U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-SB/A1
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(g) of
The Securities Exchange Act of 1934
QUOTEMEDIA.COM, INC.
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(Name of Small Business Issuer in its charter)
Nevada 91-2008633
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11100 NE 8th Street, Suite 300
Bellevue, Washington 98004
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(Address of principal executive offices) (Zip code)
Issuer's telephone number: (415) 451-1604
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Securities to be registered pursuant to Section 12(b) of the Act:
none
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
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(Title of Class)
Page One of Sixty One Pages
Exhibit Index is Located at Page Fifty Seven
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TABLE OF CONTENTS
Page
PART I ----
Item 1. Description of Business. . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Plan of Operation. . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 3. Description of Property. . . . . . . . . . . . . . . . . . . . . . 24
Item 4. Security Ownership of Certain
Beneficial Owners and Management . . . . . . . . . . . . . . . . . 25
Item 5. Directors, Executive Officers, Promoters
and Control Persons. . . . . . . . . . . . . . . . . . . . . . . 27
Item 6. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . 29
Item 7. Certain Relationships and
Related Transactions. . . . . . . . . . . . . . . . . . . . . . 33
Item 8. Description of Securities. . . . . . . . . . . . . . . . . . . . . 34
PART II
Item 1. Market for Common Equities and Related Stockholder
Matters . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 35
Item 2. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 37
Item 3. Changes in and Disagreements with Accountants. . . . . . . . . . . 37
Item 4. Recent Sales of Unregistered Securities. . . . . . . . . . . . . . 37
Item 5. Indemnification of Directors and Officers. . . . . . . . . . . . . 41
PART F/S
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 42
PART III
Item 1. Index to Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . 57
Item 2. Description of Exhibits. . . . . . . . . . . . . . . . . . . . . . 60
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PART I
Item 1. Description of Business
We were incorporated in the state of Nevada on June 29, 1992, under the
name "Genetic Futures, Inc." Since our inception, we have undertaken to
implement numerous business plans and, in relation to such various businesses,
we have been known under many different names, including (in order) Physician's
Cybernetic Systems, Inc., Videocom International, Inc., Canadian Tasty Fries,
Inc., International Tasty Fries, Inc., Filtered Souls Entertainment, Inc.,
Skyline Entertainment, Inc. and, finally, our current name, QuoteMedia.com, Inc.
(the "Company" or "QMI"). As of the date of this registration statement, our
principal business purpose is an Internet technology company specializing in the
collection, aggregation and delivery of "delayed" and "real-time" financial data
and complementary content via the Internet. We utilize existing browser based
technology, as well as unique and proprietary Java based analytic tools and
components, to deliver information to the user's desktop. We also intend to
license and develop light weight, sophisticated and reliable on-line trading
technologies. In January 2000, we formed a wholly-owned Canadian subsidiary
corporation, QuoteMedia.com Technologies, Ltd., from which all proposed Canadian
operations will occur.
We are a development stage company which intends to engage in the on-line
financial services market. We focus on private labeling our turnkey Internet
products to established web portals, brokerage and other financial services
firms which we believe currently offer no or inadequate on-line financial
information and trading tools. Our systems allow existing web portals and
brokerage firms to offer premium investment information and services to their
clients via the Internet. Investors can monitor investments through our
customizable portfolio tracker, research investment opportunities, watch live
video and execute trades, all within their browser. The private label model
allows us to take advantage of existing brand recognition and loyalties already
established between the firms and their clients.
In November 1998, pursuant to the affirmative vote of our Board of
Directors and a majority of our issued and outstanding common stockholders, we
undertook a "reverse split" of our issued and outstanding common stock, whereby
20 shares of common stock then issued and outstanding were exchanged for one (1)
share of our common stock. For purposes herein, all references to our issued and
outstanding common stock reflect this reverse stock split.
HISTORY OF BUSINESS
Our current business was acquired in July 1999 as a result of a merger
between us and QuoteMedia.com, Inc., a Colorado corporation ("Old QMI").
Pursuant to a definitive agreement, we
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issued an aggregate of 11,000,000 shares of our common stock in exchange for all
of the issued and outstanding securities of Old QMI. As a result, Old QMI did
not survive this transaction and we changed our name to QuoteMedia.com, Inc. Mr.
R. Keith Guelpa also was appointed as President, Treasurer and a director. With
the exception of Mr. Ian Lambert, the balance of our officers and directors
resigned their respective positions with us. Mr. Lambert has remained as our
Secretary and as a director.
Subsequent to the closing of the transaction with Old QMI, in August 1999,
we commenced a private offering of our common stock pursuant to the exemption
from registration provided by Rule 505 of Regulation D and Regulation S, each
promulgated under the Securities Act of 1933, as amended (the "33 Act"). In this
offering, we have sold 1,540,669 shares of common stock at a price of $.75 per
share and we received net proceeds of approximately $1,155,000 to date. We
intend to raise up to $3.5 million in this offering. The principal reason for
this offering is to provide initial funding to allow the implementation of our
current business plan. Thus far, our common stock has been sold to one US
resident who was an accredited investor (as that term is defined under the 33
Act), and seven (7) non-US residents.
In October 1998 through March 1999, we were a party to a series of
agreements with Skyline Records, Inc., a privately held British Columbia, Canada
corporation ("SRI"), engaged in music production and distribution and the
exclusive owner of certain rights to produce and distribute albums for five
individual artists, collectively known as Filtered Souls. On October 6, 1998, we
reached an agreement with SRI to acquire a fifty percent (50%) interest in the
net revenues derived from the independent, national, international and Internet
distribution and sales in the initial Filtered Souls album to be produced and
distributed by SRI. The purchase price payable to SRI for the interests was
originally $1,000,000 (US) and issuance by us of 1,250,000 "restricted" shares
of our Common Stock. These funds were payable over a period of time when the
costs associated with the production and distribution of the music were incurred
by SRI. However, this agreement was subsequently amended in July 1999, by which
time we had tendered $500,000 of the original $1 million due. The amendment to
the SRI agreement provided for (i) a waiver of any and all additional cash
contributions due SRI by us; (ii) the issuance by us of an additional 1,250,000
shares to SRI; and (iii) the payment to us by SRI of up to $3 million out of the
net revenues derived by SRI from album sales. To date, we have not received any
funds from SRI, but we remain hopeful that revenues will be received from SRI in
the future. Based upon representations made to us by management of SRI, we
anticipate that SRI will begin generating revenues from the sale and
distribution of its album sales in late spring of the year 2000. However, there
can be no assurances that SRI will generate profits from this endeavor within
the time parameters estimated herein, or at all.
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Prior to engaging in the transaction with SRI, we obtained the distribution
rights in various countries in Europe to market and distribute a french fry
vending machine which allegedly was to produce a "fat free" french fry. We
acquired these rights in 1995 from Tasty Fries, Inc., a Delaware corporation
("TFI") in exchange for a cash payment of $800,000. In addition to the
distribution rights, we also received 10 million shares of TFI "restricted"
common stock. TFI subsequently undertook a reverse split of its common stock on
a 20 for 1 basis. To date, we have sold some of the TFI shares, recovering a
nominal amount of our initial investment. However, we have retained the European
rights originally acquired.
The principal problem with the aforesaid business was that TFI has been
unable to deliver a machine which can meet the representations made by TFI
relating to the fat free nature of the potato end product. However, we continue
to remain in contact with TFI and it has been represented that the machine may
become available in the Spring of 2000. No assurances can be provided that this
will occur. In the event the french fry vending machine is successfully
produced, we will consider selling these rights either to a third party, or back
to TFI. No discussions in this regard have occurred as of the date of this
registration statement and none are expected until the viability of the machine
is confirmed.
Because we were relatively dormant after the SRI transaction, our then
management began seeking out other business opportunities in order to enhance
shareholder value. As a result, we identified and consummated the transaction
with Old QMI described above.
CURRENT BUSINESS ACTIVITIES
We are an Internet technology company specializing in the collection,
aggregation and delivery of "delayed" and "real-time" financial data and
complementary content via the Internet. We utilize existing browser based
technology, as well as proprietary Java based analytic tools and components to
deliver information to the user's desktop. We also intend to license and develop
light weight, sophisticated and reliable on-line trading technologies.
Our business strategy is to utilize a multi-level approach to generate
revenues. The first of these strategies includes engaging in the on-line
financial services market by focusing on private labeling our turnkey Internet
products to established web portals, brokerage and other financial services
firms which currently offer no or inadequate on-line financial information and
trading tools to its clients. The second strategy involves offering free "quote
boxes" to smaller volume sites, enabling them to offer their users free
quotation services. Users accessing the free "quote boxes" will automatically be
linked to our site and can avail themselves of the information offered. Both
strategies are being implemented simultaneously. By using this model, we believe
this will increase
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site usage significantly, accelerating our revenue base and growth as a company.
However, no assurances can be provided that this will occur.
Our products allow existing web portals and brokerage firms to offer
investment information and services to their clients via the Internet. Investors
can monitor investments through our customizable portfolio tracker, research
investment opportunities, watch live video and execute trades all within their
browser. We believe that the business model of providing turnkey, cost
effective, solutions to these firms on a private label basis is unique and
timely. The private label model allows us to take advantage of existing brand
recognition and loyalties already established between the firms and their
clients.
The alternative to our private label program is expensive, for both the
initial development (estimated $2 million to $5 million) and the on going
monthly content and maintenance (estimated $150,000 to $250,000 per month). The
time to completion of a comparable system would be approximately 8 to 12 months,
not including the on-line trading systems. The advertising and transaction based
revenue model which we employ allows us to offer these systems to the brokerage
firms at a very attractive price point and it is hoped that this will enable us
to build a large subscriber/user base at an accelerated rate. However, no
assurances can be provided that this will occur.
Most of the firms currently offering on-line trading have been slow in
providing their client base with comprehensive financial content and investment
research. We intend to offer financial content engines (which navigate the
Internet) to the most popular on-line brokerages to offer their users the
ability to conduct investment research by providing an aggregation of
comprehensive financial content, advisory content, discussion forums and virtual
communities complemented with an improved trading interface to their existing
on-line brokerage. This combination of content and transactional elements offers
the user what we believe to be the first true one-stop, on-line trading
experience.
We have identified four potential target markets for our products,
including large web portals, brokerage firms, banks and financial institutions,
cyber investors and corporate advertisers. Initially, cyber investors will not
be direct paying customers for our basic service, as they will receive them free
of charge. They are still deemed extremely important to our overall revenue
equation because cyber investors accessing our site generate quantifiable,
site-specific Internet traffic and site-specific Internet traffic generates
advertising and revenues. In the future, cyber investors will be charged a
monthly subscription fee for real time streaming quotes and analytical tools.
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Public companies are expected to be direct paying customers for the
products and services provided in the Select Gallery on our site. Commercial
advertisers and publishers will contribute to revenues by supporting banner
advertising and mutual links on the QuoteMedia site. Financial institutions will
have the opportunity to license our interface for their own private label
Internet-based investment sites and/or the Select Gallery to reside on their own
corporate Intranets.
In January 2000, we announced that we had launched our new financial web
site under our own brand name at "www.quotemedia.com." In addition, we are in
the process of establishing a relationship with a large web portal, Shopnow.com,
Inc., which recently acquired Pronet Enterprises, Inc. This potential partnered
site is expected to provide a substantial number of users. As of the date of
this registration statement, we have executed a letter of intent with
Shopnow.com, Inc. and we are in the process of finalizing a formal definitive
agreement, which is expected to be executed on or before March 2000.
We plan to establish other similar relationships throughout the course of
the next few years with the ultimate goal of developing a large enough user base
to sustain profitability through the sale of banner ads on each of the partnered
sites. For a more detailed description of our business plan, see "Item 2, Plan
of Operation" below.
Previously, in October 1999, we executed an agreement with Tappedinto.com,
Inc. ("TIC") whereby TIC appointed us as its exclusive financial content
provider for the TIC website and we granted TIC a non-exclusive,
non-transferable right to distribute our Private Branded Site solely by
Hypertext Links from TIC's site and to use the tradename "QuoteMedia" solely in
connection with the marketing and promotion of the Private Branded Site. TIC
provided us with the worldwide non-exclusive, non-transferable rights to use
TIC's graphics in connection with developing the Private Branded Site. However,
in January 2000, we and TIC mutually agreed to terminate this agreement and
TIC's web site was converted to our own brand name site. TIC has become the
first company to use our traffic generating "quote box" approach. As of the date
of this registration statement, we are in discussions with other entities to use
our site, but no definitive agreements have been reached.
Employees
We currently have seven (7) full time employees, including Mr. R. Keith
Guelpa, our CEO, President and director, our chief technologist, chief financial
officer, manager of investment relations, a computer programmer, an executive
assistant and a receptionist. None of our employees are members of any union,
nor have we entered into any collective bargaining agreements regarding our
employees. We believe that our relationship with our employees
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is satisfactory. It is anticipated that, in the event we are successful in
implementing our business plan, additional employees will be retained in the
next year to handle this anticipated growth. These areas include administration
and sales and marketing, technology customer care and legal.
