless:
(a) such sale or purchase is exempt from Rule 15g-9;
(b) prior to the transaction the broker or dealer has (1) approved the
person's account for transaction in penny stocks in accordance with Rule 15g-9,
and (2) received from the person a written agreement to the transaction setting
forth the identity and quantity of the penny stock to be purchased; and
(c) the purchaser has been provided an appropriate disclosure statement
as to penny stock investment.
The Securities and Exchange Commission ("Commission") adopted regulations that
generally define a penny stock to be any equity security other than a security
excluded from such definition by Rule 3a51-1. Such exemptions include, but are
not limited to (1) an equity security issued by an issuer that has (i) net
tangible assets of at least $2,000,000, if such issuer has been in continuous
operations for at least three years, (ii) net tangible assets of at least
$5,000,000, if such issuer has been in continuous operation for less than three
years, or (iii) average revenue of at least $6,000,000 for the preceding three
years; (2) except for purposes of Section 7(b) of the Exchange Act and Rule 419,
any security that has a price of $5.00 or more; and (3) a security that is
authorized or approved for authorization upon notice of issuance for quotation
on the NASDAQ Stock Market, Inc.'s Automated Quotation System.
It is likely that shares of the Company's common stock, assuming a market were
to develop in the US therefor, will be subject to the regulations on penny
stocks; consequently, the market liquidity for the common stock may be adversely
affected by such regulations limiting the ability of broker/dealers to sell the
Company's common stock and the ability of shareholders to sell their securities
in the secondary market in the US.
Moreover, the Company's shares may only be sold or transferred by the Company
shareholders in those jurisdictions in the US in which an exemption for such
"secondary trading" exists or in which the shares may have been registered.
The Company has not declared any dividends since inception, and has no present
intention of paying any cash dividends on its common stock in the foreseeable
future. The payment by the Company of dividends, if any, in the future, rests
in the discretion of the Company's Board of Directors and will depend, among
<PAGE>
Page 14
other things, upon the Company's earnings, its capital requirements and
financial condition, as well as other relevant factors.
The possible issuance of additional shares may impact the value of the Company
stock.
The Company is authorized to issue up to 200,000,000 shares of common stock. It
is the Company's intention to issue more shares. Sales of substantial amounts
of common stock (including shares issuable upon the exercise of stock options,
the conversion of the notes and the exercise of the warrants), or the perception
that such sales could occur, could materially adversely affect prevailing market
prices for the common stock and the ability of the Company to raise equity
capital in the future.
(d) Management's Discussion and Analysis of Financial Condition and Results of
Operations.
The following table sets forth the status, technological steps to be
implemented, expected costs for completion, timing for completion and any
security authorization concerns regarding each of the present and proposed
segments of the Company's business.
================================================================================
Business Steps to be Expected Security Estimated
Segment Status Implemented Costs Authorization Completion
================================================================================
WebZine Up and Current $87,000/Year None N/A
Running technology
in place
--------------------------------------------------------------------------------
Virtual Up and Wireless $57,000 Through September
Department Running communications Cardservice 2001
Store and 3D imaging International
--------------------------------------------------------------------------------
Publishing Up and None $119,500/Year None N/A
Running
================================================================================
Company Promotion. To increase its website traffic, the Company is developing
custom-built search engine-focused entry pages for all relevant keywords and
phrases; extensive monitoring for maximizing placement on Excite and other major
search engines; and customizing its positioning strategies on Yahoo! The
Company also plans to submit its website to over 400 secondary Internet search
engines. Boris Chow of BO2.com Ltd. has designed award winning web sites for
many companies. He was retained by the Company to create a more dynamic
appearance for its WebZine. The Company's redesigned website encompasses a
number of cutting edge design techniques and Internet navigational features that
the Company hopes will help position its WebZine as a leading Internet Travel
WebZine. It is also intended that external publicity will be implemented once
the Company is funded and that a publicity and advertising person will be
engaged. Ongoing publicity of the Company and its publications has already
commenced. The Company's intent is to garner greater attention and focus on the
Company, its WebZine and related activities. The following is a list of media
coverage within which the Company has been mentioned or featured:
<PAGE>
Page 15
================================================================================
Radio WPON-AM Detroit Aired September 27, 2000. The host
of this show indicated other Lit
Trips writers may be interviewed.
--------------------------------------------------------------------------------
Radio KSL-AM Salt Lake City Aired September 3, 2000
--------------------------------------------------------------------------------
Radio WAMC/Northeast Public Syndicated. Taped September 6, 2000
Radio Network, based in
Albany
--------------------------------------------------------------------------------
Radio KVOD-FM Denver Taped September 14, 2000
--------------------------------------------------------------------------------
Radio Business Radio Network 63 stations. Taped September 10,
Syndicate 2000
--------------------------------------------------------------------------------
Radio CFAX-AM Victoria, B.C. Aired live, October 21, 2000
--------------------------------------------------------------------------------
Radio KGO San Francisco Big network of stations. Taped
September 30, 2000
--------------------------------------------------------------------------------
Radio CNX Media San Francisco 10 stations. Taped September 26,
2000
--------------------------------------------------------------------------------
Television VTV, Vancouver, B.C. Spot on Malcolm Lowry's Vancouver
featuring Victoria Brooks. Aired on
the evening news, September 19, 2000
--------------------------------------------------------------------------------
Television CNX Media, San Francisco Spot featuring Victoria Brooks
on-location in San Francisco talking
about beat writers. To be aired on
"Consumer Reports", a high profile
program sent out to 50 TV executives
across the country. It can be
picked up by any of several outlets,
one possibility being "Travel
Reports", the largest syndicated
travel show in North America.
--------------------------------------------------------------------------------
In Print Vancouver Sun Published Daily
Vancouver Province "
North Shore News "
Toronto Star "
Ottawa Citizen "
Palo Alto Daily News "
San Francisco Chronicle "
The Oakland Tribune "
Atlanta Journal &
Constitution "
Chicago Tribune "
USA Today "
North Shore News Vancouver suburb bi-weekly
publication
Publishers Weekly Weekly
Newsday Weekly
Library Journal U.S. Librarians' magazine
Quill & Quire Writing industry magazine published
in Toronto
CNNfn CNN's financial website
--------------------------------------------------------------------------------
Upcoming Air Jamaica In-flight magazine
Potential Air Canada In-flight magazine
Cathay-Pacific In-flight magazine
Conde Nast Traveler International travel magazine
available at newsstands
================================================================================
Internet Promotion. As of February 1, 2000, the Company appointed a new
Internet marketing firm, AEI Productions, Inc. ("AEI"), based in Boca Raton,
Florida. AEI will create positioning strategies with major search engines, such
as Yahoo!, as well as continuing to make submissions to secondary Internet
search engines. The Company has paid AEI $7,500 for the first month, which
covered 100 search words and/or phrases for each of the Virtual Department Store
and www.greatestescapes.com, with doorway pages generated by AEI hosted on the
-----------------------
Company's servers and belonging to the Company. For each month thereafter the
Company will pay a fee of $3,000 for both domains or $2,000 for either one
<PAGE>
Page 16
separately, adding or replacing 10% of the search words each month and adding
new doorway pages.
Multi-Media. The first in what is planned as a series of thematic literary
travel guide books became available in preferred Canadian book stores in March
2000 and United States bookstores in July 2000, and are also currently being
sold in Australia. To date, the Company has printed 4,000 books, of which 3,350
have been sold. In Canada, Sandhill Book Marketing Ltd ("Sandhill") of Kelowna,
B.C. markets the books on a consignment basis only and, to date, has sold 1,300
copies. In the United States, WORDS Distributing ("WORDS") of Oakland,
California markets the books on a purchase order basis and, to date, has sold
1,500 copies. In Australia, the books are distributed by Tower Books, on a
90-day purchase order basis and, to date, has sold 200 copies. The remainder of
the sales to date have been in-house. The Company does not receive any advances
on its travel guide books. As at August 31, 2000, the Company had realized
revenues of $8,203 from the sale of books.
Virtual Department Store. The Company has built and is operating its virtual
department store. In January 2000, the Company signed an agreement with
Authorizenet.com Corporation, in conjunction with Card Service International, to
provide online credit card authorization for its online virtual department
store. Products offered include travel adapters, silk sleeping bags, travel
lingerie, luggage, portable computer equipment, sporting goods and equipment,
cigars and smoking paraphernalia, computer software and games, videos, books and
book reviews, music on compact discs, and information on discounts on items such
as insurance, long distance telephone rates, and travel-related products. The
Company has not yet realized any revenues from its Virtual Department Store.
The Company will recognize and report revenue using both net revenue and gross
revenue methods. As at August 31, 2000 the Company had recognized and reported
revenues using the net revenue method. The Company received the revenue
generated from distribution sales and, therefore, reported the revenues on a net
basis. The Company may in the future recognize and report revenues using the
gross revenue method when applicable as a separate line item. This method of
reporting conforms to the guidance of EITF 99-19.
Travel Services Sold Through an Affiliate Site. The Company anticipates that
the commission it can expect to receive on travel services sold through an
affiliate program would be 10 to 20% of the commission payable on a travel
booking which could equate to 1 to 2% of the gross sales price.
Merchant Agreement with LinkShare - In June 2000 the Company entered into a
merchant agreement with LinkShare Corporation of New York, New York, thus
becoming a "LinkShare Merchant". The term of the agreement is three years.
LinkShare offers technology and services to facilitate marketing links between
websites providing products, property or services over the world wide web or
other websites carrying offers and links for LinkShare Merchants. LinkShare
also operates a network that includes LinkShare Merchants and websites that are
potential sales affiliates for LinkShare Merchants. The Company is part of the
LinkShare network which the Company may use to post offers, respond to
counter-offers and conclude engagements. The Company has paid a license fee of
$5,000 and will pay a yearly license renewal fee of $1,000. In addition, there
is a monthly basic tracking service fee payable under the agreement.
<PAGE>
Page 17
Brochure Advertising. The Company's WebZine is becoming a travel resource for
travelers planning their trips to various destinations around the world. The
various feature stories obtained from correspondents around the globe enable the
Company to expand its range of Destination sections offered on the WebZine home
page. The Destination section display, in one convenient location, of all
previously featured stories, restaurant reviews and brochures on a given
destination. The WebZine's Destination sections currently include Florida,
California, Cuba, Jamaica, British Columbia, Mexico, Belize, Spain, France, and
others.
The Company anticipates hiring a commissioned sales force to sell advertising
brochures to tourism-oriented businesses in the geographic locations of the
Destinations. The Company takes the local tourism-related business's brochure
and publishes it in its WebZine, with text and photographs included. The
Company believes the market for such advertisers is significant, and includes
businesses as diverse as small bike rental shops, restaurants, bed and
breakfasts, hotels, motels, local tour companies, national or international car
rental companies, tourist attractions, airlines, wine and liquor producers and
distributors, real estate offices, time share projects, mutual fund companies,
zoos, aquariums, planetariums, adventure tours, eco-tours, tennis clubs,
horseback riding stables, bowling alleys, casinos, ski resorts, ski rentals,
golf courses, rental shops, instruction schools and driving ranges, spa resorts,
day spas, spa equipment manufacturers and distributors, spa cream manufacturers
and distributors, retail skin products such as moisturizers, sunblock and
massage oils, cooking schools, gourmet food providers, art galleries and other
businesses which rely on tourists.
Advertisers with existing web sites benefit from the increased coverage obtained
from being in the Company's WebZine. Companies which do not have an existing
web site or which have a web site which is undeveloped or unpromoted, which is
more common, are able to establish their own Internet address and Internet
presence through the Company's WebZine. The Company will offer advertisers the
ability to display their products or services by way of full page brochure style
ads. These could be one, two or three pages. Banners will be used on the table
of contents page, the Destinations section, and within relevant stories linking
directly to the advertiser's display ad hosted within the Company's WebZine.
This will direct interested readers to the advertiser's full-page display ad
The Company's advertising rates are $500 per month or $1,250 per quarter, and
are not based directly on a guaranteed cost per thousand impressions ("CPM")
factor. However, if they were, the Company's CPM rate would be $5 which is very
competitive with other CPM rates that run as high as $25. The Company believes
that this is a cost-effective way for advertisers to acquire an Internet
presence without incurring the high set-up costs and ongoing maintenance fees of
creating a web site. The Company intends to engage an experienced travel
product salesman in Vancouver, British Columbia to sell the Company's
advertising. The Company has not yet realized any revenues from its advertising
program.
The Growth of E-Commerce. Greatestescapes.com Inc. has looked at a number of
different studies which were designed to predict Internet growth over the next
three to six years. It must be pointed out that these studies do differ in
terms of quantitative results and, therefore, also differ in terms of predicted
growth. This is not unexpected as it is doubtful that these studies used the
same research methodologies and they differed in both geographical locations and
time frames. For example, some studies looked at Internet growth in Asia,
predicted for a three year period, while others looked solely at North America,
and predicted growth for a five year period. Obviously, the results of the
studies differed. Nevertheless, the results are consistent in that the majority
of the studies predicted online retail sales would "soar" over the next three to
six years.
<PAGE>
Page 18
Following (in point form) are highlights of some of the key results regarding
Internet growth as predicted by a number of studies conducted by Forrester
Research Inc., which is the largest independent Internet research firm and is,
arguably, the leader in providing accurate information respecting online
e-commerce.
* Percentage of US households now on the Internet - 28%;
* Currently 9.7 million US households shop the Internet. By 2004 this will
increase to approximately 50 million;
* There will be a steady increase in average online spending per household,
growing from $1,167 in 1999 to $3,738 in 2004. In 2004 US households alone
will spend more than $184 billion online for a variety of goods; and
* Global e-commerce (both B2B and B2C) will hit 6.8 trillion in 2004, 8.6% of
the global sales of goods and services. These numbers are estimated at US
$3.2 trillion, Asia-Pacific $1.6 trillion, Latin America $482 billion (from
Global E-commerce Approaches Hyper- growth).
The above results are supported by both the Economist and Jupiter Communications
(another highly regarded Internet research firm). They also support the
Company's contention that Internet shopping is truly "coming of age".
Although growth statistics by sector are difficult to obtain, and do fluctuate
widely, the Company believes that e-commerce over the Internet will attract an
increasing number of travel-related companies offering various types of
travel-related products and services. One such company is www.byebyenow.com,
-----------------
which offers a number of different travel-related packages, including cruises,
spa and golf vacations, resort and airfare booking, and offers all these
services online. The growth and development of other online travel-related
companies, such as www.conceirge.com and www.fodors.com, supports the Company's
----------------- --------------
contention that Internet growth has in fact attracted travel-related companies.
Another study conducted by the National Retail Foundation and Forrester Research
supports such growth. It found that travel-related categories grew by almost
$114 million from March 2000 to April 2000. These numbers are astounding
considering that other categories within the study actually decreased. If this
study is accurate then it appears that the travel sector is in part responsible
for current Internet growth and if online shopping continues to grow as
predicted, it will comprise an increasing share of the on-line sales dollar.
Such results are exciting for established online travel companies and do support
the growth of Internet travel sales.
The following information is taken from material obtained from the Travel
Industry Association of America ("TIA"). Specific sources are shown within the
tables.
<PAGE>
Page 19
=============================================
Total Online Travel Market Revenue
1996 - 2002
=============================================
1996 $276 million
1997 $827 million
1998 $1.9 billion
1999 $3.2 billion
2000 $4.7 billion
2001 $6.5 billion
2002 $8.9 billion
=============================================
When broken out into segments, the overwhelming bulk of online travel revenues
in 1996 stemmed from airline ticket sales, approximately $243 million or 90% of
all online travel revenues. By the year 2002, the proportion of airline ticket
sales is estimated to decrease to 75%, generating $6.5 billion in revenues.
Non-air revenues, consisting mostly of hotel reservations and car rentals are
projected to grow from $31 million in 1996 to $938 million in 2000 and $2.4
billion by the end of 2002.
=============================================
Total Number of Online Travel
Buyers in the U.S.