Competition
The ability to provide stock quotes and related information is not
exclusive to us. There are literally hundreds of websites offering stock quotes
and charts on the Web today. The most popular and largest of these websites
include MSN Investor, Quicken, CBS MarketWatch, The Street.com, and PC Quote.
Many online brokerages also offer detailed market information to their clients,
such as E*Trade, Charles Schwab, SureTrade and many others.
We believe that the our business model offers strong market differentiation
through our strategy of offering turn-key private labeled financial web
solutions to large, well established web portals and brokerages. This should
allow us to take advantage of existing brand recognition and loyalties already
established between the partnered sites and their clients/users. However, there
can be no assurances that this will occur. See "Risk Factors" below.
GOVERNMENTAL REGULATIONS
We are not subject to any extraordinary governmental regulations.
RISK FACTORS
Our business is subject to numerous risk factors, including the following:
OUR INDEPENDENT AUDITORS HAVE EXPRESSED A GOING CONCERN OPINION
As a result of our lack of revenues and accumulated deficit of $(706,029)
at December 31, 1999, our financial statements accompanying this Registration
Statement have been prepared assuming that we will continue as a going concern,
which contemplates the realization of assets and liquidation of liabilities in
the normal course of business. The financial statements do not include any
adjustment that might result from the outcome of this uncertainty. We have had a
limited operating history and have not generated any revenues or earnings from
our current operations. We will, in all likelihood, continue to sustain
operating expenses without corresponding revenues, at least until our business
plan described herein is fully implemented. This may result in our continuing to
incur a net operating loss until we are able to generate profits from
operations, which is not
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expected to occur until the end of year 2000. However, there are no assurances
that we will generate profits from operations within the aforesaid time period,
or at all. Our short operating history makes it difficult to predict our future
financial results. If we do not begin generating profits, the price of our stock
will suffer and our shareholders may not be able to recover their initial
investment if this occurs.
OUR PROPOSED OPERATIONS ARE SPECULATIVE. WE HAVE NOT CONDUCTED ANY MARKET
RESEARCH, NOR DO WE HAVE A MARKETING ORGANIZATION OTHER THAN OUR CURRENT
MANAGEMENT.
The success of our proposed plan of operation will depend to a great extent
on the acceptance of our business premise by the general public. We have neither
conducted, nor have others made available to us, results of market research
indicating that market demand exists for the business plan contemplated by us.
Moreover, we do not yet have a formal marketing organization. However, we
believe that our business plan is viable based upon the success achieved by
other current competitive financial information portals. Even in the event
demand is identified for the business contemplated by us, there is no assurance
we will be successful in generating profitable operations. Without the ability
to generate profits, our shareholders may not be able to recover their
investment.
WE ARE A DEVELOPMENT STAGE COMPANY, HAVE A LIMITED OPERATING HISTORY, WE
ANTICIPATE CONTINUED LOSSES IN THE NEAR FUTURE AND FUTURE RESULTS ARE UNCERTAIN.
We have only a limited operating history upon which an evaluation of us and
our prospects can be based. Our prospects must be evaluated with a view to the
risks encountered by a company in an early stage of development, particularly in
light of the uncertainties relating to the new and evolving markets in which we
have begun to operate and whether there will be acceptance of our business
model. We will be incurring costs to continue to develop and enhance our
website, to establish marketing and distribution relationships and acquire
additional hardware and software and to enhance our existing administrative
organization. To the extent that such expenses are not subsequently followed by
commensurate revenues, our business, results of operations and financial
condition will be materially adversely affected. There can be no assurance that
we will be able to generate sufficient revenues from the sales through our
business to achieve or maintain profitability on a quarterly or an annual basis
in the future. We expect negative cash flow from operations to continue, at
least for the foreseeable future, as we continues to develop and market our
business. If cash generated by operations is insufficient to satisfy our
liquidity requirements, we may be required to sell debt or additional equity
securities. The sale of additional equity or convertible debt securities would
result in additional dilution to our stockholders. Further, there can be no
assurances that we will
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successfully be able to sell our securities in order to obtain additional
capital.
OUR BUSINESS PLAN IS DEPENDENT IN PART ON THE INTERNET AND THERE IS UNCERTAIN
ACCEPTANCE OF THE INTERNET AS A MEDIUM FOR COMMERCE.
Use of the Internet by consumers is at an early stage of development and
market acceptance of the Internet as a medium for commerce is subject to a high
level of uncertainty. Our future success will depend on our ability to generate
significant revenues, which will require the development and widespread
acceptance of the Internet as a medium for commerce. There can be no assurance
that the Internet will be a successful retailing channel. The Internet may not
prove to be a viable commercial marketplace because of inadequate development of
the necessary infrastructure, such as reliable network backbones, or
complementary services, such as high speed modems and security procedures for
financial transactions. The viability of the Internet may prove uncertain due to
delays in the development and adoption of new standards and protocols (for
example, the next generation Internet Protocol) to handle increased levels of
Internet activity or due to increased governmental regulation. If use of the
Internet does not continue to grow, or if the necessary Internet infrastructure
or complementary services are not developed to support effectively the growth
that may occur, our business, results of operations and financial condition
could be materially adversely affected.
Our future success will be significantly dependent upon our ability to
attract users and advertisers to our website. There can be no assurance that we
will be attractive to a sufficient number of users to generate significant
revenues. There can also be no assurance that we will be able to anticipate,
monitor and successfully respond to rapidly changing consumer tastes and
preferences so as to continually attract a sufficient number of users to our
websites. If we are unable to develop Internet content that allows us to
attract, retain and expand a loyal user base, our business, results of
operations and financial condition will be materially adversely affected. This
will have a negative impact on the price of our stock and our shareholders may
not be able to recover the cost of their investment.
THERE IS A RISK OF CHANGES IN TECHNOLOGY.
Our success will also depend upon our ability to develop and provide new
products and services. The delivery of our products and services on-line is, and
will continue to be, like the Internet, characterized by rapidly changing
technology, evolving industry standards, changes in customer requirements and
frequent new service and product introductions. Our future success will depend,
in part, on our ability to use effectively leading technologies to continue our
technological expertise, to enhance
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our current services, to develop new services that meet changing customer
requirements and to influence and respond to emerging industry standards and
other technological changes on a timely and cost-effective basis. There can be
no assurance that we will respond to these changing technological conditions. If
we do not, our stock price will likely suffer.
WE ARE SUBJECT TO SIGNIFICANT COMPETITION.
The market for Internet content providers is new, highly competitive and
rapidly changing. Since the Internet's commercialization in the early 1990's,
the number of websites on the Internet competing for consumers' attention and
spending has proliferated. With no substantial barriers to entry, we expect that
competition will continue to intensify. Currently, there are hundreds of real
time data information, research and trading services websites on the Internet.
With respect to competing for consumers' attention, in addition to intense
competition from Internet content providers, we also face competition from
traditional brokerage institutions.
We believe that the primary competitive factors in providing our services
via the Internet are name recognition, content available on an exclusive basis,
variety of value-added services, ease of use, price, quality of service,
availability of customer support, reliability, technical expertise and
experience. Our success in this market will depend heavily upon our ability to
provide high quality content, along with cutting-edge technology and value-added
Internet services. Other factors that will affect our success include our
ability to attract experienced marketing, sales and management talent. In
addition, the competition for advertising revenues, both on Internet websites
and in more traditional media, is intense. We believe that our business model
offers strong market differentiation through our strategy of offering turn-key
private labeled financial web solutions to large, well established web portals
and brokerages. This should allow us to take advantage of existing brand
recognition and loyalties already established between the partnered sites and
their clients/users. However, there can be no assurances that this will occur.
If it does not occur, the value of our Company will suffer.
Our industry is highly competitive. Many of our current and potential
competitors in the Internet and financial industry have longer operating
histories, significantly greater financial, technical and marketing resources,
greater name recognition and larger existing customer bases than us. These
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements and to devote greater resources to the
development, promotion and sale of their services than us. There can be no
assurance that we will be able to compete successfully against current or future
competitors. Failure to adequately compete will have a negative impact on our
value.
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In addition, the market in which we compete is characterized by frequent
new product introductions, rapidly changing technology and the emergence of new
industry standards. The rapid development of new technologies increases the risk
that current or new competitors will develop products or services that reduce
the competitiveness and are superior to our products and services. Our future
success will depend to a substantial degree upon our ability to develop and
introduce in a timely fashion new products and services and enhancements to our
existing products and services that meet changing customer requirements and
emerging industry standards. The development of new, technologically advanced
products and services is a complex and uncertain process requiring high levels
of innovation, as well as the accurate anticipation of technological and market
trends. There is a potential for product development delay due to the need to
comply with new or modified standards. There can be no assurance that we will be
able to identify, develop, market, support, or manage the transition to new or
enhanced products or services successfully or on a timely basis; that new
products or services will be responsive to technological changes or will gain
market acceptance; or that we will be able to respond effectively to
announcements by competitors, technological changes, or emerging industry
standards. Our business, results of operations and financial condition would be
materially and adversely affected if we were to be unsuccessful, or to incur
significant delays, in developing and introducing new products, services, or
enhancements.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY.
Our quarterly operating results may fluctuate significantly in the future
as a result of a variety of factors, most of which are outside our control,
including: the level of use of the Internet; Internet advertising; seasonal
trends in Internet use, purchases and advertising placements; the addition or
loss of advertisers; the level of traffic on our Internet sites; the amount and
timing of capital expenditures and other costs relating to the expansion of our
Internet operations; the introduction of new sites and services by us or our
competitors; price competition or pricing changes in the industry; technical
difficulties or system downtime; general economic conditions; and economic
conditions specific to the Internet and Internet media. Due to the foregoing
factors, among others, it is likely that our operating results will fall below
our expectations or our shareholders in some future quarter.
WE ARE DEPENDENT ON KEY PERSONNEL AND EXPECTS TO HIRE ADDITIONAL PERSONNEL.
Our performance is substantially dependent on the services of R. Keith
Guelpa, our Chief Executive Officer and President. Our success also depends on
our ability to attract and retain additional qualified employees. Competition
for qualified personnel is intense. There can be no assurance that we will be
able to attract and retain key personnel. The loss of Mr. Guelpa
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or more key employees could have a material adverse affect on our business,
which will have a negative impact on the value of our Company.
We believe our future success will also depend in large part upon our
ability to attract and retain highly skilled management, technical engineers,
sales and marketing, finance and technical personnel. Competition for such
personnel is intense and there can be no assurance that we will be successful in
attracting and retaining such personnel. The loss of the services of any of the
key personnel, the inability to attract or retain qualified personnel in the
future, or delays in hiring required personnel, particularly technical engineers
and sales personnel, could have a material adverse affect on the our business,
results of operations and financial condition.
WE ARE DEPENDENT ON THIRD PARTIES FOR INTERNET OPERATIONS AND PRODUCT
DELIVERIES.
Our ability to advertise on other Internet sites and the willingness of the
owners of such sites to direct users to our Internet site through hypertext
links are critical to the success of our Internet operations. We also rely on
the cooperation of owners of copyrighted materials and Internet search services
and on our relationships with third party vendors of Internet development tools
and technologies. There can be no assurance that the necessary cooperation from
third parties will be available on acceptable commercial terms or at all. If we
are unable to develop and maintain satisfactory relationships with such third
parties on acceptable commercial terms, or if our competitors are better able to
leverage such relationships, our business, results of operations and financial
condition will be materially adversely affected, which will have a negative
impact on our value.
WE MAY NEED TO SPEND SIGNIFICANT AMOUNTS OF MONEY TO PROTECT AGAINST SECURITY
BREACHES.
A party who is able to circumvent our security measures could
misappropriate proprietary information or cause interruptions in our Internet
operations. We may be required to expend significant capital and resources to
protect against the threat of such security breaches or to alleviate problems
caused by such breaches. Consumer concern over Internet security has been, and
could continue to be, a barrier to commercial activities requiring consumers to
send their credit card information over the Internet. Computer viruses,
break-ins, or other security problems could lead to misappropriation of
proprietary information and interruptions, delays, or cessation in service to
our customers. Moreover, until more comprehensive security technologies are
developed, the security and privacy concerns of existing and potential customers
may inhibit the growth of the Internet as a merchandising medium. Were these
risks to occur, our business, results of operations and financial condition
could be materially adversely affected.
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WE WILL NEED ADDITIONAL CAPITAL WITH WHICH TO IMPLEMENT OUR BUSINESS PLAN AND
THERE IS NO AGREEMENT WITH ANY THIRD PARTY TO PROVIDE SUCH CAPITAL IF NEEDED AS
EXPECTED.
Based on current levels of operations and planned growth, we anticipate
that the proceeds derived from the closing of our current private offering,
wherein we are attempting to raise up to $3.5 million, will be sufficient to
meet our needs for the immediate future. As of the date of this registration
statement, we have received approximately $1,155,000 from this offering. There
can be no assurances that we will be able to raise the balance of the additional
$2,345,000. In addition, if we requires additional funding or determine it
appropriate to raise additional funding in the future, there is no assurance
that adequate funds, whether through additional equity financing, debt financing
or other sources, will be available when needed or on terms acceptable to us.
Further, any such funding may result in significant dilution to existing
stockholders. The inability to obtain sufficient funds from operations and
external sources when needed would have a material adverse affect on our
business, results of operations and financial condition.
THE INTERNET MAY BECOME SUBJECT TO SIGNIFICANT GOVERNMENT REGULATIONS IN THE
FUTURE WHICH COULD NEGATIVELY IMPACT OUR PROPOSED BUSINESS.
We are not currently subject to direct federal, state, or local regulation
and laws or regulations applicable to access to, or commerce on, the Internet,
other than regulations applicable to business generally. However, due to the
increasing popularity and use of the Internet and other on-line services, it is
possible that a number of laws and regulations may be adopted with respect to
the Internet or other on-line services covering issues such as user privacy,
"indecent" materials, freedom of expression, pricing, content and quality of
products and services, taxation, advertising, intellectual property rights and
information security. The adoption of any such laws or regulations might also
decrease the rate of growth of Internet use, which in turn could decrease the
demand for our products and services or increase the cost of doing business or
in some other manner have a material adverse affect on our business, results of
operations and financial condition. In addition, applicability to the Internet
of existing laws governing issues such as property ownership, copyrights and
other intellectual property issues, taxation, libel, obscenity and personal
privacy is uncertain. The vast majority of such laws were adopted prior to the
advent of the Internet and related technologies and, as a result, do not
contemplate or address the unique issues of the Internet and related
technologies. We do not believe that such regulations, which were adopted prior
to the advent of the Internet, govern the operations of our business nor have
any claims been filed by any state implying that we are subject to such
legislation. There can be no assurance, however, that a state will not attempt
to impose these regulations upon us
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in the future or that such imposition will not have a material adverse affect on
our business, results of operations and financial condition.
Several states have also proposed legislation that would limit the uses of
personal user information gathered on-line or require on-line services to
establish privacy policies. The Federal Trade Commission has also initiated
action against at least one on-line service regarding the manner in which
personal information is collected from users and provided to third parties.
Changes to existing laws or the passage of new laws intended to address these
issues could create uncertainty in the marketplace that could reduce the demand
for our services or increase its costs of doing business as a result of
litigation costs or increased service delivery costs, or could in some other
manner have a material adverse affect on our business, results of operations and
financial condition. In addition, because our services are accessible worldwide,
other jurisdictions may claim that we are required to qualify to do business as
a foreign corporation in a particular state or foreign country. We are qualified
to do business in Nevada and our failure to qualify as a foreign corporation in
a jurisdiction where we are required to do so could subject us to taxes and
penalties for the failure to qualify and could result in our inability to
enforce contracts in such jurisdictions. Any such new legislation or regulation,
or the application of laws or regulations from jurisdictions whose laws do not
currently apply to our business, could have a material adverse affect on our
business, results of operations and financial condition.
THE SUCCESS OF OUR ANTICIPATED FUTURE GROWTH IS DEPENDENT UPON OUR ABILITY TO
SUCCESSFULLY MANAGE THE GROWTH OF OUR PROPOSED OPERATIONS.
We expect to experience significant growth in the number of employees and
the scope of our operations. Our future success will be highly dependent upon
our ability to successfully manage the expansion of our operations. Our ability
to manage and support our growth effectively will be substantially dependent on
our ability to implement adequate improvements to financial and management
controls, reporting and order entry systems and other procedures and hire
sufficient numbers of financial, accounting, administrative and management
personnel. Our expansion and the resulting growth in the number of our employees
will result in increased responsibility for both existing and new management
personnel. There can be no assurance that we will be able to identify, attract
and retain experienced accounting and financial personnel. Our future operating
results will depend on the ability of our management and other key employees to
implement and improve our systems for operations, financial control and
information management and to recruit, train, and manage our employee base.
There can be no assurance that we will be able to achieve or manage any such
growth successfully or to implement and maintain adequate financial and
management controls and procedures. Any inability to
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do so would have a material adverse affect on our business, results of
operations and financial condition, which will have a negative impact on our
shareholder's ability to recover their investment.
Our future success depends upon our ability to address potential market
opportunities while managing our expenses to match our ability to finance
operations. This need to manage our expenses will place a significant strain on
our management and operational resources. If we are unable to manage our
expenses effectively, our business, results of operations and financial
condition will be adversely affected.
OUR COMMON STOCK IS CURRENTLY DESIGNATED AS A "PENNY STOCK", WHICH HAS AN
ADVERSE EFFECT ON TRADING.
The Securities and Exchange Commission has adopted a Rule which established
the definition of a "penny stock," for purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require: (i)
that a broker or dealer approve a person's account for transactions in penny
stocks; and (ii) the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person's account for
transactions in penny stocks, the broker or dealer must (i) obtain financial
information and investment experience and objectives of the person; and (ii)
make a reasonable determination that the transactions in penny stocks are
suitable for that person and that person has sufficient knowledge and experience
in financial matters to be capable of evaluating the risks of transactions in
penny stocks. The broker or dealer must also deliver, prior to any transaction
in a penny stock, a disclosure schedule prepared by the Commission relating to
the penny stock market, which, in highlight form, (i) sets forth the basis on
which the broker or dealer made the suitability determination; and (ii) that the
broker or dealer received a signed, written agreement from the investor prior to
the transaction. Disclosure also has to be made about the risks of investing in
penny stock in both public offering and in secondary trading, and about
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
Because our securities are currently subject to the rules on penny stocks, the
market liquidity for the our securities is adversely affected, which could have
a negative impact on our shareholder's ability to recover their investment.
INVESTORS SHOULD NOT EXPECT TO RECEIVE A DIVIDEND IN THE FUTURE.
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No dividend has been paid on any of our securities since inception and none
is contemplated at any time in the foreseeable future. Potential shareholders
who are seeking a dividend should not invest in our securities.
Item 2. Plan of Operation
Our business strategy is comprised of three distinct, yet interrelated
facets: (i) Private Label Product Strategy; (ii) Interactive Financial & On-line
Trading Portal Strategy; and (iii) Vendor Relationship Strategy. Following is a
description of these facets.
PRIVATE LABEL PRODUCT STRATEGY
In order to compete effectively, we must adopt an original and animated
product strategy designed to provide service access to huge audiences with
underlying demographic parallels. Through private label product adaptation, we
intend to offer a customized suite of products, tools, and permitting
technologies to financial and investment industry institutions such as retail
brokerages, mutual fund companies, banks, credit unions and investment advisory
firms. Our Private Label Products ("PLP") strategy is designed to meet the
necessity of comprehensive systems employed by the financial community. Research
has determined that there is a waiting market of potential institutional clients
who wish to nurture and serve the specific requirements of their own distinct
investor clients.
Through the PLP program, we intend to offer a wide selection of components
that include but are not limited to: (i) branded analytical tools, applications
and functions; (ii) access to account information; (iii) on-line trading
systems; (iv) registered rep/employee web pages; (v) specialty client to
representative e- mail response services; (vi) branded identification for the
PLP usage; and (vii) branded versions of our desktop applications.
INTERACTIVE FINANCIAL & ON-LINE TRADING PORTAL STRATEGY
We believe that what matters in the new environment on the Internet is not
only what providers deliver in terms of content but also how it is delivered. As
such, we incorporate a fundamentally new approach to this paradigm by becoming a
true portal to a myriad of "financial applications," rather than "web pages" of
information. In effect, we abandon the "online newspaper" format and HTTP
protocol so common in today's leading financial websites. We leverage the
browser and eventually the Desktop for massive interactivity and optimal
responsiveness. Our site is a large set of financial applications allowing an
investor to trade, watch charts, quote-grids, news tickers and conduct research,
using advanced Internet "thin client" (Java) technology. Our browser technology
in effect becomes customized for the retrieval of
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financial information, with application-like responsiveness. Our private label
marketing strategy supports the applications by being the first screen that a
user sees when he first brings up his or her browser and empowers the user to
conduct transactions and use applications from within the comfort of our or
branded site's environment.
We intend to incorporate technologies which allow the user to trade with
his broker of choice within our portal. The content and technologies offered
provides the user with a more personalized and informative environment in which
to execute investment decisions.
Our financial content offering includes investment performance data,
financial and business news and company-specific information. Investment
performance data is raw financial data about a company's stock, its industry and
the economy as a whole. This data includes specific information in price quotes,
performance charts, company- specific fundamental data and market indices.
Financial and business news consists of real-time and delayed broadcasts of
general and business/financial news as well as company-specific press releases.
We will assemble the current news and company press releases from data feeds
provided by Comtex. Company specific content is corporate information that
complements the investment performance data for a particular company's
securities offering. Such data includes a briefing about products and services,
corporate management, historic performance, financial statements and disclosure
documents.
Analytic provisions are expected to enable investors to enhance the
accuracy of their decisions to improve the productivity and performance of their
portfolios. On our website, analytic tools enable retail investors to
screen/source investment opportunities, track investment performance and analyze
and interpret financial information through fundamental and technical tools.
Analytic tools that will be offered include, but are not limited to, advanced
charting for technical analysis, adept systems which interpret financial
fundamentals, library research tools which retrieve and store relevant
information about an investor's portfolio in the investor's personal library,
portfolio monitoring and management tools.
VENDOR RELATIONSHIP STRATEGY
Our approach is to establish relationships with premier industry contenders
whose products have established brand equity. Most brokerage firms and financial
services organizations are realizing that financial information creating,
packaging, and hosting is not their core business and can actually save
extensive financial resources by outsourcing these services through partnering.
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The "bundling" of this information and content and technology within our
data warehouse allows us to selectively contract individual data from specific
content providers under the best financial and redistribution terms and provides
the user with a true one-stop shopping environment.
We have negotiated a number of contracts with major providers of financial
content, including but not limited to StockPoint Inc., which provides quotes,
charts, company background data and general information; Thomson Information
Services Inc., which provides research reports, analysis and educational data;
CNBC/Dow Jones, which provides video feeds; IPO.com, Inc., which provides IPO
information; Market Guide Inc., which provides company performance reports,
financial analysis and a "What's Hot, What's Not" report; and Prophet Financial
Systems, Inc., which provides stock charting. The contracts with the
aforementioned companies have a term of between one to three years and are based
upon a worldwide license fee and/or cost per thousand page view format. We have
commitments with respect to these contracts totaling $673,953, $673,953 and
$561,627 in years 2000, 2001 and 2002, respectively. While no assurances can be
provided, we expect that similar additional agreements with key content
providers will be reached in the future.
We believe that we have assembled one of the industries most impressive and
comprehensive data warehouses. We have identified content areas for
specialization and as they are not currently aggregated in a single "portal" by
other investment services, we should have a basis of differentiation from our
competitors.
Such areas of specialization are expected to support us in creating and
fostering an Internet community. An Internet community is established by
providing targeted information and comprehensive opportunities for electronic
transactions. The community becomes a reference point for users with shared
interests or tasks. Establishing such a community is very consequential because
the community becomes the continuous, "repeat traffic" to our site.
The financial services industry on the Internet is currently fragmented and
confusing. An overwhelming number of providers are offering various types of
investment-related information and services. The large financial aggregation
providers such as Yahoo Financial, Microsoft(TM) Investor, Quicken Financial
Network and Wall Street City are engaged in a fierce competition to bundle
content and analytic tools and provide access through super web portals. Their
goal is to become one-stop super-sites and entry portals to large arrays of
financial content in the traditional library or newspaper approach.
We believe that one critical component has been overlooked in the drive to
become super portals. The financial information
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providers still oblige the user to conduct business within the confines and
limitations of the World Wide Web. The users often must leave the portal to
conduct trades with their chosen online broker, discount broker, or full service
broker. Through strategic alliances, online discount brokers are also bundling
resources in an attempt to attract and retain end users. Discount brokerages,
however, have been apprehensive to supply any research at $7.95 per trade and
only minimal information for $29.95 per trade.
We offer a multi faceted revenue model consisting of the following: (i)
monthly service fees; (ii) advertising revenue; (iii) delivery of real time data
(streaming quotes, etc.); (iv) delivery of research content (reports, analyst's
recommendations, etc.); and (v) the on-line sale of books, magazine and
newsletter subscriptions, investment software, investment tools and
complementary goods and services.
We will install turnkey website and on-line trading systems for brokerage
firms and other companies for a license fee. The fee structure will vary based
on the number of clients, existing Internet and server components and the back
office system employed by the firm. We will charge the private labeled firms a
monthly fee based on the number of active accounts and the level of service and
site content selected by the firm.
In addition, we intend to retain an advertising agency on behalf of the
networked partner firms to place advertisements on the private labeled websites.