1996 - 2002
=============================================
1996 25.3 million people
1997 32.2 million people
1998 41.0 million people
1999 48.1 million people
2000 54.2 million people
2001 60.5 million people
2002 71.9 million people
=============================================
Source: Travel and Interactive Technology
A Five Year Outlook
=============================================
According to TIA research, 54.5 million U.S. adults or 62% of current Internet
users have used an Internet or an online service to make travel plans in the
last year. Travel planning consists of activities such as getting information
on destinations or checking prices and schedules. This is up 54% from the 33.8
million adults in 1998.
Out of 52.2 million online travellers who used the Internet to make travel
plans, the following table sets out the types of sites used:
=============================================
Internet Sites Used for Travel Planning
=============================================
Type of Site Percentage
=============================================
Search Engine 62%
Destination 51%
Company 48%
Commercial 36%
Special Interest 23%
Travel Guide 14%
Newpaper/Magazine 14%
Community 10%
=============================================
<PAGE>
Page 20
According to the National Travel Survey, 16.5 million U.S. adults or 20% of
current Internet users have used the Internet or an online service to make
travel reservations in the past year. Travel reservations include actual
booking or paying for an airline ticket, hotel room, rental car, or package
tour, etc. This is up 146% from 6.7 million adults in 1998. The following
table breaks down the 16.5 million U.S. adults into gender, household income and
age:
=========================================================
Profile of People Who Book Travel on the Internet
=========================================================
Gender
=========================================================
Male 57%
Female 43%
=========================================================
Household Income
=========================================================
Under $50,000 20%
$50,000 to $74,999 31%
$75,000 to $99,000 28%
Over $100,000 21%
(Average Income: $91,000)
=========================================================
Age
=========================================================
18-34 44%
35-54 48%
Over 55 8%
=========================================================
Source: Travel and Technology 1999.
=========================================================
E-Commerce Operations. The Company has built a virtual department store,
Victoria Brooks' Greatest Escapes Department Store, to sell travel-related
products and services at the WebZine. This virtual department store at
www.greatestescapestore.com is starting off as a four floor virtual department
store selling essential travel items as well as unusual and unique products and
services. The Company believes that the growing acceptance of e-commerce
represents a substantial opportunity for it to conduct its business over the
Internet. There can be no assurance, however, that Internet commerce will
continue to expand, or that its e-commerce operations will be successful.
The Company utilizes a secure server for handling credit card transactions at
its WebZine. This service is provided by Cardservice International of Agoura
Hills, California. The suppliers of product are responsible for handling
warranty claims and product repairs. The Company will very rarely, if ever,
inventory product. Items will be described along with a small picture of the
item on the respective "floor" of the virtual department store. If a virtual
shopper wants more information, he or she clicks on the icon to acquire
additional product information. To purchase an item, a consumer clicks on the
"buy" icon and is connected to a secure point of purchase.
Products to be sold include travel adapters, silk sleeping bags, travel
lingerie, luggage, portable and traveling computer equipment, sporting goods and
equipment, cigars and smoking paraphernalia, computers, computer software and
games, videos, books and book reviews, music on compact discs, music reviews,
and information on available discounts on items such as insurance, long distance
telephone rates, and travel related products. The Company anticipates providing
department store "managers" with opportunities to enter into joint ventures with
the Company or to participate on a profit-sharing basis. Travel services may
<PAGE>
Page 21
be sold through external travel providers initially, with the Company receiving
commissions on services sold.
Since 1997, the Company's founders have devoted time and resources to make a
product with a wide market appeal. Management of the Company believes there are
three steps in developing a successful Internet business:
1. develop a product having appeal to the target market, ultimately
inspiring increased user traffic on the website;
2. establish a plan of commerce, thus increasing the opportunity to post
advertisements or banner style ads; and
3. develop a strategy for selling products over the Internet.
The Company believes it has addressed these three important steps.
The Company has attempted to create an environment where both travelers and
travel service providers can come together to share the same resources. The
WebZine is free for travelers. However, travel service providers pay for
advertising.
The Company hopes to have multi-dimensional income streams. It intends to try
to position the Company to benefit from the anticipated growth within the
Internet. The Company hopes that it will be able to earn revenue through:
1. advertising sold by external or inhouse Internet advertising/marketing
consultants;
2. an on-line department store which will offer a wide range of travel-
related products;
3. travel services sold through external travel providers, with the
Company receiving a commission on items sold; and
4. enhancement of multi-media opportunities by offering a range of travel
books. The travel books are being distributed through traditional bookstores as
well as on www.greatestescapes.com and www.LiteraryTrips.com.
Literary Travel Guides. During 1999, the Company created a new division,
GreatestEscapes.com Publishing, to produce traditional print publications. The
Company's first project, Literary Trips: Following in the Footsteps of Fame, is
a thematic guidebook containing a compilation of 23 destination pieces
(travelers' tales with guidebook information at the end of each piece) on a
destination surrounding a famous literary figure (for example, Ian Fleming in
Jamaica, John Steinbeck in California, Ernest Hemingway in Cuba, Paul Bowles in
Morocco, Graham Greene in Viet Nam, etc.). Each story has 4 to 15 pages of text
with 2 to 7 pages of graphics, photographs, pen-and-ink sketches, and maps. The
book has 368 pages. The book is in bookstores across Canada, the United States
and Australia. The book is also available in the Company's virtual department
store and at www.LiteraryTrips.com.
<PAGE>
Page 22
In December 1999, the Company signed an agreement with a British Columbia
company, Sandhill Book Marketing Ltd., one of Canada's leading book
distributors, to effectuate the distribution of the Company's titles in Canada.
The Company has entered into a distribution contract with WORDS Distributing
Co., located in Oakland, California, whereby WORDS Distributing Co. distributes
the Company's titles in the United States. The Company's books are also being
distributed through Tower Books of Sydney, Australia.
GEC Tech Research & Development. GEC Tech is the research and development arm
of the Company. It will research, identify and, if appropriate, develop
technical strategies that could assist the Company in becoming and maintaining
itself at the cutting edge of technological advancements on the Internet. These
areas can include virtual reality technology, wireless applications for
e-commerce strategies and many other aspects, which are currently being
researched and considered. With its expertise in website development, including
e-commerce, GEC Tech has received a consulting fee from another business that
needed its services.
Potential Acquisitions. The Company will be seeking appropriate acquisition
targets to accelerate growth and revenue projections. Such targets could
include existing on-line department stores and Internet travel booking companies
and travel companies. The Company anticipates that the ultimate acquisition of
a travel service provider will also contribute to the Company's revenue sources.
Regulation. The Internet has been under increasing scrutiny by various state,
federal and international regulatory agencies. The Company may be subject to
various existing or proposed forms of government regulations, including
restrictions on interstate telecommunications to promote certain transactions
and age-based content restrictions. Any future violation of, and the cost of
compliance with, these laws and regulations could have a material adverse effect
on the Company's business, financial condition and results of operations.
Reliance on Growth and Use of the Internet. The substantial growth in the use
of and interest in the Internet is a recent phenomenon. There can be no
assurance that communication or commerce over the Internet will become more
widespread or that extensive content will continue to be provided over the
Internet. To the extent that the Internet continues to experience significant
growth in the number of users and level of use, there can be no assurance that
the Internet infrastructure will continue to be able to support the demands
placed upon it by such potential growth or that the performance or reliability
of the Web will not be adversely affected by this continued growth.
Insufficient availability of telecommunications services to support the Internet
also could result in slower response times and adversely affect usage of the Web
and the Company's online media properties. If the Internet infrastructure does
not effectively support growth that may occur, the Company's business, operating
results and financial condition would be materially and adversely affected.
Regulatory and Market Influences. The Internet is subject to changing
political, economic and regulatory influences that will affect the procurement
practices and operation of Internet directory service organizations. Changes in
current Internet directory service reimbursement systems could result in the
need for unplanned product enhancements, in delays or cancellations, or in the
revocation of endorsement of the services of the Company. Any of these
occurrences could have a material adverse effect on the Company's business,
financial condition and results of operations. During the past several years,
various Internet directory service industries and telecommunications industries
have been subject to an increase in governmental and international regulation.
<PAGE>
Page 23
Certain proposals to reform the telecommunications and Internet service systems
are periodically under consideration by the appropriate regulators. These
programs may contain proposals to increase government involvement in Internet
directory services and otherwise change the operating environment for the
Company's customers. The Company cannot predict what impact, if any, such
factors might have on the Company's business, financial condition and results of
operations. In addition, many Internet directory service providers are
consolidating to create integrated Internet directory service delivery systems
with greater regional market power. As a result, these emerging systems could
have greater bargaining power, which may lead to price erosion of the Company's
products. The Company's failure to maintain adequate price levels would have a
material adverse effect on the Company's business, financial condition and
results of operations. Other legislative or market-driven reforms could have
unpredictable effects on the Company's business, financial condition and results
of operations.
Liquidity and Capital Resources. The Company's capital resources have mainly
derived from cash flows generated from the sale of the Company's common stock.
The Company completed the six month period ending August 31, 2000 with a net
cash flow of $2,171 as compared to $14,090 at the year ended February 29, 2000.
As a result of spending on the acquisition of property and equipment and the
deficit provided by operations of $162,983 and proceeds received from the sale
of shares, resulted in a decease of $11,919 from the year ended February 29,
2000. During the period ended August 31, 2000, accounts payable increased by
$20,670. The increase in accounts payable is comprised of operating expenses
which remained outstanding as at August 31, 2000. The increase in accounts
receivable and prepaid expenses of $5,391 from the year ended February 29, 2000
was due to an increase in refundable goods and services tax ("GST") and prepaid
office expenses. The cash and equivalents constitute the Company's present
internal sources of liquidity. During the period ended August 31, 2000, the
Company had an accumulated deficit of $455,631. Since the Company does not
generate enough revenue from operations, it needs to raise funds on an ongoing
basis by sale of its common stock. The Company does not expect any change in
the number of employees. At present the Company does not have any employees,
but hires consultants as required. The Company has no arrangements with its
officers, directors or affiliates to provide liquidity to the Company. At the
period ended August 31, 2000 the Company had accounts receivable, and the amount
due to the Company from Revenue Canada for GST. If the output GST tax exceeds
the input then excess tax is refunded by Revenue Canada.
Results of Operations. The operating results of the Company for the period
ended August 31, 2000 showed a net loss of $179,133 as compared to a net loss of
$126,945 in 1999. The increase in net loss of approximately $52,188 was
primarily due to an increase in general operating expenses. Income for the
period was $8,203, as compared to nil in 1999. During the period ended August
31, 2000, one main factor contributed to the increase in revenue. During the
period, the Company derived revenues from the sale of literary travel guide
books. Some major expenses include the following: administrative and general
include fees for secretarial and administration services provided by
consultants; corporate development includes a fee paid to a consulting company
for services relating to enhancing the Company's image, increasing its
productivity and cultivating valuable relationships with local business
associates and brokerage companies; designers, editors and writers includes fees
paid to individuals for services as designers, writers and editors of stories
for the Company's literary travel guide book; investor communications includes
<PAGE>
Page 24
fees paid for providing services in updating the Company's shareholders on the
progress of the Company; management fees include fees paid for overseeing the
operations of the Company; printing and reproductions include amounts paid for
printing and photocopying information brochures and general office documents;
website development expenses include fees paid for services provided by
individuals and companies for designing, building, hosting, and updating the
Company's website. During the quarter ended August 31, 2000, the Company spent
$63,196 for professional fees; including fees paid for legal, marketing,
auditing and accounting.
(e) Description of Property. As of the dates specified in the following table,
the Company held the following property:
==============================================================
PROPERTY FEBRUARY 29, 2000 AUGUST 31, 2000
--------------------------------------------------------------
Cash $14,090 $ 2,171
--------------------------------------------------------------
Property and Equipment $ 2,916 $ 7,833
==============================================================
(f) Security Ownership of Certain Beneficial Owners and Management. The
following table sets forth certain information regarding the beneficial
ownership of the Company's common stock as of October 19, 2000 by (i) each
person or entity known by the Company to be the beneficial owner of more than 5%
of the outstanding shares of common stock, (ii) each of the Company's directors
and named executive officers, and (iii) all directors and executive officers of
the Company as a group.
================================================================================
Name and Address Amount and Nature Percent
Title of Class of Beneficial Owner of Beneficial Owner of Class
--------------------------------------------------------------------------------
$.001 Par Value Guy Brooks President and Director 10.2%
Common Stock 5255 Gulf Place 646,068 common shares (1)
West Vancouver, B.C.
Canada V7W 2V9
--------------------------------------------------------------------------------
$.001 Par Value Victoria Brooks Chief Operating Officer 16.2%
Common Stock 5255 Gulf Place and Director
West Vancouver, B.C. 1,027,000 common shares(2)
Canada V7W 2V9
--------------------------------------------------------------------------------
$.001 Par Value Brian Buchanan Vice President Corporate 4.7%
Common Stock 2876-139A Street Development and Director
White Rock, B.C. 300,000 common shares
Canada, V4P 2N1
--------------------------------------------------------------------------------
$.001 Par Value Shiraz Hussein Treasurer and Director 0.39%
Common Stock 4911 Wintergreen Ave. 25,000 common shares
Richmond, B.C.
Canada V7C 1L4
--------------------------------------------------------------------------------
$.001 Par Value James Henshall Director 0.39%
Common Stock #602-1040 West 25,000 common shares
Georgia St.
Vancouver, B.C.
Canada V7C 1L4
--------------------------------------------------------------------------------
$.001 Par Value Duncan Merrin 350,000 common shares 5.5%
Common Stock c/o Oberon Group Ltd.
111 North Bride Road
#18-01
Peninsula Plaza,
Singapore 179098
--------------------------------------------------------------------------------
<PAGE>
Page 25
--------------------------------------------------------------------------------
$.001 Par Value Mervyn Zabinsky 375,000 common shares 5.9%
Common Stock 23 Woodwoards Road
Richmond, B.C.
Canada V7E 6G7
--------------------------------------------------------------------------------
All Directors and Officers as a Group 2,023,068 common shares 31.9%
--------------------------------------------------------------------------------
All Directors and Management as a Group 2,748,068 common shares 43.4%
================================================================================
(1) Guy Brooks and Victoria Brooks are husband and wife.
(2) Includes 206,068 shares owned by BBB Consultants Ltd., a company
controlled by Guy Brooks.
(3) All these shares are held in the name of Victoria Brooks Investments
Inc., a company controlled by Victoria Brooks.
Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. In accordance with Commission rules, shares of the Company's common
stock which may be acquired upon exercise of stock options or warrants which are
currently exercisable or which become exercisable within 60 days of the date of
the table are deemed beneficially owned by the optionees. Subject to community
property laws, where applicable, the persons or entities named in the table
above have sole voting and investment power with respect to all shares of the
Company's common stock indicated as beneficially owned by them.
(g) Directors, Executive Officers, Promoters and Control Persons
Executive Officers of the Company:
The following table sets forth the names, ages, offices held and the percentage
of time each officer will spend on the Corporation's business:
================================================================================
NAME AGE OFFICE(S) % OF TIME SPENT
--------------------------------------------------------------------------------
Guy Brooks 44 President and CEO 75%
Victoria H. Brooks 49 Chief Operating Officer 100%
Brian Buchanan 52 Vice-President 40%
Shiraz Hussein 52 Treasurer 30%
================================================================================
Board of Directors of the Company:
========================================
NAME AGE
----------------------------------------
Guy Brooks (1) 44
Victoria H. Brooks(1) 49
Brian Buchanan 52
Shiraz Hussein 52
James Henshall 53
========================================
(1) Co-Chairpersons
All directors resign at the annual general meeting of the Company following
their appointment, at which meeting, they can be nominated for re-election at
each such meeting. There is no limit to the number of times a director can be
re-elected to the Company's board.
<PAGE>
Page 26
Biographical Information on Company's Officers and Directors:
Victoria Brooks (49) is the Chief Operating Officer and a director of the
Company. Mrs. Brooks is a director of GreatestEscapes.com Holdings Ltd., a
subsidiary of the Company. She is also the Editor-in-Chief of all of the
Company's publications and a partner with Guy Brooks in the creation and
development of GreatestEscapes.com Corp. Mrs. Brooks is a freelance travel
writer and photographer and five-time published guidebook author. Mrs. Brooks
is the creator and co-author of the Kick Start business travel guide series.