The ads will be of a non-competitive nature to the partnered firms. The
advertising rate charged will be competitive within the industry and is
estimated at approximately $20 to $35 per 1,000 page views after we achieve
approximately 20 million page views per month. There can be no assurances we
will ever meet this threshold.
In the future, we intends to offer real time streaming information,
streaming quotes, real time stock and index monitors and Internet delivered
information to complementary market analysis legacy software programs such as
TradeStation and Windows on Wall Street. We will offer users the ability to
purchase on-line research reports from top analysis firms and financial services
firms such as Thomson Financial Interactive, Inc.
Our portal is also expected to offer for sale relevant and complementary
goods and services to its subscriber base. We will offer financial books,
magazine and newsletter subscriptions, investment software, investment tools and
other relevant goods and services. We are also an Amazon.com affiliate member.
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SALES ADVERTISING AND PROMOTIONS STRATEGY
Our products will be marketed through a combination of direct sales and
online subscriptions. We will rely on a multi-faceted direct sales team to sell
our product line, private label contracts and bundled content to other financial
sites. We are currently building a sales team consisting of account managers and
executive salespersons to market and distribute our products throughout North
America. Sales executives will be responsible for the sale of private label
contracts, our content, related products and tools to financial institutions, or
other financial sites.
Our marketing communications strategy will encompass extensive promotions
on and offline directed at its cyber investor, institutional, corporate
advertiser and public company audiences. This is intended to be executed
aggressively throughout North America. Our promotional campaigns may be
comprised of digital or online marketing, direct marketing, print media
advertising and public relations. To accomplish our sales goals, we expect to
engage an Internet advertising network/agency to promote the sale of advertising
space on the website.
We acknowledge that simply having a website does not guarantee
automatically reaching millions of customers. In this regard, we will expand our
online presence by trafficking our name, Internet address, identity and message
in front of as many end users as possible in a manner that is respectful of Net
culture. We will use the following listed online tools to accomplish these
goals:
(i) Usenet Newsgroups. A newsgroup is a place on the Internet where groups
of people post and read messages on a particular topic. We will participate in
industry related newsgroups to gain visibility and develop relationships with
our targeted audiences. Newsgroups offer us a great deal of marketing leverage
because their potential audiences include participants who are interested in
related topics.
(ii) Mailing Lists. Mailing lists are not direct mail lists but, rather,
they are similar to e-mail newsletters or on-going dialogues dedicated to
special interests. Like newsgroups where messages are posted, e-mail messages
are sent to specific mailing lists. We will participate in special interest
mailing lists to gain visibility among a targeted audience and generate traffic
for our site.
(iii) Internet Advertising. Advertising online is expected to help us
create visibility in cyberspace. We will develop, purchase and place banner ads
with links to our site on industry-related and high volume search engines. These
ads are expected to promote our online presence and help direct traffic to the
site. We will employ online ad networks and brokers such as Web Connect to guide
our purchase of ad space on appropriate sites. We will also actively
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post notices on What's New sites and newsgroups that cover new Net features and
websites. We also anticipate submitting our site to all What's Cool rating
services and contests in order to position it as a "best of breed" site.
(iv) Search Engines, Directories, Regional Indexes, and Business Indices.
We intend to register and list our web addresses with search engines and
directories such as Yahoo, Lycos, Web Crawler, and Infoseek. We may use a
professional service company such as www.submitit.com, www.netcreations.com, or
www.mgroup.com to register the appropriate URLs with the most significant search
engines. When registering, we will include keyword sensitive content tags and
titles to ensure that it results in the top 20 or better in most search returns.
Professional services will also be employed to list its URL with numerous e-mail
directories (similar to the White pages), business and regional indices and
promotional sites.
(v) Mutual Links. For every search engine there are at least 100 special
interest websites dedicated to a specific market. We believe that creating
mutual links can be more powerful than listing with search engines and
directories because mutual links allow us to target a very specific market. This
tactic is considerably more successful than banner ads, as the link is perceived
by the user to be "information," rather than advertising. We will attempt to
select industry-related and trade association websites (NIRI, CIRI, and American
Association for Individual Investors) and negotiate reciprocal links to and from
their web pages.
(vi) Public Relations. We intend to engage the services of a dedicated
public relations company to devise and implement an aggressive public relations
campaign. This contractor will act as the primary spokesperson for us. The PR
agent will be expected to create and distribute press kits to appropriate
audiences to acquire substantial exposure for us on local, national and radio
talk shows and TV magazines shows both in Canada and the US. This firm will also
be responsible for organizing press tours and interviews to further enhance
editorial coverage for us in key business and technology magazines and
newspapers.
INDUSTRY OVERVIEW
There has been enormous growth in the business of providing investment
information to retail investors via the Internet. In a recent study, the
American Home Financial Services Survey, October 1997, conducted by SVP and
Jupiter Communications concludes that 6.7 million households (7% of total US
households and 17% of PC households) use investment related online services.
Another national survey, conducted by Peter D. Hart Research Associates on
behalf of the NASDAQ Stock Market in January 1997 (the "NASDAQ survey")
discovered that 37% of American investors regularly use
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the Internet or other online computer information services at work or home to
access investment related information.
The NASDAQ survey clearly indicates that today's investors are increasingly
interested in managing and diversifying their own investments and should
continue to drive investment funds into stocks, mutual funds and 401Ks. As
investors take control of managing their own funds it is expected that they will
seek new sources of independent research and recommendations without the
"sell-side" bias of brokerage firms. The growth of discount brokers (from 2% in
1980 to 14% in 1995) and the unbundling of investment services created a need to
make research and advisory information available to this growing market.
This new ethic of self-reliance has investors aspiring to gain better
control over their finances. They demand "faster, more personalized access to
relevant investment information," and the Internet plays a major role in
providing the information that is now being sought. In the past 12 months, the
supply of investment information such as financial data, market news, investment
tools and the execution of securities transactions has been profoundly affected
by the rise in user traffic on the Internet.
TRENDS
We intend to continue to identify, purchase and develop complimentary,
proprietary technologies and investment tools to enhance our websites and help
to build strong market differentiation. As of the date of this registration
statement, we have established contractual relationships with an unrelated web
portal. We intend to develop similar relationships over the next few months and
fiscal year and have targeted other well established web portals which can
demonstrate significant registered user bases. It is our intention to continue
the development of similar relationships, with the ultimate goal of developing a
large enough user base to sustain profitability through the sale of banner ads
of each of the partnered sites. However, as of the date of this registration
statement, no other definitive agreements have been reached by us and there can
be no assurances that we will contract with other web portals meeting the
aforesaid characteristics in the future.
We began generating revenues in January 2000, and we expect to become
profitable by the end of 2000. However, no assurances can be provided that this
will occur within the time parameter stated herein, or at all.
YEAR 2000 DISCLOSURE
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change
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in the century. If not corrected, many computer applications could fail or
create erroneous results by or at the Year 2000. As a result, many companies
will be required to undertake major projects to address the Year 2000 issue. The
Year 2000 issue is the result of computer programs written using two digits
rather than four to define the applicable year. As a result, date-sensitive
software may recognize dates using "00" as the year 1900 rather than the year
2000. This could result in system failures or miscalculations causing
disruptions of operations, including, among others, a temporary inability to
process transactions, send invoices, or engage in similar normal business
activities.
Because our systems and software are relatively new, we do not expect Year
2000 issues related to our own internal systems to be significant and do not
anticipate that we will incur significant operating expenses or be required to
invest heavily in computer systems improvements to be Year 2000 compliant. As we
make arrangements with significant suppliers and service providers, we intend to
determine the extent to which our interface systems may be vulnerable should
those third parties fail to address and correct their own Year 2000 issues.
There can be no assurance that the systems of suppliers or other companies on
which we rely will be converted in a timely manner and, accordingly, will not
have a material adverse affect on our systems. Additionally, there can be no
assurance that the computer systems necessary to maintain the viability of the
Internet or any of the websites that direct consumers to our website will be
Year 2000 compliant. As part of our overall Year 2000 compliance plan, we intend
to monitor systems performance and plans to develop a rapid response program in
the event of any significant disruption as a result of the Year 2000 issues. To
date, we have not developed a formal contingency plan. We believe we are taking
the steps necessary regarding Year 2000 compliance with respect to matters
within our control. However, no assurance can be given that our systems will be
made Year 2000 compliant in a timely manner or that the Year 2000 problem will
not have a material adverse affect on our business, results of operations and
financial condition.
Item 3. Description of Property
Our principal office is located at 11100 NE 8th Street, Suite 300,
Bellevue, Washington 98004 which we sublease pursuant to an oral month to month
lease. This space consists of approximately 700 square feet of executive office
space, which is provided to us on a rent free basis. Our telephone number is
(415) 451-1604. We expect to move our principal place of business to the
Phoenix, AZ area in the near future, but no definitive arrangements in this
regard have been made as of the date of this registration statement.
In addition, we also subleases approximately 6,120 square feet of office
space at 701 W. Georgia Street, Suite 1260, Vancouver,
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British Columbia Canada V7Y 1C6, at a monthly rent of approximately $7,300
(CDN). This sublease expires September 29, 2000. We anticipate that all or a
portion of this space will be re-leased upon expiration of the sublease. We
believe that our current leased space is sufficient to meet our needs for the
foreseeable future.
We have no other properties and have no agreements to acquire any
properties.
Item 4. Security Ownership of Certain Beneficial Owners and
Management
The table below lists the beneficial ownership of our voting securities by
each person known by us to be the beneficial owner of more than 5% of such
securities, as well as our securities beneficially owned by all our directors
and officers. Unless otherwise indicated, the shareholders listed possess sole
voting and investment power with respect to the shares shown.
Amount and
Nature of
Title Name and Address of Beneficial Percent of
of Class Beneficial Owner Ownership Class
- -------- ---------------- --------- -----
Common R. Keith Guelpa(1) 3,597,000(2)(3) 19.8%
Suite 1067
4304 E. Cambell Ave.
Phoenix, AZ 85018
Common Duane & Bev Nelson 4,270,000(4) 23.5%
3339 Huntleigh Ct.
N. Vancouver, British Columbia
Canada V7H 1C9
Common Skyline Records, Inc. 2,500,802(5) 13.8%
Suite 602
595 Howe St.
Vancouver, British Columbia
Canada V6C 2T5
Common Ian D. Lambert(1) 350,000(3) 1.9%
1220 Eastview Road
N. Vancouver, British Columbia
Canada V7J 1L6
Common Robert J. Thompson(1) 150,000(6) 1.0%
35386 N. 95th St.
Scottsdale, AZ 85262
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Amount and
Nature of
Title Name and Address of Beneficial Percent of
of Class Beneficial Owner Ownership Class
- -------- ---------------- --------- -----
Common Keith J. Randall 125,000(7) 1.0%
1206 - 110 West 4th St.
North Vancouver, British Columbia
Canada V7M 3H3
Common All Officers and 4,072,000(2)(3) 23.4%
Directors as a
Group (3 persons)
_________________
(1) Officer and/or director
(2) Includes 3,360,000 shares of our common stock held in the name of Keeva
Trust, trustee for a trust to which Mr. Guelpa's wife and children are
beneficiaries, as well as 14,500 shares of common stock owned in the name
of Mr. Guelpa's wife. Mr. Guelpa disclaims any and all beneficial ownership
of such shares.
(3) Includes 200,000 shares subject to option, which option is exercisable
pursuant to the our stock option plan described below, at an option price
of $1.27 per share.
(4) Includes 200,000 shares subject to option, which option is exercisable
pursuant to our stock option plan described below, at an option price of
$1.85 per share.
(5) Includes 802 shares of common stock held in the name of Dan Tartaglia, the
sole shareholder of Skyline Records, Inc.
(6) Includes 150,000 shares subject to option, which option is exercisable
pursuant to our stock option plan described below, at an option price of
$3.85 per share.
(7) Includes 125,000 shares subject to option, which option is exercisable
pursuant to our stock option plan described below, at an option price of
$1.85 per share.
The balance of our outstanding Common Shares is held by 266 persons, not
including those persons who hold their shares in "street name."
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Item 5. Directors, Executive Officers, Promoters and Control
Persons.
Our directors and officers are as follows:
Name Age Position
---- --- --------
R. Keith Guelpa 52 Chief Executive Officer,
President and a director
Ian D. Lambert 54 Secretary and a director
Robert J. Thompson 58 Chairman of the Board
Keith J. Randall 33 Vice President, Treasurer
and Chief Financial Officer
The above listed officers and directors will serve until the next annual
meeting of the shareholders or until their death, resignation, retirement,
removal, or disqualification, or until their successors have been duly elected
and qualified. Vacancies in the existing Board of Directors are filled by
majority vote of the remaining Directors. Our officers serve at the will of the
Board of Directors. There is no family relationship between any executive
officer and director.