Together with her husband Guy, they have had five of their Kick Start guides
published - Vietnam, Indonesia, Malaysia, Hong Kong and Costa Rica. Mrs. Brooks
writes freelance travel pieces for various North American publications. Mrs.
Brooks has a degree from Evergreen University in English Literature and has
studied Journalism at Mount Royal College in Calgary, Alberta, Canada. She is
an active member of the prestigious American Society of Travel Writers, the
American Society of Journalists and Authors, the Writers Union of Canada, the
Periodical Writers Association of Canada and the Travel Media Association of
Canada. From 1980 to 1985, Mrs. Brooks worked in sales for Qualico Calgary;
from 1989 to 1992, she was the owner of Eclectic Sox & Stocks; and from 1993 to
1999, she was an Editor and Freelance Writer for Kick Start Publishing.
Guy Brooks (44) is the President, Chief Executive Officer and a director of the
Company. Mr. Brooks is also the President and a director of Greatestescapes.com
Holdings Ltd., a subsidiary of the Company. He is the publisher and partner
with Victoria Brooks in the development of GreatestEscapes.com Inc. Mr. Brooks
has experience in project management and business development of both private
and public companies. He is currently Director of Spire Ventures Ltd., a gold
exploration company publicly listed on the CDNX. Mr. Brooks studied Journalism
at Carleton University. At various times, Mr. Brooks has held the following
professional memberships: Australian Society of Investment & Financial Advisors;
Institute of Company Directors, and Rotary Club of Perth. From 1990 to 1993,
Mr. Brooks was the General Manager of Key to Asia Consulting. Also from 1990 to
1993, he was the State General Manager for The Over 50's Friendly Society. From
1993 to 1999, Mr. Brooks was a representative of Regal Capital Investments.
From 1993 to 1999, he was the publisher and a partner in Kick Start Publishing.
Since 1996, Mr. Brooks has been the President of South East Asia Brewing Co.,
and Global Brewing Services Co. Ltd., which obtained a brewery license in
Vietnam. To date this company has not progressed to the development of the
brewery and it has no revenues or operations.
Brian Buchanan (52) is the Vice President of Corporate Development and a
director of the Company. Mr. Buchanan has a wide range of business experience
that will be of value to the Company now and as it expands into various
international markets. Mr. Buchanan's experience is in the area of marketing
and human resources. He has developed management techniques that he has used in
Canada as well as on overseas projects. The Company believes his experience
will enhance productivity as well as cultivate valuable relations with local
businesses on an international level. His corporate background includes nine
years as Vice President and Director of Marketing for one of Canada's largest
insurance brokerage companies, TOS Insurance. He is currently President and
Director of Spire Ventures Ltd., a junior mining company active in southeast
Asia, which is publicly traded on CDNX. In 1979, Mr. Buchanan studied Business
Administration at Fraser Valley College. His professional memberships include
the Insurance Council of British Columbia and Sales & Marketing Executives of
Vancouver. From 1983 to 1991, Mr. Buchanan was a Vice President and a director
of TOS Insurance. From 1991 to 1992, he was the General Manager of Southern
<PAGE>
Page 27
Cross Agriculture based in Indonesia. Concurrently, from 1991 to 1993, Mr.
Buchanan held his licenses with TN Stevens Association, and acted as Manager
from 1992 to 1993. From 1993 to 1994, Mr. Buchanan was the General Sales
Manager of Bow Mac Saturn Saab. Mr. Buchanan has been the President of Spire
Ventures Ltd. since October 1995.
Shiraz Hussein (52) has been the Treasurer and a Director of the Company since
February 1999. In 1969, Mr. Hussein earned a diploma in Business Administration
from Filton College in the United Kingdom. Mr. Hussein is a principal of Razzle
& Company, a company which provided accounting and management services to
reporting and non-reporting companies since October 1988. He has over 15 years
of experience as a controller/accountant within the natural resource, retail,
technology and construction industries. Mr. Hussein has been the Chief
Financial Officer and Secretary since September 1996 and a Director since
October 1997 of Spire Ventures Ltd., a junior mining company publicly listed on
CDNX. He has been Controller of Welcome Opportunities Ltd. Since February 1996
and Secretary since December 1996. He is also a Director of Arcturus Resources
Ltd. Since November 1998. Mr. Hussein is responsible for all accounting and
financial management of the Company.
James Henshall (53) has been a Director of the Company since 1998. In 1970, Mr.
Henshall earned a law degree at the University of Alberta in Canada. In 1974,
Mr. Henshall earned a Bachelor of Arts degree at the University of Western
Ontario in Canada. Mr. Henshall is a member of the Canadian Bar Association as
well as the British Columbia Bar Association. From 1974 to 1978, Mr. Henshall
worked as a Associate Attorney for Russell & Dumoulin, in Vancouver, Canada.
From 1978 to 1982, Mr. Henshall was a Partner at the law firm of Henshall
Cottick. From 1982 to 1987, Mr. Henshall was a Partner with the law firm of
Knott Pollard Morgan. From 1987 to 1995, Mr. Henshall was a Partner with the
law firm of Alexander Holburn. Mr. Henshall currently works as an attorney with
C.C. China Capital International Corp. He is also the Senior Vice President for
C.C. China Capital International Corp.
Other Key Personnel
Katherine Means is a communications professional with 20 years of experience as
a newspaper and magazine reporter, editor and feature writer. Her recent
professional emphasis has been on travel and lifestyle writing. Katherine is
Senior Contributing Editor to the Company's WebZine. Over the past 20 years her
career as a magazine and newspaper editor has taken her to Jakarta and back to
Houston where she now resides. As a freelance writer, Katherine has written for
numerous publications including; Conroe Courier daily newspaper, Ultra Magazine
(a regional lifestyle 4-color monthly magazine), local Houston newspapers,
Adweek, American Automobile Association World, American Express Expression,
Associated Press Special Editions, Body Smart (a health and fitness
publication), Communication Arts, Continental Airlines Profiles, Houston
Advanced Research Center Corollary, Houston Home & Living, Houston Magazine, San
Francisco Review of Books, Singapore Airlines Silver Kris, Southwest Airlines
Spirit, and others. Ms. Means has a Bachelor of Arts in Journalism from Ohio
State University, and completed graduate courses in journalism at the University
of North Washington. She also holds a certificate in publishing from Rice
University and is active in various service organizations.
<PAGE>
Page 28
All other contributing writers work on a freelance basis. They generally
present material to the Company as opposed to being approached for material.
The contributors can change each month. The Company has no written or oral
agreements with any of its contributing writers.
Executive Compensation - Remuneration of Directors and Officers. Any
compensation received by officers, directors, and management personnel of the
Company will be determined from time to time by the Board of Directors of the
Company. Officers, directors, and management personnel of the Company will be
reimbursed for any out-of-pocket expenses incurred on behalf of the Company.
Summary Compensation Table. The table set forth below summarizes the annual and
long-term compensation for services in all capacities to the Company payable to
the Chief Executive Officer of the Company and the other executive officers of
the Company whose total annual salary and bonus is anticipated to exceed $50,000
during the years shown. The Board of Directors of the Company has recently
adopted an incentive stock option plan for its executive officers which will
result in additional compensation.
--------------------------------------------------------------
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
--------------------------------------------------------------
================================================================================
Name and Other All Other
Principal Salary Bonus Annual Compen
Position Year ($) ($) Compensation -sation
--------------------------------------------------------------------------------
Guy Brooks Up to 02/28/1999 None None None None
President, Up to 02/29/2000 18,000
CEO and Director
--------------------------------------------------------------------------------
Victoria Brooks Up to 02/28/1999 None None None None
COO and Director Up to 02/29/2000 18,000
--------------------------------------------------------------------------------
Brian Buchanan Up to 02/28/1999 None None None None
VP of Corporate Up to 02/29/2000 16,720
Development
and Director
================================================================================
Compensation of Directors. Directors who are also employees of the Company
receive no extra compensation for their service on the Board of Directors of the
Company.
Employment Contracts. The Company has not entered into any employment
contracts, but anticipates entering into employment contracts with certain
management and other key personnel.
Stock Option Plans. The Board of Directors of the Company have recently adopted
a stock option plan ("Stock Option Plan"). Pursuant to the provisions of the
proposed Stock Option Plan, certain shares of the Company's $0.001 par value
common stock will be reserved for issuance upon exercise of options. The Stock
Option Plan will be designed to retain qualified and competent officers,
employees, and directors of the Company. The Company's Board of Directors, or a
committee thereof, shall administer the Stock Option Plan and will be
authorized, in its sole and absolute discretion, to grant options thereunder to
all eligible employees of the Company, including officers and directors (whether
or not employees) of the Company. Options will be granted pursuant to the
provisions of the Stock Option Plan on such terms and at such prices as
determined by the Company's Board of Directors. Options granted under the Stock
Option Plan will be exercisable after the period specified in the option
<PAGE>
Page 29
agreement. Options granted under the Stock Option Plan will not exercisable
after the expiration of 10 years from the date of grant. The Stock Option Plan
will also authorize the Company to make loans to optionees to enable them to
exercise their options. At present, no options have been granted.
Stock Awards Plan. The Company has not adopted a Stock Awards Plan, but may do
so in the future. The terms of any such plan have not been determined.
(h) Certain Relationships and Related Transactions. On or about February 9,
1999, the Company purchased the intellectual property of Kick Start Publishing,
a partnership owned by Victoria Brooks and Guy Brooks, for $1.00. The
intellectual property included the Company's WebZines, travel names and trade
names, and the Company's virtual department store.
The Company pays consulting and accounting fees to Razzle & Company, a company
controlled by Shiraz Hussein, Treasurer and a director of the Company. The
Company has paid Razzle & Company the sum of $10,067 to August 31, 2000. The
Company has no formal agreement with Razzle & Company.
The Company incurred corporate development fees to Asia Group of Companies in
the amount of $12,038 to August 31, 2000. Brian Buchanan, a director of the
Company is also the President and a director of the Asia Group of Companies.
The Company has no formal agreement with Asia Group of Companies.
The Company incurred management fees to BBB Consultants in the amount of $5,936
to August 31, 2000. BBB Consultants is a private company owned by Guy Brooks,
the President, CEO and a director of the Company. The Company has no formal
agreement with BBB Consultants.
The Company will attempt to resolve any such conflicts of interest in favor of
the Company. The officers and directors of the Company are accountable to the
Company and its shareholders as fiduciaries, which requires that such officers
and directors exercise good faith and integrity in handling the Company's
affairs. A shareholder may be able to institute legal action on behalf of the
Company on or behalf of that shareholder and all other similarly situated
shareholders to recover damages or for other relief in cases of the resolution
of conflicts in any manner prejudicial to the Company.
(i) Legal Proceedings. There are no legal actions pending against the Company
nor are any such legal actions contemplated.
(j) Market for Common Equity and Related Stockholder Matters. On or about June
26, 2000 the Company was cleared by the NASD to list the Company's securities on
the Pink Sheets maintained by the NASD. With the completion of the Merger, the
Company is applying for participation on the OTC Bulletin Board, an electronic
quotation medium for securities traded outside the Nasdaq Stock Market. There
can be no assurance that the Company will be approved for participation on the
OTC Bulletin Board.
<PAGE>
Page 30
(k) Recent Sales of Unregistered Securities. There have been no sales of
unregistered securities by the Company within the last three years which would
be required to be disclosed pursuant to Item 701 of Regulation S-B, except for
the following:
The following shares of the Company's common stock were issued in reliance upon
the exemption from registration and prospectus delivery requirements of
Regulation S:
================================================================================
Price Per Total Number of
Date Issued No. of Shares Share($) ($) Shareholders
--------------------------------------------------------------------------------
March 19, 1999 1,000,000 0.005 5,000 1(1)
--------------------------------------------------------------------------------
July 31, 2000 763,068 0.25 190,767 10
================================================================================
(1) These shares were purchased by Victoria Brooks, a director and
officer of the Company.
The following shares of the Company's common stock were qualified for the
non-public offering exemption specified by Section 4(2) of the Securities Act of
1933 and Rule 504 of Regulation D:
================================================================================
Price Per Total Number of
Date Issued No. of Shares Share($) ($) Shareholders
--------------------------------------------------------------------------------
March 19, 1999 3,460,000 0.005 17,300 18(1)
--------------------------------------------------------------------------------
May 11, 1999 661,666 0.15 99,250 16
--------------------------------------------------------------------------------
October 4, 2000 701,400 0.25 175,350 21
================================================================================
(1) Of these shares 850,000 were purchased by Guy Brooks (500,000 shares),
Brian Buchanan (300,000 shares), Shiraz Hussein (25,000 shares) and James
Henshall (25,000 shares), all directors and/or officers of the Company.
Of the 6,586,134 shares currently issued and outstanding, 2,613,068 shares, or
40% of the currently issued and outstanding shares of the Company, are
considered restricted.
(l) Description of Securities. The Company is authorized to issue 200,000,000
shares of common stock, $0.001 par value, each share of common stock having
equal rights and preferences, including voting privileges. The Company is not
authorized to issue shares of preferred stock. As of October 19, 2000, there
were 6,586,134 shares of the Company's common stock issued and outstanding.
The shares of $0.001 par value common stock of the Company constitute equity
interests in the Company entitling each shareholder to a pro rata share of cash
distributions made to shareholders, including dividend payments. The holders of
the Company's common stock are entitled to one vote for each share of record on
all matters to be voted on by shareholders. There is no cumulative voting with
respect to the election of directors of the Company or any other matter, with
the result that the holders of more than 50% of the shares voted for the
election of those directors can elect all of the Directors. The holders of the
Company's common stock are entitled to receive dividends when, as and if
declared by the Company's Board of Directors from funds legally available
therefor; provided, however, that cash dividends are at the sole discretion of
the Company's Board of Directors. In the event of liquidation, dissolution or
winding up of the Company, the holders of common stock are entitled to share
ratably in all assets remaining available for distribution to them after payment
of liabilities of the Company and after provision has been made for each class
of stock, if any, having preference in relation to the Company's common stock.
Holders of the shares of Company's common stock have no conversion, preemptive
<PAGE>
Page 31
or other subscription rights, and there are no redemption provisions applicable
to the Company's common stock. All of the outstanding shares of Company's
common stock are duly authorized, validly issued, fully paid and non-assessable.
(m) Indemnification of Directors and Officers. Currently, the Company does not
have a provision in either the Company's Articles of Incorporation or Bylaws
limiting the liability of the Company's officers and directors. The Company
may, in the future and with shareholders' consent, amend the Company's Articles
of Incorporation to limit the liability of the Company's officers and directors.
In such a case, the Company's officers and directors will not be liable to the
Company for monetary damages occurring because of a breach of their fiduciary
duty as officers and directors in certain circumstances. Such limitation will
not affect liability for any breach of an officer's or director's duty to the
Company or the Company's shareholders (i) with respect to approval by the
officer or director of any transaction from which he or she derives an improper
personal benefit, (ii) with respect to acts or omissions involving an absence of
good faith, that he or she believes to be contrary to the best interests of the
Company or the Company's shareholders, that involve intentional misconduct or a
knowing and culpable violation of law, that constitute an unexcused pattern of
inattention that amounts to an abdication of his or her duty to the Company or
the Company's shareholders, or that indicate a reckless disregard for his or her
duty to the Company or the Company's shareholders in circumstances in which he
or she was or should have been aware, in the ordinary course of performing his
or her duties, of a risk of serious injury to the Company or the Company's
shareholders, or (iii) based on transactions between the Company and the
Company's officers and directors or another corporation with interrelated
officers or directors or on improper distributions, loans or guaranties pursuant
to applicable sections of the General Corporation Law of Nevada. Such limitation
of liability does not affect the availability of equitable remedies such as
injunctive relief or rescission.
Indemnification Agreements. The Company anticipates that the Company will enter
into indemnification agreements with each of the Company's directors and
executive officers pursuant to which the Company shall indemnify each such
director and officer for all expenses and liabilities, including criminal
monetary judgments, penalties and fines, incurred by each such director and
officer in connection with any criminal or civil action brought or threatened
against such director and officer because of such director and officer being or
having been an executive officer or director of the Company. To be entitled to
indemnification by the Company, such person must have acted in good faith and in
a manner such person believed to be in the best interests of the Company and,
with respect to criminal actions, such director and officer must have had no
reasonable cause to believe his or her conduct was unlawful.
DISCLOSURE OF OPINION OF SECURITIES AND EXCHANGE COMISSION REGARDING
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
INSOFAR AS INDEMNIFICATION FOR LIABILITIES OCCURRING PURSUANT TO THE SECURITIES
ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT
IT IS THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH
INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE SECURITIES ACT OF
1933 AND IS, THEREFORE, UNENFORCEABLE.
<PAGE>
Page 32
(n) Financial Statements
Copies of the financial statements specified in Regulation 228.310 (Item 310)
are filed with Form 8K (see Item 7 below).
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not Applicable
ITEM 4. CHANGES IN REGISTRANT'S ACCOUNTANT.
Not Applicable
ITEM 5. OTHER EVENTS.
Successor Issuer Election
Upon effectiveness of the Merger on October 16, 2000, pursuant to Rule 12g-3(a)
of the General Rules and Regulations of the Commission, the Company became the
successor issuer to Capstra for reporting purposes under the Securities Exchange
Act of 1934 (the "Exchange Act") and elects to report under the Exchange Act
effective October 16, 2000.
ITEM 6. RESIGNATION OF DIRECTORS AND EXECUTIVE OFFICERS.
The officers and directors of Capstra, John Mackay and Rod Saunders, resigned
such offices as a result of the merger with the Company. The officers and
directors of the Company will continue as the officers and directors of the
successor issuer.
ITEM 7. FINANCIAL STATEMENTS
(a) Index to Financial Statements.
Audited Financial Statements of the Company: Page
------------------------------------------- ----
Auditors Report
Balance Sheet as at February 28, 1999 and February 29, 2000 F-1
Statement of Operations F-2
<PAGE>
Page 33
Statement of Stockholders' Deficit F-3
Statement of Cash Flows F-4
Notes to Financial Statements F5 - F7
Unaudited (Auditor Reviewed) Financial Statements:
Management Report 1
Balance Sheet as at August 31, 2000 and February 29, 2000 2
Statement of Operations for Six Months Ended August 31, 2000 3
Statement of Stockholders' Deficit from February 10, 1999
to August 31, 2000 4
Statement of Cash Flows for Six Months Ended August 31, 2000 5
Notes to Financial Statements 6 - 9
Audited Financial Statements to February 7, 1999 of Kickstart
Publishing, the predecessor company to the Company:
Auditor's Report 1
Balance Sheet 2
Statement of Income and Proprietor's Equity 3
Statement of Changes in Financial Position 4
Notes to Financial Statements 5 - 6
<PAGE>
Page 34
(b) Index to Exhibits.
Copies of the following documents are filed with this Form 8K as exhibits:
Exhibits Page
-------- ----
1 Corporate Charter (previously filed
2 Articles of Incorporation (previously filed
3 Bylaws (previously filed)
4 Intellectual Property Assignment Between Kick Start
Publishing and Greatestescapes.com (previously filed)
5 Public Relations Agreement Between Between Kathleen
Carney & Associates and Greatestescapes.com (previously filed)
6 Distribution Agreement Between WORDS Distributing
and Greatescapes.com Publishing (previously filed)
7 Supplier Agreement Between Organic Buckwheat Pillow Products
of Canada & USA and Greatestescapes.com (previously filed)
8 Supplier Agreement Between Microsoie, Inc.
and Greatestescapes.com (previously filed)
9 Supplier Agreement Between Ulysses Press and Greatestescapes.
com (previously filed)
10 Supplier Agreement Between SunDreamer and Greatestescapes.
com (previously filed)
11 Supplier Agreement Between Attart Industries, Inc. and
Greatestescapes.com (previously filed)
12 Merger Agreement between the Company and
Capstra Capital Corp. (previously filed)
13 Merchant Agreement between the Company
and LinkShare Corporation 1-10
14 Distribution Agreement between the Company
and Sandhill Book Marketing Ltd. 1-2
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
GREATESTESCAPES.COM CORP.(A Development Stage Company)
We have audited the accompanying balance sheets of Greatestescapes.com Corp. as
at February 29, 2000 and February 28, 1999 and the related statements of
operations, shareholders' deficit and cash flows for the year, the initial 19
day period and the period from inception, February 10, 1999 through February 29,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at February 29, 2000 and
February 28, 1999 and the results of its operations and the cash flows for the
year, the initial 19 day period and the period from inception February 10, 1999
through February 29, 2000 in conformity with generally accepted accounting
principles in the United States.
/s/ Pannell Kerr Forster
Chartered Accountants
Vancouver, Canada
May 4, 2000
<PAGE>
Page F-1
--------------------------------------------------------------------------------
GREATESTESCAPES.COM CORP.
(A Development Stage Company)
Balance Sheets
(U.S. Dollars)
February 29, February 28,
2000 1999
--------------------------------------------------------------------------------
Assets
Current
Cash $ 14,090 $ 11,911
Account receivable 3,470 30
--------------------------------------------------------------------------------
17,560 11,941
Property and Equipment (note 3) 2,916 0
Other (note 4) 1 1
--------------------------------------------------------------------------------
$ 20,477 $ 11,942
================================================================================
Liability
Current
Accounts payable $ 23,552 $ 15,460
--------------------------------------------------------------------------------
Commitment (note 7)
Stockholders' Deficit
Common Stock, $0.001 par value;
200,000,000 shares authorized,
5,121,666 (1999 - 4,460,000)
shares issued and outstanding 5,122 4,460
Additional Paid-In Capital 116,428 17,840
Share Subscriptions 150,825 0
Other Comprehensive Income 1,048 0
Accumulated Deficit (276,498) (25,818)
--------------------------------------------------------------------------------
(3,075) (3,518)
--------------------------------------------------------------------------------
$ 20,477 $ 11,942
================================================================================
See notes to financial statements.
<PAGE>
Page F-2
--------------------------------------------------------------------------------
GREATESTESCAPES.COM CORP.
(A Development Stage Company)
Statements of Operations
(U.S. Dollars)
Period from
Initial 19 Inception
Day Period February 10,
Year Ended Ended 1999 Through
February 29, February 28, February 29,
2000 1999 2000
--------------------------------------------------------------------------------
Expenses
Administrative and general 24,294 0 24,294
Advertising and promotion 14,798 0 14,798
Bank charges 374 75 449
Corporate development 24,720 0 24,720
Depreciation 515 0 515
Designers, editors and writers 37,999 0 37,999
Investor relations 4,065 0 4,065
Management fees 36,000 0 36,000
Office 8,337 0 8,337
Printing and reproductions 11,051 0 11,051
Professional fees 35,778 25,417 61,195
Regulatory fees 7,990 0 7,990
Telephone 3,815 326 4,141
Website development 40,944 0 40,944
--------------------------------------------------------------------------------
Net Loss for Period $ 250,680 $ 25,818 $ 276,498
================================================================================
Net Loss Per Share $ 0.05 $ 0.01
================================================================================
Weighted Average Number
of Shares Outstanding 4,620,738 4,460,000
================================================================================
See notes to financial statements.
<PAGE>
Page F-3
--------------------------------------------------------------------------------
GREATESTESCAPES.COM CORP.
(A Development Stage Company)
Statements of Stockholders' Deficit
(U.S. Dollars)
<TABLE>
<CAPTION>
Additional Other Total
Common Stock Paid-In Share Comprehensive Accumulated Stockholders'
Number Amount Capital Subscriptions Income Deficit Deficit
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
February 10, 1999
(Inception) 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Issuance of Common
Stock 4,460,000 4,460 17,840 0 0 0 22,300
Net Loss 0 0 0 0 0 (25,818) (25,818)
-----------------------------------------------------------------------------------------------------------------------------------
Balance,
February 28, 1999 4,460,000 4,460 17,840 0 0 (25,818) (3,518)
Issuance of Common
Stock 661,666 662 98,588 0 0 0 99,250
Share Subscriptions
Received 0 0 0 150,825 0 0 150,825
Other Comprehensive
Income 0 0 0 0 1,048 0 1,048
Net Loss 0 0 0 0 0 (250,680) (250,680)
-----------------------------------------------------------------------------------------------------------------------------------
Balance,
<S> <C> <C> <C> <C> <C> <C> <C>
February 29, 2000 5,121,666 $ 5,122 $ 116,428 $ 150,825 $ 1,048 $ (276,498) $ (3,075)
===================================================================================================================================
</TABLE>
See notes to financial statements.
<PAGE>
Page F-4
--------------------------------------------------------------------------------
GREATESTESCAPES.COM CORP.
(A Development Stage Company)
Statements of Cash Flows
(U.S. Dollars)
Period
from Inception
Initial 19 Day February 10,
Year Ended Period Ended 1999 Through
February 29, February 28, February 29,
2000 1999 2000
--------------------------------------------------------------------------------
Operating Activities
Net loss $(250,680) $ (25,818) $(276,498)
Adjustments to reconcile net
loss to net cash used by
operating activities
Depreciation 515 0 515
Changes in operating assets
and liabilities
Account receivable (3,440) (30) (3,470)
Accounts payable 8,092 15,460 23,552
--------------------------------------------------------------------------------
Net Cash Used by Operating
Activities (245,513) (10,388) (255,901)
--------------------------------------------------------------------------------
Investing Activities
Acquisition of intellectual
property 0 (1) (1)
Acquisition of property and
equipment (3,431) 0 (3,431)
--------------------------------------------------------------------------------
Net Cash Used by Investing
Activities (3,431) (1) (3,432)
--------------------------------------------------------------------------------
Financing Activities
Share subscriptions received 150,825 0 150,825
Issuance of common stock 99,250 22,300 121,550
--------------------------------------------------------------------------------
Net Cash Provided by
Financing Activities 250,075 22,300 272,375
--------------------------------------------------------------------------------
Effect of Foreign Currency
Translation on Cash 1,048 0 1,048
--------------------------------------------------------------------------------
Cash Inflow 2,179 11,911 14,090
Cash, Beginning of Period 11,911 0 0
--------------------------------------------------------------------------------
Cash, End of Period $ 14,090 $ 11,911 $ 14,090
================================================================================
See notes to financial statements.
<PAGE>
Page F-5
--------------------------------------------------------------------------------
GREATESTESCAPES.COM CORP.
(A Development Stage Company)
Notes to Financial Statements
Year Ended February 29, 2000 and Initial 19 Day Period Ended February 28, 1999
(U.S. Dollars)
1. BACKGROUND AND BUSINESS
The Company was incorporated on February 10, 1999 under the laws of the State of
Nevada. The Company is in the development stage as more fully defined in
statement No. 7. of the Financial Accounting Standards Board. The Company
intends to operate as a multi media travel related publishing enterprise. The
Company markets and will market travel-related products based on the content of
its print publications as well as its digital Internet magazine. Products will
include a wide range of goods including books, individual stories and hundreds
of items in its online store www.GreatestEscapesStore.com. The Company intends
developing other travel products to be sold and distributed through its on-line
department store, two websites www.GreatestEscapesStore.com and
www.LiteraryTrips.com and other more traditional outlets.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Property and equipment
Property and equipment are carried at cost less accumulated depreciation.
Depreciation of property and equipment are calculated as follows:
Equipment and furniture - 30% Declining balance
(b) Foreign currency translation
Amounts recorded in foreign currency are translated into U.S. dollars as
follows:
(i) Current assets and current liabilities, at the rate of exchange in effect at
the balance sheet date;
(ii) Expenses at the average rate of exchange for the period
Gains arising from this translation of foreign currency are accounted for as
other comprehensive income shown as a separate component of stockholders'
deficit.
(c) Net loss per share
Net loss per share computations are based on the weighted average number of
common shares outstanding during the year.
(d) Financial instruments
The Company's financial instruments consist of cash, account receivable and
accounts payable. Unless otherwise noted, it is management's opinion that the
Company is not exposed to significant interest, currency or credit risk.
<PAGE>
Page F-6
--------------------------------------------------------------------------------
GREATESTESCAPES.COM CORP.
(A Development Stage Company)
Notes to Financial Statements
Year Ended February 29, 2000 and Initial 19 Day Period Ended February 28, 1999
(U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES
(e) 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 amount of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates and would impact future results
of operations and cash flows.
3. PROPERTY AND EQUIPMENT
2000 1999
--------------------------------------------------------------------------------
Accumulated
Cost Depreciation Net Net
--------------------------------------------------------------------------------
Equipment and
furniture $ 3,431 $ 515 $ 2,916 $ 0
================================================================================
4. OTHER ASSET
During the initial 19 day period ended February 28, 1999, the Company purchased
intellectual property from Kick Start Publishing (a Proprietorship) for
consideration of $1.00 cash. This intellectual property includes any trademark,
travel names, associated registrations, etc. specifically relating to Greatest
Escapes Travel Report and Greatest Escapes Travel Webzine.
5. RELATED PARTY TRANSACTIONS
During the year ended February 29, 2000, the Company paid related parties
$89,706 in administration, corporate development, management and professional
fees. The above transactions were completed in the normal course of operations
on normal market terms and were recorded at fair market value as estimated by
management.
6. INCOME TAXES
A deferred tax asset stemming from the Company's net operating loss carry
forward, has been reduced by a valuation account to zero due to uncertainties
regarding the utilization of the deferred assets. At February 29, 2000, the
Company has available a net operating loss carry forward of approximately
$270,000 which it may use to offset future federal taxable income. The net
operating loss carry forward if not utilized, will begin to expire in 2014.
<PAGE>
Page F-7
--------------------------------------------------------------------------------
GREATESTESCAPES.COM CORP.
(A Development Stage Company)
Notes to Financial Statements
Year Ended February 29, 2000 and Initial 19 Day Period Ended February 28, 1999
(U.S. Dollars)
7. COMMITMENT
During the year ended February 29, 2000, the Company entered into a marketing
agreement with Net Media, an unrelated third party. The Company agreed to
compensate Net Media for services rendered with the following:
i) 50,000 common shares of the Company;
ii) 20% sales commission on all advertising placed and/or contracted directly or
indirectly by Net Media for the Company and their affiliates;
iii) 20% production commission on all required material;
iv) $5,000 monthly draw against production and sales commissions earned; and,
v) 8-10% on on-line product and service sales introduced by Net Media (unless
otherwise agreed prior to listing the product or service).
Subsequent to the year end, the Company terminated its agreement with Net Media
for non- performance. It is management's opinion that amounts paid to the date
of this report will satisfy the Company's obligations under the agreement.
<PAGE>
GreatestEscapes.com, Inc.
(A Development Stage Company)
Financial Statements
(Stated in U.S. Dollars)
August 31, 2000 and February 29, 2000
(Unaudited)
INDEX Page
----- ----
Report to Management 1
Financial Statements
Balance Sheets 2
Statements of Operations 3
Statements of Stockholders' Deficit 4
Statements of Cash Flows 5
Notes to the Financial Statements 6-8
<PAGE>
Page 1
MANAGEMENT REPORT
We have prepared the accompanying unaudited balance sheets of Greatescapes.com
Inc. as at August 31, 2000, and for the six month period then ended and the
related statements of operations, shareholders' deficit and cash flows for the
period. These financial statements are the responsibility of the Company's
management.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at August 31, 2000 and
February 28, 1999 and the results of its operations and the cash flows for the
period then ended, in conformity with generally accepted accounting principles
in the United States.
/s/ Razzle & Company
Vancouver, Canada
<PAGE>
Page 2
GreatestEscapes.com, Inc.
(A Development Stage Company)
Balance Sheets
(Stated in U.S. Dollars)
(Unaudited)
================================================================================
August 31, February 29,
2000 2000
$ $
--------------------------------------------------------------------------------
Assets
Current
Cash and term deposits 2,171 14,090
Accounts receivable 8,861 3,470
--------------------------------------------------------------------------------
11,032 17,560
Property and Equipment 7,833 2,916
Other 1 1
--------------------------------------------------------------------------------
Total Assets 18,866 20,477
================================================================================
Liabilities
Current
Accounts payable and accrued liabilities 44,222 23,552
--------------------------------------------------------------------------------
Stockholders' Deficit
Common Stock, $0.001 par value; 200,000,000
shares authorized,
5,884,734 shares issued and outstanding 5,885 5,122
Additional Paid-In Capital 306,432 116,428
Share Subscriptions 117,633 150,825
Other Comprehensive Income 325 1,048
Accumulated Deficit (455,631) (276,498)
--------------------------------------------------------------------------------
Total Stockholders' Deficit (25,356) (3,075)
--------------------------------------------------------------------------------
Total Liabilities and Stockholders' Deficit 18,866 20,477
================================================================================
See notes to financial statements.