Resumes
R. Keith Guelpa, Director, President and Chief Executive Officer. Mr.
Guelpa assumed his positions with us in July 1999. From March 1999 through June
1999, Mr. Guelpa was President of R.K. Guelpa & Associates, a private consulting
company. Prior, from January 1998 through February 1999, Mr. Guelpa was Chairman
and Chief Executive Officer of Mailbank.com, Inc., Vancouver, Canada, a
privately held Canadian Internet based corporation which owned the largest
registration of top level Domain names in the world. From November 1995 through
December 1997, Mr. Guelpa was President/CDO of C.M. Oliver Inc., a publicly held
Canadian corporation offering brokerage/financial planning and investment
banking services. From November 1991 through October 1995, Mr. Guelpa was
President and Chief Executive Officer of Western Pro Imaging Labs Ltd., a
privately held Canadian corporation engaged in the business of digital imaging.
Mr. Guelpa received a Bachelor of Commerce degree from the University of British
Columbia in 1970. He devotes substantially all of his business time to our
affairs.
Ian D. Lambert, Secretary and a Director. Mr. Lambert was our President and
a director from May 1994 through July 1999. In July 1999, he resigned his
position as President and was appointed as Secretary. In addition to his
positions with us, since 1983 Mr. Lambert has been President and a director of
Canasia Data Corporation, Vancouver, Canada, a privately held management
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services and consulting company. Mr. Lambert is also a director of Tasty Fries,
Inc., a Delaware publicly held corporation engaged in development, manufacturing
and marketing of a french fry vending machine, and Litewave Corp., a publicly
held Nevada corporation engaged in the installation and operation of voice over
Internet protocol telecom networks. Mr. Lambert received a Bachelor of Commerce
degree in quantitative analysis and computer science from the University of
Saskatchewan in 1970. He devotes approximately 10% of his time to our business.
Robert J. Thompson, Chairman of the Board, was appointed as our Chairman in
February 2000. In addition, since May 1996, Mr. Thompson has been the president
of Bimsi Marketing Services, Inc., Vancouver, British Columbia, Canada, a
privately held company that manages the worldwide marketing activities for
Birkman International, Inc., Houston, Texas, which is one of the world's leading
companies in employment behavior assessment companies utilized by Fortune 500
companies. From October 1994 through May 1996, he was president of The Robert
Thompson Partnership, Certified Management Consultants Inc., a division of which
was the predecessor firm of Bimsi Marketing Services. For over 30 years Mr.
Thompson practiced as a professional management consultant and was a partner of
KMPG Management Consultants, Woods Gordon/Clarkson Gordon and Ernst & Whitney.
He is expected to devote only such time as necessary to our business, which is
not expected to be over 10% of his business time.
Keith J. Randall, Vice President, Treasurer and Chief Financial Officer.
Mr. Randall assumed his positions with us in September 1999. In addition, from
August 1998 through August 1999, Mr. Randall was Controller of C.M. Oliver &
Company Ltd., a publicly held Canadian corporation offering brokerage/financial
planning and investment banking services. Mr. Randall was promoted to the
position of Vice President and Chief Financial Officer of C.M. Oliver in August
1999 and, in addition to his positions with us, he remains employed part time by
C.M. Oliver as of the date of this registration statement, which is expected to
terminate March 1, 2000, when Mr. Randall will become a full time employee.
Also, from April 1998 through August 1998, Mr. Randall was a consultant with
KPMG, Inc., an accounting firm. From December 1997 through April 1998, Mr.
Randall was the Chief Financial Officer for Vantage Securities Inc., a Canadian
brokerage firm. From November 1995 through December 1997, Mr. Randall was an
exchange examiner for the Vancouver Stock Exchange. From September 1991 through
November 1995, Mr. Randall was employed as a chartered accountant with KPMG,
Inc. Mr. Randall is a licensed chartered accountant in Canada. He received a
Bachelor of Commerce degree with Honors from Queen's University in May 1991. He
devotes approximately 90% of his time to our business.
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Item 6. Executive Compensation.
Remuneration
The following table reflects all forms of compensation for services to us
for the fiscal years ended December 31, 1999 and 1998 of our then Chief
Executive Officer.
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------------
Annual Compensation Awards Payouts
--------------------- -------------------- -------
Securities
Other Under- All
Name Annual Restricted lying Other
and Compen- Stock Options/ LTIP Compen-
Principal Salary Bonus sation Award(s) SARs Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
- ---------- ---- ------ ----- ------ -------- ------- ------- ------
Ian Lambert 1998 $32,000 $ 0 $ 0 $ 0 0 $ 0 $ 0
President &
Director(1)
R. Keith
Guelpa 1999 $43,414 $ 0 $ 2,180(2)$ 0 200,000 $ 0 $ 0
President &
Director(1)
- -------------------------
(1) Mr. Lambert resigned his position as our President in July 1999,when he was
replaced by Mr. Guelpa. During his tenure as our President during 1999, Mr.
Lambert did not received any salary or other compensation.
(2) This was provided in the form of a car allowance.
Mr. Guelpa was appointed to his position as President and Treasurer, as
well as a director in July 1999. In September 1999, Mr. Guelpa was appointed as
Chief Executive Officer and resigned as Treasurer and Keith J. Randall was
appointed to that office. The terms of an employment agreement have been agreed
in writing by the parties and approved by our Board of Directors. These terms
include an initial five (5) year term, a starting salary in July 1999 of
$120,000 per annum, increasing based upon our profitability as follows: annual
profit level of $.5 million - salary of $175,000 per annum; $3 million in annual
profits - $250,000 annual salary; $6 million in annual profits - $350,000 per
annum. In addition, in the event and at such time as we achieve cumulative
profits of $10 million calculated from July 14, 1999 forward, Mr. Guelpa is
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entitled to a bonus of 500,000 shares of our common stock at a price of $.0001
per share. Further salary increases are tied to our performance and are to be
negotiated with our Board of Directors at an unspecified date. In addition, Mr.
Guelpa's compensation includes a $650 per month car allowance, 30 days vacation
per annum and reimbursement of all business related expenses. In the event of
termination by us without cause beginning October 15, 1999, Mr. Guelpa is
entitled to receive 6 months salary as severance, plus all perquisites. After 6
months of employment, Mr. Guelpa would receive one year salary, plus
perquisites. After one year of employment, Mr. Guelpa would receive two years's
salary, plus perquisites. In the event of a change in control that results in
more than 25%, which change results in termination of employment, Mr. Guelpa
would receive three (3) years salary, plus perquisites. In the event of a change
in control and Mr. Guelpa elects to terminate his employment, he would be
entitled to one (1) years' salary, plus perquisites. Mr. Guelpa is also entitled
to participate in all employee benefit plans, including but not limited to
health insurance and such other plans which may be adopted by us in the future.
Mr. Keith J. Randall was appointed to his positions as Vice President,
Treasurer and Chief Financial Officer in September 1999. The terms of an
employment agreement have been agreed in writing by the parties and approved by
our Board of Directors. These terms include an initial three (3) year term
commencing March 1, 2000, subject to a probationary period of employment on a
part time basis commencing on November 15, 1999 through March 1, 1999, and
thereafter on a full time basis, at a starting salary of $75,000 per annum
prorated to November 1, 1999, increasing to $80,000 per annum commencing
February 1, 2000, with annual increases based on performance, plus four (4)
weeks paid vacation per year and other benefits as are standard and customary in
the industry.
In addition, we have agreed in writing upon the terms of an employment
agreement with Mr. Duane Nelson as Manager of Business Development and Chief
Technologist, which has been approved by our Board of Directors. These terms
include an initial five (5) year term retroactive to July 15, 1999, a starting
salary of $120,000 per annum, increasing based upon our profitability as
follows: annual profit level of $.5 million - salary of $175,000 per annum; $3
million in annual profits - $250,000 annual salary; $6 million in annual profits
- - $350,000 per annum. In addition, in the event and at such time as we achieve
cumulative profits of $10 million calculated from July 14, 1999 forward, Mr.
Nelson is entitled to a bonus of 500,000 shares of our common stock at a price
of $.0001 per share. In addition, Mr. Nelson's compensation includes a $650 per
month car allowance, 30 days vacation per annum and reimbursement of all
business related expenses.
It is also anticipated that we will employ a Vice President of Sales and
Marketing during the fiscal year ending December 31,
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2001, who is expected to receive a salary in excess of $100,000, provided that
we have sufficient financial resources to meet such obligation.
We maintain a policy whereby our directors may be compensated for out of
pocket expenses incurred by each of them in the performance of their relevant
duties. We provided reimbursement to Mr. Lambert of $300 for out of pocket
expenses during the fiscal years ended December 31, 1999 and 1998. Mr. Guelpa
received $6,680.64 in reimbursed expenses during the fiscal year ended December
31, 1999.
STOCK PLAN
In March 1999, our Board of Directors adopted the 1999 Stock Option Plan
(the "Plan"), reserving an aggregate of 400,000 shares of our common stock for
issuance thereunder. The Plan was subsequently approved by our shareholders.
Thereafter, in September 1999, our Board and shareholders authorized an increase
in the number of shares authorized for issuance under the Plan, to 2,500,000
shares.
The Plan provides for the Board of Directors, or a designated committee, to
administer the Plan, which provides for the issuance of both incentive and non
qualified options. Following is a description of the provisions of the Plan:
Grants. Grants under the Plan may consist of:
- options intended to qualify as incentive stock options within the
meaning of Section 422 of the Internal Revenue Code
- non qualified stock options that are not intended to so qualify
Eligibility for participation. Grants may be made to our employees,
officers, directors, advisors and independent contractors, including any
non-employee member of the board of directors. As of the date of this
Registration Statement, 950,000 options were outstanding under the Plan.
Options. Incentive stock options may be granted only to officers and
directors who are employees. Non qualified stock options may be granted to
employees, officers, directors, advisors and independent contractors. The
exercise price of common stock underlying an option will be determined by
the board of directors or compensation committee and may be equal to,
greater than, or less than the fair market value but in no event less than
50% of fair market value, provided that:
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- the exercise price of an incentive stock option shall be equal to
or greater than the fair market value of a share of common stock
on the date such incentive stock option is granted
- the exercise price of an incentive stock option granted to an
employee who owns more than 10% of the common stock must not be
less than 110% of the fair market value of the underlying shares
of common stock on the date of grant
The participant may pay the exercise price:
- in cash
- by delivering shares of common stock owned by the participant and
having a fair market value on the date of exercise equal to the
exercise price of the grant
- by such other method as the board of directors or compensation
committee shall approve, including payment through a broker in
accordance with procedures permitted by Regulation T of the
Federal Reserve Board
Options vest according to the terms and conditions determined by the board
of directors or compensation committee.
The board of directors or compensation committee will determine the term of
each option up to a maximum of ten years from the date of grant except that
the term of an incentive stock option granted to an employee who owns more
than 10% of the common stock may not exceed five years from the date of
grant. The board of directors or compensation committee may accelerate the
exercisability of any or all outstanding options at any time for any
reason.
Amendment and termination of the plan. The board of directors or
compensation committee may amend or terminate the plan at any time, except
that it may not make any amendment that requires shareholder approval as
provided in Rule 16b-3 or Section 162(m) of the Securities Exchange Act of
1934 without shareholder approval. The Plan will terminate on the day
immediately preceding the tenth anniversary of its effective date, unless
terminated earlier by the board of directors or compensation committee.
Acceleration of rights and options. If our board of directors or
shareholders agree to dispose of all or substantially all of our assets or
stock, any right or option granted will become immediately and fully
exercisable during the period
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<PAGE>
from the date of the agreement to the date the agreement is consummated or,
if earlier, the date the right or option is terminated in accordance with
the Plan. No option or right will be accelerated if the shareholders
immediately before the contemplated transaction will own 50% or more of the
total combined voting power of all classes of voting stock of the surviving
entity (whether it is us or some other entity) immediately after the
transaction.
Item 7. Certain Relationships and Related Transactions.
Since 1995 we have borrowed funds from management and our shareholders in
order to meet our obligations. Included in these borrowings was the balance of
$44,006 due to Ian Lambert, an officer and director and parties related to Mr.
Lambert. These loans were provided to us on an interest-free basis and were due
upon demand. On December 16, 1999, we, Mr. Lambert and parties related to Mr.
Lambert (hereinafter jointly referred to as the "Lambert Parties"), did execute
a settlement agreement whereby the Lambert Parties did agree to accept the sum
of $9,803 as full and complete settlement of all balances due. We paid $5,574
against the outstanding obligations on December 16, 1999 and issued an aggregate
of 5,638 shares of our common stock to Mr. Lambert for the balance.
We also owed Lee Kramer (or companies which he controls) the balance of
$145,154, which was provided to us on an interest-free basis and which was due
on demand. On December 16, 1999, we and Mr. Kramer did enter into a settlement
agreement whereby Mr. Kramer agreed to accept $5,000 in cash, plus 111,000
shares of our common stock, in full and complete settlement of all obligations.