<PAGE>
Page 3
GreatestEscape.com, Inc.
(A Development Stage Company)
Statements of Operations
(U.S. Dollars)
(Unaudited)
================================================================================
Period
Six months Six Months from Inception
ended ended February 10,
August 31, August 31, 1999 Through
2000 1999 August 31, 2000
$ $ $
--------------------------------------------------------------------------------
Revenue 8,203 0 8,203
--------------------------------------------------------------------------------
Expenses
Administrative and general 17,480 11,690 41,774
Advertising and promotion 4,058 2,850 18,856
Bank charges and interest 598 152 1,047
Corporate development 12,038 13,610 36,758
Depreciation 871 180 1,386
Designers, editors and writers 17,027 14,335 55,026
Investor communications 7,655 3,029 11,720
Management fees 5,936 36,000 41,936
Office 13,464 4,832 21,801
Printing and reproductions 7,893 1,014 18,944
Professional fees 63,196 17,775 124,391
Regulatory filing fees 1,227 6,912 9,217
Telephone and faxes 2,852 1,862 6,993
Website development 33,041 12,704 73,985
--------------------------------------------------------------------------------
$ 187,336 $ 126,945 $ 463,834
================================================================================
Net Loss for the period $ (179,133) $ (126,945) $(455,631)
================================================================================
Net Loss Per Share $ 0.03 $ 0.03
================================================================================
Weighted Average Number of
Shares Outstanding 5,884,734 4,576,393
================================================================================
See notes to financial statements.
<PAGE>
Page 4
GreatestEscape.com Inc.
(A Development Stage Company)
Statement of Shareholders' Deficit
Period from Inception to August 31, 2000
(Stated in U.S. Dollars)
(Unaudited)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Common Stock Additional Other Total
Paid-In Share Comprehensive Accumulated Stockholders'
Number Amount Capital Subscriptions Income Deficit Equity
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
February 10, 1999
(Inception) 0 0 0 0 0 0 0
Issuance of Common Stock 4,460,000 4,460 17,840 0 0 0 22,300
Net Loss 0 0 0 0 0 (25,818) (25,818)
-----------------------------------------------------------------------------------------------------------------------------------
Balance,
February 28, 1999 4,460,000 4,460 17,840 0 0 (25,818) (3,518)
Issuance of Common Stock 661,666 662 98,588 0 0 0 99,250
Share Subscriptions
Received 0 0 0 150,825 0 0 150,825
Other Comprehensive Income 0 0 0 0 1,048 0 1,048
Net Loss 0 0 0 0 0 (250,680) (250,680)
-----------------------------------------------------------------------------------------------------------------------------------
Balance,
February 29, 2000 5,121,666 5,122 116,428 150,825 1,048 (276,498) (3,075)
Issuance of Common Stock 763,068 763 190,004 (190,767) 0 0 0
Share Subscriptions
Received 0 0 0 157,575 0 0 157,575
Other Comprehensive 0 0 0 0 (723) 0 (723)
Net Loss 0 0 0 0 0 (179,133) (179,133)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, August 31, 2000 5,884,734 $5,885 $306,432 $117,633 $ 325 $(455,631) $ (25,356)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
<PAGE>
Page 5
GreatestEscape.com, Inc.
(A Development Stage Company)
Statement of Cash Flows
(Stated in U.S. Dollars)
(Unaudited)
================================================================================
Period
Six months Six Months from Inception
ended ended February 10,
August 31, August 31, 1999 Through
2000 1999 August 31, 2000
$ $ $
--------------------------------------------------------------------------------
Operating Activities
Net loss $ (179,133) $ (126,945) $ (455,631)
Adjustments to reconcile net
loss to net cash used by
operating activities
Depreciation 871 180 1,386
Changes in Operating Assets and
Liabilities
Accounts receivable (5,391) (1,865) (8,861)
Accounts payable 20,670 (10,052) 44,222
--------------------------------------------------------------------------------
Net Cash Used in Operating
Activities (162,983) (138,682) (418,884)
--------------------------------------------------------------------------------
Investing Activities
Acquisition of intellectual property 0 0 (1)
Acquisition of property and equipment (5,788) (2,377) 2,357
--------------------------------------------------------------------------------
(5,788) (2,377) 2,356
--------------------------------------------------------------------------------
Financing Activities
Share subscriptions received 157,575 146,750 308,400
Issuance of common stock 0 0 121,550
--------------------------------------------------------------------------------
Net Cash Provided by Financing
Activities 157,575 146,750 429,950
--------------------------------------------------------------------------------
Effect of Foreign Currency
Translation on Cash (723) - 325
--------------------------------------------------------------------------------
Cash Inflow (Outflow) (11,919) 5,691 2,171
Cash, Beginning of Period 14,090 11,911 0
--------------------------------------------------------------------------------
Cash, End of period $ 2,171 $ 17,602 $ 2,171
--------------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
Page 6
GreatestEscape.com Inc.
(A Development Stage Company)
Notes to Financial Statements
Six Months Ended August 31, 2000
(Stated in U.S. Dollars)
(Unaudited)
================================================================================
1. BACKGROUND AND BUSINESS
The Company was incorporated on February 10, 1999 under the laws of the
State of Nevada. The Company is in the development stage as more fully
defined in statement No. 7. of the Financial Accounting Standards Board.
The Company intends to operate as a multi media travel related publishing
enterprise. The Company markets and will market travel-related products
based on the content of its print publications as well as its digital
Internet magazine. Products will include a wide range of goods including
books, individual stories and hundreds of items in its online store
www.GreatestEscapesStore.com. The Company intends developing other travel
----------------------------
products to be sold and distributed through its on-line department store,
two websites www.GreatestEscapesStore.com and www.LiteraryTrips.com and
---------------------------- ---------------------
and other more traditional outlets. The Kick Start was the predecessor
operations. (see note 4)
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Property and equipment
Property and equipment are carried at cost less accumulated
depreciation. Depreciation of property and equipment are calculated
as follows:
Equipment and furniture - 30% Declining balance
(b) Foreign currency translation
Amounts recorded in foreign currency are translated into U.S. dollars
as follows:
(i) Current assets and current liabilities, at the rate of exchange
in effect at the balance sheet date;
(ii) Expenses at the average rate of exchange for the period
Gains arising from this translation of foreign currency are accounted
for as other comprehensive income shown as a separate component of
stockholders' deficit.
(c) Net loss per share
Net loss per share computations, are based on the weighted average
number of common shares outstanding during the year.
(d) Financial instruments
The Company's financial instruments consist of cash, account
receivable and accounts payable. Unless otherwise noted, it is
management's opinion that the Company is not exposed to significant
interest, currency or credit risk.
(e) Revenue recognition
Revenue from sale of goods, advertising, sponsorship fees, and
commission are recognized on a completed contract basis.
<PAGE>
Page 7
GreatestEscape.com Inc.
(A Development Stage Company)
Notes to Financial Statements
Six Months Ended August 31, 2000
(Stated in U.S. Dollars)
(Unaudited)
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES
(e) 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 amount of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates and would impact future results of
operations and cash flows.
3. PROPERTY AND EQUIPMENT
===========================================================================
2000 1999
---------------------------------------------------------------------------
Accumulated
Cost Depreciation Net Net
---------------------------------------------------------------------------
Equipment and
furniture $9,219 $1,386 $7,833 $0
---------------------------------------------------------------------------
4. OTHER ASSET
During the initial 19 day period ended February 28, 1999, the Company
purchased intellectual property from Kick Start Publishing (a
Proprietorship) for consideration of $1.00 cash. The Kick Start was the
predecessor operations. This intellectual property includes any trademark,
travel names, associated registrations, etc. specifically relating to
Greatest Escapes Travel Report and Greatest Escapes Travel Webzine.
5. RELATED PARTY TRANSACTIONS
During the six-month period ended August 31, 2000, the Company:
(i) Incurred $5,936 management fees with a company related by a President
and director in common.
(ii) Incurred $12,038 corporate development fees with a company related by
a director in common.
(iii) Incurred $10,067 professional fees with a company related by a
director in common.
As at August 31,2000, the Company owed related parties $16,000 for corporate
development fees and $1,100 for professional fees.
The above transactions were completed in the normal course of operations on
normal market terms and were recorded at fair market value as estimated by
management
<PAGE>
Page 8
GreatestEscape.com Inc.
(A Development Stage Company)
Notes to Financial Statements
Six Months Ended August 31, 2000
(Stated in U.S. Dollars)
(Unaudited)
================================================================================
6. ACCOUNTS RECEIVABLE
As at August 31, 2000, the Company had account receivable of $3,693. This
amount was due from Revenue Canada for refund of goods and services taxes.
7. DEPOSIT
As at August 31, 2000, the Company placed a deposit of $5,168 for office
rent and property tax expenses.
8. ACCOUNTS PAYABLE
During the six-month period ended August 31, 2000, the Company had accounts
payable of $27,122 due to non-related parties for website development,
designers, editors and writers services rendered to the Company. The
Company did not have any accrued liabilities as at August 31, 2000.
9. SHARE SUBSCCRIBTIONS
During the period ended August 31, 2000 the Company received $157,575 in
share subscriptions. During the period, the Company issued common shares
for the value of $190,767 for share subscriptions, amounts that the
Company received from the subscribers for purchase of common shares. As at
period ended August 31, 2000, there were share subscriptions to value of
$117,633. These shares were not issued to the subscribers as at period
ended.
10. REVENUES
During the period to date, the Company had only received revenue of $8,203
from sale of literary travel-guide books. There was no other source of
revenue reported by the Company.
11. INCOME TAXES
A deferred tax asset stemming from the Company's net operating loss carry
forward, has been reduced by a valuation account to zero due to
uncertainties regarding the utilization of the deferred assets. At August
31, 2000, the Company has available a net operating loss carry forward of
approximately $455,000 which it may use to offset future federal taxable
income. For tax purposes, the losses expire as follows:
2014 $ 25,818
2015 250,680
2016 179,133
The potential future benefit of these losses has not been recorded.
<PAGE>
Page 9
GreatestEscape.com Inc.
(A Development Stage Company)
Notes to Financial Statements
Six Months Ended August 31, 2000
(Stated in U.S. Dollars)
(Unaudited)
================================================================================
12. COMMITMENT
During the year ended February 29, 2000, the Company entered into a
marketing agreement with Net Media, an unrelated third party. The Company
agreed to compensate Net Media for services rendered with the following:
i) 50,000 common shares of the Company;
ii) 20% sales commission on all advertising placed and/or contracted
directly or indirectly by Net Media for the Company and their
affiliates;
iii) 20% production commission on all required material;
iv) $5,000 monthly draw against production and sales commissions earned;
and,
v) 8-10% on on-line product and service sales introduced by Net Media
(unless otherwise agreed prior to listing the product or service).
During the period ended August 31, 2000, the Company terminated its
agreement with Net Media for non- performance. It is management's opinion
that amounts paid to the date of this report will satisfy the Company's
obligations under the agreement.
<PAGE>
KICKSTART PUBLISHING
Financial Statements
February 7, 1999
INDEX Page
----- ----
Auditor's Report to the Proprietor 1
Financial Statements
Balance Sheets 2
Statements of Income and Proprietor's Equity 3
Statements of Changes in Financial Position 4
Notes to the Financial Statements 5-6
<PAGE>
Page 1
SR SMIYTHE RATCLIFFE
CHARTERED ACCOUNTANTS
AUDITOR'S REPORT TO THE PROPRIETOR
We have reviewed the balance sheet of Kickstart Pubishing as at February 7,
1999 and the statements of income and proprietor's equity and changes in
financial position for the 38 day period then ended. These financial statements
are the responsibility of the Proprietor. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our review in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position for the 38 period then ended in accordance with
generally accepted accounting principles.
/s/ Smythe Ratcliffe
Chartered Accountants
Vancouver, British Columbia
March 16, 1999
A member of Pannel Kerr Forster Worldwide
<PAGE>
Page 2
KICKSTART PUBLISHING
Balance Sheet
================================================================================
February 7, December 31,
1999 1998
--------------------------------------------------------------------------------
Assets
Current
Cash and short-term deposit $ 5,151 $ 5,062
Interest receivable 0 169
--------------------------------------------------------------------------------
5,151 5,231
Fixed (note 3) 1,876 998
--------------------------------------------------------------------------------
$ 7,027 $ 6,229
================================================================================
Liability
Current
Accounts payable $ 1,830 $ 1,070
--------------------------------------------------------------------------------
Proprietor's Equity 5,197 5,159
--------------------------------------------------------------------------------
$ 7,027 $ 6,229
================================================================================
Approved by the Proprietor:
Proprietor
------------------------------------
See notes to financial statements
<PAGE>
Page 3
KICKSTART PUBLISHING
Statement of Income and Proprietor's Equity
================================================================================
38 Day
Period Ended Year Ended
February 7, December 31,
1999 1998
--------------------------------------------------------------------------------
Revenues $ 48 $ 4,745
--------------------------------------------------------------------------------
Expenses
Publishing 1,285 4,053
Internet service 1,070 2,130
Advertising and promotion 401 788
Office and miscellaneous 126 1,505
Bank charges 10 96
Travel 0 6,179
Professional fees 0 1,500
Licenses and dues 0 619
Depreciation 0 157
--------------------------------------------------------------------------------
2,892 17,027
--------------------------------------------------------------------------------
Net Loss for Period (2,844) (12,282)
Proprietor's Contributions, net 2,882 17,441
Proprietor's Equity, Beginning of Period 5,159 0
================================================================================
Proprietor's Equity, End of Period $ 5,197 $ 5,159
================================================================================
See notes to financial statements.
<PAGE>
Page 4
KICKSTART PUBLISHING
Statement of Changes in Financial Position
================================================================================
38 Day
Period Ended Year Ended
February 7, December 31,
1999 1998
--------------------------------------------------------------------------------
Cash Used in Operating Activities
Net loss $ (2,844) $ (12,282)
Item not involving cash
Depreciation 0 157
--------------------------------------------------------------------------------
(2,844) (12,125)
--------------------------------------------------------------------------------
Changes in Non-Cash Working Capital
Interest receivable 169 (169)
Accounts payable 760 1,070
--------------------------------------------------------------------------------
929 901
--------------------------------------------------------------------------------
(1,915) (11,224)
Investing Activity
Acquisition of fixed assets (878) (1,155)
Financing Activity
Net contributions by proprietor 2,882 17,441
--------------------------------------------------------------------------------
Increase in Cash 89 5,062
Cash and Short-Term Deposit, Beginning of Period 5,062 0
--------------------------------------------------------------------------------
Cash and Short-Term Deposit, End of Period $ 5,151 $ 5,062
================================================================================
See notes to financial statements.
<PAGE>
Page 5
KICKSTART PUBLISHING
Notes to Financial Statements
38 Day Period Ended February 7, 1999
================================================================================
1. PROPRIETORSHIP
These financial statements include only those assets, liabilities, revenues
and expenses related to the unincorporated business of the proprietor. No
charge is made to the income statement for any remuneration, interest or
similar items accruing to the proprietor nor has any provision been made in
these financial statements for personal income taxes which may be payable or
recoverable by the proprietor on the income or loss of the proprietorship.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Depreciation
Depreciation of fixed assets is calculated on a declining balance basis
at the following annual rates:
Computer equipment - 30%
Office equipment - 20%
No depreciation provision has been made for this 38 day period.
(b) Cost of development
Amounts related to development of intellectual property have been
expensed in the period incurred.
(c) Foreign currency translation
Amounts recorded in foreign currency are translated into Canadian
dollars as follows:
(i) Current assets and current liabilities, at the rate of exchange
in effect as at the balance sheet date; and
(ii) revenues and expenses, at the average rate of exchange for the
period.
Gains and losses arising from this translation of foreign currency are
included in net loss for period.
(d) Financial instruments
The Proprietorship's financial instruments include cash and a short-term
deposit and accounts payable. It is proprietor's opinion that the
Proprietorship is not exposed to significant interest, currency or
credit risks.
<PAGE>
Page 6
KICKSTART PUBLISHING
Notes to Financial Statements
38 Day Period Ended February 7, 1999
================================================================================
3. Fixed Assets
=============================================================================
1999 1998
-----------------------------------------------------------------------------
Cost Depreciation Net Net
-----------------------------------------------------------------------------
Computer equipment $ 835 $ 125 $ 710 $ 710
Office equipment 1,198 32 1,166 288
-----------------------------------------------------------------------------
$ 2,033 $ 157 $ 1,876 $ 998
=============================================================================
4. SUBSEQUENT EVENT
Subsequent to the year-end, the Company sold it's intellectual property,
GreatestEscapes Travel Report and travel Webzine, to GreatestEscapes.Com Inc.
for $1 U.S.
<PAGE>
Exhibit 13
Page 1
MERCHANT AGREEMENT, dated June 30, 2000, between LinkShare Corporation, a
Delaware corporation ("LinkShare"), and the undersigned Website owner
("Company" or "You").
------- ---
LinkShare offers technology and services to facilitate marketing links
between Websites providing products, property or services over the Web
("Merchants") and other Websites carrying offers and links for Merchants ("Sales
--------- -----
Affiliates"). LinkShare also operates a network that includes members that are
----------
Merchants ("LinkShare Merchants") and Websites that are potential Sales
-------------------
Affiliates for LinkShare Merchants ("LinkShare Affiliates"). This Agreement
--------------------
(including all attachments) contains the terms for Company's use of the
LinkShare Network and LinkShare's services. "Web" means the part of the
---
Internet commonly referred to as the World Wide Web. Unless defined in this
Agreement or unless the context otherwise requires, terms used in this Agreement
that have commonly accepted meanings within the Web-based e-commerce industry
are intended to have such meanings.
1. Certain Defined Terms. "Company Site" means any Website through which
--------------------- ------------
Company or any of its subsidiaries offers or provides any products, property or
services to End-Users, including providing information, images, audio or visual
programming or other content.
A "corporate affiliate" of any person is any other person that
-------------------
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with such first person, with "control"
-------
meaning the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a person.
"End-User" means, with respect to any Website, a third party Internet user
--------
that interacts with such Website (including by purchasing goods or services,
viewing or downloading material, providing data, completing applications or
forms or requesting information).
"Engagement" means an on-line agreement between Company and a LinkShare
----------
Affiliate for a Qualifying Link.
"Licensed Software" means the LinkShare Client Software and the Optional
-----------------
Software Products, if any, that You decide to order pursuant to Section 5.
"LinkShare Client Software" means the components of the LinkShare SynergyTM
-------------------------
Software that LinkShare licenses to LinkShare Merchants generally for
installation on their own server(s) for purposes of participation in the
LinkShare Network and the provision by LinkShare of the basic reports referred
to in Section 2.3, together with all new versions, enhancements and upgrades
thereof, if any, provided by LinkShare to Company for such purpose.
"LinkShare Network" means the sales affiliate program operated by
-----------------
LinkShare (currently under the service name The LinkShare NetworkTM) that is
open for membership by Merchants and Sales Affiliates generally, as distinct
from other sales affiliate programs now or hereafter operated by LinkShare that
are "private label" or otherwise restrict membership or access on either the
Merchant or the Sales Affiliate side.
"LSN Site" means the English-language Website used by LinkShare for the
--------
LinkShare Network.
"Optional Software Product" means any component, feature or function of the
-------------------------
LinkShare SynergyTM Software (other than the LinkShare Client Software) or any
other LinkShare proprietary software offered by LinkShare to Company from time
to time for fees or charges in addition to the Basic Software License Fees
provided for in the Pricing Schedule, together with all new versions,
enhancements and upgrades thereof, if any, provided by LinkShare to Company.
A "Qualifying Link" is a link between a Company Site and a LinkShare
---------------
Affiliate with whom You conclude an Engagement established through the interface
of the LSN Site using a code that is generated by the LinkShare Client Software
and additional tracking code added at the LSN Site by LinkShare's software
installed on its own server(s).
2. LinkShare Network Services.
---------------------------
2.1 Network Access. Company hereby joins the LinkShare Network as a
--------------
LinkShare Merchant. As such, Company may use the LinkShare Network in the same
manner and for the same purposes as LinkShare Merchants generally, including
using the relevant area of the LSN Site to post offers to establish Qualifying
Links, respond to counteroffers by LinkShare Affiliates and, if agreement is
reached, conclude Engagements. The URL(s) for the initial Company Site(s) are
set forth below Your signature to this Agreement. Subject to payment of any
applicable license or other fees under the Pricing Schedule, You may add
Company Site(s) upon notice to LinkShare at least ten business days before first
use in the LinkShare Network. Service for a newly added Company Site shall
commence upon establishment and successful acceptance testing of the necessary
interface with the LSN Site.
<PAGE>
Page 2
2.2 Software License. LinkShare grants Company a license to download and
----------------
install the Licensed Software onto the server(s) for the Company Site(s) for the
sole purpose of participating in the LinkShare Network pursuant to this
Agreement. Company shall not access or use any Optional Software Product unless
Company orders and pays for it under Section 4. LinkShare will provide Company,
at no separate charge, with up to four hours of telephonic technical assistance
with regard to initially installing the LinkShare Client Software and
establishing the interface between the Company Site(s) and the LSN Site
contemplated by this Agreement.
2.3 Reports. LinkShare's SynergyTM Software is designed to permit
-------
LinkShare to track certain End-User activities on Company Websites(s)
attributable to Qualifying Links, such as purchases of merchandise, form
completions, click-throughs or number of impressions served. The kinds of
activities attributable to Qualifying Links that LinkShare will track for You
are indicated by the initials of Your authorized representative on Attachment A.
Within ten business days after the end of each calendar month, LinkShare will
provide You, online at a password-protected area of the LSN Site, with a report
showing the level of tracked activities during the month attributable to Your
Qualifying Links. If Your Engagements require you to pay LinkShare Affiliates
based on such tracked activities, the reports also will show amounts due from
You to LinkShare Affiliates for such month.
3. LinkShare Warranties.
--------------------
3.1 Services. LinkShare warrants to Company that, subject to Section
--------
B6 of Attachment B, LinkShare's services rendered under this Agreement will be
performed in a professional and workmanlike manner, in accordance with accepted
practices for similar services in the U.S. e-commerce industry. If such
warranty is breached, LinkShare shall reperform such services to the extent
reasonably necessary to meet the foregoing standard. If, despite LinkShare's
commercially reasonable efforts, such correction is not accomplished, LinkShare
shall render an equitable prorated refund or credit based on the original charge
for the noncomplying services.
3.2 Non-Infringement. LinkShare warrants to Company that Company's use of
----------------
the Licensed Software in accordance with this Agreement for the purposes and in
the manner permitted by this Agreement will not infringe or violate any third
party's intellectual property rights. LinkShare shall not be liable or
responsible if such warranty proves to be incorrect because of (i) the
modification of any LinkShare software by Company not authorized by LinkShare;
(ii) the failure of Company to make, install and use modifications or
enhancements to or substitutions for the Licensed Software (or any elements
thereof) made available to Company by LinkShare from time to time; or (iii) use
of the Licensed Software in a manner or for a purpose not expressly authorized
by this Agreement or any related written or online documentation provided to or
made accessible by Company by LinkShare or contrary to the terms of this
Agreement or such documentation.
3.3 Functionality. LinkShare warrants to Company that, subject to Section
-------------
B6 of Attachment B, (i) the Licensed Client Software and services provided by
LinkShare to Company pursuant to this Agreement shall permit Company to offer,
negotiate, accept and administer Qualifying Links as contemplated by Section 2.1
and permit LinkShare to provide the reports referred to in Section 2.3; (ii)
each Optional Software Product, if any, licensed to Company pursuant to this
Agreement will perform substantially in accordance with LinkShare's applicable
written or online specifications and (iii) the Licensed Software will record,
store, process and present calendar dates falling on or after January 1, 2000 in
the same manner, and with the same functionality, as it does for calendar dates
on or before December 31, 1999.
3.4 Corrections. If Company believes in good faith that any warranty in
-----------
Section 3.3 has been breached in any material respect and reports the problem to
LinkShare, LinkShare shall promptly respond to such report. If LinkShare is
able to reproduce and verify such problem, it shall use commercially reasonable
efforts to correct it promptly. A correction may, in LinkShare's reasonable
discretion, include issuing corrected instructions, a restriction, workaround,
patch, new release or other means that eliminates the practical adverse effects
of the problem. Company shall provide such information, access, cooperation and
assistance as LinkShare may reasonably request for such purpose. If LinkShare
is unable, despite its reasonable efforts, to correct any such problem within 30
days after being notified by Company, Company may terminate this Agreement upon
5 days' prior written notice to LinkShare and LinkShare shall refund to Company
any prepaid software license fees.
3.5 User-Specific Problems. LinkShare shall not be liable or
----------------------
responsible if any of its warranties proves to be incorrect because of (i)
failure by Company to properly install or use any Licensed Software; (ii)
failure of any software, system or technology You use in combination or
conjunction with the Licensed Software to properly exchange date/time or other
data with it or is otherwise defective or deficient; (iii) modification or
misuse of the Licensed Software by Company (or any of its agents or
contractors); (iv) other acts or omissions of Company or LinkShare Affiliates
with whom it forms or attempts to form Qualifying Links; or (v) other
user-specific problems or errors. LinkShare shall not be responsible for
correcting problems with any version of any LinkShare software other than the
most recent release of such software.
<PAGE>
Page 3
4. LinkShare Charges. Company agrees to pay LinkShare, when due, all
------------------
applicable fees and charges provided for in Attachment A to this Agreement (the
"Pricing Schedule") and, if You order optional services not listed in the
----------------
Pricing Schedule, the fees and charges agreed upon at the time of Your order.
5. Optional Services and Software. In Your discretion, You may select (through
------------------------------
your LinkShare account executive) any of the optional services or Optional
Software Product indicated on the Pricing Schedule. LinkShare also offers You
the option of ordering a range of additional or customized reports on tracked
activities for separate charges. In addition, from time to time LinkShare may
offer You the choice of selecting additional optional services or programs or
Optional Software Products, either with or without charge. In some cases, those
services or programs may be provided by a LinkShare Affiliate or other third
party acting as independent contractors, not as LinkShare's agents or
subcontractors, with LinkShare being the neutral host, intermediary or
facilitator. If You choose any of the optional services or programs or Optional
Software Products offered from time to time, such service, program or Optional
Software Product will be provided to You at the prices and charges set forth on
the Pricing Schedule or agreed to in writing at the time of Your order and
otherwise on the same terms as provided by LinkShare to LinkShare Merchants
generally, and Your and LinkShare's respective obligations will be subject to
the terms of this Agreement. Except to the extent provided as part of the
optional services referred to above, LinkShare's services do not include
installing the Licensed Software, End-User or other customer service, collecting
or making any payments due to or from You, serving up graphics, text,
impressions or other items or other services not expressly provided for in this
Agreement.
6. Confidentiality of End-User Data. Unless compelled by law or legal process,
--------------------------------
LinkShare shall not, without Your prior written consent, (i) disclose to any
third party a list of Your End-Users or information about the transactions that
You engage in with any End-User obtained solely as a result of this Agreement or
(ii) disclose to any third party any information which permits such third party
to determine the identity of such End-User or learn about such End-User 's
transactions with You and which is obtained solely as a result of this
Agreement. The foregoing shall not prevent any use or disclosure by LinkShare
to the extent reasonably necessary to carry out its obligations under this
Agreement and its agreements with LinkShare Affiliates with which You enter into
Engagements or as an inseparable part of demographic or other aggregate data
concerning multiple persons, provided that LinkShare does not identify Company
as the source of such information.
7. WARRANTY DISCLAIMER; LIABILITY LIMITATIONS. Except as specifically set forth
herein, each party disclaims all express or implied warranties, including
warranties of merchantability or fitness for a particular purpose. Except in
the case of a breach of any of Sections B1 through B5, inclusive, of Attachment
B, neither party shall be liable to the other (whether in contract or based on
warranty, negligence, tort, strict liability or otherwise) in connection with or
resulting from this Agreement or any of the contemplated links, services,
activities or relationships (i) for any indirect, incidental, consequential,
reliance or special damages, even if such party was aware that such damages
could result or (ii) in an amount that is in excess of, for LinkShare, the
amount of fees actually paid to LinkShare by Company during the term of this
Agreement and, for Company, the amount of fees and charges paid or accrued to
LinkShare by Company during the term of this Agreement. The limit in clause
(ii) of the immediately preceding sentence shall not apply in the case of a
party's gross negligence or willful misconduct or in the case of the parties'
respective indemnification obligations expressly set forth in this Agreement.
Clause (i) of the second sentence of this Section shall survive failure of the
limited remedy in clause (ii) or any other limited or any exclusive remedy. If
any provision of this Agreement other than Section 8.2(a) states that under
certain circumstances a party has a right to terminate this Agreement, to
receive a refund of fees or both, such right shall be the sole right and remedy
of such party under such circumstances; otherwise, all rights and remedies are
cumulative and non-exclusive. Each party acknowledges that the provisions of
this Section are an essential element of the benefit of the bargain reflected in
this Agreement.
8. Initial and Renewal Terms; Termination; Effects of Expiration or
----------------------------------------------------------------
Termination.
-----------
8.1 Initial and Renewal Terms. Unless terminated sooner as provided in
--------------------------
Section 8.2, this Agreement will remain in effect for an initial term of three
years beginning as of the date of this Agreement. Unless either party gives the
other written notice of termination no later than ten business days prior to the
expiration date of the then-existing initial or renewal term, this Agreement
will automatically renew for consecutive two-year terms.
8.2 Termination Rights. (a) Termination for Default or Just Cause.
------------------- -------------------------------------
Either party may terminate this Agreement if the other party materially breaches
its obligations and such breach remains uncured for thirty days following
written notice of the breach given to the breaching party. LinkShare may
terminate or suspend Company's use of the LinkShare Network or the LSN Site for
just cause, if the acts or omissions constituting such just cause continue for
ten days following notice given by LinkShare. Just cause includes default in
payment obligations to LinkShare or LinkShare Affiliates, persistent failure to
comply with this Agreement or a violation of Section B8. Company understands
that LinkShare has similar rights to suspend or terminate participation in the
LinkShare Network by LinkShare Affiliates.
<PAGE>
Page 4
(b) Additional Company Termination Rights. Company may terminate this Agreement
-------------------------------------
in accordance with Section 3.4. In addition, if, despite Company's good faith
efforts and use of LinkShare's technical assistance contemplated by Section 2.2,
the interface of any Company Site with the LSN Site contemplated by this
Agreement is not achieved within 30 days after the date of this Agreement, for
an initial Company Site, or after the notice referred to in Section 2.1 for any
additional Company Site, then Company may terminate this Agreement as to such
Company Site by ten days' prior written notice to LinkShare unless such
interface is achieved within such ten-day period. Promptly after any such
termination, LinkShare shall refund the initial basic software license fee for
such Company Site paid by Company pursuant to the Pricing Schedule. This
Agreement will continue in effect with regard to each other Company Site, if
any.