We also owed the balance of $56,449 to Dan Tartaglia (or companies which he
controls), a shareholder, which loan was provided to us on an interest-free
basis and which was due upon demand. Effective December 16, 1999, we entered
into a settlement agreement with Mr. Tartaglia, whereby a definitive repayment
schedule was adopted. Relevant thereto, as of the date of this registration
statement, all balances due have been paid in full.
Finally, Leah Lambert, the daughter of Ian Lambert, did loan us $8,228 on
an interest-free basis. On December 16, 1999, Ms. Lambert did agree to accept
the payment of $4,000 as full and complete settlement of all outstanding
obligations. Each of the aforesaid persons did execute a release in our favor as
part of the terms of settlement.
In October 1998 through March 1999, we were party to a series of agreements
with Skyline Records, Inc., a privately held British Columbia, Canada
corporation ("SRI"), engaged in music production and distribution and the
exclusive owner of certain rights to produce and distribute albums for five
individual artists,
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collectively known as Filtered Souls. Mr. Dan Tartaglia, one of our majority
shareholders, is also the principal shareholder and an officer and director of
SRI. On October 6, 1998, we reached an agreement with SRI to acquire a fifty
percent (50%) interest in the net revenues derived from the independent,
national, international and Internet distribution and sales in the initial
Filtered Souls album to be produced and distributed by SRI. The purchase price
payable by us to SRI for the interests was originally $1,000,000 (US) and
issuance of 1,250,000 "restricted" shares of our Common Stock. The aforesaid
funds were payable over a period of time when the costs associated with the
production and distribution of the music were incurred by SRI. However, this
agreement was subsequently amended in July 1999, by which time we had tendered
$500,000 of the original $1 million due. The amendment to the SRI agreement
provided for (i) a waiver of any and all additional cash contributions due SRI
from us; (ii) the issuance of an additional 1,250,000 shares of our Common Stock
to SRI; and (iii) the payment by SRI to us of up to $3 million out of the net
revenues derived by SRI from album sales. To date, we have not received any
funds from SRI, but management remains hopeful that revenues will be received
from SRI in the future. Based upon representations made to us by management of
SRI, it is anticipated that SRI will begin generating revenues from the sale and
distribution of its album sales in late spring of the year 2000. However, there
can be no assurances that SRI will generate profits from this endeavor within
the time parameters estimated herein, or at all.
There have been no other related party transactions, or any other
transactions or relationships required to be disclosed pursuant to Item 404 of
Regulation SB.
We believe that each of the related party transactions described above were
on terms at least as favorable as could be obtained from nonaffiliated parties.
All future transactions between us and an officer, director or a principal
shareholder will be on terms at least as favorable to us as could be obtained
from nonrelated parties; and in addition, such transactions must be approved by
a majority of the disinterested members of the board of directors with access to
counsel.
Item 8. Description of Securities.
Our authorized capital stock consists of 50,000,000 shares of Common Stock,
par value $0.001 per share and 10,000,000 shares of Preferred Stock, par value
$0.001 per share. There are 17,513,684 Common Shares issued and outstanding as
of the date of this registration statement. No shares of Preferred Stock have
been issued or are outstanding.
Common Stock. All shares of Common Stock have equal voting rights and, when
validly issued and outstanding, are entitled to one vote per share in all
matters to be voted upon by shareholders.
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The shares of Common Stock have no preemptive, subscription, conversion or
redemption rights and may be issued only as fully- paid and nonassessable
shares. Cumulative voting in the election of directors is not permitted, which
means that the holders of a majority of the issued and outstanding shares of
Common Stock represented at any meeting at which a quorum is present will be
able to elect the entire Board of Directors if they so choose and, in such
event, the holders of the remaining shares of Common Stock will not be able to
elect any directors. In the event of our liquidation, each shareholder is
entitled to receive a proportionate share of our assets available for
distribution to shareholders after the payment of liabilities and after
distribution in full of preferential amounts, if any. All shares of our Common
Stock issued and outstanding are fully-paid and nonassessable. Holders of the
Common Stock are entitled to share pro rata in dividends and distributions with
respect to the Common Stock, as may be declared by the Board of Directors out of
funds legally available therefor.
Preferred Shares. Shares of Preferred Stock may be issued from time to time
in one or more series as may be determined by the Board of Directors. The voting
powers and preferences, the relative rights of each such series and the
qualifications, limitations and restrictions thereof shall be established by the
Board of Directors, except that no holder of Preferred Stock shall have
preemptive rights. We have no shares of Preferred Stock outstanding, and the
Board of Directors does not plan to issue any shares of Preferred Stock for the
foreseeable future, unless the issuance thereof shall be in our best interests.
PART II
Item 1. Market Price for Common Equity and Related Stockholder
Matters.
(a) Market Information. Through November 1999, our common stock was traded
on the OTC Bulletin Board operated by the National Association of Securities
Dealers, Inc. ("NASD"). Thereafter, our common stock has been traded on the
"pink sheets". Below are the reported high and low bid prices for our common
stock for the previous two years. The bid prices shown reflect quotations
between dealers, without adjustment for markups, markdowns or commissions, and
may not represent actual transactions in our securities.
Bid Price
Date High Low
---- ---- ---
March 31, 1998 $0.090 $0.063
June 30, 1998 $0.063 $0.015
September 30, 1998 $0.031 $0.010
December 31, 1998 $1.313 $0.015
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Bid Price
Date High Low
---- ---- ---
March 31, 1999 $3.063 $0.500
June 30, 1999 $1.50 $0.500
September 30, 1999 $2.625 $0.594
December 31, 1999 $4.72 $0.72
As of February 22, 2000, the closing price for our common stock was $3.75.
Effective December 1, 1999, our common stock was delisted from the OTC
Bulletin Board as a result of new rules adopted by the NASD, wherein only those
companies who are reporting companies pursuant to the Securities Exchange Act of
1934, as amended, are entitled to be listed on said exchange. It is anticipated
that upon effectiveness of this registration statement, we will file a new
application to list our common stock for trading on the Bulletin Board. There
are no assurances that our application will be approved for trading on the OTC
Bulletin Board. Failure to obtain listing of our common stock on the OTC
Bulletin Board may have a negative impact on a shareholder's ability to dispose
of his shares in our Company. See "Risk Factors."
The Securities and Exchange Commission adopted Rule 15g-9, which
established the definition of a "penny stock," for purposes relevant to us, as
any equity security that has a market price of less than $5.00 per share or with
an exercise price of less than $5.00 per share, subject to certain exceptions.
For any transaction involving a penny stock, unless exempt, the rules require:
(i) that a broker or dealer approve a person's account for transactions in penny
stocks; and (ii) the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person's account for
transactions in penny stocks, the broker or dealer must (i) obtain financial
information and investment experience and objectives of the person; and (ii)
make a reasonable determination that the transactions in penny stocks are
suitable for that person and that person has sufficient knowledge and experience
in financial matters to be capable of evaluating the risks of transactions in
penny stocks. The broker or dealer must also deliver, prior to any transaction
in a penny stock, a disclosure schedule prepared by the Commission relating to
the penny stock market, which, in highlight form, (i) sets forth the basis on
which the broker or dealer made the suitability determination; and (ii) that the
broker or dealer received a signed, written agreement from the investor prior to
the transaction. Disclosure also has to be made about the risks of investing in
penny stock in both public offering and in secondary trading, and about
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in
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cases of fraud in penny stock transactions. Finally, monthly statements have to
be sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks.
b. Holders. There are two hundred sixty-six (266) holders of our Common
Stock, not including those persons who hold their shares in "street name."
Of our shareholders, thirteen (13) of the shareholders representing
3,136,000 shares of common stock (17.9% of our issued and outstanding common
shares) have executed a "pooling agreement" wherein they have agreed not to sell
their respective shares, except as follows: (i) 25% of their shares may be sold
on or after August 2, 2000; (ii) 25% of their shares may be sold on or after
November 2, 2000; (iii) 25% of their shares may be sold on or after February 2,
2001; and the balance of their shares may be sold on or after May 2, 2001. As of
the date of this registration statement, one (1) other shareholder representing
200,000 of our issued and outstanding common shares (approximately 1%) has
verbally agreed to these restrictions as well, but has not yet executed the
applicable agreement. The restriction on transferability may be released by our
Board of Directors, in their sole discretion. The relevant certificates
representing the shares have been deposited with our transfer agent.
c. Dividends. We have not paid any dividends to date and have no plans to
do so in the immediate future.
Item 2. Legal Proceedings.
There is no litigation pending or threatened by or against us.
Item 3. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.
We have not changed accountants since our formation and there are no
disagreements with the findings of said accountants.
Item 4. Recent Sales of Unregistered Securities.
In February 2000, we issued an aggregate of 1,000 shares of our common
stock in favor of Gary Rae and D. Jeff Kadanoff, each a Canadian citizen, in
exchange for services relating to software program development. Our stock was
valued at $3.50 per share, the closing price on February 10, 2000. We relied
upon the exemption from registration provided by Regulation D and Section 4(2),
each promulgated under the Securities Act of 1933, as amended.
In January 2000, we issued 5,000 shares of our common stock in favor of
Stargate Connections, Ltd., a Canadian corporation, in consideration for
Internet services rendered to us. In addition,
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also in January 2000, we issued 30,000 shares of our common stock to Ullrich
Shade Associates Ltd., a Canadian corporation, in exchange for services rendered
in the development of a corporate identity and communications package and
250,000 shares of common stock to Mindquake Software, Inc., a Canadian
corporation, in exchange for services rendered in relation to software
development on our web site through March 1, 2000, development and intellectual
property rights for the QTick project and development and intellectual property
rights for wireless applications that enable distribution of our data. For each
of the aforesaid issuances, the applicable shares were issued at a price of
$1.37 per share, the closing price of our common stock on the date of issuance.
We relied upon the exemption from registration provided by Regulation S and
Section 4(2), promulgated under the Securities Act of 1933, as amended, to issue
these shares.
Also in January 2000, we issued a one year option to purchase 133,000
shares of our common stock in favor of Prophet Financial Services, Inc. a
California corporation. The per share exercise price is $.75 per share. Upon
exercise, the shares underlying the option will be issued in reliance upon
Section 4(2) and Regulation D, promulgated under the Securities Act of 1933, as
amended.
In December 1999, we issued 5,638 and 111,000 shares of our common stock in
favor of Ian Lambert and Lee Kramer, respectively, as part of the settlement of
debt discussed under "Certain Relationships and Related Party Transactions"
above. We relied upon the exemptions from registration provided by Regulation S
and Section 4(2), promulgated under the Securities Act of 1933, as amended.
In November 1999, we issued 16,667 shares of our common stock in favor of
Andrew I. Telsey in exchange for legal services. The shares of common stock
issued to Mr. Telsey were valued at $0.75 per share. We relied upon the
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended, to issue these shares. We also issued an option to purchase up
to 50,000 shares of our common stock in favor of Marfam Holdings, Inc., a
Canadian corporation, which is exercisable until November 4, 2004, at an
exercise price of $1.68 per share. We relied upon the exemption from
registration provided by Regulation S, promulgated under the Securities Act of
1933, as amended.
In August 1999, we issued 160,000 shares of our common stock to Darryl Yea,
a Canadian citizen, in exchange for investment banking services. The shares of
common stock issued to Mr. Yea were valued at $0.75 per share. We also issued
Mr. Yea an option to purchase 200,000 shares of our common stock, which option
is exercisable through August 4, 2004 at an exercise price of $0.75 per share.
We relied upon the exemption from registration provided by Regulation S,
promulgated under the Securities Act of 1933, as amended.
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Also in August 1999, we commenced a private offering of our securities
pursuant to the exemption from registration provided by Rule 505 of Regulation D
and Regulation S, each promulgated under the Securities Act of 1933, as amended
(the "33 Act"), as part of a total offering of $3.5 million. Thus far in this
offering, we have sold 1,540,669 shares of common stock at an offering price of
$.75 per share and received net proceeds of approximately $1,155,000 therefrom.
Our common stock was sold to one US resident who was an accredited investor (as
that term is defined under the 33 Act) and seven non-US residents, including the
following:
Number
Name of Shares
---- ---------
International Cetec Investments, Inc. 133,335
Clariden Bank 405,000
Intercon Ventures Inc. 133,333
Fieldstone Services Limited 135,000
Jirehouse Et Cie 333,334
Jeffrey Putnam(1) 66,667
Valor Investments Ltd. 134,000
Welcome Opportunities Ltd. 200,000
-----------------
(1) US resident.
In July 1999, we and Old QMI engaged in a "reverse merger" pursuant to a
definitive agreement. As part of the terms of this transaction, we issued an
aggregate of 11,000,000 shares of our common stock in exchange for all of the
issued and outstanding securities of Old QMI. Following is a list of the Old QMI
shareholders and the number of shares each received as a result of the aforesaid
transaction:
Number
Name of Shares
---- ---------
Duane and Bev Nelson 4,070,000
Rutherford Asset Management Ltd. 100,000
Keeva Trust 3,360,000
Western Skyline Capital Corp. 325,000
Choguy Ltd. 750,000
Torquay Holdings Ltd. 550,000
Canasia Data Corp. 150,000
Leroy Kramer(1) 100,000
CookieJar Investments Ltd. 400,000
Joseph Schaefer 20,000
Philip Oakes 20,000
Leah K. Lambert 10,000
Seija Tyllinen 150,000
James Zellner(1) 100,000
Ranbir Dhaliwal 150,000
Derrick Huston 50,000
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Number
Name of Shares
---- ---------
Rana Charanek 15,000
James Kattany(1) 15,000
Elizabeth Anderson 20,000
Brown Simpson Asset Management. LLC(1) 40,000
Matfam Holdings Inc. 50,000
Paul Holbrook(1) 100,000
Allen H. Finalyson 50,000
Rolf Dedamm(1) 100,000
Wetcoast Capital 40,000
Admirality Fund 40,000
PMGN Inc. 200,000
Leonard T. Doust 25,000
----------------
(1) US resident
We relied upon the exemptions from registration provided by Regulation S,
Regulation D and Section 4(2) of the 33 Act. Each shareholder of Old QMI have
signed Investment Letters acknowledging that they are experienced in evaluation
and investing in securities of companies in the development stage and
acknowledges that they are able to fend for himself or herself, can bear the
economic risk of the investment and has such knowledge and experience in
financial and business matters that they are capable of evaluating the merits
and risks of the investment in the relevant securities.
In December 1998, we undertook a private offering of our common stock
pursuant to the exemption from registration provided by Rule 504 of Regulation
D, promulgated under the 33 Act, wherein we sold an aggregate of 1,250,000
shares at an offering price of $.80 per share and received proceeds of $1
million therefrom. These shares were sold to the following persons, in the
amount of shares indicated:
Number
Name of Shares
---- ---------
Denise Tartaglia 522,250
Larry McNabb 150,000
CDC Capital, Inc. 146,000
EVC Capital, Inc. 126,250
Denise Daniels Consulting Corp. 197,000
Medallion International
Communications Inc. 108,500
Each investor executed subscription documents wherein they represented that
they have sufficient knowledge and experience in financial and business matters
so as to be capable of evaluating the merits and risks of investments generally
and of their investment in the relevant shares, they are able to bear the
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economic risk of the investment with the full understanding that they could lose
their entire investment without producing a material adverse change in their
standard of living as of the date of their subscription.
In November 1998, we issued 1,250,000 shares of our "restricted" common
shares in favor of Skyline Records, Inc. pursuant to the terms of the applicable
agreement between us and Skyline. Thereafter, this agreement was amended and
pursuant to the terms of the amendment, we issued an additional 1,250,000 shares
of common stock to Skyline. We relied upon the exemption from registration
afforded by Regulation S promulgated under the 33 Act. Our management at the
time had a preexisting business and personal relationship with the principal of
Skyline, which had existed for in excess of three (3) years and we believed that
this shareholder is considered a "sophisticated" and "accredited" investor based
upon Skyline's management previous investment experience. Skyline is a Canadian
corporation.
In June 1997, we undertook a private offering of our common stock pursuant
to Regulation D, Rule 504 promulgated under the 33 Act, whereby we sold an
aggregate of 248,600 (post reverse split) shares of its common stock to the
following nine entities at a price of $2.50 per share for aggregate proceeds of
$621,500:
Number
Name of Shares
---- ---------
Denise Ulbarri 12,000
Dan J. Tartaglia 26,400
CDC Capital Inc. 60,600
EVC Capital Inc. 60,000
Denise Daniels Consulting Corp. 18,000
Leroy Kramer 18,000
Medallion International
Communications Inc. 42,000
Andrew I. Telsey 2,000
Jim Zellner 9,600
There have been no other issuances of our securities during the previous
three year period required to be disclosed pursuant to Item 701 of Regulation
SB.
Item 5. Indemnification of Directors and Officers.
Our Articles of Incorporation, incorporate the provisions of the Nevada
Corporation Code providing for the indemnification of officers and directors and
other persons against expenses, judgments, fines and amounts paid in settlement
in connection with threatened, pending or completed suits or proceedings against
such persons by reason of serving or having served as officers, directors or in
other capacities, except in relation to matters
41
<PAGE>
with respect to which such persons shall be determined not to have acted in good
faith and in our best interests. With respect to matters as to which our
officers and directors and others are determined to be liable for misconduct or
negligence, including gross negligence in the performance of their duties to us,
Nevada law provides for indemnification only to the extent that the court in
which the action or suit is brought determines that such person is fairly and
reasonably entitled to indemnification for such expenses which the court deems
proper.
Insofar as indemnification for liabilities arising under the 33 Act may be
permitted to officers, directors or persons controlling us pursuant to the
foregoing, we have been informed that in the opinion of the U.S. Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 1933 Act, and is therefore unenforceable.
In accordance with the laws of the State of Nevada, our Bylaws authorize
indemnification of a director, officer, employee, or our agent for expenses
incurred in connection with any action, suit, or proceeding to which he or she
is named a party by reason of his having acted or served in such capacity,
except for liabilities arising from his own misconduct or negligence in
performance of his or her duty. In addition, even a director, officer, employee,
or our agent who was found liable for misconduct or negligence in the
performance of his or her duty may obtain such indemnification if, in view of
all the circumstances in the case, a court of competent jurisdiction determines
such person is fairly and reasonably entitled to indemnification. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to directors, officers, or persons controlling the
issuing company pursuant to the foregoing provisions, we have been informed that
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act and is therefore unenforceable.
PART F/S
Financial Statements.
Our audited financial statements for the fiscal years ended December 31,
1999 and 1998 are attached to this Registration Statement and filed as a part
hereof. See page 43.
1) Independent Auditors' Report
2) Balance Sheet
3) Statement of Operations
4) Statement of Cash Flows
5) Statement of Stockholders' Equity
6) Notes to Financial Statements
42
<PAGE>
QUOTEMEDIA.COM, INC.
FINANCIAL STATEMENTS
December 31, 1999
43
<PAGE>
DUNCAN BUDGE, C.A.
CHARTERED ACCOUNTANT
Ste. #200 - 120 Lonsdale Ave.
North Vancouver, B.C. V7M 2E8
Telephone: (604) 990-6680
Facsimile: (604) 990-7701
INDEPENDENT AUDITOR'S REPORT
The Stockholders and Board of Directors QUOTEMEDIA.COM, INC.
I have audited the balance sheet of QUOTEMEDIA.COM, INC. as at December 31, 1999
and the statements operations, stockholders' equity and cash flows for the
period from date of incorporation, June 28, 1999 to December 31, 1999. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audits.
I conducted my audit in accordance with United States generally accepted
auditing standards. Those standards require that I 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 the significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In my opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1999 and the
results of its operations and its cash flows for the period from the date of
incorporation, June 28, 1999 to December 31, 1999, in accordance with generally
United States accepted accounting principles applied on a consistent basis.
The accompanying financial statements have been prepared assuming that
QUOTEMEDIA.COM, INC. will continue as a going concern. As discussed in Note 2 to
the financial statements, the Company has no established sources of revenue.
This raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Vancouver, Canada DUNCAN BUDGE, C.A.
February 11, 2000 CHARTERED ACCOUNTANT
44
<PAGE>
<TABLE>
QUOTEMEDIA.COM, INC.
(A Development Stage Company)
BALANCE SHEET
Period from Date of Incorporation June 28, 1999 to December 31, 1999
(United States Dollars)
<CAPTION>
1999
-----------
<S> <C>
ASSETS
CURRENT
Cash and cash equivalents $ 672,038
Marketable securities (note 4) 102,500
Accounts receivable 23,931
-----------
798,469
Fixed assets (note 5) 14,206
-----------
812,675
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable 130,240
Due to related parties (note 7) 13,200
-----------
143,440
-----------
STOCKHOLDERS' EQUITY
Capital stock issued (note 8) 17,228
Additional paid-in capital 1,370,536
Deficit (718,529)
-----------
669,235
-----------
812,675
===========
"Commitments" (note 9)
"Subsequent Events" (note 10)
"Year 2000 Issue" (note 11)
</TABLE>
45
<PAGE>
<TABLE>
QUOTEMEDIA.COM, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
Period from Date of Incorporation June 28, 1999 to December 31, 1999
(United States Dollars)
<CAPTION>
1999
------------
<S> <C>
REVENUE
Interest $ 9,149
------------
EXPENSES
Consulting fees 127,641
Corporate finance 124,035
Depreciation 750
Website content fees 121,013
Development costs 31,331
Legal and accounting 77,717
Marketing and business development 35,210
Office and miscellaneous 31,254
Premises lease 14,848
Promotion and shareholder relation 17,314
Regulatory and transfer agent 8,177
Telephone 7,277
Travel and accommodation 6,954
Forgiveness of amounts due to related parties (note 7) (87,172)
Write-off of accounts payable (41,598)
------------
474,751
------------
LOSS FOR THE PERIOD (465,602)
============
Basic loss per share $ (0.03)
Diluted loss per share $ (0.03)
Weighted average number of shares outstanding
- basic 16,159,071
- diluted 16,275,897
</TABLE>
46
<PAGE>
<TABLE>
QUOTEMEDIA.COM, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Period from Date of Incorporation June 28, 1999 to December 31, 1999
(United States Dollars)
<CAPTION>
1999
-----------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (465,602)
Adjustments to reconcile loss to net cash
used in operating activities
Depreciation 750
Issuance of capital stock for services 132,500
Changes in non-cash working capital items
Accounts receivable (21,625)
Accounts payable 67,146
Due to related parties (184,875)
-----------
(471,706)
-----------
Cash flow from investing activities
Fixed assets (12,857)
Cash acquired on acquisition of subsidiary 1,100
-----------
(11,757)
-----------
Cash flow from financing activities
Issuance of capital stock for cash 1,155,501
-----------
Net increase in cash 672,038
Cash, Beginning -
-----------
Cash, Ending 672,038
===========
Cash and cash equivalents include cash and money market investments
</TABLE>
47
<PAGE>
<TABLE>
QUOTEMEDIA.COM, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
Period from Date of Incorporation June 28, 1999 to December 31, 1999
(United States Dollars)
<CAPTION>
Capital Stock
---------------------- Additional
Common Paid-in
Shares Amount Capital Deficit
---------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, June 28, 1999 4,393,710 $ 4,394 $ 6,317,427 $(6,563,748)
Elimination of deficit
and share capital of
Quotemedia.com, Inc., as
at date of acquisition - (3,294) (6,317,427) 6,563,748
Write-off of excess cost
of acquisition of
QuoteMedia.com, Inc - - - (252,927)
---------- -------- ----------- -----------
4,393,710 1,100 - (252,927)
Shares issued
- - acquisition of
QuoteMedia.com Inc. 11,000,000 11,000 - -
Shares issued -
for cash 1,540,669 1,540 1,153,961 -
Shares issued -
for services 176,667 177 132,323 -
Shares issued -
settlement of debt 116,638 117 87,546 -
Transfer to par value - 3,294 (3,294) -
Loss for the period - - - (465,602)
---------- -------- ----------- -----------
Balance, December
31, 1999 17,227,684 17,228 1,370,536 (718,529)
========== ======== =========== ===========
</TABLE>
48
<PAGE>
QUOTEMEDIA.COM, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from Date of Incorporation, June 28, 1999 to December 31, 1999
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company ("QuoteMedia") was incorporated June 28, 1999 under the laws of the
State of Colorado.
On July 14, 1999, QuoteMedia entered into a plan of reorganization and plan of
merger with Skyline Entertainment, Inc. ("Skyline"). Skyline was incorporated as
Capital Resources Corporation in August 1983 under the laws of the State of
Utah. As a result of a merger in 1986, the company became a Nevada corporation
and changed its name to Capital Resources, Inc. Further name changes have
occurred as follows:
QuoteMedia.com, Inc. (July 1999)
Skyline Entertainment, Inc. (March 1999)
Filtered Souls Entertainment, Inc. (October 1998)
International Tasty Fries, Inc. (April 1995)
Canadian Tasty Fries, Inc. (January 1995)
Videocom International, Inc. (July 1994)
Physician's Cybernetic Systems, Inc. (October 1992)
Genetic Futures, Inc. (June 1992)
QuoteMedia is in the business of providing stock market information, research
and other services via the Internet.
On July 14, 1999, Skyline issued 11,000,000 common shares to acquire 100% of the
issued and outstanding shares of QuoteMedia. This issuance represented
approximately 72% of the issued and outstanding shares of Skyline. As a result,
the selling shareholders of QuoteMedia have become the controlling shareholders
of Skyline. This transaction, under which control of the parent company passes
to the former shareholders of the subsidiary, is accounted as a reverse
takeover.
Under reverse takeover accounting, the cost of the acquisition of QuoteMedia has
been recorded using the purchase method, with QuoteMedia (the legal subsidiary)
being recognized as the parent for accounting purposes.