8.3 Effects of Expiration or Termination. Upon the expiration or any
------------------------------------
termination of this Agreement in accordance with any of its terms, all rights
and obligations of each party under this Agreement will cease, except that:
(i) any rights or remedies arising out of a breach of any terms of this
Agreement will survive any expiration or termination of this Agreement;
(ii) the provisions of Sections 6, 7, 8.3, B1, B2, B3, B4 (b), B5, B8 and
B9 of this Agreement shall survive expiration or any termination of this
Agreement indefinitely;
(iii) the payment obligations of Company under Section 4 will survive
expiration or any termination of this Agreement to the extent of any unpaid fees
or other amounts that have accrued through the date of expiration or
termination; and
(iv) each party shall discontinue use of the software and other
intellectual property and Confidential Information (as defined in Section B2 of
Attachment B), if any, previously provided to it by the other party and return
or destroy all copies thereof (regardless of medium of expression or storage) in
the possession or control of such first party or any of its corporate
affiliates, agents or representatives, including all full or partial copies
thereof and all other documents, notes, computer files and other materials based
on or referring to any of the foregoing or any extracts thereof, except that
LinkShare may retain and use data, copies and materials to the extent required
to exercise its rights under Section 6 with respect to aggregate or demographic
data.
EACH PARTY HAS READ THIS AGREEMENT, INCLUDING THE ATTACHED PRICING SCHEDULE AND
ATTACHMENT B, AND AGREES TO BE BOUND BY ALL THE TERMS AND CONDITIONS HEREOF
(INCLUDING SUCH ATTACHMENTS).
GreatestEscapes.com Inc. LINKSHARE CORPORATION
------------------------
By: /s/Guy Brooks By:
------------------------ -------------------------
Name:_Guy Brooks Name:
----------------------- -------------------------
Title: President Title:
----------------------- -------------------------
Address: 800 W. Pender St. Suite 730 215 PARK Avenue SOUTH, EIGHTH Floor
---------------------------
Vancouver, British Columbia, NEW YORK, NY 1003
---------------------------
Canada V6C 2V6 Fax: (646) 602-0160
---------------------------
Fax: 604 683-1055
---------------------------
State of Incorporation/Organization:
Company Site(s) URLs(s): Initials of Company's authorized agent
----------------------- --------------------------------------
www.greatestescapes.com /s/
----------------------- ----------
Initials of LinkShare's authorized agent
----------------------------------------
----------
<PAGE>
Page 5
ATTACHMENT A TO LINKSHARE NETWORKTM MERCHANT AGREEMENT: PRICING SCHEDULE
BASIC SOFTWARE FEES:
-------------------
The following are LinkShare's license fees for the LinkShare Client Software.
(Fees for Optional Software Products are separate).
License Fee Per Company Site: $5,000 payable upon execution and
delivery of this Agreement
License Renewal Fee Per Company Site $1,000 on each anniversary of the
date of this Agreement
MONTHLY BASIC TRACKING SERVICE FEES
-----------------------------------
LinkShare's monthly service fees for the basic tracking and reporting services
it provides are based on the manner in which Company compensates LinkShare
Affiliates with which it forms Qualifying Links. Company may from time to time
change the type(s) of activities tracked and reported by LinkShare pursuant to
this Agreement upon at least 30 days prior written notice to LinkShare. No such
change, however, will affect any pre-existing Engagements while they remain in
effect.
Percentage of Gross Sales: To the extent Company pays LinkShare Affiliates a
-------------------------
commission based on Gross Sales (as defined below in this Attachment), then
LinkShare's monthly fees will be the percentage of Gross Sales determined from
the following table:
Monthly Gross Sales
from Qualifying Links Percentage of Gross Sales
--------------------- -------------------------
Up to $500,000 3.0%
$500,000 and above 2.0%
Other Fee Arrangements: To the extent Company pays LinkShare Affiliates based
----------------------
on any method specified in the left column of the following table, then
LinkShare's monthly fees will be as specified opposite that method in the right
column of such table:
Pay-per-CPM (Other than Ad Tracking Program) $1.50 per CPM (Other
than Ad Tracking Program)
Pay-per-Click-Through $0.25 per click-through
Pay-per-Form $2.00 per form
TECHNICAL ASSISTANCE; ACCOUNT EXECUTIVE SUPPORT
-----------------------------------------------
Software Installation Technical Assistance: 4 hours of free telephonic
technical support for initial
installation of LinkShare
Client Software on first
Company Site
Additional Telephonic Technical Support
(if requested): $200 per hour
Account Executive Telephonic Support
(if requested and if optional AE Support
services are not selected) $150 per hour
OPTIONAL SOFTWARE FEES
------------------------
LinkShare Expert Advanced Software Package: $1,000 per month.
Accepted: Declined: /s/ [INITIAL WHERE APPLICABLE]
------ ------
CERTAIN OPTIONAL SERVICE FEES
-----------------------------
LinkShare AE Support $2,000 per month.
--------------------
Accepted Declined /s/ [INITIAL WHERE APPLICABLE]
------ ------
LinkShare Ad Tracking Program
-----------------------------
If Company elects to use the LinkShare Ad Tracking Program, the following charge
(which is in addition to the Monthly Basic Tracking Service Fees as specified
above) will apply. If this service has not been ordered upon the execution
date of this Agreement, Company may elect to order this service at any time
thereafter upon providing LinkShare with ten business days' written notice.
$0.75 per CPM Accepted Declined /s/ [INITIAL WHERE
------ ------ APPLICABLE]
Image/Text Serving
------------------
If Company elects to have LinkShare serve images or text for Pay-Per-CPM
Engagements, the following charges (which are in addition to the Monthly Basic
Tracking Service Fees as specified above) will apply. If this service has not
been ordered upon execution of this Agreement, then Company may order this
service at any time thereafter upon providing LinkShare with ten business days'
written notice.
Image $0.50 per CPM Accepted Declined /s/ [INITIAL WHERE APPLICABLE]
---- ----
Text $0.25 per CPM Accepted Declined /s/ [INITIAL WHERE APPLICABLE]
---- ----
Check Disbursement:
------------------
If Company orders LinkShare's optional check disbursement services, the fee
shall be $1.50/ per check per LinkShare Affiliate, which includes postage. If
LinkShare is required by law to file a Form 1099 or any similar tax form, an
additional charge of $4.00 per tax form per LinkShare Affiliate will apply. If
this service has not been ordered upon the execution date of this Agreement,
Company may elect to order this service at any time thereafter upon providing
LinkShare with ten business days' prior written notice.
Accepted Declined /s/ [INITIAL WHERE APPLICABLE]
----- -----
<PAGE>
Page 6
LinkShare Client Services Program
---------------------------------
The LinkShare Client Services Program includes LinkShare's standard services
offered to subscribing LinkShare Merchants generally under such program in the
areas of (i) development of strategies for, and optimization of, Your LinkShare
sales affiliate program powered by LinkShare; (ii) affiliate segmentation
analysis, acquisition and approval; (iii) affiliate relationship development and
communications; (iv) development of merchandising campaigns such as the creation
of promotions including virtual storefronts of products targeted by season,
demographics or affinity; and (v) facilitation of. co-op marketing arrangements
between You and selected LinkShare Merchants. Unless LinkShare otherwise agrees
in writing, LinkShare Client Services are available at mutually convenient times
on normal working days from 9:00 A.M. to 5:00 P.M., Denver, Colorado time. If
the LinkShare Client Services Program has not been ordered upon the execution
date of this Agreement, Company may elect to subscribe to the LinkShare Client
Services Program at any time after the execution date of this Agreement upon
Company providing LinkShare with prior written notice. Company acknowledges and
agrees that LinkShare does not guarantee or warrant the results of the LinkShare
Client Services Program .
$7,000 per month, plus monthly reimbursement for out-of-pocket expenses
incurred on Company's behalf, with a minimum twelve-month subscription.
Accepted Declined /s/ [INITIAL WHERE APPLICABLE]
------ -----
<PAGE>
Page 7
* * * * *
1. For purposes of calculating monthly service fees for any month (or
portion thereof) that are based on a percentage of Gross Sales from a Qualifying
Link, "Gross Sales" shall mean the gross sales price for all merchandise sold in
Qualifying Sales attributable to that Qualifying Link during that month (or
portion thereof), less (to the extend included therein and to the extent also
excluded in calculating Affiliate Payouts) shipping, handling, taxes and
returns. A "Qualifying Sale" attributable to a Qualifying Link with a specific
WebSite of a LinkShare Affiliate (an "Originating Site") is a sale by Company
(or one of its affiliates, partners or associates selling through the linked
Company Site) of merchandise to an ultimate buyer (a "customer") that occurs
during a Session that originated with Company's Qualifying Link with that
Originating Site. Once a Web user accesses a Company Site using a Qualifying
Link at an Originating Site, a "Session" begins and continues until the earlier
of (i) the time that such user, after having exited the Company Site, returns to
the Company Site using a link other than the Qualifying Link to such Originating
Site, (ii) the time specified in Company's Engagement with such LinkShare
Affiliate relating to such Qualifying Link and (iii) the expiration or
termination of such Engagement. For purposes of calculating such service fees
for any period, LinkShare may aggregate all Qualifying Sales made during such
period from all Qualifying Links between any one or more Company Sites and all
Originating Sites that are owned or operated by the same person.
2. Subject to the parties' audit rights described below, all determinations
of whether Qualifying Links have been established and maintained, the number or
amount of Sessions or sales, the commissions and other payments due from Company
to any or all LinkShare Affiliates with which Company has Engagements from time
to time or to LinkShare that are made by LinkShare in good faith will, absent
manifest error, be final and binding on Company and all such LinkShare
Affiliates.
3. Company will promptly provide LinkShare with all information it
reasonably may request in order to calculate its fees and commissions or other
sums payable by Company to LinkShare Affiliates with which Company has
Engagements from time to time, including the manner in which it agrees to
compensate any LinkShare Affiliate with respect to any Qualifying Link and any
changes in any such compensation arrangement.
4. Each party shall have the right to audit the other party's books and
records as they relate to this Agreement, at the audited party's offices, during
the term of this Agreement and for one year thereafter. Each party shall
maintain accurate and complete books and records relating to such matters. Such
audits shall be made during normal business hours and shall be at the auditing
party's sole expense and may be made upon not less than ten days prior notice,
but not more often than once during any period of twelve months. The auditing
party and its representatives shall observe reasonable restrictions imposed by
the audited party in order to maintain the confidentiality of such books and
records and to minimize disruption of its business. If, as a result of an
audit, it is determined that there were errors or omissions in calculating fees
of 5% or more that were detrimental to the auditing party or, if LinkShare is
the auditing party, that there was an unauthorized modification of LinkShare's
software or by-pass of its transaction monitoring features caused or performed
by Company or its agents or otherwise on its behalf, then in addition to
correcting the underpayment/overpayment, the audited party will pay the
reasonable cost of that audit. The foregoing does not limit LinkShare's rights
or remedies if it does discover any such unauthorized modification or by-pass,
whether through an audit or otherwise.
5. All payments to LinkShare will be made in U.S. Dollars, will be due and
payable upon LinkShare providing written or electronic invoices or statements to
Company and must be paid within thirty days after each such invoice or
statement. Late payments will bear interest at the rate of 1.5% per month or,
if lower, the maximum rate allowed by law. Payments made or due pursuant to
this Pricing Schedule are not refundable or subject to offset or reduction in
whole or part and are in addition to any commission or other payments to
LinkShare Affiliates under Engagements made by Company. Prices and charges do
not include any applicable taxes and duties, which will be added to invoices and
statements. Returned checks shall result in a twenty-five dollar processing
fee.
6. Check disbursement services are subject to Company providing to LinkShare
on a timely basis the amounts owed to LinkShare Affiliates for the transactions
tracked by LinkShare.
7. The features and functions of LinkShare's Expert Advanced Software
Package are intended to be those stated in LinkShare's applicable written or
online specifications in effect on the date of this Agreement.
8. Unless LinkShare otherwise agrees, LinkShare AE Support may be ordered
only at the time of execution of this Agreement. AE Support service is
available at mutually convenient times on normal working days from 9:00 A.M. to
5:00 P.M., New York City time. AE Support includes LinkShare's standard
services offered to LinkShare Merchants generally under its AE Support program,
including (i) discussion sessions with Your Dedicated Account Executive (as
defined below) to assist You in preparing for Your initial launch and marketing
strategy for Your LinkShare sales affiliate program, (ii) periodic discussions
with Your Dedicated Account Executive about Your LinkShare sales affiliate
program, (iii) periodic reviews with Your Dedicated Account Executive about Your
overall LinkShare sales affiliate program and (iv) providing analyses of Your
LinkShare sales affiliate program and trends in marketing over the Web.
LinkShare will designate one of its employees (the "Dedicated Account
Executive") who will oversee and manage the provision of AE Support to Company
and who will serve as LinkShare's primary point of contact with Company.
LinkShare may change the person serving as Dedicated Account Executive at any
time and from time to time, and will notify Company, by e-mail or other
appropriate means, of the name of and contact information for the Dedicated
Account Executive. The Dedicated Account Executive and other personnel of
LinkShare will be required to devote to the matters contemplated by this
Agreement only such time as necessary to perform such duties and
responsibilities related to this Agreement as may be assigned to them by
LinkShare. Company acknowledges and agrees that LinkShare does not guarantee or
warrant the results of the AE Support services.
9. If Company compensates any LinkShare Affiliates with which it forms
Qualifying Links on any basis other than one of those specified under the
caption "MONTHLY BASIC TRACKING SERVICE FEES," then Company and LinkShare shall
negotiate in good faith to agree upon LinkShare's compensation for its basic
services with respect to those Qualifying Links. If the parties fail to agree,
then such compensation shall be LinkShare's then-effective standard monthly fees
for new LinkShare Merchants less a discount equal in percentage to the largest
percentage discount, if any, from LinkShare's corresponding standard fee in
effect on the date of this Agreement represented by any percentage fee specified
under such caption.
10. If ordered by Merchant and approved by Your LinkShare Account Executive,
on-site technical or other assistance will be provided at rates and on other
terms agreed to at the time of order and confirmed by You and LinkShare in
writing or by confirmed e-mail.
<PAGE>
Page 8
ATTACHMENT B: GENERAL TERMS AND CONDITIONS
B1. License Terms. The licenses and rights granted to Company in this
-------------
Agreement are non-transferable, non-exclusive and without the right to
sublicense, and shall terminate upon the expiration or termination of this
Agreement. The license of the Licensed Software is for object code version only
and not for source code. Without limiting its obligations under applicable
intellectual property law, Company agrees that it will not directly or
indirectly copy, modify, reverse engineer, decompile or distribute the Licensed
Software or use any of LinkShare's Confidential Information, software or other
intellectual property or any of Company's knowledge of LinkShare's business
strategies or methods gained from this Agreement to develop or improve any
affiliate marketing technology (as defined in Section B4).
B2. Confidentiality Generally.(a) By virtue of this Agreement, each party (the
-------------------------
"Disclosing Party") may disclose Confidential Information to the other party
----------------
(the "Receiving Party"). Except as expressly provided in this Agreement, each
---------------
party shall hold the other party's Confidential Information in confidence and
not disclose or use it except solely to the extent reasonably necessary to
perform its obligations or exercise its rights under this Agreement. Each party
agrees to take reasonable steps using at least the same degree of care that it
uses to protect its own Confidential Information, but no less than reasonable
care, to protect the other party's Confidential Information to ensure that it is
not disclosed or used in violation of this Agreement. Each party may disclose
Confidential Information of the other party to its employees, contractors,
attorneys and accountants who need to know such information in order to perform
their duties and to potential parties to significant corporate transactions
(including financing transactions) with the Receiving Party as part of their
customary due diligence; provided that each such person has a legal or
--------
contractual obligation to maintain the confidentiality of such information
comparable to the Receiving Party's obligations under this Section and is not
known to the Receiving Party to be a competitor or corporate affiliate of a
competitor of the Disclosing Party. The Receiving Party shall be liable for any
such person's failure to comply with such obligation. The foregoing
restrictions on disclosure shall not apply to the extent disclosure of
Confidential Information by the Receiving Party is required by law or court
order, provided that the Receiving Party uses reasonable efforts to give the
Disclosing Party prior notice of such requirement in order to give the
Disclosing Party an opportunity to lawfully prevent or limit the scope of such
disclosure.