Under the July 14, 1999 agreement, immediately after the reverse takeover,
QuoteMedia was merged into Skyline, with Skyline being the surviving
corporation. Skyline's name was then changed to QuoteMedia.com, Inc.
49
<PAGE>
QUOTEMEDIA.COM, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from Date of Incorporation, June 28, 1999 to December 31, 1999
2. GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principals applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has no current source of revenue. Without
realization of additional capital, it would be unlikely for the Company to
continue as a going concern.
3. SIGNIFICANT ACCOUNTING POLICIES
a) Cash and cash equivalents
Cash equivalents include money market investments which are redeemable on
demand.
b) Fixed Assets
Fixed assets are recorded at cost less accumulated depreciation.
Depreciation is calculated on a declining-balance basis at a rate of 30%
for the computer. In the years of acquisition and disposal, depreciation is
calculated at one-half the normal rate.
c) Loss per share
Financial Accounting Standards No. 128 "Earnings Per Share" requires the
presentation of basic and diluted earnings per share. Basic earnings per
share are computed by dividing income by the weighted average number of
shares outstanding during the year. Diluted earnings per share takes into
account shares outstanding (computed under basic earnings per share) and
potentially dilutive common shares (such as stock options outstanding). The
effect of a stock split or reverse split is applied retroactively to
preceding periods.
d) Stock based compensation
Statement of Financial Accounting Standards No. 123 "Accounting Per Stock-
Based Compensation" ("FAS 123") encourages, but does not require, to record
the compensation cost for stock-based employee compensation plans at fair
value. The Company has chosen to account for stock-based compensation using
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees". Accordingly, compensation cost for stock options is measured as
the excess, if any, of the quoted market price of the Company's stock at
the date of the grant over the amount an employee is required to pay for
the stock. The company has provided the pro-forma stock compensation
information required by FAS 123 in note 8 d).
50
<PAGE>
QUOTEMEDIA.COM, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from Date of Incorporation, June 28, 1999 to December 31, 1999
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
e) Income taxes
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes". A deferred tax
asset or liability is recorded for all temporary differences between income
for financial statement purposes and income for tax purposes as well as
operating loss carry forwards. Deferred tax expenses or recovery result
from the net change during the year of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance, when, in the
opinion of management, it is likely that some portion of the deferred tax
asset will not be realized. Deferred taxes are adjusted for the effects of
changes in tax laws and rates.
f) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that effect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities as at the year end and the
reported amount of revenues and expenses during the year. Actual results
may vary from the estimates.
g) New accounting standards
Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities" establishes accounting and
reporting standards for derivative instruments and hedging activities and
is effective for all fiscal quarters or years beginning after June 15,
1999. The Company does not anticipate that adoption of the statement will
have a significant impact on its financial statements.
h) Reporting on costs of start-up activities
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5: "Reporting the Costs of Start-Up
Activities" which provides guidance on the financial reporting of start-up
costs and organization costs. It requires costs of start-up activities and
organization costs to be expensed as incurred. The statement is effective
for fiscal years beginning after December 15, 1998. The company does not
anticipate that the statement will have a significant impact on its future
financial statements.
51
<PAGE>
QUOTEMEDIA.COM, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from Date of Incorporation, June 28, 1999 to December 31, 1999
4. MARKETABLE SECURITIES
Tasty Fries, Inc. 1999
----------------- --------
Number of shares 250,000
Recorded value $102,500
Tasty Fries, Inc., a U.S. corporation trades on the OTC Bulletin Board.
Tasty Fries, Inc. owns the right to manufacture, distribute and sell a fully
automated French fry vending machine. In addition to acquiring the above shares
in Tasty Fries, Inc. during 1995, the company was interested in become involved
in the business. The company was granted the distribution rights for 15 European
Countries. Consideration is only payable to Tasty Fries, Inc. at the time
vending machines are ordered and delivered. To date, no business has evolved
from this distributorship agreement.
5. FIXED ASSETS
Computer Equipment 1999
------------------ -------
Cost $16,922
Accumulated Depreciation 2,716
-------
Net Value $14,206
=======
6. INVESTMENT AND ADVANCES
1999
----------
Cash Advances $ 938,913
Shares Issued - 2,500,00 at a deemed price of $0.80 per share 1,000,000
----------
1,570,036
Write down recorded on July 14, 1999 takeover and merger (1,570,036)
----------
Total -
==========
On October 6, 1998, the Company entered into an agreement with Skyline Records,
Inc. of San Diego, California under which the Company was to earn a 50% interest
in net revenues (after artists' royalties) from sales proceeds of music albums
being produced and distributed by Skyline Records, Inc.
52
<PAGE>
QUOTEMEDIA.COM, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from Date of Incorporation, June 28, 1999 to December 31, 1999
6. INVESTMENT AND ADVANCES (continued)
The agreement and amendments required the Company to pay $500,000 and issue
1,250,000 common shares.
On March, 1999, the Company and Skyline Records, Inc. entered into an agreement
under which the Company could participate in future music albums on the same 50%
basis as detailed above in consideration for the Company issuing an additional
1,250,000 post reverse split common shares. These shares were issued on July 2,
1999 at a deemed price of $0.80 per share ($1,000,000).
On July 2, 1999, the company and Skyline Records, Inc. entered into an agreement
to terminate the above agreements. All of the Company's interests under prior
agreements revert to Skyline Records, Inc. and Skyline Records, Inc. relieves
the Company of any obligations under the agreements. As consideration, Skyline
Records, Inc. is required to pay the Company a total of $3,000,000. The money is
to be paid from time to time from Skyline Records, Inc.'s net revenues derived
from the sales of albums as detailed in the above agreements. Due to the
uncertainty of the recovery of the investment the balance was written off prior
to the reverse acquisition and merger with Skyline Entertainment, Inc.
7. RELATED PARTY TRANSACTIONS
a) Due to related parties
During the period $87,172 of amounts due to related parties was forgiven.
An additional $87,663 due to related parties was settled during the period
by issuing 116,638 common shares.
Amounts owing to related parties are unsecured, non-interest bearing and
due on demand.
8. CAPITAL STOCK
a) Authorized share capital
400,000 Series A-1 preferred, $0.001 par value
1,036,500 Series A-11 preferred, $0.001 par value
8,563,000 non-designated preferred, $0.001 par value
50,000,000 common shares, $0.001 par value
53
<PAGE>
QUOTEMEDIA.COM, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from Date of Incorporation, June 28, 1999 to December 31, 1999
8. CAPITAL STOCK (continued)
b) Issued share capital
Preferred, Series A-1, A-11 and non-designated, none issued
Common - December 31, 1999 17,227,684
c) Additional paid-in capital
The excess of proceeds received for common shares over their par value of
$0.001 is credited to additional paid in capital.
d) Stock option plan
The Company has a stock option plan whereby shares of the Company's common stock
may be issued pursuant to the exercise of stock options granted to employees,
officers, directors, advisors, and independent contractors of the company. The
exercise price of the common stock underlying an option will be determined by
the Board of Directors or compensation committee and may be equal to, greater
than, or less than the fair market value but in no event less than 50% of fair
market value. The options generally vest after one year unless, at the
discretion of the Board of Directors, alternative vesting methods are allowed.
The term of each option is determined at the time it is granted and may extend
to a maximum of ten years. At December 31, 1999, the Company has reserved
2,500,000 options for issuance under the stock option plan. Options may also be
granted outside the Company stock option plan. Options granted outside the plan
generally contain terms that are more restrictive in nature and have a maximum
expiration term of five years. An unlimited number of options may be granted
outside the Company stock option plan at the discretion of the Board of
Directors.
The following table sets forth certain stock option information:
Weighted-Average
Options Exercise Price
--------- --------------
Outstanding at June 28, 1999 - $ -
--------- -------
Granted under company stock option plan 750,000 $ 1.54
Granted outside company stock option plan 250,000 0.94
Exercised - -
Cancelled - -
--------- -------
Outstanding at December 31, 1999 1,000,000 $ 1.39
========= =======
54
<PAGE>
QUOTEMEDIA.COM, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from Date of Incorporation, June 28, 1999 to December 31, 1999
8. CAPITAL STOCK (continued)
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------- ---------------------------
Weighted
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise Price at 12/31/99 Contractual Life Exercise Price at 12/31/99 Exercise Price
- -------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$0.75 - 1.85 1,000,000 6.46 $1.39 850,000 $1.31
</TABLE>
As explained in note 3 c), if the Company has adopted only the disclosure
provisions of FAS 123 for options granted under the existing employee stock
option plan. As at December 31, 1999 all stock options have been granted with
exercise prices equal to or greater than the market value of the underlying
common shares on the date of grant therefore no compensation expense has been
recognized for the stock option plan in the statement of operations.
FAS 123 uses a fair value method of calculating the cost of stock option grants.
Had the Company elected to recognize compensation cost for its option plans
based on this method net income and earnings per share would have been as
follows:
1999
-----------
Net income:
As reported $ (465,602)
Pro forma (723,813)
Basic earnings per share:
As reported (0.03)
Pro forma (0.04)
Diluted earnings per share:
As reported (0.03)
Pro forma (0.04)
The weighted average fair value of the options granted during the year is $0.99
per share.
The fair value of each option on the date of grant is estimated using the Black-
Scholes option-pricing model with the following weighted average assumptions for
1999: expected dividend yield of 0%, expected stock price volatility of 209%, a
risk free interest rate of 6%; and an expected life of options of one year.
9. COMMITMENTS
The Company has contracts with web content providers extending one to three
years. Commitments total $673,953, $673,953 and $561,627 in years 2000, 2001,
and 2002, respectively.
55
<PAGE>
QUOTEMEDIA.COM, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from Date of Incorporation, June 28, 1999 to December 31, 1999
10. SUBSEQUENT EVENTS
a) Share capital issued
The Company has issued 286,000 shares for software development and advertising
services. The total market value of the shares at the date of issue was
$393,950.
b) Stock options
The Company has granted 200,000 stock options inside the Company stock option
plan and 133,000 stock options outside the plan at exercise prices ranging from
$0.75 to $3.85 and expiry dates ranging from January 2001 to February 2010.
11. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when using year 2000
dates is processed. In addition, similar problems may arise in some systems,
which use certain dates in 1999 to represent something other than a date. The
effects of the year 2000 Issue may be experienced before, on, or after January
1, 2000, and, if not addressed, the impact on operations and financial reporting
range from minor errors to significant systems failure which could affect an
entity's ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity, including
those related to the efforts of customers, suppliers, or other third parties,
will be fully resolved.
56
<PAGE>
PART III
Item 1. Exhibit Index
No.
- --- Sequential
Page No.
--------
(3) Articles of Incorporation and Bylaws
3.1 Articles of Merger Between Physician
Cybernetic System, Inc. and Genetic
Futures, Inc. *
3.2 Articles of Amendment to Articles of
Incorporation *
3.3 Amended and Restated Articles of
Incorporation *
3.4 Certificate of Amendment to Articles
of Incorporation *
3.5 Certificate of Amendment to Articles
of Incorporation *
3.6 Certificate of Amendment to Articles
of Incorporation *
3.7 Certificate of Amendment to Articles
of Incorporation *
3.8 Articles of Merger Between Skyline
Entertainment, Inc. and Quotemedia.com,
Inc. *
3.9 Bylaws *
(4) Instruments Defining the Rights of Holders
4.1 Form of "Pooling Agreement" Executed
by certain of the Company's Shareholders *
(10) Material Contracts
10.1 Agreement and Plan of Reorganization
between the Company and Old QMI *
10.2 Employment Agreement between the Company
and R. Keith Guelpa *
57
<PAGE>
No.
- --- Sequential
Page No.
--------
10.3 Employment Agreement between the Company
and Keith Randall *
10.4 Employment Agreement between the Company
and Duane Nelson *
(27) Financial Data Schedule
27.1 Financial Data Schedule 60
- ---------------
* Incorporated by reference to our initial Registration Statement filed
with the SEC on or about December 21, 1999.
58
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
QUOTEMEDIA.COM, INC.
(Registrant)
Date: February 23, 2000
By:s/ R. Keith Guelpa
------------------
R. Keith Guelpa,
President
59
<PAGE>
QUOTEMEDIA.COM, INC.
-------------------------
EXHIBIT 27.1
-------------------------
FINANCIAL DATA SCHEDULE
-------------------------
60
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 672,038
<SECURITIES> 102,500
<RECEIVABLES> 23,931
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 798,469
<PP&E> 14,206
<DEPRECIATION> 0
<TOTAL-ASSETS> 812,675
<CURRENT-LIABILITIES> 143,440
<BONDS> 0
0
0
<COMMON> 17,228
<OTHER-SE> 652,007
<TOTAL-LIABILITY-AND-EQUITY> 812,675
<SALES> 0
<TOTAL-REVENUES> 9,149
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 474,751
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (465,602)
<INCOME-TAX> 0
<INCOME-CONTINUING> (465,602)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (465,602)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