(b) "Confidential Information" of a Disclosing Party means any and all
------------------------
technical and non-technical information (including patent, copyright, trade
secret, and proprietary information, techniques, sketches, drawings, models,
inventions, know-how, processes, apparatus, equipment, algorithms, software
programs, software source documents, and formulae) related to the current,
future and proposed business, products and services of such party, and its
suppliers and customers, and includes information concerning development, design
details and specifications, engineering, customer lists, business forecasts,
sales, and marketing plans and any other similar information or data which is
disclosed to the other party and, in the case of LinkShare, the identities and
contact information regarding LinkShare Affiliates "Confidential Information"
------------------------
also includes proprietary or confidential information of any third party that
may disclose such information to the Disclosing Party or the Receiving Party in
the course of the Disclosing Party's business. "Confidential Information" does
------------------------
not include information, technical data or know-how which: (i) is in the
Receiving Party's possession at the time of disclosure as shown by the Receiving
Party's files and records immediately prior to the time of disclosure or other
credible evidence; (ii) before or after it has been disclosed to the Receiving
Party, enters the public domain, not as a result of any action or inaction of
the Receiving Party; (iii) is approved for release by written authorization of
the Disclosing Party; (iv) is disclosed to the Receiving Party by a third party
not in violation of any obligation of confidentiality; or (v) is independently
developed by the Receiving Party without reference to Confidential Information.
The terms of this Agreement shall be considered Confidential Information of each
party.
B3. Public Statements. Nothing in this Agreement is intended to prevent either
-----------------
party from representing itself as doing business with the other within the scope
of this Agreement or otherwise making public or private statements in the normal
course of its business that do not disclose the specific terms of this
Agreement. The parties may make a joint press release regarding the execution of
this Agreement, with the content and timing to be approved by each party.
Neither party will publicly or privately disparage the other party or its
services or business, but if the parties ever offer competitive services, this
will not prevent either from comparing its services to the other's in good
faith.
B4. Certain Other Agreements of Company. (a) Company agrees that during the
-----------------------------------
term of this Agreement:
(i) Company will not place on any of its own Websites, or authorize any third
party to place on such third party's Website, any link or promotion by which any
Website owner or operator may become, or is invited to become, a Sales Affiliate
for Company other than through the LinkShare Network and as a LinkShare
Affiliate.
(ii) Company will not attempt to recruit any LinkShare Affiliate for any sales
affiliate program other than the LinkShare Network. Company shall not disclose
to any third party, or permit any third party to have access to, the names, URLs
or e-mail addresses of or contact information for any LinkShare Affiliates that
Company acquires as a result of this Agreement.
(iii) Company will not enter into any agreement or arrangement with the intent
of reducing payments to which LinkShare otherwise would be entitled hereunder,
including by creating a link outside the LinkShare Network with any LinkShare
Affiliate.
<PAGE>
Page 9
(iv) Company will not install on any server or other device that interfaces
with any of LinkShare's servers or computer equipment any software, system or
technology used for forming links with Sales Affiliates or tracking or reporting
on End-User transactions or other activities through those links for purposes of
any sales affiliate program ("affiliate marketing technology"), whether
proprietary to Company or any third party.
(v) LinkShare shall be the exclusive provider to Company of affiliate marketing
technology for sales affiliate programs. Company will not use, develop or
actively assist a third party in the development of affiliate marketing
technology that is competitive with or could serve as a substitute for the
LinkShare affiliate marketing technology.
(b) If this Agreement is terminated by LinkShare during the initial or any
renewal term because of a material breach of this Agreement by Company or for
just cause, then Company shall immediately terminate all Qualifying Links and,
during the period consisting of unexpired balance of such term plus an
additional twelve months, Company shall continue to comply with clause (ii) of
the first sentence of this Section and also shall not maintain or create any
link with any LinkShare Affiliate on terms that provide for payment of such
person for levels of End-User activities through that link. The foregoing shall
not exclude or limit any other rights or remedies of LinkShare. For purposes of
this Section, the term "Company" includes Company and its corporate affiliates.
B5. Intellectual Property Ownership. As between the parties, each of Company
-------------------------------
and LinkShare shall be the sole and exclusive owner of its respective
inventions, software, technology, know-how, works, materials, trademarks, trade
names, service marks or other intellectual property (whether or not patented,
copyrighted or registered or covered by an application for a patent, copyright
or registration). LinkShare's intellectual property and Confidential Information
shall in any event include the Licensed Software and the LinkShare SynergyTM
Software and all modifications, improvements, additions and derivatives thereof
or thereto. As between the parties, all copyrights and other intellectual
property rights with respect to the templates for or content of any Webpages
used for purposes of this Agreement shall, to the extent created or supplied by
LinkShare, or based on or derived from any templates or content similar to those
used by LinkShare for the LinkShare Network or any other sales affiliate program
powered by LinkShare, be owned solely by LinkShare. Neither party shall assert
ownership of or any claim to or interest in any intellectual property of the
other party or any goodwill associated therewith, except for any licenses or
rights expressly granted in this Agreement while they endure. At no time during
the term of the Agreement or thereafter shall either party attack, challenge or
file any application with respect to any such intellectual property of the other
party. Subject to the foregoing, LinkShare may use the corporate and trade
names and trademarks of Company and its corporate affiliates to the extent
reasonably necessary in order to perform its obligations and provide its
services pursuant to this Agreement. Such use shall conform to Company's
generally applicable guidelines or policies furnished in writing to LinkShare
from time to time and shall inure to Company's benefit.
B6 Certain Service Conditions. LinkShare's performance of its services depends
--------------------------
on Your proper installation and use of the Licensed Software, Qualifying Links
being properly established and maintained, LinkShare's being properly notified
of the formation and terms of Your Engagements and compliance with Your
obligations under this Agreement. If Company designates any additional Website
as a Company Site pursuant to Section 2.1, LinkShare may decline to permit the
Licensed Software or its services to be used for such Website for just cause
(within the meaning of such term for purposes of Section 8.2) or if such use
would result in a violation of law or contract by LinkShare. If LinkShare does
so with regard to any such Website, Company shall be released from its
obligations under clause (i) of the first sentence of Section B4(a) to the
extent necessary to permit Company to operate a sales affiliate program for that
Website; provided that if any affiliate marketing technology used for such
--------
purpose is supplied by a competitor of LinkShare, Company shall not, without
LinkShare's prior written consent, install or permit installation of such
alternative affiliate marketing technology on any server or other device used by
Company or any of its corporate affiliates on which any software licensed by
LinkShare is installed or that otherwise has an interface with or link to the
LSN Site or the servers used by LinkShare in connection with the provision of
its services under this Agreement.
B7 LinkShare Logo and Link. During the term of this Agreement, Company will
-----------------------
provide, on the appropriate and mutually agreed Webpage(s) of the Company
Website(s) designated by Company for use for its sales affiliate program(s), a
link from such Webpage(s) to the LSN Site through which Websites may join the
LinkShare Network as LinkShare Affiliates. LinkShare may also place on such
Webpage(s) a logo that says "Powered by LinkShare." The parties shall agree in
good faith as to the size and placement of such logo, link and related material,
which must satisfy Company's reasonable editorial standards.
B8 Uploads to LSN Site. Company agrees that it shall not post on the LSN Site
-------------------
or any Company Site that has an interface with it of content that advocates
violence, is libelous, defamatory, obscene, pornographic, "adult-oriented"
(including sexually explicit materials of any kind), abusive or overly-violent,
relates to gambling, use of illegal substances, sedition or illegal activities,
advocates or endorses discrimination of the basis of race, ethnicity, gender,
religion, sexual orientation or class or violates any law or any third party's
rights. Company shall defend and indemnify LinkShare for third-party claims
arising out of a violation of this Section.
B9 Miscellaneous. (a) Independent Contractor; Neutral Host. The parties are
------------- ------------------------------------
independent contractors. Neither this Agreement nor any course of dealing
between the parties will confer upon Company any exclusive rights with respect
to the LinkShare Network or LinkShare's software or services. LinkShare is the
neutral host of the LinkShare Network. Neither the admission of any person as a
LinkShare Affiliate nor inclusion of any link or content on the LSN Site
<PAGE>
Page 10
constitutes endorsement by LinkShare. LinkShare is not responsible for breaches
of Engagements by LinkShare Affiliates, the acts or omissions of third-party
providers of optional programs or services referred to in Section 5 or acts or
omissions of other third parties,. LinkShare may assume that any person
accessing the LSN Site using Company's unique password is authorized to do so.
Company agrees to indemnify LinkShare for liabilities, damages and expenses
(including reasonable attorneys' fees) arising from third party claims based on
Company's acts or omissions in using the LSN Site or the LinkShare Network.
(b) Force Majeure. Neither party will be liable to the other by reason of
-------------
any failure or delay in the performance of its obligations hereunder on account
of strikes, shortages, riots, insurrection, fires, flood, storm, explosions,
acts of God, war, governmental action, labor conditions, earthquakes,
interruptions in telecommunications services or Internet access, or any other
cause which is beyond the reasonable control of such party.
(c) Assignability. This Agreement may not be assigned by either party, in
-------------
whole or in part, without the express prior written consent of the other party,
which will not be unreasonably withheld or delayed. Reasonable grounds for
LinkShare withholding any such consent shall include that a proposed assignee is
a competitor or a corporate affiliate of a competitor. Except as expressly
authorized by Section B9, Company agrees that it shall not resell, sublicense or
otherwise directly or indirectly provide any third party with the use or benefit
of the LinkShare Network or any of LinkShare's software or services,
(d) Severability. If any provision of this Agreement or its application
------------
to any person or circumstance is held by a court with jurisdiction to be invalid
or unenforceable, the remaining provisions hereof, or the application of such
provision to persons or circumstances other than those as to which it has been
held invalid or unenforceable, shall remain in full force and effect. Such
court may substitute therefor a suitable and equitable provision to carry out,
so far as may be valid and enforceable, the intent and purpose of the invalid
unenforceable provision and, if such court shall not do so, the parties shall
negotiate in good faith to agree upon such a provision. If any provision of
this Agreement shall be judicially unenforceable in any jurisdiction, such
provision shall not be affected with respect to any other jurisdiction.
(e) Specific Performance. Each party acknowledges that if it breaches its
--------------------
obligations under any of Sections B1 through B5, inclusive, the other party will
be irreparably harmed, and that damages will be inadequate to compensate the
other party for such breach. Accordingly, without limiting any other right or
remedy of the nonbreaching party in respect of such a breach, the nonbreaching
party shall be entitled to a decree of specific performance or injunctive relief
with respect thereto.
(f) Construction; Governing Law; Consent to Jurisdiction. This Agreement
----------------------------------------------------
will be construed according to its fair meaning and not strictly for or against
either party. All definitions apply equally to the singular and plural forms of
the terms defined. The words "include," "includes" and "including" shall be
------- -------- --------
deemed to be followed by the phrase "without limitation." The word "or" means
--
"and/or." The term "person" is to be broadly construed and includes any natural
------
person or any corporation, trust, association, limited liability company,
partnership, joint venture or other entity. Whenever the context requires, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The section headings shall not affect in any way the meaning or interpretation
of this Agreement. This Agreement shall be governed by the internal laws of the
State of New York. Each party consents to the jurisdiction of the Federal and
New York State courts sitting in New York County, New York (and the appellate
courts to which judgments or orders of such Federal and State courts may be
appealed), and agrees to commence any litigation hereunder in one of those
courts.
(g) Entire Agreement; Amendments and Waivers; Counterparts. This
------------------------------------------------------
Agreement (including all attachments) is the entire agreement between the
parties pertaining to its subject matter, and all written or oral agreements,
representations, warranties or covenants, if any, previously existing between
the parties are canceled. The statements about the LinkShare Network or
LinkShare's services on its Website or otherwise are not representations,
warranties or other contractual obligations. There are no third party
beneficiaries. Any amendments of this Agreement must be in writing and signed
by both parties. No failure or delay in exercising any power, right, or remedy
under this Agreement will operate as a waiver. A waiver, to be effective, must
be written and signed by the waiving party. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same agreement. In addition to any other
lawful means of execution or delivery, this Agreement may be executed by
facsimile signatures and may be delivered by the exchange of counterparts of
signature pages by means of telecopier transmission.
<PAGE>
Exhibit 14
GRAPHIC OMITTED
Sandhill Book Marketing Ltd.
#99 - 1270 Ellis Street (rear), Kelowna, BC VIY IZ4
Phone: (250) 763-1406 Fax: (250) 763-4051 Email: [email protected]
DISTRIBUTION AGREEMENT with:
Publisher: GreatestEscapes.com Publishing Contact Name: Guy Brooks
--------------------------------- ------------
Address: 5255 Gulf Place
---------------------------------
West Vancouver
---------------------------------
BC V7W 2V9
---------------------------------
Phone: 604 889-2105 Fax: 604 913-1657 or 683-1055
------------- -------------------------
Cheques payable to different from above):
-------------------------------
GST X Yes Reg. No. GST Exempt
--- ------------------------- --------
================================================================================
TITLE(S) Retail Discount Net/Cost/Bk
Literary Trips 29.95 60% 11.98
-------------- ----- --- -----
-------------- ----- --- -----
Sandhill Book Marketing Ltd. agrees to sell and otherwise distribute books
written and or published by the above author/publisher as his/her agent in
matters concerning the above noted title(s) as these matters relate to sales
and distribution. Sandhill distributes regionally and nationally (depending on
the topic and/or category of the title) selling to national chainstores, private
bookstores and specialty accounts across the country.
Sandhill will accept books on a consignment basis only. Books must arrive at our
warehouse free of any delivery costs. All shipments must be accompanied by a
stock memo or packing slip showing a) total number of copies shipped b) total
number of cartons shipped c) number of copies per carton d) weight of individual
cartons e) retail price. This information allows us to accurately input the
receiving data in our computer system.
Sandhill pays for the actual number of books sold on a 90 day basis as follows:
at the end of each month an in-house computer report is generated showing the
net number of books (sales less returns) sold in that month. Payments are based
on these reports and are processed 90 days from the date of each report. After
the initial 90 day start up period, you will receive a cheque once a month but
always for books sold 90 days previously.
con't pg2
<PAGE>
pg 2
Sample copies are required for major national chain buyers, reps samples and
book reviewers. The cost of sample or review copies will be carried by the
author/ publisher. These review copies are taken from inventory when required
and recorded as such. When introducing anew back, approximately 12 copies are
required and only used when the end result is to gain either sales and/or
publicity.
Defective/hurt copies will be set aside and ultimately returned to the
publisher.
Publishers am initially expected to supply promotional sheets on new titles; in
quantities of 500 or 1000 in order to announce the now publication. These sheets
are included in our regular monthly mailings and used as salts tools until the
now title has been incorporated into one of Sandhill's in-house supplements that
announce the latest batch of new titles. Where a publisher specifically requests
that we produce a promotional sheet for a new title, a makeup charge of $50.00
will apply on mutual agreement. Sandhill does not charge for inclusion into our
own catalogue of Independent Publishers.
Sandhill egularly advertises titles in a variety of industry publications on a
co-op basis. You maybe contacted to participate in a group ad and will be
advised on a cost per title basis. Per title ad costs may range from $100.00 for
BC BookworId News to $250.00 for national industry publications. You have the
option of participating or not. ( X Yes - please advertise our book in BC
Bookworld on a one time basis. I understand that we will be invoiced at $100.00
plus GST for the ad cost.)
The author and publisher agrees to save Sandhill Book Marketing harmless and not
liable for any lawsuits or damages that may arise resulting from libel, slander,
plagiarism or any such aspect That may be contained in the work created by the
author or publisher.
Sandhill buys and sells all consignment titles on a fully returnable basis and
from time to time, reviews the sales performance of all titles. If we feel it is
no longer appropriate for us to distribute your book(s), we will give 90 days
notice of our intention to discontinue and return all unsold copies for final
accounting. Publishers may also discontinue this agreement with the same 90 days
notice.
In the event of discontinuation of this agreement, any books carried or stocked
by Sandhill will be returned at the publishers expense. Books previously
purchased and paid for by Sandhill must be returnable for a full cash refund.
This agreement represents our common objective to work together to sell as many
of your books as possible. We rely on our mutual efforts to communicate
information that will benefit the sales and promotional efforts of both parties
working together towards a common goal.
Signed: /s/ signed (Publisher)
---------------------
Date: Dec 2/99
---------------------
Signed: (per Sandhill Book Marketing Ltd)
------------------------------
Date:
------------------------
<PAGE>
